On 12 October 2022 the government introduced the Energy Prices Bill in the House of Commons. The bill is being treated as emergency legislation and completed all its Commons stages on 17 October 2022. It is scheduled to have its second reading in the House of Lords on 19 October 2022 and to complete all its stages before the end of October 2022.
The wholesale price of gas and oil has increased significantly since the beginning of 2021. Demand increased as countries recovered from the Covid-19 pandemic, driving up prices. Prices increased still further in 2022, as Russia reduced supplies of gas to Europe because of European support for Ukraine.
The Energy Prices Bill would enact several policies the government announced in September 2022 to reduce the cost of energy for consumers. The bill would put in place the ‘energy price guarantee’. This would enable the government to limit the cost of electricity and gas per unit for domestic consumers for two years from 1 October 2022. As a result of the cap, the government has said that the average household would see annual energy bills of £2,500 rather than the £3,549 they would have otherwise been. The bill would also create an equivalent measure for non-domestic consumers, to run for six months from 1 October 2022.
The bill would enable the secretary of state to put in place other support measures for consumers not on the mains gas grid and would require intermediaries such as landlords to pass on the benefits of the support to end users.
The bill would create equivalent schemes for Northern Ireland. UK ministers do not have existing powers to take such measures for Northern Ireland; however, in the absence of an executive the government is proposing these powers in the bill.
The costs of these measures will be borne by the government. On 17 October 2022 the government announced it would reduce the length of support for households from two years to six months. After this it would provide support targeted at the most vulnerable. The government said it took this decision because the announcement of additional borrowing for the original measure, alongside tax cuts, had caused market volatility. This contributed to increased government borrowing costs and a decrease in the value of the pound.
The bill also contains measures to require other electricity generators, such as renewables and nuclear power, to make payments to a payments administrator and to change the law regarding pricing mechanisms for low-carbon generation called contracts for difference. The government has said the aim of this is to stop energy generators whose costs have not risen from benefitting from the high price of gas.
This briefing was updated on 18 October 2022 to cover the bill’s stages in the House of Commons.