Business Secretary Jacob Rees-Mogg has been accused of launching a ‘power grab’ as new legislation proposes to give the government absolute control of the energy industry.
The government last week tabled the Energy Prices Bill in parliament to formalize the Energy Price Guarantee, Liz Truss’ flagship policy to lower household bills by limiting the cost of electricity. electricity and gas for two years.
However, the Guardian understands that energy suppliers have raised concerns with the Business Department that the legislation contains proposals to allow the government to be able to effectively overrule Ofgem, the independent regulator of the sector.
The bill proposes to confer “the power of the Secretary of State to modify energy licenses” as well as the “power of the Secretary of State to issue directives”.
Ofgem is responsible for overseeing every element of a supplier’s license, from ensuring vulnerable customers are properly treated to rules governing smart meters.
If approved in its current form, the legislation could override Ofgem’s authority. The regulator has been battered by the energy crisis after its efforts to increase competition were undermined as more than 30 suppliers went bankrupt when gas prices soared.
The Lords are expected to discuss the broad principles and purpose of the bill during a second reading of the legislation on Wednesday. Energy companies are also upset that they had little time to review the legislation.
Dhara Vyas, Advocacy Director at Energy UK, said: “It is amazing that the government has given the energy industry just 24 hours to respond to a bill which unexpectedly proposes giving ministers new sweeping and seemingly unlimited powers over the regulation of industry.
“While we certainly need swift legislation to enable support for households and businesses this winter, the decision to include longer-term measures in the bill with very significant potential consequences for the industry – which must therefore be closely examined and debated – is inexplicable.We urge the government to reconsider its decision so that it does not jeopardize the measures that this bill should bring.
A senior source at a major energy supplier accused Rees-Mogg of a “Henry VIII-like” power grab. He said: “This gives absolute power to the Secretary of State over all rules governing all aspects of the UK energy industry, in perpetuity.”
“It means bypassing Ofgem and the entire licensing and regulatory regime without any guarantees or time constraints and without any consultation or appeal process for anyone – supplier, generator, networks – affected by a decision.”
An executive from another major energy company said: “This takeover means the government could control the grid, governance, pricing, ability to acquire assets and infrastructure. It is a furtive nationalization.
Ofgem declined to comment. Its website states that the Acts of Parliament establish its “duties and give us the powers necessary to achieve our objectives”.
“The government is responsible for defining energy sector policy and proposing any changes to this regulatory framework. We have a clear role to play in supporting policy issues such as decarbonisation and we must operate within this framework. We do not direct the overall policy of the sector. However, where we believe there are significant policy shortcomings that affect consumers, we can point this out,” he said.
The sales department did not respond to requests for comment.
The Energy Price Guarantee and Energy Bill Relief Scheme, designed to reduce business bills, has effectively given policy makers significant influence over the business models of UK suppliers.
Rees-Mogg had already angered the energy industry by suddenly announcing a windfall tax on low-carbon electricity generators last week.
Executives fear the scant details included in the proposals could further scare off investors after six months in which the government blew hot and cold on the idea.
Analysts want to know the level of the cap and how long the levy will be in place. Oil and gas companies were shocked to find a windfall tax on their profits could last up to three years when a levy was announced earlier this year.