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My Lords, these draft regulations were laid before the House on 8 June and, in case noble Lords think we are suffering from a small dose of déjà vu, similar regulations, which we debated at the time, were laid months ago for reasons that I will come to in a moment. Further regulations were laid concerning Northern Ireland a little while after that.
As the background to this SI, the Government acted in the Autumn Budget to reduce electricity costs to the benefit of all households with a domestic electricity meter by scrapping the energy company obligation—ECO—scheme and moving 75% of the domestic costs of the renewables obligation to the Exchequer. We have been able to provide immediate savings for households in kind. These actions also mean that the energy price cap grew by less than it would otherwise have done on 1 July this year.
On 27 May, Ofgem announced that the price cap level for the period from 1 July to 30 September would be set at £1,862—an increase of £221 from April. The changes that we made at the Autumn Budget are still factored into bills and, without that action, the price cap would be significantly higher.
This concerns the transfer of 75% of the levies on the renewables obligation scheme to the Exchequer. The renewables obligation scheme exists to incentivise UK renewable electricity generation through a system of tradeable certificates. Of course, it is not a current scheme—it closed to new applications in 2017—but existing sites will continue to receive support until the scheme ends in 2037. The scheme has been instrumental in taking a nascent renewable energy sector to where it is today, with the scheme supporting around 30% of total UK electricity generation.
The core of the renewables obligation scheme is a process in which electricity suppliers purchase certificates from renewables generators. This process continues unchanged. However, previously, suppliers ultimately recovered the costs of complying with their renewables obligations from consumers via electricity bills. Ofgem considered these costs when setting the quarterly price cap for domestic consumers in Great Britain.
From 1 April, the Government have instead been providing grant funding to electricity suppliers to cover 75% of the cost of these obligations attributable to domestic energy supply in GB. We have given a legal direction to electricity suppliers requiring them to pass these savings on to domestic consumers. Translated into the typical dual-fuel bill used by Ofgem, and accounting for other changes, our intervention delivered a reduction of £117 in the price cap on 1 April. Although the price cap on 1 July increased by £221 as a direct consequence of events in the Middle East, it would have been considerably higher still without the ongoing effect of moving the renewables obligation to the Exchequer, which continues to suppress bills.
I come to the vehicle through which those changes could be placed in legislation. The legislative basis for the grant funding that enables the energy bill reductions was originally due to expire in April; that is because the Energy Prices Act 2022 contained provisions that have been used, for the purpose of this legislation on these reductions, to sunset the possibility of those reductions being undertaken. As I mentioned, we debated the Energy Prices Act 2022 (Extension of Time Limit) Regulations 2026 in the Chamber this year. They came into force in April and extended the power so that it is now set to expire on 25 October. The regulations before us extend this time limit once more to ensure that the removal of costs from energy bills can continue.
I should say at this point by way of a confession that, when I was the shadow Energy Minister in opposition and took part in our consideration of the then Energy Prices Bill in 2022, I did state that I was rather concerned that some other Government might come along and use the provisions in that Bill for something else entirely. I was a little mollified by the fact that a sunset clause was placed in the Bill, but I consider that the changes that have been put into legislation here have a rather similar purpose to that of the Bill in 2022—at least as far as the clauses at that time are concerned; they aimed to provide additional assistance for people who had very high energy bills as a result of the Russian invasion of Ukraine and the volatility that resulted from that.