Electricity Supplier Payments (Amendment) Regulations 2026
House of Lords · Grand Committee · 17 Mar 2026 · 15 speeches · Official Report
Considered in Grand Committee
Moved by
That the Grand Committee do consider the Electricity Supplier Payments (Amendment) Regulations 2026.
My Lords, you have got me again. These draft regulations were laid before the House on 2 February 2026. I trust that since they are very technical in their nature and very modest in their effect, they will be agreed, because they are an essential element of making sure that our supplier payments and supplier collection work well for the future; they are an integral part of how the system works, so I hope that they will meet with general agreement. This statutory instrument amends regulations concerning the levies used to fund the operational cost budgets for the Low Carbon Contracts Company and the Electricity Settlements Company. Before I proceed, I apologise to the Committee for the enormous number of acronyms that will no doubt emerge during this debate and in my speech. Let me start with the LCCC and the ESC, which I have already explained. The LCCC administers the contracts for difference scheme on behalf of the Government under the Energy Act 2013. Under that Act, the LCCC also administers schemes modelled on the contracts for difference, including the dispatchable power agreement, the DPA, and the low-carbon dispatchable contracts for difference, or LCD contracts for difference. The LCCC also acts as the revenue collection counterparty for the regulated asset base for new nuclear under the Nuclear Energy (Financing) Act 2022. It is anticipated, subject to future policy decisions and the will of Parliament, that the LCCC will conduct additional work to support...
My Lords, there is a reason why UK energy prices are some of the most expensive in the world. We are starting from a high base and we are increasingly vulnerable. At the moment, our gas prices are six times higher than you might find on an ex-NOLA basis: that is, exported from New Orleans. We are more expensive than the rest of Europe, apart from Germany, which has its own particular industrial problems, and we are increasingly vulnerable because we are trying to run our 24-hour-a-day, 365-day-a-year economy on energy sources that do not work at night or when the wind does not blow. I understand that, and I am not against using renewable energy-we need to have an energy mix-but the way we are going at the moment is to put too many eggs in the renewables basket. With this statutory instrument, the name is on the tin: it is all about nuclear energy, but the speech that the Minister gave was not really about nuclear at all, but about the mission creep that has led to us having the world’s most expensive industry, whereby we are deindustrialising. Only today, what a shame that the Huntsman Group has announced that the Wilton facility, that last vestige of ICI at Billingham, could be closed. How ironic it is that the obituary of Sir Ronald Hampel, the architect of ICI, was in the Times this week: he must be turning in his grave. This debate has all been about carbon capture and storage. I did not realise it was going to be, I thought it was about nuclear, but there we are. Carbon...
This is not a debate. This is an SI about the mechanism for contracts for difference. It is not a debate on energy policy.
I thank the noble Earl, but he will forgive me for having made an introduction, and now I come immediately to the substance, because what we have heard, and it came from the Minister’s mouth, is that this is all about investor confidence. This is about subsidy farming; this is about underwriting the most emitting power station in Britain, Drax, which is responsible for the desecration of huge tracts of forestry on the other side of the world, the shipping costs associated with getting it and its transport to that power station, as if it is somehow renewable. That is a fantasy. What these regulations underpin is a false economic market that says, “No matter how high the gas price is”, and, my goodness, gas prices are high now, “we’re going to bid up the costs of renewables in an unearned income”. This is financial engineering. We are kidding ourselves that we are doing this for low carbon. We are creating a false market in unproductive assets such as carbon capture and storage. When we invest in carbon capture and storage, and I use the word “invest” advisedly, we are not investing in productive assets that will generate an economic return; we are just burying money, money that we need. I do not deny that, as a result of this regulation, the authorities-forgive me, there are so many acronyms, I cannot remember them all, the LCCC and so forth-have to be paid for. However, this debate has exposed that it is not just about paying for the authorities, it is about financing a...
My Lords, it is a pleasure to follow my noble friend and to have the opportunity to speak to this statutory instrument. I support and welcome the update levies to fund operational costs of low carbon and nuclear energy schemes. However, it is the wider context that is my concern: the continued high prices of electricity, which are among the highest in the world for our heavy industry-such as steel, which is truly disadvantaged when having to compete worldwide. Our high-energy intensive industries-not only steel, chemicals and ceramics, which are the industrial base of the UK-are, therefore, left inadequately supported. We all know that lower electricity costs directly help to retain manufacturing reinvestment and jobs, and support the supply chains, so it is disappointing to see manufacturing jobs moving abroad in the past 12 months. For high-energy intensive industries to compete on a level playing field, confidence must be targeted, building that elusive confidence and bringing the precious private investment into the heavy sector. The Government know they have to develop and go further with serious long-term plans, and possibly introduce a two-way contract for difference to provide a competitive wholesale electricity price to support and restore our British industrial competitiveness for the next decade. Finally, the Government must support further-rather than undermine-the UK’s wider industrial strategy and growth emissions. I look forward to the Minister’s reply.
My Lords, the draft Electricity Supplier Payments (Amendment) Regulations make technical but necessary changes to the levies that electricity suppliers pay to fund three of the UK’s key energy schemes: the contracts for difference-CfD-scheme, the capacity market and the nuclear regulated asset base, or RAB model. There is a sense of gravity on these Benches in that we fully recognise the role that CfDs have played, since they were introduced by the Liberal Democrats a long time ago, in helping to fund and secure funding for our energy transition. We recognise that these are necessary updates, and we welcome what the Minister has said to introduce these amendments. We welcome the measures that are being taken to ensure that efficiency savings are gained. Therefore, we fully support this SI.
My Lords, I am very grateful to my noble friends Lady Redfern and Lord Fuller for their contributions. They bring a great deal of expertise to this Committee from a lifetime outside London in places where industries’ success has depended on low energy prices. For them to give up their time and dedicate it to the work of this Committee is commendable, and I associate myself with everything that both of them said. That helps me in one way because it means that I can be short on this occasion. I will make just make four points. First, Drax has been raised. There are still major issues with Drax, as the Minister knows. Billions have been spent in public subsidies on it. As I recall, it was axed from the S&P green bond index because it clearly did not add to the net-zero objectives of either this Government or the previous one. Indeed, the burning of pellets releases CO 2 immediately and does not achieve anything except for carbon debt. That undermines our net-zero goals, not least because the pellets come from the west of Canada; they are brought right the way across Canada and must then be transported to the United Kingdom by boat. The sooner we grasp the nettle and stop biomass burning, the better. In fact, it is unfair even to call it biomass: it is a CO 2 pellet-driven wrong solution for Drax. Today, it has contributed a significant amount of electricity generated into the grid-not much less than comes from solar energy in the UK at the present time. However, these are...
I thank noble Lords for, as I have said on previous occasions, their valuable, extensive and wide-ranging contributions to the debate. I am similarly tempted to follow the wide-ranging comments that have been made-some of which I agree with and a lot of which I do not-but I do not think that this is the place to undertake that particular debate. As noble Lords have reflected on, this SI is, in essence, about a practical and straightforward measure to ensure that the body that administers the working of the CfDs and an increasing amount of further contracts-acting as the counterparty and the proper regulatory body to make sure that there is value in all directions from the money that is collected-simply has the wherewithal to make sure that it can do that job. As I have said, the levels of that wherewithal were set in 2022 and have not been revised since then. They really need to be revised so that we are not in a position where the taxpayer has to come in and bail out the LCCC or similar bodies, come 2028-29, if they do not have sufficient funds to administer the contracts in the way they should.
The reason why the word “nuclear” is in this SI, which has been mentioned, is that the LCCC will begin to administer the RAB process for Sizewell C; that is another job that has been placed on the LCCC’s shoulders. This is not mission creep. Actually, the fact that there is a large and increasing number of contracts that vary around CfDs-they take into account dispatchable and baseload low-carbon operation, as well as the intermittent and variable low-carbon emissions that we are more used to-means that both the LCCC and the ESC have considerable new responsibilities that need to be properly managed and funded. The cost of those new responsibilities, which are not mission creep, is very minimal to the consumer-it is less than 0.1% of bills-but this enables efficient management and price reductions as a result of the LCCC’s work.
Briefly, the new Drax contract has been mentioned as coming within the purview of the LCCC. I would just point out that the new contract halves the cost of the previous Drax contract and is a considerable saving to customers. Therefore, it also causes Drax to come in to produce power on the margins, rather than centrally in the system; there is a 27% cap in its operations. It is far more sustainable, with 100% sustainability in the fuel that is going into Drax, making sure that what goes into Drax is traceable and not from ancient forests and the other sources over which concern has been raised previously. So the new deal for Drax is much better than the old one. What noble Lords may say about Drax overall is perhaps a debate for another day, but this is certainly an efficient new contract that is now back within LCCC; of course, it will require proper management over the next period.
I hope the responses I have given provide the necessary assurances to approve the statutory instrument before the Grand Committee today. As I said at the start of the debate, the regulations the Government are seeking to amend through this instrument will revise the operational cost levies of the LCCC and the ESC-and that is all they will do. These companies play a crucial role in delivering the CfD, the RAB, the capacity market and other schemes. The Government anticipate that the LCCC may also play a similar role in administering new schemes in the future, including a potential new scheme supporting bioenergy with carbon capture and storage. So they have to be in good shape and sufficiently funded to perform these tasks effectively, but the costs of doing so must be kept to a minimum. It is my view that the operational budget for 2026-27 to 2028-29 strikes an appropriate balance between ensuring that the companies are adequately funded and ensuring that consumer bills are minimised. I commend the regulations to the Grand Committee.
Motion agreed.