Business Committee look at carbon trading, emissions trading & Ofgem’s “RIIO 2” price-controls to protect consumers from overcharging

On Thursday morning, the Business, Energy and Industrial Strategy (BEIS) Committee will be holding a session looking at two energy related issues – i) Ofgem’s proposals for new energy network price controls (known as ‘RIIO 2’) ii) the future of carbon pricing and UK arrangements for an emissions trading scheme (ETS).

The BEIS Committee will hear from witnesses from Ofgem, Citizens Advice, and National Grid, and question Kwasi Kwarteng MP, Minister for Business, Energy and Clean Growth.

Ahead of Thursday’s session, the BEIS Committee has published correspondence from Kwasi Kwarteng MP, BEIS Minister. This Ministerial letter responds to earlier correspondence from Darren Jones, Chair of the BEIS Committee, on a series of issues relating to the UK ETS Common Framework, the Treasury’s proposals for a Carbon Emissions Tax and the post-transition period regime for UK carbon pricing, raised in the BEIS Committee’s earlier session on the ETS on 15^th October.

The BEIS Committee will be following up on these issues in the session with Kwasi Kwarteng, BEIS Minister, as part of the Committee’s scrutiny of the UK ETS Common Framework. The Committee are also likely to ask questions around the Government’s wider energy and clean growth policy.

RIIO-2 – network price controls (from 10.30am)

“RIIO” is the regulatory system that Ofgem uses to determine how much monopoly energy network companies can charge consumers for operating Britain’s power lines and gas pipes.

This session will investigate the issues around the current proposals for the new price controls (known as ‘RIIO 2’), which are due to come into force in 2021. Ofgem published ‘draft determinations’ (proposed new rules) for RIIO-2, the next set of network price controls, in July 2020.

This session is likely to look into some of the key principles behind the regulation including:

- ensuring the networks companies can operate the network securely and facilitate the transition to net zero,

- how consumers are supported and protected from excess costs,

- how Ofgem operates the price control process to be transparent and efficient.

ETS (from 11.30am)

The session on Thursday morning takes place amid recent media reports suggesting the Chancellor is planning a UK-wide carbon tax to replace the existing EU carbon-reduction scheme when the transition period finishes at the end of the year.

The ETS session will look at questions around the options for replacing the UK’s membership of the EU ETS, industrial competitiveness and carbon pricing, relationships with the devolved administrations, and how a new carbon pricing scheme will be aligned with the net zero target.

Evidence session: i) ‘RIIO 2’ – network price controls ii) The future of carbon pricing (UK Emissions trading system Common Framework inquiry), 10.30am, Thursday 12^th November

Witnesses:

10.30am on RIIO 2

• Jonathan Brearley, Chief Executive, Ofgem;
• Stew Horne, Principal Policy Manager – Energy Networks and Systems, Citizens Advice;
• Nicola Shaw, Executive Director UK, National Grid

At around 11.30 on ETS & Ministerial portfolio

• Rt Hon Kwasi Kwarteng MP, Minister for Business, Energy and Clean Growth, Department of Business, Energy and Industrial Strategy

Editor’s Notes

On 15th October, the BEIS Committee held a session looking at options for the future as the UK leaves the EU Emissions Trading System with witnesses include representatives from BP, Energy UK, and a number of experts, academics, and representatives, including from industries affected by the transition. Carbon-pricing was one of the topics raised during the recent MyBEIS public-engagement exercise undertaken by the BEIS Committee.

The carbon pricing session followed the public engagement ‘MyBEIS’ evidence hearing in July, where the BEIS Committee heard a pitch by Hannah Dillon, Head of Campaign, Zero Carbon Campaign, on the ‘Future of Carbon Pricing in the UK’. At the public hearing in July, the Business, Energy and Industrial Strategy (BEIS) Committee heard a series of pitches as the case was made for business, energy policy or climate change issues to be investigated by the BEIS Committee over the course of this Parliament. The ‘dragons-den’ style session format followed a call (in March) for the public to submit their own ideas for future Committee inquiries.