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EE/S3/11/R1

1st Report, 2011 (Session 3)

Legislative consent memorandum on the Energy Bill (LCM (S3) 31.1)

Remit:

To consider and report on the Scottish economy, enterprise, energy, tourism and all other matters falling within the responsibility of the Cabinet Secretary for Finance and Sustainable Growth apart from those covered by the remits of the Transport, Infrastructure and Climate Change and the Local Government and Communities Committees.

Membership:

Ms Wendy Alexander
Gavin Brown
Rob Gibson (Deputy Convener)
Christopher Harvie
Marilyn Livingstone
Lewis Macdonald
Stuart McMillan
Iain Smith (Convener)

Committee Clerking Team:

Clerk to the Committee
Stephen Imrie

Senior Assistant Clerk
Joanna Hardy

Assistant Clerk
Diane Barr

Legislative consent memorandum on the Energy Bill (LCM (S3) 31.1)

The Committee reports to the Parliament as follows—

Introduction

1. The UK Energy Bill (“the Bill”)1 was introduced in the House of Lords on 8 December 2010. As the Bill makes provisions applying to Scotland for purposes that lie within the legislative competence of the Scottish Parliament and that alter the executive competence of the Scottish Ministers, a legislative consent memorandum (LCM(S3) 31.1)2 has been lodged by the Scottish Government (see annexe).

Background information

2. As the memorandum explains, consent is sought in relation to a number of areas. The UK Energy Bill is designed to provide for a step change in the provision of energy efficiency measures to homes and businesses and to make improvements to the UK Government’s framework which enable and secure low carbon energy supplies and fair competition in the energy markets. The Bill seeks to provide for some of the key elements of the UK Government’s Programme for Government and its first Annual Energy Statement.

3. The Bill is a first step and further legislation will be sought later in the UK Parliament to implement, for example, the findings of the Electricity Market Review. This further legislation will have a key bearing on devolved matters such as the Renewables Obligation, funding for carbon capture and storage, and control of emissions from power stations. The Scottish Government is working closely with the UK Government on this.

Key provisions

4. Firstly, the core of the UK Energy Bill is the provision for the Green Deal. This is a new financing framework to enable the provision of energy efficiency measures to all householders and private landlords, funded by a charge on energy bills in order to avoid the payment of upfront costs. The Green Deal will also extend to non domestic buildings and include:

  • powers to set parameters around the use of this facility to ensure consumer protection for both the originator of the work and subsequent occupiers;

  • powers to limit access to the financial mechanism in the framework to the installation of genuine energy efficiency measures which are expected to exceed the level of the charge; and

  • an obligation on energy companies to administer the charges and pass monies to the appropriate party.

5. Secondly, the Bill contains powers to create a new Energy Company Obligation (ECO) to take over from the existing obligation to reduce carbon emissions (Carbon Emissions Reduction Target), which expires at the end of 2012. The new obligation will be designed to work alongside the Green Deal finance offer and target appropriate measures at those households which are likely to need additional support, in particular those containing vulnerable people on low incomes and those in hard to treat housing.

6. Finally, the Bill will also contain a number of additional measures relating to energy efficiency, security of energy supplies, low carbon generation and powers to enable the Coal Authority to offer and charge for services relating to the longer-term safety and remediation of non-coal mining subsidence and non-mine water pollution.

7. The Scottish Government has indicated that its officials have liaised closely with the UK Department for Energy and Climate Change (DECC) colleagues on the content of the Bill clauses and will continue to be closely involved in the development of related policy.

Provisions that relate to Scotland

8. The areas of the Bill with devolved implications that are subject to legislative consent are:

  • the areas of the Green Deal (domestic and non-domestic) around energy efficiency which are devolved;

  • the areas of the Energy Company Obligation around energy efficiency measures that are devolved;

  • enabling the Coal Authority to provide and charge for services around certain of its functions (i.e. remediating subsidence and water pollution); and

  • repeal of the Home Energy Conservation Act 1995.

9. In addition, there are also areas of the Bill where Scottish Ministers will have powers to make Regulations, for example in relation to the acknowledgement of a Green Deal plan by purchasers or tenants on the sale or lease of a property, in relation to the private and socialrented sectors and for modification of the disclosure of information from the register maintained under the Energy Performance of Buildings (Scotland) Regulations 2008. Recognition that Energy Performance Certificates are different in Scotland has been made and reference is included in the Bill to an “equivalent alternative approach” to ensure the framework regulations represent the Scottish interest.

10. It has further been agreed that when making regulations to implement the Green Deal, the UK Government will consult with, and (to the extent that they relate to devolved matters) require the consent of, Scottish Ministers prior to making provisions that will affect Scotland.

Subordinate Legislation Committee consideration

11. The Subordinate Legislation Committee considered the provisions in the Energy Bill which confer on the Scottish Ministers powers to make subordinate legislation at its meetings on 18 and 25 January 2011. The Committee considered in principle that the powers to make subordinate legislation are acceptable. However, the Subordinate Legislation Committee raised issues on the application of clauses 50, 52, 53, 55, 56, 58, 59 and 71 in relation to improvement in energy efficiency in the private rented sector and possible sanctions should these improvements not be made.

12. The Subordinate Legislation Committee’s report can be viewed in full on the Parliament’s website.3

The Economy, Energy and Tourism Committee’s consideration of the Bill

13. The Committee considered the legislative consent memorandum and took evidence at two meetings. At its meeting on 26 January 2011,4 the Committee took evidence from a panel of witnesses consisting of Energy Action Scotland, the Scottish Federation of Housing Associations and Scottish Environment LINK. At its meeting on 2 February 2011,5 the Committee took evidence from Alex Neil, Minister for Housing and Communities and Scottish Government officials. A number of points and questions were raised by the Committee as outlined below.

14. In evidence to the Committee, Elizabeth Leighton of Scottish Environment LINK, sought confirmation that “the bill will not impinge on the powers in the 2009 act”.6 The Minister was asked to clarify if there would be any implications for sections 63 and 64 of the Climate Change (Scotland) Act 2009 of the implementation of the private rented sector provisions in Chapter 3 of the UK Energy Bill. The Minister indicated that whilst the UK Energy Bill did provide some additional legal benefits it would not alter or weaken the Climate Change (Scotland) Act 2009.

15. In evidence to the Committee, the Scottish Federation of Housing Associations (SFHA) asked that account should be taken of the higher fuel bills in Scotland when calculating the amount of financial support under the Energy Company Obligation. David Stewart of SFHA told the Committee that—

“It is key that the arrangements do not disadvantage Scotland. Scotland is a more rural country, with more properties that are off the gas network, and we have longer, colder winters and more non-traditional or difficult-to-treat properties.”7

16. The Minister was asked if the Scottish Government would ensure that Scotland’s severe weather and subsequent higher fuel bills would be taken into account in the calculation of financial support under the Energy Company Obligation. The Minister confirmed that he had already raised this issue with the Secretary of State for Energy and Climate Change and had received an undertaking that this would be the case.

17. Norman Kerr of Energy Action Scotland, raised concerns of a danger of “privatising fuel poverty” and told the Committee that “We rely on input from the fuel companies but I do not think that we can pass responsibility to them completely”. The Minister confirmed that responsibility for fuel poverty would remain with Scottish Ministers.

18. The Committee also heard concerns that some local authorities may not do anything to achieve energy efficiency targets if guidance was introduced to replace the existing statutory duty of the Home Energy Conservation Act 1995 (HECA). Elizabeth Leighton told the Committee “that housing represents a quarter of our emissions” and that the Scottish Quality Housing Standard (SQHS) was not the solution to meeting targets as—

“Local authorities have to consider both social housing stock—which has a standard already—and the private housing stock. The need to cover the whole of the housing stock is one issue that an SHQS alone will not solve”.8

19. In relation to the proposed repeal of HECA the Minister told the Committee that the Scottish Government intended to amend existing legislation to set tougher quality standards for housing beyond those already set in the SHQS to be met by 2015.

20. Finally, the Minister was asked if the Scottish Government intended to use a “super-affirmative” procedure in relation to clauses 50, 53 and 56 and also what sanctions were available in relation to clauses 52, 55, 58 and 71 of the UK Energy Bill. Whilst the Minister did not rule out the use of the “super-affirmative” procedure, the Minister did indicate that the Scottish Government was content with the use of the affirmative procedure in relation to these clauses as this allowed stakeholders and the committee to be consulted and that the sanctions had been drafted to allow a degree of flexibility to enable further consideration, as the regulations were not due to come into force until 2015.

Conclusion

21. The Committee recommends that the Scottish Government takes into account the issues raised by both the Economy, Energy and Tourism Committee and the Subordinate Legislation Committee in future discussions with the UK Government on potential amendments to the Bill. As much of the detail relating to the Scottish provisions of the UK Energy Bill is to be agreed in future discussions between the Scottish and UK Governments the Committee would like some clarification on how that will be progressed throughout the dissolution period.

Recommendation to the Parliament

22. By division, the Economy, Energy and Tourism Committee recommends that the relevant provisions of the UK Energy Bill introduced in the House of Lords on 8 December 2010 relating to the provision of energy efficiency measures to homes and businesses and improvements to the UK Government’s framework to enable and secure low carbon energy supplies and fair competition in the energy markets, so far as these matters fall within the legislative competence of the Scottish Parliament, or alter the executive competence of Scottish Ministers, should be considered by the UK Parliament.9

ANNEXE A

Annexe A: LEGISLATIVE CONSENT MEMORANDUM: energy bill

Draft Legislative Consent Motion

1. The draft motion, which is being progressed by the Minister for Housing and Communities and will be lodged by the Cabinet Secretary for Health & Wellbeing, is:

“That the Parliament agrees that the relevant provisions of the UK Energy Bill introduced in the House of Lords on 8 December 2010 relating to the creation of powers to develop a new Green Deal, for energy efficiency measures, the repeal of the Home Energy Conservation Act 1995, enabling the Coal Authority to provide and charge for services and to implement additional measures to make improvements to regulatory frameworks for the energy markets, so far as these matters fall within the legislative competence of the Scottish Parliament, or alter the executive competence of Scottish Ministers, should be considered by the UK Parliament.”

Background

2. This memorandum has been lodged by Nicola Sturgeon, Cabinet Secretary for Health & Wellbeing under Rule 9.B.3.1(a) of the Parliament’s standing orders. The Energy Bill was introduced in the House of Lords on the 8th December. More information on the Bill can be found at:

http://services.parliament.uk/bills/2010-11/energyhl.html

Content of the Energy Bill

3. The UK Energy Bill is designed to provide for a step change in the provision of energy efficiency measures to homes and businesses and to make improvements to the UK Government’s framework which enable and secure low carbon energy supplies and fair competition in the energy markets. The Bill seeks to provide for some of the key elements of the UK Government’s Programme for Government and its first Annual Energy Statement.

4. The Bill is a first step and further legislation will be sought later in the Parliament to implement, for example, the findings of the Electricity Market Review. This further legislation will have a key bearing on devolved matters such as the Renewables Obligation, funding for carbon capture and storage, and control of emissions from power stations. The Scottish Government is working closely with the UK Government on this.

Key Elements of the Bill

5. The core of the Bill will provide for the Green Deal. These provisions include:

  • a new financing framework to enable the provision of energy efficiency measures to all householders and private landlords, funded by a charge on energy bills in order to avoid paying upfront costs. This framework will also extend to non domestic buildings and include:

  • powers to set parameters around the use of this facility to ensure consumer protection for both the originator of the work and subsequent occupiers;

  • powers to limit access to the financial mechanism in the framework to the installation of genuine energy efficiency measures which are expected to exceed the level of the charge; and

  • an obligation on energy companies to administer the charges and pass monies to the appropriate party.

  • Powers to create a new Energy Company Obligation to take over from the existing obligation to reduce carbon emissions (Carbon Emissions Reduction Target), which expires at the end of 2012. The new obligation will be designed to work alongside the Green Deal finance offer, above, and target appropriate measures at those households which are likely to need additional support, in particular those containing vulnerable people on low incomes and those in hard to treat housing.

Additional Measures Contained in the Bill

6. The Bill will also contain a number of additional measures, detailed below.

Energy efficiency:

  • Extension and amendment of the enabling powers in the Energy Act 2008 concerning smart meters, in order to facilitate the successful introduction of smart meters in Great Britain.

  • Power to remove unnecessary restrictions on access to data. Held on the register maintained under Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007, and for Scotland, under the Energy Performance of Buildings (Scotland) Regulations 2008.

  • Powers that would allow the Government to require energy companies to provide information on the cheapest tariff on energy bills.

Security of energy supplies:

  • Steps to increase the effectiveness of monitoring of electricity security of supply. This will include making Ofgem responsible for providing estimates of future capacity need.

  • Measures to strengthen the market incentive mechanism for ensuring sufficient gas is available.

  • Consolidation of existing provisions for third party access to upstream oil and gas infrastructure, and streamlining of current procedures to facilitate determinations by the Secretary of State where required; with new provisions for notification of commercial negotiations, and to trigger determination procedures where negotiations have been unduly protracted.

  • A special administration regime for a gas and electricity suppliers to ensure that gas and electricity continue to be supplied as cost effectively as possible in the event a company becomes insolvent.

  • Powers to de-designate areas of the UK Continental Shelf in order to facilitate the signing of a comprehensive agreement with Ireland about maritime boundaries to enable the alignment of Exclusive Economic Zones and to facilitate the exploitation of our Continental Shelf resources (important for oil, gas and renewable energy supply).

Low carbon generation:

  • Powers, if required, to implement the enduring offshore electricity transmission regime.

  • Amendment to the existing powers in the Energy Act 2008 enabling the Secretary of State to modify a nuclear operator’s Funded Decommissioning Programme; to ensure that there is an appropriate balance between the Secretary of State’s powers to protect the taxpayer and the operator’s need for clarity over how those powers will be exercised. This should give investors in new nuclear the certainty they need to finance very significant, long-term investments.

Coal Authority:

  • Powers to enable the Coal Authority to offer and charge for services relating to the longer-term safety and remediation of non-coal mining subsidence and non-mine water pollution.

7. Scottish Government officials have liaised closely with DECC colleagues on the content of the Bill clauses and will continue to be closely involved in the development of related policy.

Provisions Which Relate to Scotland

8. Energy matters are generally reserved under Head D of the Scotland Act 1998. Agreement to this LCM will enable a UK wide policy on energy efficiency. The areas of the Bill which are reserved and not included in the subject matter of this LCM include: smart meters; energy bills; electricity monitoring; gas security; North Sea infrastructure; special administration regime, CCS incentives, nuclear funded decommissioning, continental shelf, and offshore transmission.

9. The areas of the Bill with devolved implications that will be subject to the LCM are:

  • the areas of the Green Deal (domestic and non-domestic) around energy efficiency which are devolved;

  • the areas of the Energy Company Obligation around energy efficiency measures that are devolved;

  • enabling the Coal Authority to provide and charge for services around certain of its functions (i.e. remediating subsidence and water pollution); and,

  • repeal of the Home Energy Conservation Act 1995.

10. In addition, there are also areas of the Bill where Scottish Ministers will have powers to make Regulations, for example for in relation to the acknowledgement of a green deal plan by purchasers or tenants on the sale or lease of a property, in relation to the private and socialrented sectors and for modification of the disclosure of information from the register maintained under the Energy Performance of Buildings (Scotland) Regulations 2008. Recognition that Energy Performance Certificates are different in Scotland has been made and reference is included in the Bill to an “equivalent alternative approach” to ensure the framework regulations represent the Scottish interest.

11. It has further been agreed that when making regulations to implement the Green Deal the UK Government will consult with, and (to the extent that they relate to devolved matters) require the consent of, Scottish Ministers prior to making provisions that will affect Scotland.

Reasons for seeking a legislative consent motion

12. As outlined above, Energy is generally a reserved area. However, the provisions of the Bill that relate to; the Green Deal (domestic and non-domestic); provisions relating to energy efficiency measures, activities of the Coal Authority enabling it to charge for services and remediating subsidence and water pollution; and, the repeal of the Home Energy Conservation Act 1995 all fall, wholly or partly, within devolved competence.

13. The Bill will confer functions on the Scottish Ministers to reflect devolved competence in the following ways:

Regulation-making powers - These relate to the manner of the acknowledgement of a green deal plan by purchasers or tenants on the sale or lease of a property and the cases to which a requirement for acknowledgment would not apply., to the powers to impose efficiency measures or the green deal on the private and social rented sectors and powers to amend the Energy Performance of Buildings (Scotland) Regulations 2008 for the purposes of the Green Deal. In these areas Scottish Ministers will have powers to make secondary legislation. Energy Performance Certificates are different in Scotland. In this regard reference will be made to an "equivalent alternative approach" ,and UK Ministers will consult with Scottish Ministers to ensure that the framework regulations represent the Scottish interest. UK Ministers are proposing to introduce regulation on the Private Rented Sector in England (and Wales).

Consent mechanism – in relation to other provisions that would be within the competence of the Scottish Parliament, the Secretary of State must secure the consent of the Scottish Ministers before making any regulations that extend to Scotland and must consult the Scottish Ministers in any other case. This mechanism is identical to that agreed for the Renewable Heat Incentive under s.100(7) of the Energy Act 2008.

Consultation

14. Over the coming months DECC will be working with stakeholders to further develop policies to ensure that Scottish issues are covered. They have also offered to hold a session with Ministers and with MSPs to set out the proposals in more detail once the Bill has been laid in the UK Parliament. Officials are currently discussing the timings and content of this event.

Financial Implications/Investment/Jobs

15. There are no direct financial implications for the Scottish Budget as this initiative will be delivered by the market place. It is expected that this policy will provide new investment into energy efficiency throughout the UK and create substantial green jobs.

Conclusion

16. An ambition of the Scottish Government is to move to a low carbon economy while achieving challenging energy efficiency and climate change targets and maintaining the security and diversity of energy supplies. The provisions in the Bill will help achieve this and should be supported.

SCOTTISH GOVERNMENT
December 2010


Footnotes:

4 Economy, Energy and Tourism Committee Official Report 26 January 2011.

5 Economy, Energy and Tourism Committee Official Report 2 February 2011.

6 Economy, Energy and Tourism Committee Official Report 26 January 2011,Col 4720.

7 Economy, Energy and Tourism Committee Official Report 26 January 2011,Col 4730.

8 Economy, Energy and Tourism Committee Official Report 26 January 2011,Col 4732.

9 The result was: For 5 (Iain Smith, Rob Gibson, Stuart McMillan, Christopher Harvie and Gavin Brown). Against 3 (Lewis Macdonald, Wendy Alexander and Marilyn Livingstone).