Power for People is attempting to get a new Bill passed into law, which would encourage and enable the local supply of electricity. The Local Electricity Bill was set to be considered under the Ten Minute Rule on Tuesday 28 April, however due to the current timetable restrictions, this has now been postponed.
The group remains optimistic, calling for more people to petition their MPs to support the Bill. The law could “empower local communities to sell locally generated clean energy directly to local customers by establishing a statutory right to local supply” according to the group’s chief executive.
Meeting the needs of local communities
There is no doubt that local electricity supply is insufficiently supported by the current legal and regulatory regime. It is fiendishly difficult to achieve the licence required under the Electricity Act 1989 to sell electricity and gas directly to consumers.
Whilst the provisions are more relaxed in relation to commercial customers, consumers are rightly protected by the law. The unfortunate side effect of this is that the regulatory blanket effectively preserves the current monopoly of the large suppliers.
There have been inroads into the near complete grip that the big six have had on electricity supply over past years, but by whom? By small companies, who bear the brunt of fluctuating wholesale prices and find it the hardest to stay the course. Nearly 20 such companies – all small – went to the wall in the last year or so.
So how can a provision be found that encourages smaller supply, whilst still protecting consumers’ rights?
One of the problems with the current situation is to carve out provisions that focus wholly on renewable energy supply at local level, rather than energy supply per se.
It is currently the case that if a local community centre with a reasonable sized roof fits solar panels, then it can use the power generated in the operation of the building itself. But if there is an excess of supply, it has to go into the grid for a small reward (in the region of 5 pence per kWh), when the members of the community living on the same street have to pay an average of 14.37 pence per kWh for their own supplies.
Many community schemes are simply trying to facilitate a generator supplying excess generation from solar or wind to local people. To do so gives the generator a better return and allowing the consumer to pay less too. To split the difference would arrive at a figure around 9.5 pence per kWh. This would encourage local supply, help those paying for electricity, help the grid and enable more investment into local renewable energy projects. This in turn would help the country meet its obligations under the Climate Change Act 2008.
It is possible at present under exemptions provided by the Electricity Act but these are complex. So this latest Bill seeks to try and provide a better way.
The Local Electricity Bill
The Bill is a very short document, just four clauses long. Clause 1 states the purpose of the Act is to encourage and enable the local supply of electricity. It is surprising that this does not mention the necessity for this electricity to be from renewable sources and also does not link it here to local provision.
Clause 2 gives more detail in that local generation is introduced and a local supplier may set prices for the power. It accepts that a licence will be required for this and creates the new concept of a ‘local supply licence.’ Ofgem will remain as regulator.
Clause 3 provides a duty on Ofgem to issue a local supply licence to any generator if they basically understand what they are doing. Importantly, the costs of such a licence should be proportionate to the size of the business concerned and the regulations themselves must be “as simple and straightforward as possible.”
Ofgem will also specify the radius that will apply to such a local supply licence and this will be a matter for its own discretion.
Interpretation comes in Clause 4 and defines relevant business as including individuals and not for profit organisations.
So the thrust of the Bill appears to be that local generation by individuals and not for profit organisations can be supplied to local consumers with only a light touch level of regulation and oversight.
The previous paragraph used the word ‘appears’ because the wording of the Bill is not entirely clear. Private Members Bills are often drafted by non-lawyers and there numerous issues of interpretation with this Bill.
The fact that it does not seek to apply solely to renewable energy should be fatal. I am aware of no instances where local communities want to supply fossil fuels to each other at local level. The only local generation that could be relevant is diesel generators and that is not to be supported.
It is not clear how it will relate to numerous current arrangements, in particular the exemption under Schedule 4 to the Electricity (Class Exemptions from the Requirement for a Licence) Order 2001 (SI 2001 no 3270), providing for up to 2.5MW of electricity to be supplied to consumers, without a supply licence under the 1989 Act.
A large group of MPs have signalled their support to the Bill and many local authorities have also been approached. Whilst support for the concept of a better system is a given, this Bill has little prospect of ever reaching the statute book. Nonetheless perhaps it will suffice to give the valuable oxygen of publicity to the need for a solution to be found to this dilemma before too long.