Official Report: Minutes of Evidence

The Chairperson (Mr Brett): I am pleased to welcome Nichola Hughes, executive director at Sustainable Northern Ireland. Nichola, you are very welcome. I will hand over to you at this stage.

Ms Nichola Hughes (Sustainable NI): Thank you, Chair. I will give a brief introduction about who I am. My name is Nichola Hughes, and I am the director at Sustainable NI. We are Northern Ireland's independent sustainability champion. We champion and promote the principles of sustainable development.

Thanks for the opportunity to give evidence. To frame this evidence, we bring a whole-system view and do not represent the interest of any one licensee or technology. We support the Bill and think that it is worth passing. It is a sensible, enabling measure, but, as drafted, it is a permission-only Bill. It states what the regulator may do to help the Department and leaves the Utility Regulator's duty under the Energy (Northern Ireland) Order 2003 unchanged. That duty, in practice, leans heavily towards short-term cost minimisation, which has slowed grid investment and renewable connection for over a decade. However, both things would bring down energy costs over the long term for consumers. That matters because the energy system, if you include electricity, heat and transport, accounts for close to half of Northern Ireland's carbon emissions. We have extremely challenging decarbonisation targets ahead of us. The first carbon budget runs until 2027, and decisions made in that budget, and particularly in the next budget, fall at a critical point in Northern Ireland's decarbonisation trajectory. Therefore, a facilitative Bill that is silent on duty, accountability and anticipatory investment is a missed opportunity to align the regulator’s operating framework with the pace of change that the carbon budgets demand.

We have set out a number of amendments in our written evidence, which we ask the Committee to consider. The first amendment, labelled amendment A, covers the main point, and it sets out a decarbonisation duty. There are two options: option A is to reopen the Energy (Northern Ireland) Order 2003 to include decarbonisation, but that would be more difficult politically; the other option is to have a free-standing decarbonisation duty in this piece of legislation, which would be a statutory duty so that the regulator can lawfully weigh long-term decarbonisation against short-term price considerations. That is the key amendment.

Amendment B covers reporting to the Assembly to give the regulator accountability in outlining its contribution to the energy sector through periodic reporting to the Committee and the Assembly.

Amendment C is about the duty to consult the industry, consumers, fuel poverty representatives and councils, which is fairly straightforward.

Amendment D is about anticipatory investment and links back to amendment A and the decarbonisation duty. The amendment would give explicit legal cover to invest ahead of need in the grid, instead of the just-in-time investment that we have seen to date. It changes the regulator's efficiency test when it decides what it lets the network recover when the budgets are set for the next regulatory period.

Amendment E is a suggestion for a broader scope to link the advisory role to the energy strategy, not just the Climate Change Act, and to widen the definition of the energy sector to cover heat, hydrogen, storage and flexibility.

Amendment F is around the just transition: decarbonisation must not fall hardest on those who are least able to pay. The amendment makes that explicit because fuel poverty is high in Northern Ireland.

Finally, amendment G is simply a review clause to create a three-year review in order that the framework can be improved without new legislation.

In short, the amendments turn a permission-only Bill into one that gives the regulator a clear duty, clear accountability and clear legal cover to invest ahead of need, while keeping fairness and the whole-system nature of the transition in mind.

We will be glad to take your questions.

The Chairperson (Mr Brett): Thank you very much. Thank you for setting out so clearly some of the Bill’s limitations, in your view and that of your organisation.

I am particularly interested in the point about aligning the Bill with the energy strategy action plan. Given that it is an Executive-agreed strategy, it should be politically acceptable to all parties. Can you talk about why that is important?

Ms Hughes: The Climate Change Act applies to the whole system and all sectors, and the direct read out of that is the energy strategy action plan. The energy sector makes up half of Northern Ireland's emissions, and, if more transport becomes electrified, in practice, the framework will be most relevant to the Utility Regulator's advice, rather than the Climate Change Act. It is about directly tying those two things together and making it clear that the Utility Regulator has a role in shaping that in the future, rather than being only a consultee.

The Chairperson (Mr Brett): Do you have a view on who the Utility Regulator can provide advice to? Should all Departments be able to seek advice directly from the Utility Regulator, rather than just the Department for the Economy?

Ms Hughes: All the Departments and the Consumer Council should be able to seek advice because it is a single energy system. The Utility Regulator should have a broader advice role so that it has the full freedom to look across the board on certain matters. I agree.

Mr Delargy: Thanks very much for your contribution. There are two points that I want to make. At the moment, I am particularly interested in how this is going to help households that are really struggling with the cost of energy. I want to get a better understanding as to how the regulation will help those households, and in the context of the three-year review, how that figure was arrived at. I am conscious, as are we all, that the energy market is very volatile and that it changes regularly. Is the mechanism regular enough to ensure that households are not disproportionately affected? Was there any discussion of whether there would need to be a tighter time frame around that, as well as how that figure was arrived at?

Ms Hughes: The proposed legislation is fairly broad-brush in nature, so I do not feel that there will be matters that will need to be adjusted on an annual basis; that would be overkill. There was no formal process to come to that figure. It was set at somewhere between one year and five, and three years was felt to be a suitable period. There should not be a sunset clause in the legislation; it should be ongoing. You should not have to bring in new legislation. There should be an opportunity to reopen the existing legislation in three years' time if it is not doing the job that it set out to do. That seems to be sensible to me, but it is just a suggestion.

Your other question was about consumer costs. I covered the point about fuel poverty issues. The one thing that will really lower costs in the long term, not the short term, will be to get more and more consumers on to cheap and free renewables. Of course, they are not free, because there is an initial capital outlay. That is a long-term approach. It is completely unfair that well-off households that are able to pay can install solar PV and access heat pumps, thereby enjoying lower energy costs. It is right that Northern Ireland takes a long-term approach and applies anticipatory investment. Instead of trimming the budget in an effort to keep costs as low as possible in the short term, we need to take a more sustainable and durable approach. We need to invest in the grid in order to decarbonise it further, which will, in the long term, be the one thing that brings down costs. That will take a bit of time, but it is the right thing to do for consumers.

Mr Delargy: Thanks for that. I wanted to understand the conversations with Department for Communities colleagues about this matter in particular. One of the issues that I hear a lot about from constituents in Derry — I am sure that everybody gets it — is energy efficiency, including around boiler replacement schemes, window replacement schemes and home insulation projects. Those were previously a lot easier to apply for and to get. I wanted to understand whether, in the short term, there are any ongoing policy changes that can be made in that regard. I wrote to the Minister a number of months ago about increasing that cap, which was very low and excluded a lot of households from access to those schemes. Has there been any sort of ongoing policy work with those teams across Departments?

Ms Hughes: That is probably not for me to speak to. However, I know that the Department for Communities has consulted on the warm healthy homes strategy, which contains enabling measures such as grants and schemes to reduce fuel poverty in the short term. We responded to that consultation, which was recently closed. That is good to see, and we support that; that should help.

Mr Delargy: Thank you.

Mr Kearney: To what extent have you, Nichola, and your organisation engaged directly with the Utility Regulator and the Consumer Council? Apart from responding to consultations, have you engaged directly with, for example, Department for Communities and DFE officials?

Ms Hughes: There has been very little engagement. We are a micro-organisation that does not have enough capacity. We tend to respond to the most impactful pieces of legislation and policy through consultation. We have not met the Utility Regulator or the Consumer Council directly. However, because we were giving evidence today, we extended an invitation to the Utility Regulator to meet, and we are planning to meet its senior management team next week for an informal introduction. There has been very little direct work or engagement with those bodies to date.

Mr Kearney: Would it be useful to be able to upscale that type of engagement?

Ms Hughes: Yes, it would. We are a non-profit charity, so we do the best that we can. I think that we are aligned, but it would be good to talk to those officials. I think that our principles and views are aligned. Without prejudging next week's meeting, my working understanding is that they would probably like some legal cover to allow them to do the job of decarbonising the grid, but, at the moment, they are being pulled by that kind of underlying cost-minimisation in the Energy Order. It is very difficult for them to do that and weigh up short- and long-term, competing time horizons.

I will not speak for them, but I think that what we propose would help them to do their job and give them some legal cover and clarity, and lower the risk of legal challenge. It will be interesting to talk to them. I am sure that we will pursue some more engagement and discussion.

Mr Kearney: Thank you.

Mr Honeyford: Thank you for your presentation and the information that came through on the amendments. I am interested to tease something out about fuel poverty. The type of fuel poverty that people are struggling with at the moment relates to home heating oil. Is there something that we can join up in the shorter term? You talked about decarbonisation in the longer term, but does something in the shorter term need to be built in to make sure that people who use home heating oil and the spikes that affect them can be dealt with and be part of the equation?

Ms Hughes: Yes, I agree about helping those who are most in need first through a triage or hierarchy system. That is what is proposed through the warm healthy homes fund. I agree that people who use oil are most vulnerable to those price shocks, and I agree with doing anything that can be done in the short term to alleviate the impacts of those price shocks and help those people. There is a dimension in which we see a correlation with rural households as well. I do not have data on that, but it is well known that people in rural locations are more dependent on oil and therefore more at risk of fuel poverty. It is a vicious cycle. We fully support there being some sort of prioritised support in the short term to help them.

Mr Honeyford: No bother. I am questioning whether the legislation itself needs to bring it in. How do we talk about fuel poverty if we do not identify its cause and look at those fuel spikes? We have had multiple people in the office regularly who have been affected by home heating oil, especially those in rural areas — you identified that rural connection — who have no alternative. We are talking about the longer term, but it is about how to do that in the short term in the legislation and make sure that those people are protected as well.

Ms Hughes: If members wanted to add further detail, our amendment F on a just transition is the place to do it. In general, my understanding of such Bills is that they need to be principle-oriented, rather than going into the detail of how it will be delivered. If you are really clear in speaking about the principles of decarbonisation and just transition, that will, by definition, make sure that the decarbonisation does not fall hardest on those who are least able to pay. The Utility Regulator should read that, be able to form its own advice and advise Departments on the schemes. I do not know whether you need to go into all the detail of the how and why. We have to get off oil and gas, as uncomfortable as that truth is. We have to get off oil first, and, then, we have to get off gas, but whether to make that more explicit is up to members. It is a fair point.

Mr Honeyford: I appreciate that. Thank you for your time.

The Chairperson (Mr Brett): Thank you very much indeed, Nichola, on behalf of the Committee. Once the Bill is going through the Assembly stages, I do not doubt that individual Committee members will be in touch with you to seek more of your advice. I thank you very much indeed.

Ms Hughes: Thank you, Chair and members.