Scottish Government

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 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.
• 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 areas that are devolved;
• enabling the Coal Authority to 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 the disclosure provisions of the Green Deal in relation to the private and social rented sectors and for disclosure to home owners. 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 the UK Government will consult with, and 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); 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 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 disclosure provisions of the Green Deal in relation to the private and social rented sectors and disclosure to home owners. 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), and intend to include in the Bill a broad enabling power for Scottish Ministers to use if we decide this is required

Consent mechanism - in any 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