The business secretary, Jacob Rees-Mogg, has been accused of launching a “power grab” as new legislation proposes to hand sweeping control over the energy industry to the government.
The government last week introduced the energy prices bill to parliament to formalise the energy price guarantee, Liz Truss’s flagship policy to reduce household bills by limiting the cost of 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 for the government to be able to effectively overrule Ofgem, the sector’s independent regulator.
The draft legislation proposes to hand “power of the secretary of state to modify energy licences” as well as the “power of the secretary of state to give directions”.
Ofgem is responsible for overseeing every element of a supplier’s licence, from ensuring vulnerable customers are correctly handled to rules governing smart meters.
If approved in its current form, the legislation could override the authority of Ofgem. The regulator has been bruised by the energy crisis after its efforts to increase competition were undermined as more than 30 suppliers went bust when gas prices rapidly escalated.
The Lords are expected to discuss the main principles and purpose of the bill at a second reading of the legislation on Wednesday. Energy companies are also unhappy that they were given little time to examine the legislation.
Dhara Vyas, the director of advocacy at Energy UK, said:“It’s astonishing that the government gave the energy industry just 24 hours to respond to a draft bill which unexpectedly proposes giving ministers broad and seemingly unlimited new powers over the regulation of the industry.
“While we certainly need swift legislation to enable the 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 examined and debated closely – is inexplicable. We are urging the government to reconsider so that they do not risk the measures which this bill should be delivering.”
A senior source at one large energy supplier accused Rees-Mogg of a power grab “worthy of Henry VIII”. He said: “It gives absolute power to the secretary of state over all rules governing all aspects of the UK’s energy industry, in perpetuity.”
“That means bypassing Ofgem and the entire licensing and regulatory regime without any safeguards or time constraints and no consultation or appeal process for anyone – supplier, generator, networks – affected by any decision.”
An executive at another large energy company said: “This power grab means that the government could control the network, governance, pricing, the ability to acquire assets and infrastructure. It’s nationalisation by stealth.”
Ofgem declined to comment. Its website states that parliamentary statutes establish its “duties and gives us powers to achieve our objectives”.
“The government is responsible for setting the policy for the energy sector and proposing any changes to this statutory framework. We have a clear role to play to support policy issues such as decarbonisation and we need to operate within this framework. We do not direct overall policy in the sector. However, where we think there are important policy gaps that affect consumers, we can call this out,” it said.
The business department did not respond to requests for comment.
The energy price guarantee and the energy bill relief scheme, designed to reduce bills for businesses, have effectively given policymakers significant influence over the business models of Britain’s suppliers.
Rees-Mogg had already angered the energy industry by suddenly announcing a windfall tax on low-carbon electricity generators last week.
Executives are concerned the scant details included in the proposals will further spook investors after six months in which the government has blown hot and cold on the idea.
Analysts are keen to discover the level of the cap and for how long the levy will be in place. Oil and gas firms were shocked to discover a windfall tax on their profits could last up to three years when a levy was announced earlier this year.