The House of Commons energy committee says the Treasury should explain its influence on energy policy.
Treasury ministers have given evidence in the past, but now they say it would be improper to comment on another department’s legislation.
The MPs believe this is disingenuous because the Treasury’s cap on the environmental levy on energy bills will effectively determine policy.
The Department of Energy and Climate Change’s Energy Bill is currently out to pre-legislative scrutiny.
The MPs’ protest raises a serious question about whether energy policy can be scrutinised as the government says it intends, if the department pulling some of the policy strings refuses to be questioned. The committee has now written to the Treasury asking for answers to key questions over the future of the levy on energy bills to fund low-carbon power. The Treasury has imposed a cap on the levy to limit the cost to households. The MPs want to know what happens if the UK cannot meet its legally binding target of 15% renewable energy by 2020 without breaching the cap. (The UK may face heavy fines if it misses the target). They want to know if the cap overrides government CO2 targets under the legally binding Climate Change Act, which mandates an 80% CO2 cut by 2050. They are also keen to find out how much research has been done by the Treasury on the impact of the energy levy cap on future investments in the UK’s energy infrastructure, which the government agrees are essential.
The questions are pointed:
“Would you accept that the introduction of the levy cap has created a new risk and undermined certainty for developers (of low carbon energy)?
“Would you accept that the new risks introduced by the presence of the levy cap will increase the cost of capital and may therefore undermine the whole purpose of the electricity market reform package?”
The MPs had hoped for replies before the Energy Secretary, Ed Davey, whose department has been in a long tussle with the Treasury over policy, appears before them on Tuesday afternoon. If the Treasury gives frank answers to the questions, the future of the UK’s energy policy will look a lot more clear.