Electricity supply levy

I beg to move amendment 3, in clause 4, page 4, line 18, leave out subsections (3) and (4).

This amendment is a probing one, as is the next one. It relates to the electricity supply levy, which is the subject of clause 4. It is designed to explore whether it is appropriate for the levy to be on all suppliers and sources, given that obviously it will have specific benefits in a certain part of the industry.

At the moment, there is the ability to have a levy on different sources differentially. The amendment would strike out that provision and allow the Minister and the Government to act differently. I wonder whether the Government would like to comment on what the logic of their argument is on whether it is appropriate for the renewables sector to contribute to the levy. When we probed that issue earlier, the Minister responded that at the moment all sectors contribute to the levy on renewables—the renewables obligation. It does not seem to me that it necessarily follows logically that if we are doing something that is raising money to develop carbon capture and storage from the processes that produce the carbon, we should also be putting a levy on the processes that do not produce carbon. I ask the Minister to think again about that.

My understanding is, however, that that may not be the specific purpose of the clause. The thinking behind the Government’s proposal may be different. The proposal may be that coal suppliers should not be contributing to a fund that will go back to them. Will the Government share with us what the explanation is?

I want to make one important point that comes from other people’s research. Obviously, if this works, there is a huge potential earner for the UK in carbon capture and storage. We are not the experts, but we have had experts give evidence to us. In an article in this month’s Parliamentary Brief, Jon Gibbins, a co-author of one of the papers submitted to us, says:

“Several studies have shown that the UK deep offshore holds a vast storage potential, perhaps enough to store 100 years of emissions from all power plants in NW Europe...Selling UK storage capacity which is proven and licensed as an EU asset may be worth â‚Ź5bn a year for 50 years if developed efficiently. An essential first step is to evaluate UK storage in more detail using actual CO2 injections at a number of different sites, but this cannot be done without a demonstration programme to supply the CO2.”

An impressive table shows that in what are described as the top 13 states in and around the EU, Norway has the largest capacity, which is principally in aquifers; there is a little in gas. We are second. Norway and the UK are first and second by a mile, ahead of anybody else in the league. We have the south North sea gas capacity, referred to earlier by my hon. Friend the Member for Harrogate and Knaresborough, the north North sea’s potentially very large aquifer capacity and the potentially even larger unproven aquifer capacity. Way down the league table are Germany, Spain, France, Denmark, Slovakia, Italy, Bulgaria, Poland, Croatia, the Netherlands and the former Yugoslav Republic of Macedonia. All those put together would not have the same capacity as the UK.

If this is such a potentially rich source of finance for us—with fantastic export potential; we could not just store our own CCS, but take in pretty much the rest of our continent’s—how are the levy and the costing thought through against the backdrop of what the earning might be? Is there any consideration of what the charges might be and where the payback might be? Obviously, if we are trying to save UK plc budget money there could be a levy that is charged now and is paid back, or reimbursed. That might be an incentive to certain parts of the industry. I would like to know how the Government see the issue in the context of not just a one-year piece of legislation, but the incentivisation of the industry and the development of CCS—in the end, seeking to ensure that those who benefit have not had a subsidy that cannot be paid back at the end of the day, out of what may be very large profits indeed. I hope that that is clear and would appreciate the maximum indication that the Minister can give us.

Following on from the hon. Gentleman’s questions about the nature of the levy, will my hon. Friend the Minister provide a little clarity on some of the structure of the levy? I appreciate that that is a matter for further regulation. However, I remain unclear about how the levy will be charged over a period of time and therefore accumulated into what might be regarded as a fund that will then be disbursed in the assistance scheme, either during the collection levy or at a future date subsequent to that levy being collected.

Presumably, that levy will continue to prop up that fund as those disbursements take place. Therefore, is it the Minister’s understanding that such a levy is effectively a ring-fenced fund set up separately from other purposes that the Treasury, shall we say, might have for such a general fund? Is it her understanding that, should such a fund be set up, the interest that might accrue would also go towards CCS projects, rather than for other general purposes? If that is not her understanding, does she intend to regulate to ensure that such a fund—in its entirety, one way or another—is applied to CCS projects? If not, might there be other specific uses for the interest gathered on the fund, prior to its being disbursed for CCS projects, for example? I am thinking of other renewable new technology that might require development and assistance in the meantime.

The clause gives the Secretary of State the power to make regulations that place a levy on electricity supplies, with the levy paid by electricity suppliers. The levy will be used to fund a financial incentive that will support industry in bringing forward a programme of four commercial-scale CCS demonstration projects and, should it prove necessary, the retrofit of any unabated coal capacity at those stations.

Amendment 3 is, as the hon. Member for North Southwark and Bermondsey said, a probing amendment that would remove the flexibility that subsections (3) and (4) provide for giving exemptions or relief to certain types of supply. Subsections (3) and (4) will allow us, through regulations, to set the levy at different rates in different cases or to exempt certain supplies from the levy altogether.

I have made it clear previously—I will return to the matter in a moment—that we see that as very limited at present. For example, we think that the provisions  could be applied to types of supply categorised by generation source or by end user. At the moment, the only example that I would give that is concretely under examination concerns whether subsection (4) might be used to exempt exported electricity from the levy. That is the area that is currently under consideration.

Subsections (3) and (4) also allow us, for example, to adjust the levy for certain business sectors such as energy-intensive users. Obviously, those users have made recommendations to us about how they should be considered. They make special cases and we shall consider the issue. At the moment, however, we have made no decisions about it.

I should be grateful if the Minister amplified the argument about why there would be logic or fairness in exempting energy-intensive users. Obviously their bills are bigger, and therefore their levy would be a top-up on a big bill, but there is no logic to their not paying their fair share into the kitty, as it were, for the development of the new technology.

The hon. Gentleman makes a reasonable argument. The energy-intensive users’ argument, of course, is that there is a prospect that the levy will have an unacceptable impact on their industries, and that that should be avoided. All I am saying is that that is the representation that we have received and will consider, but I have made it clear that at the moment we have made no decisions to exclude anyone from the process.

I was asked specifically about renewables.

I am concerned about the potential thinking of the Government on this matter. Does it mean that, proportionally, small and medium-sized businesses will have a heavier load than the businesses that the Minister has described?

No. I have said nothing to that effect. I have said simply that representations have been made and must be considered. If the witness had been able to attend, the Committee could have heard the case for that approach directly. That did not happen, but I must inform the Committee that a case was made to us. As I have said, we must give consideration to the specific issue relating to the export of energy; there is European law that we must consider alongside it. We need to consider that one issue, but no other decisions have been taken.

An interesting point has been raised. The Minister has referred to the issue of exports. We also import a significant amount of energy. Does that mean that we will be able to charge the levy on imported electricity?

I am sure that the answer must be no. It is a question that I have not had asked, but I think that the answer must be no because there is no such provision in the Bill. Lawyers will need to look at it. [Interruption.] Oh no! I am exactly wrong.

Shall I ask the question again?

No, please do not ask the question again.

Will the Minister give way?

No, the Minister will not give way at this point. I am being told that we can tax imports, but whether that is our intention or whether the Bill provides for it is another matter. I am being rescued, but without sufficient information to enlighten the Committee. We will see.

Can I help the Minister?

No.

I am happy to help.

I am delighted to have the help of the hon. Gentleman.

The Minister has been caught by my hon. Friend the Member for Harrogate and Knaresborough. I was simply going to say that we would be happy if she gave us the amplified explanation of the policy in the clause stand part debate in a minute; we do not want to force her to do so at this stage.

Right, let me try to continue. I was trying to answer the question about renewables and whether we should exempt them. The answer is that we are dealing with supplies overall and have issues of energy security, so we have to bear in mind that we all—including the companies themselves—benefit from having an energy mix. Furthermore, it is to the benefit of those who produce renewables, and certainly to the customers, that coal is part of the energy mix and gives stability to the security of supply. We see CCS as being to the benefit of all because without it we can not envisage having coal in the mix—and if coal was not there, it would be a disbenefit to all. Therefore, it is not unreasonable to put the levy on renewables and other kinds of supply.

We have talked about large energy suppliers, but how small would the Minister consider going? What about microgeneration and people who put back into the grid, as a church in St. Albans does from solar generation? How small would the supplier have to be to escape the levy, if escape is at all possible?

The hon. Lady is talking about something completely different. We are talking about supply companies and she is talking about local generation, which is of a completely different nature and is about to be incentivised by the Government. It is not covered by the provision.

If I may, Mr. Atkinson, I will try to make a little progress, otherwise I will completely lose track of what I am trying to say. As I have indicated, at the moment we do not intend to apply any exemptions or reduced rates when we first introduce the regulations for the levy, but, given that the levy is likely to be in operation for 15 years or longer, it is important that we have the flexibility to adjust it in response to changing circumstances.

I am sorry to pursue my hon. Friend’s question, but it is important. I shall give the Minister an example: if a farmer is able to generate all his electricity through wind farms, or whatever system he has, will he be exempt from the levy? Do the Government see that as a situation in which he would not be paying the levy? Is the Government’s intention that everyone, regardless of the source of their electricity supply, will contribute?

I am being provided with information that I cannot read, unfortunately.

Shall we have a break?

No, no. This is the answer: it is what I have been trying to indicate. The issue is just not relevant. The levy applies to licensed suppliers; small microgeneration schemes are not licensed suppliers and will not be caught. That is, definitively, the case.

Our intention is that the detailed policy for the levy, together with the draft regulations, will be subject to a formal public consultation this summer. Clause 4 also requires that regulations be laid in draft and approved by both Houses of Parliament before they can be made. That will ensure that the hon. Member for North Southwark and Bermondsey will have more than one opportunity to scrutinise and comment on the detailed provisions of the levy before they are finalised. I hope, therefore, that he will not pursue the amendment; it would not be helpful to the Bill.

I am grateful to the Minister for her response, which opens the subject. As she indicated, the regulations must be considered under the affirmative procedure and will need to come before the House, where we will have the chance to debate them. She indicated—as does the Bill—that there will be a consultation.

As I said, this is a probing amendment and I will shortly seek leave to withdraw it. However, when we come to the clause stand part debate, it would be helpful—and of interest both to the Committee and outside—if the Minister stated current Government thinking about the amount of the levy. One of the factors— [Interruption.] Well, if there is a plan for a levy, the Minister must have an idea of how much it will cost in general terms. Plenty of thinking on that has gone on outside the Government, so I am sure that it has gone on inside the Government.

As my hon. Friend the Member for Harrogate and Knaresborough noted, one of the factors is that the bigger the levy is likely to be, the stronger the argument for sharing it across a larger number of payers, as that would obviously make for a smaller burden per contributor. Therefore, the argument for keeping everybody in the system and paying becomes stronger the more it costs. I hope that the Minister will return to that matter. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 4, in clause 4, page 4, line 34, leave out paragraph (g).

Under subsection (5) there is a list of things that the regulations may make provision about. Paragraph (g) is the

“provision of information, including its provision to third parties”.

This is a probing amendment that would strike out that provision. It would not allow the regulations to deal with the issue of what happens to the knowledge that is gleaned from the carbon capture and storage development process. My question, which I and others have raised elsewhere with Ministers, is, what happens to the intellectual property arising from that process?

Two questions seem to be involved. First, are we clear that the information can be shared not only within any consortium that wins the competition for the project, but more generally? Everybody is investing in this science, which is the purpose behind the debate, the Bill and the levy. Therefore, we all ought to benefit; it should not be kept for private commercial advantage.

Secondly, following the themes of the Copenhagen conference and the international climate change discussions, there is a need for the richer, more developed countries to share the benefits of our technological advances with developing countries. I want to ensure that any intellectual property can be shared with other countries that might not have done the work or had the development and which may be further behind, even though their need might be greater than ours. There are countries in Europe that have a huge amount of coal, and large countries such as China have massive coal industries that pump out emissions all the time. There are also smaller and poorer countries—some in Latin America—that would benefit from such information. I would like some reassurance that the intellectual property will be shared.

The clause gives the Secretary of State the power to make regulations that place a levy on electricity supplies, to be paid by electricity suppliers. Subsection (5) sets out a non-exhaustive list of matters on which the Secretary of State can make provision through regulations. Paragraph (g) expressly provides for regulations to require the provision of information, including its provision to a third party.

The main information requirements that are likely to be imposed under levy regulations will be for the supplier to provide information to Ofgem to enable it to carry out its administrative functions. The type of provision that might be made in regulations requiring information to be given to a third party would be requirements for the supplier to provide information directly to a third party, or for Ofgem to provide to a third party information that it had received from the supplier.

Amendment 4 would remove the express provision to make any such requirement. Requiring the provision of information will be an important part of the levy arrangements. As with other forms of taxation, those paying the levy will be expected to provide information to the administrator of the levy.

In the case of the levy, we would expect suppliers to provide information in respect of the amount of levy due in a particular period and the basis of the calculation of the amount due. That is likely to include information on the amount of electricity supplied by the supplier in an accounting period and possibly the amount of that electricity that qualifies for the levy. That will form part of the declaration that is made by a supplier to Ofgem. Suppliers may also be required to notify the administrator of such things as changes in ownership.

As the administrator, Ofgem will be expected to prepare and publish a report each year on the operation of the levy, as it does for the renewables obligation.  We expect that at least some of the information provided by suppliers would be used in the preparation of any report. Information provided by suppliers might also be used to assist the Secretary of State with budgeting and financial management of the CCS programme.

The wording of clause 4(5)(g) could also be used to require suppliers to provide information directly to a third party. At present, we do not anticipate any circumstances where we would include that in regulations, but one example of where the use of a power might be appropriate would be to require the provision of information for the supplier to an auditor appointed by Ofgem.

We believe that the provision of information is an important part of ensuring that the levy can be operated effectively and is open and transparent. I can assure hon. Members that any information or data considered commercially sensitive will, of course, be subject to a high level of safeguards. As the provision of information is a requirement that we can be certain will be part of the final regulations, I believe it is appropriate to refer to it in the clause so that our intentions are clear.

We intend to set out the details of any information requirements and the use of information received in the reporting process as part of the consultation on the regulations planned for the summer. That, together with the requirement that those regulations are subject to affirmative resolution, will ensure that hon. Members have ample opportunity to look closely at the detail before it is finalised.

From what I have just said, the hon. Member for North Southwark and Bermondsey will see that this provision relates to the levy—to the schemes specifically—to ensure that it is properly regulated and that Ofgem has the information it needs to ensure that the schemes are being properly carried through by the companies. That is a rather different information provision from the one he raises in respect of intellectual property.

We have said that intellectual property is, of course, going to remain with those who develop it if they seek to own it. As I said in my evidence session, that is a matter of international law. We have made it clear that the developed and the developing world need to work together to be able not just to transfer technology, but to develop technology together. That is the way to make it possible to enable developing countries to gain from the development of new technologies without them having to wait until everything has been done and then pay a high price to acquire it.

Such collaboration, which we have sought repeatedly and will continue to promote, will make it possible for new technologies such as CCS to be developed alongside the needs of developing countries and in joint projects—we foresee partnerships.

We want to encourage everything of that nature that will make this possible. It is not only the financing of the purchase of technology developed in the developed countries that is so difficult for developing countries; it is also the lead times. We cannot afford for developing countries to wait until developed countries have done all the work, gained all the benefit and established the price, and then expect them to take it from us. There has  to be a developmental process running in partnership between developed and developing countries. That is well understood by companies, many of which now participate willingly, productively and positively in international forums where ideas of CCS are continually rehearsed.

I hope that I have answered the questions raised by the hon. Gentleman. I know that in speaking to the earlier amendment I failed to respond to my hon. Friend the Member for Southampton, Test. Perhaps I might do so now. For the record, the aim is for the amount raised through the levy to be as near as possible as to the amount required for the projects. There is no intention to develop a central pot, and all moneys raised will be spent on the CCS demonstration project.

The House of Commons Library notes on the Bill have that figure at about £9.5 billion. Whatever the figure is, it is to be calculated in detail in future. While there are stipulations requiring the Minister or the Secretary of State to come to the House to announce various changes as the details are confirmed, will the Minister give the Committee a guarantee that an update of the levy, the process and the entire CCS project as it is rolled out will be provided to the House on, say, a six-monthly basis, perhaps in a written statement, but certainly annually as an oral statement, so that we can be aware of how this huge project costing the taxpayer about £9.5 billion is progressing?

The hon. Gentleman will forgive me if I do not give a commitment in such specific terms. I am more than aware of the number of consultations that will happen as we progress, which will be available to hon. Members. They are often subject to questions and statements in the House. We have the annual report of the Committee on Climate Change, to which the Government are obliged to respond and will do so. We have just had the first one. Our response will be made soon, and there will be a continual process of reporting on all aspects of CCS. I have not the slightest doubt that that will be the case. I confirm that we expect that the amount raised could be as much as £9.5 billion. We envisage CCS being supported to that order of magnitude.

I hope that I have dealt with the issues raised in relation to amendment 4. I further hope, therefore, that the hon. Member for North Southwark and Bermondsey will not press the amendment to a vote.

The Minister’s answer was helpful. I now understand that paragraph (g) enables information to be given internally from the companies to Ofgem and that the patent issues are dealt with in another way. I am grateful to her for that response.

May I make one point before seeking permission to withdraw the amendment? I endorse what the Minister said about the importance of the developing world not waiting until all the technology is tested to completion in the developed world. One way the Government could assist is to indicate in the competitions that they would look favourably on those consortiums, which would include companies, or collections of companies from the developing world. For example, there are companies across southern Africa, where there is a lot of coal production, that would be welcome partners. India,  which has significant coal production, would clearly be a welcome partner. The Minister need not respond now, but will she talk to her colleagues in the Department for International Development and other Departments about how we might encourage the participation of and collaboration between companies based in the UK or Europe and companies in the developing world, particularly through Commonwealth links?

The Minister is right that, if there is something the end of a project that can be immediately taken—and adapted, possibly with some change—to India, southern Africa, Latin America or elsewhere, it will be of huge advantage, because it is everybody’s carbon emissions that we need to bring down, not just our own.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Briefly, will the Minister take the opportunity afforded by the question put by my hon. Friend the Member for Harrogate and Knaresborough to talk about the companies that will be charged the levy? There is the question whether the levy deals with imports of electricity. It would be helpful if she expanded on the levy’s remit.

Also, I want to press the Minister a little about the parameters of the amount of the levy. She does not have to be precise, but the Government must have ballpark figures. I am not seeking to tie her down, but everybody has a significant interest in this issue and it would be odd if we never explored it further and never got any figures on the record.

This is one of the most important clauses in the Bill, in terms of how the whole thing will be paid for. We have had a useful debate on the amendments that we have dealt with so far and we spotted for just one moment there that the Minister did not have her customary mastery of her brief.

I want to probe the issue a little further. The Minister will recall that, in our evidence sessions last week, I talked about whether this money could instead be found from the receipts from the EU emissions trading scheme that Britain will receive in due course. I asked where we could find evidence that that money was already allocated. One of her officials helpfully pointed to the Budget 2009 report and said that it was dealt with in table 2.9, under other taxes and royalties. That column shows that, in the coming years, that sum will go from £16.8 billion in 2009-10 to £19 billion, before falling to £18.8 billion, then rising again to £20 billion in 2012-13 and to £21.8 billion in 2013-14.

However, the only additional information that that table gives is that that section on other taxes and royalties says it includes VAT refunds and money paid into the national lottery distribution fund. Something as important as Britain’s receipts from the EU ETS is not even mentioned in the footnote.

As we continue to debate the clause, I would be grateful if the Minister was given some information on the exact amount in each of the years that I referred to that the Treasury is assuming it will receive from the EU ETS. Simply to lump that money together with those other sums is completely unacceptable and much too broad; we need much greater detail.

I hope that that information is forthcoming, because during our pre-briefing session on the Bill I indicated to her ministerial colleague, the Under-Secretary of State for Energy and Climate Change, that I wanted those figures. I asked for them last week and we need to be absolutely clear whether money would be available through the EU ETS receipts for this sort of work, because that would be an alternative to the levy and the consumer and the taxpayer have a right to know what alternatives have been explored.

However, the clause and our debate show some of the challenges of vague legislation. What we see here is an extremely broad power, but we have not been able to gain much clarity about who will be caught by it. Subsections (3) and (4) clearly give scope to vary the extent to which different groups of consumers will be affected, but we gained no concept from this morning’s debate whether that means that people who might obtain their electricity from coal-based supplies will be affected, so that the dirtiest and most polluting sources of electricity might pay a lower levy; whether people who have opted for renewables tariffs might pay less or nothing; or whether people getting nuclear power might pay less or nothing.

Any of those people could benefit from those powers in the Bill, but we have no real understanding of what the Government’s intentions are in this area. We have no knowledge as to whether they intend that large users should be helped in some way or whether small businesses and consumers should benefit. The Government clearly have the power to make choices on the different levies to be imposed, but we do not know what is intended.

I always have a concern about legislation that is drafted in broad, general terms, where the detail will be supplied through secondary legislation. There is a sort of regulatory creep: there is an intention that one thing should happen, but a few statutory instruments down the line that is broadened out into something that was never really considered by the Committee and was never really intended by the Government or by Parliament to be the purpose of the particular clause. Therefore, we would be grateful for more information from the Minister about how she sees the levy being imposed and what it will entail for which sections of the community.

I would also be grateful if the Minister expanded her comments last week, when I asked her whether there will be a contract for difference. She implied that the Government were still thinking about that area. The evidence that we heard from Dr. Jeff Chapman of the Carbon Capture and Storage Association clearly shows that he thinks it is a done deal, as it will be a contract for difference, and therefore, as the cost of carbon rises, the levy to the consumer will reduce. If that is not the intention, there is a risk that the consumer will pay twice—through the carbon price, which is a carbon levy-type system, and through the levy on top.

We owe it to consumers, who are feeling very hard pressed, to make it clear to them that in the event that there will be charges, as one charge rises, the levy will be reduced to compensate.

Obviously, I want to go over what clause 4 does, but let me first answer the questions that have been put to me.

On the amount of the levy, we have said clearly that it could be worth between £7.2 billion and £9.5 billion. It is not possible for us to go further to say what the figure will be, because we have to raise an amount that will match the needs of the projects and we do not know what those needs are. We have not yet seen them, but when we do, we will be in a much better situation to get to the fine detail of the levy, and, as I keep saying, they are all subject to consultation.

On who will be caught, the levy is on electricity suppliers, and the licensed suppliers will make those payments. I think there is no need for further clarification. I am afraid that my instincts were, for a second, quite wrong in not thinking quickly enough about imported electricity. However, it is obvious that on the supply of electricity it does not matter whether it is imported or indigenously produced—it will be subject to the levy. The opposite is true of exported electricity, which may well not be subject to the levy. That is a matter under debate.

The hon. Member for Wealden repeatedly raised questions about the EU ETS receipts. This has been a matter of concern to me, and I have made many inquiries to try to get to the bottom of it. I can give him further information, although it will not satisfy him.

Try me.

Indeed, I must. The EU ETS receipts are not published separately because EUROSTAT, the EU’s statistical agency, has yet to take a view on how those receipts should be classified in the public finances. We believe that it would be inappropriate to publish the receipts in advance of EUROSTAT’s decision. [Interruption.] I can hear groans because of that answer. However, I must give hon. Members the real answer. What we have tried to do, as a Government—

Will the Minister give way?

In a moment. What we have tried to do as a Government, notwithstanding—

Order. I am afraid that hon. Members will have to be patient as it is 1 o’clock.

The Chairman adjourned the Committee without Question put (Standing Order No.88).

Adjourned till this day at Four o’clock.