Energy Act 2010

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Main benefits

• Tackling fuel poverty and protecting more of the most vulnerable consumers as we begin transitioning into a low carbon UK.

• Ensuring that the conditions are in place for dynamic, competitive markets and that they work fairly and deliver sustainable and secure energy for all.
  
  
• Demonstrating carbon capture and storage at commercial-scale – the critical next step in the move towards the global deployment of CCS at the levels required to achieve its potential as a carbon-reduction technology. The CCS demonstration programme delivered by the CCS Incentive will also put the UK at the forefront of global efforts to develop this technology, providing significant first-mover opportunities for UK-based firms.
  
  

Main elements

• Providing mandatory social price support, such as in the form of an electricity bill rebate. This builds on the success of the voluntary agreement with energy companies which ends in 2011 and has helped reduce the fuel bills of more than one million vulnerable customer accounts. The level of support to be provided through the new mandated scheme will be greater than £150m committed by suppliers in the final year of the agreement.

• Making absolutely clear that Ofgem, the energy market regulator, must:

• Include the reduction of carbon emissions and the delivery of secure energy supplies in their assessment of the interests of consumers; and

• Step in proactively to protect consumers as well as considering longer term actions to promote competition.

• Giving Ofgem additional powers to tackle market exploitation where companies take advantage of constraints in the electricity transmission grid.

• Strengthening the deterrent nature of Ofgem's powers by extending the time limit from 12 months to 5 years within which Ofgem can impose financial penalties for breaches of licence conditions.

• The new CCS Incentive would support the construction of up to four commercial-scale CCS demonstration projects in the UK.

• The CCS Incentive could also provide funding for the retrofit of those demonstration projects to their full capacity, should it be required in future.
  
  

Dods commentary

The Bill will take forward the government’s attempts to de-carbonise the energy sector. It focuses specifically on the potential for carbon capture and storage as a technology to combat climate change.

The government has long expressed an interest in carbon capture and storage, referencing its intention to build four carbon capture and storage projects in its Low Carbon Transition white paper of July 2009.

Further to this, it also conducted two consultations across spring/summer 2009 to consider the viability of clean coal technology. The first, on guidance for carbon capture readiness, sought to provide direction for operators building new generating stations, whilst the second sought to consult more fully on a framework for clean coal development.

The government response to the latter consultation, published in November 2009, expresses in comprehensive terms DECC's aspirations to make the UK an international leader on this technology – further borne out by today's announcement.

Greg Clark, in his conference speech this year, indicated his party's thoroughgoing support for CCS technology and the role it can play in meeting future energy requirements.

The shadow energy secretary's criticism has so far focussed on the amount of time it has taken to bring the new demonstration projects on stream.

The party's position on a CCS levy also remains unclear. Asked by the secretary of state whether he supported the provision of a levy, to finance the demonstration projects, Clark noted:

"It would be foolish to endorse the levy uncritically and sight unseen. We will give our reaction to the proposal when the Secretary of State publishes the Bill".

In other criticism of the Bill, Simon Hughes, Liberal Democrat energy spokesman, has condemned the government for its failure to incorporate measures for better insulating the nation's housing stock.

The Bill also serves to acknowledge widespread criticism of the regulatory shortcomings in the UK energy sector, partially stimulated by the Ofgem probe from earlier this year.

It must also be seen as a response to the environment, food and rural affairs committee's report into fuel poverty, in June 2009.

In that report, the government was criticised for its likely failure to meet its statutory 2010 target on eradicating fuel poverty whilst Ofgem's regulatory failings were also brought to bear.

Progress

House of Commons

1^st reading: 19 November 2009 [HC Bill 7]

2^nd reading: 7 December 2009

Committee stage:

• 1^st sitting: 5 January 2010 (am)
  
• 2^nd sitting: 5 January 2010 (pm)
• 3^rd sitting: 7 January 2010 (am)
• 4^th sitting: 7 January 2010 (pm)
• 5^th sitting: 12 January 2010 (am)
• 6^th sitting: 12 January 2010 (pm)
• 7^th sitting: 14 January 2010 (am)
• 8^th sitting: 14 January 2010 (pm)
• 9^th sitting: 19 January 2010 (am)
• 10^th sitting: 19 January 2010 (pm)
• 11^th sitting: 21 January 2010 (am)
• 12^th sitting: 21 January 2010 (pm)

Report stage: 24 February 2010
3rd reading: 24 February 2010

House of Lords

1st reading: 25 February 2010
2nd reading: 23 March 2010
Committee stage: 7 April 2010
Report stage: 7 April 2010
3rd reading: 7 April 2010

Ping Pong: 8 April 2010
Royal Assent: 8 April 2010