Truss: Energy Price Guarantee will ‘give people certainty’ on energy bills

Prime Minister Liz Truss’s opening speech on the energy policy debate in the House of Commons yesterday:

Earlier this week I promised I would deal with the soaring energy prices faced by families and businesses across the UK. And today I am delivering on that promise.

This Government is moving immediately to introduce a new Energy Price Guarantee that will give people certainty on energy bills.

It will curb inflation and boost growth.

This Guarantee – which includes a temporary suspension of green levies – means that from 1st October a typical household will pay no more than £2,500 per year for each of the next two years, while we get the energy market back on track.

This will save a typical household £1,000 a year. It comes in addition to the £400 Energy Bills Support Scheme.

This Guarantee supersedes the Ofgem price cap, and has been agreed with energy retailers.

We will deliver this by securing the wholesale price for energy, while putting in place long-term measures to secure future supplies at more affordable rates.

We are supporting this country through this winter and next, and tackling the root cause of high prices, so we are never in this position again.

For those using heating oil, living in park homes or those on heat networks, we will set up a fund so that all UK consumers can benefit from equivalent support.

We will also support all businesses, charities and public sector organisations with their energy costs this winter – offering an equivalent guarantee for 6 months.

After those 6 months we will provide further support to vulnerable sectors, such as hospitality, including our local pubs.

My Rt Hon Friend the Business Secretary will work with businesses to review where this should be targeted to make sure those most in need get support. This review will be concluded within 3 months, giving businesses certainty.

In the meantime, companies with the wherewithal need to be looking for ways they can improve energy efficiency and increase direct energy generation

We will be bringing forward emergency legislation to deliver this policy. And my Rt Hon Friend the Chancellor of the Exchequer will set out the expected costs as part of his fiscal statement later this month.

I can tell the House today that we will not be giving in to calls for this to be funded through a windfall tax.

That would undermine the national interest by discouraging the very investment we need to secure home-grown energy supplies. You can’t tax your way to growth.

Instead, we are taking an approach which is pro-growth, pro-business and pro the investment we need for energy security.

This is the moment to be bold. We are facing a global energy crisis and there are no ‘cost-free’ options.

There will be a cost to this intervention. However we are also acting immediately to defray the cost of this intervention in three ways.

Firstly, by ramping up supply.

Following on from the successful vaccine taskforce, we have created a new Energy Supply Taskforce under the leadership of Maddy McTernan.

They are already negotiating new long term energy contracts with domestic and international gas suppliers to immediately bring down the cost of this intervention.

We are also accelerating all sources of domestic energy, including North Sea oil and gas production.

We will be launching a new licensing round, which we expect to lead to over 100 new licences being awarded.

And we will speed up our deployment of all clean and renewable technologies including hydrogen, solar, carbon capture and storage, and wind… where we are already the world leader in offshore generation.

Renewable and nuclear generators will move onto Contracts for Difference to end the situation where electricity prices are set by the marginal price of gas.

This will mean generators are receiving a fair price, reflecting their cost of production, further bringing down the cost of this intervention.

Secondly, today’s action will deliver substantial benefits to our economy, boosting growth which increases tax receipts and gives certainty to business.

This intervention is expected to curb inflation by up to 5 percentage points, bringing a reduction in the cost of servicing government debt.

Thirdly, this morning, together with the Bank of England, we will set up a new scheme, worth up to £40 billion, to ensure that firms operating in wholesale energy markets have the liquidity they need to manage price volatility.

This will stabilise the market and decrease the likelihood that energy retailers need our support, like they did last Winter.

By increasing supply, boosting the economy and increasing liquidity in the market we will significantly reduce the cost to government of this intervention.

As well as dealing with the immediate situation we face, we are also dealing with the root causes.

Energy policy over the past decades has not focused enough on securing supply.

There’s no better example than nuclear, where the UK has not built a single new nuclear reactor in 25 years.

It’s not just about supply. The regulatory structures have failed, exposing the problems of having a price cap applied to the retail but not the wholesale market.

All of this has left us vulnerable to volatile global markets and malign actors in an increasingly geopolitical world.

That is why Putin is exploiting by weaponising energy supplies as part of his illegal war on Ukraine.

So as well as the action we are taking today on bills, we will use the next 2 years to make sure that the United Kingdom is never in this situation again.

I will be launching two reviews.

Firstly, a review of energy regulation to fix the underlying problems. We want a new approach which will address supply and affordability for the long term.

Secondly, we will conduct a review to ensure we deliver net zero by 2050 in a way that is pro-business and pro-growth. This review will be led by my Rt Hon Friend the member for Kingswood.

We are delivering a stable environment that gives investors the confidence to back gas as part of our transition to net zero.

We will end the moratorium on extracting our huge reserves of shale, which could get gas flowing in as soon as six months, where there is local support.

We will launch Great British Nuclear later this month – putting us on the path to deliver up to a quarter of our electricity generation with nuclear by 2050.

As a result of these steps on shale and nuclear and the acceleration of renewables, I am today setting a new ambition for our country.

Far from being dependent on the global energy market and the actions of malign actors, we will make sure the UK a net energy exporter by 2040.

And my Rt Hon Friend the Business Secretary will set out a plan in the next two months to make sure we achieve this.

I know businesses and families are very concerned about how they will get through this winter.

That’s why I felt it was important to act urgently to provide immediate help and support, as well as setting out our plan about how we are going to secure the UK’s future supplies.

This is part of my vision for rebuilding our economy.

Secure energy supply is vital to growth and prosperity. Yet it has been ignored for too long.

I will end the UK’s short-termist approach to energy security and supply once and for all.

That is what I promised on the steps of Downing Street.

Today we are acting decisively to deliver that pledge.

This will help us build a stronger, more resilient and more secure United Kingdom.

I commend this motion to the House.

UK GOVERNMENT BORROWING MORE TO BOLSTER OIL COMPANY PROFITS

Environmental campaigners have reacted to the UK Government plans for an energy price freeze funded by borrowing.

The UK Government will open a new licensing round for the North Sea next week, and is expected to give out over 100 permits for companies to look for more climate-wrecking oil and gas. This is despite climate science and energy experts warning that any new oil and gas projects will push the world well past dangerous climate limits.

Independent advisors have made it clear that increasing UK supply of oil and gas will have almost no impact on UK bills as prices are set by the international market.

Liz Truss also announced that her Government will lift the moratorium on shale gas. Scotland has a de facto ban on fracking.

In the first 6 months of 2022, 5 oil companies made over £80 billion in profits: Shell £16.6bn, BP £12.2bn, Exxonmobil £21.7bn, TotalEnergies £15.2bn, Chevron £14.5bn.

Friends of the Earth Scotland’s head of campaigns Mary Church said: “The impact of measures announced today to stop the immediate rise in household bills is welcome, but the approach taken by the new Prime Minister singularly fails to address the fundamental problems of a broken energy system that serves only to enrich oil company bosses and shareholders.

“The money the UK Government is borrowing will be pumped straight into the coffers of oil companies when it could have helped deliver the transition to clean, reliable renewables. People in the UK are being robbed by fossil fuel companies but instead of making them pay for the harm they are causing, Liz Truss has decided to borrow more money to keep paying the robbers.

“This energy price crisis is being driven by the price of fossil fuels and the only sure fire to prevent this happening again is a rapid and fair transition to renewable energy and a scaling up of energy efficiency.”

+ NORTH SEA OIL & GAS LICENCES
“Burning oil and gas is driving the climate emergency that sees tens of millions displaced by floods in Pakistan and has brought extreme heatwaves and drought across the UK. The UK Government is denying the reality of climate change by encouraging companies to seek out more fuel for the fire that is engulfing the world.

“The Scottish Government must be willing to stand up to these reckless plans to expand fossil fuels and hand out more licences for oil and gas companies to explore and drill in the North Sea. Ministers at Holyrood must speak out and use all the tools at their disposal to block any plans to further lock us into the oil and gas that is driving both the climate and cost of living crises.”

+ FRACKING
“The move to try reopen and force through fracking is a disgrace. Not only is the industry incredibly harmful in climate terms it also brings with it serious local health and environmental risks. Its laughable to suggest that fracked gas will deliver within 6 months. Communities have already successfully fought and stopped it in Northern Ireland, England and Scotland so wherever this dirty dangerous industry is proposed, it will be opposed once again.”

Commenting on the proposals announced by the government today to support households and businesses with energy bills, TUC General Secretary Frances O’Grady said: “Freezing energy bills this autumn is essential for families and to protect jobs and businesses.

“But the Prime Minister is making the wrong people pay. She should have imposed a much larger windfall tax on profiteering oil and gas giants. And she should have required all firms getting help with energy bills to commit to no lay-offs for the lifetime of the help, to protect livelihoods.

“And it’s not just energy bills soaring – so she needs to do more to help families get through the winter. That means a real plan to get wages rising, a big boost to universal credit, child benefit and pensions, and a massive rollout of home improvements to cut bills. And it’s time to bring energy retail into public ownership to make sure this crisis never happens again.”

The TUC says that the government should set out a programme to make UK living standards more resilient and the UK economy more resistant to a future crisis. This should include: 

• Increase the windfall tax to a fairer level relative to the excess profits oil and gas firms are making.
• Rapid rollout of home energy efficiency and taking the energy retail companies into public ownership – including a new approach to energy pricing with a free band of energy to cover basic lighting, heating, hot water and cooking.
• A plan to get pay rising for all workers – including stronger pay bargaining rights so that working people and their unions can make fair pay agreements across whole industries. 
• Increase the minimum wage to £15 an hour as soon as possible – by returning the UK to normal wage growth and having a more ambitious minimum wage target. 
• Social security that prevents poverty – universal credit and benefits should be raised to 80 percent of the national living wage, along with a significant boost to support for families with children.  

Commenting on the Prime Minister’s decision to end the moratorium on fracking, Tom Fyans, director of campaigns and policy at CPRE, the countryside charity, said:  ‘Giving fracking the green light is a hideous mistake.

“If the purpose is to tackle bank busting gas prices, it’s an exercise in futility. Even if we were to go full steam ahead on fracking, which nobody wants, least of all rural communities, it wouldn’t make a dent on the cost of energy anytime soon, or ever. 

‘Any move to industrialise the countryside and belch yet more fumes into our carbon-soaked atmosphere will prompt a furious response from local communities, drawn out planning delays and nationwide protests. Hardly a proposal to keep families warm this winter, or lower bills in the future. 

‘The new Chancellor got it right in March, when he said fracking “would take up to a decade to extract sufficient volumes — and it would come at a high cost for communities and our precious countryside.” Nothing has changed. 

‘Proposals to offer local people discounts on their bills in exchange for environmental destruction on their doorsteps need to be seen for what they are – a feeble attempt to bribe vulnerable rural communities to accept an unpopular, unsafe and polluting process that will destroy their tranquility. Local communities need to make their voices heard loud and clear – they were right to resist before and should continue to do so. 

‘The answer to the fossil fuel price crisis is to reduce usage with a mass insulation drive, alongside a clean energy sprint. There has never been a better time to transform our energy infrastructure to ensure a future of abundant green power. 

‘Renewables are around nine times cheaper and far quicker to plug in than any alternative. Families facing the biggest drop in living standards on record need renewable energy to become the central pillar of a modernised energy system. And they need it to happen fast.’ 

A LEADING property association has praised the Government’s package of measures to help those unable to afford rising energy costs. 

The National Association Of Property Buyers said the Prime Minister’s “swift and decisive intervention” would help many. 

Spokesman Jonathan Rolande said: “Looking at the energy and inflation crisis from the perspective of the property market, we welcome the swift and decisive intervention by the government to help households and businesses with the cost of energy by capping annual expenditure at an average of £2500.

“The impact of higher increases jeopardised so many facets of the economy it was almost impossible to over-exaggerate the terrible consequences there might have been – bankruptcies, unemployment, increased inflation, a house price crash – all were very possible.

“Bills and inflation still look set to rise. Interest rates may well do so too. But the cliff-edge has, for now, been avoided. Businesses and homeowners now have certainty about their budgets and can plan accordingly.

“There will of course be a price to pay, perhaps with higher bills or taxes in the future. But today at least, homeowners, businesses, charities and everyone in the property sector will be breathing a huge sigh of relief.”

Under proposals outlined today, a typical household energy bill will be capped at £2,500 annually until 2024.

The huge support scheme could cost up to £150bn, but Ms Truss refused to put a figure on it, saying “extraordinary times call for extraordinary measures”.

Businesses will get support, with bills capped for six months, a shorter period of protection than many had hoped for.

The help will be for everyone in England, Scotland and Wales with equivalent help for Northern Ireland.

But there are concerns the measures are not targeted enough, with no additional support for the most vulnerable. As a result, millions are still expected to be in fuel poverty this winter.

The energy price cap – the highest amount suppliers are allowed to charge households for every unit of energy they use – had been due to rise to £3,549 in October.

To limit the amount customers’ bills go up by, the government will compensate energy firms for the difference between the wholesale price for gas and electricity they pay and the amount they can charge customers.

The final cost of the scheme will depend on the cost of energy on the international energy markets, which can be extremely volatile.

The money to cover the support will be borrowed by the government, adding to the UK’s already large debt pile.