 Ond, wrth gweithio gyda'r 13 ddweud o'r newid y ffordd ein genedliadau yn y Cymru ar y cyfnodol i'r 2022, sy'n ei bod yn ffawr y bwrdd. Yn ymateb 1, mae'r cyfarwydd oedd yn cyfnodol iawno cyfarwydd 5 i 6 o'r cydweithio. Cysnodol iawn o'r cyfnodol iawn o'r cyfnodol iawn o'r cymdeithas, o'r cyfnodol iawn o'r cyfnodol iawn o'r cyfnodol iawn o'r cyfnodol iawn o'r cyfnodol iawn o'r cydweithio. dda i i nodi ddech chi eisiau i gynhyrchu cyd-aig, rwy'n ei ddweud a'i ddangos cyflol a'i cyrd- хорошu strategiidd, Scotland Order 2022 wedi cyfnodol i gael i'r ddawr ar ôl. Patrick Harvie, minister-wyrd i gydych chi'n cyfnodol â Lleid-Eregrif, ddigitgliedig fodr ac rhaid hi i gymaen nhw yn wirwc ar ei hyn oedd, mae'r ddelfweithio o'u gilydd gymaen nhw yn ei gael i gyd-weithio'r ddelfwyr. I also welcome officials joining the minister this morning, Anastasia Chara Lampedu, Heating Planning Team Leader and Paul Gilbert, Senior Policy Advisor of the Scottish Government. This instrument is laid under the affirmative procedure, which means that the Parliament must approve it before it comes into effect. Following this evidence session, the committee will be invited at the next agenda item to consider a motion to approve the instrument. I will now invite the minister to make a short opening statement to minister over to you, please. Thank you very much, convener, and good morning colleagues. I'm grateful for the opportunity to give evidence today on the local heat and energy efficiency strategies Scotland order. I think that, as we're all aware, achieving our statutory targets for net zero and fuel poverty is going to mean transforming Scotland's building stock as set out in our heat and building strategy. We have to ensure that by 2045, our homes and buildings no longer contribute to climate change as part of the wider just transition to net zero. More specifically, by 2033, all homes should have achieved a good level of energy efficiency equivalent to energy performance certificate band C, and by 2030, emissions from heating our homes and buildings must be 68 per cent lower than 2020 levels. That's going to require very significant deployment of zero emission heating. Delivering that transformation will require concerted effort across national and local government as well as the wider public and private sectors. Locally led planning is going to be key to ensuring that the decarbonisation of heat and buildings is delivered in a way that's relevant to local contexts and tailored to the specific needs of communities. That locally led planning is needed to translate national and local net zero priorities into place-based strategies for heat decarbonisation and energy efficiency improvement. Local heat and energy efficiency strategies are the principal mechanism for this locally led planning. They will support local planning, co-ordination and delivery of the heat transition across communities in Scotland. The Scottish Government has been working closely with local authorities to test approaches for local heat and energy efficiency strategies. I would like to express my gratitude to all those who took part in the pilot programme, which involved all 32 Scottish local authorities and was a great example of partnership working between national and local government. Elhys will be structured in two parts. The local strategies themselves will provide a long-term strategic framework for the improvement of energy efficiency of homes and buildings in the local authorities area and the reduction of greenhouse gas emissions resulting from the heating of those buildings. Those strategies will be accompanied by delivery plans, which will set out how a local authority proposes to support the implementation of its strategy. The local heat and energy efficiency strategies Scotland order that we are debating today will place a duty on local authorities to produce strategies and delivery plans by the end of 2023 and update them on a five-year basis. If the committee in the parliament approves and the order is brought into force, it will create a clear statutory basis that will ensure consistency and comprehensive coverage across Scotland against the common minimum standard and raise the profile of local strategies with industries and investors. The order was developed in co-operation with COSLA. In particular, I would like to thank the COSLA environment and economy spokesperson, councillor Steve Heddle and COSLA's leaders for their support and for the partnership approach that has been taken forward in developing the local heat and energy efficiency strategies. Local authorities will need to be suitably resourced to undertake this new duty. Scottish Government officials are working together with COSLA to deliver appropriate funding to enable local authorities to access the necessary staff capacity and technical skills to produce their local heat and energy efficiency strategies. In conclusion, it is clear that local government has an absolutely critical role to play in the transition of Scotland's building stock to deliver net zero, and many local authorities are already driving forward action. Passing that order will ensure consistent, comprehensive coverage of local heat and energy efficiency strategies across Scotland. It will enable local planning, co-ordination and delivery of the decarbonisation of Scotland's homes and buildings. I look forward to the committee's discussions and questions. Thank you very much Minister for those opening remarks. We will now move on to questions. I will bring in Liam Kerr shortly. The first question that I have is that it goes to the primary purpose as you outlined of the instrument to place a duty on local authorities to produce local heat and energy efficiency strategies by 31 December 2023, which is a 20-month time frame. That might seem a sufficiently long time frame, but local authorities, as you know, will need more clarity about details of the Scottish Government's own plans in this area, especially the heat and building strategy, which I think that there is still a lot of detail to be confirmed about the heat in building strategy. For example, if you look at the terms of reference for the green heat finance task force, it will only report on heat decarbonisation by September 2023, which is only a couple of months before the deadline for local authorities to provide their strategies, which is not an enormous amount of time. I think that it would be helpful, Minister, if you could explain the timing for the establishment of the green heat finance task force, who the members will be, and the engagement that it will have going along the process, the engagement that it will have with local authorities. Thank you. There is a huge amount of work happening in this space, not just in the next year or two when local authorities have to deliver their first LHEs, but in the longer term. That is a multi-decade programme of work. The green heat finance task force, which is already up and running, has been published already. If the committee has not been sent that, I am sure that we can point you to the right part of the Scottish Government website, which details that work. That finance task force will be looking at the wide range of finance solutions that will be necessary over the long term to deliver this multi-decade programme of work and the large scale of investment, both private and public, that is going to be required. It is obviously tempting to think that, until we have completed every element of this multi-decade programme of work that we have not gone far and fast enough—I would be the first to say that Scotland and other countries are not yet at the place where we should be. A lot of the transition in many people's views should have taken place a long time ago, but now that we are under way, it is very clear that local authorities, with the resource that we are discussing with COSLA at the moment, will have the capacity to deliver their first LHEs by the end of next year. It would be wrong to assume that they cannot undertake that work until the finance task force has answered every question about the longer-term funding of the whole heat transition. In many ways, the first iteration of those strategies will be about identifying issues that local authorities are already looking at—the nature of their building stock, the likelihood of heat networks in different parts of the country, and the first national assessment of heat networks, the maps that have been developed by the Scottish Government that will help to inform that work are already available to them and more information is coming down the pipeline. There is a huge amount of work already under way on that. Local authorities will be able to complete their first LHEs by the end of next year. I do not have any doubt of that. The GreenHeat Finance Task Force will continue to indicate the longer-term solutions that are necessary for the much more substantial task that lies ahead in not just the years but the decades to come. You have indicated before in the chamber that the vast majority of funding for the heat and building strategy will have to come from the private sector, or at least public-private partnership co-financing. Where is the Scottish Government identifying mechanisms and identifying sources of private capital to finance the heat and building strategy? I guess that when the local authorities, when it comes to them providing and issuing their strategies, the question of how it is going to be financed is going to be absolutely central. Will we have further clarity on the question of sourcing of finance over the next 12 months to allow local authorities to put together proper strategies? The GreenHeat Finance Task Force is already up and running and meeting. It might be more appropriate if I was to offer to provide a written update to the committee in the near future about the work that the task force is already looking at. It is rather separate to resourcing local authorities to undertake the work that they are being given a duty to undertake by this order if it is passed. The scale of investment that is needed for the development of those strategies in the first instance over the next year and a half or so is significantly lower order than the scale of investment that is needed in the actual transformation of our building stock over the coming years and decades. I think that it would be helpful to perhaps separate those two things out. If I were to give you a written update at some point in the near future regarding the work of the task force. That would be helpful, minister. The strategies are a five-year strategy. Is that right? The strategies local governments will publish by 30 December 2023. How far ahead do they look in terms of timeframe? In the first instance, the first strategies had to be completed by the end of 2023 and will be updated on a five-yearly basis from that point onward. Obviously, the nature of the challenge will be different in different parts of the country. That is why locally led planning is so important. It would be appropriate for each local authority to identify what are the issues and challenges that need to be addressed in their first strategy. I think that it is fair to say that no one would be confidentially able to predict with precision exactly how the strategies are going to be implemented over the coming decades. That is why we are going through the process of giving local authorities not just the duty but the resources to be able to identify the circumstances that are right in their locations, develop the place-based approaches and update them on a five-year cycle. It does strike me that asking local authorities to, by 2023, when the bigger question of how this is all going to be financed has yet to be clarified, asking local authorities to provide a five-year strategy without answers to the question of how it is going to be financed, might be quite an onerous task for local authorities to put together a strategy without having that question of financing in place. I am sure that we will come back to that question in another session. Let me bring in Liam Kerr. Thank you, convener. Good morning, minister. It related points to the convener's question. First of all, regulation 5 of the instrument suggests that the Scottish Government will provide guidance to local authorities in assisting them to develop their plan. When does the Scottish Government expect to publish that guidance? How long, from your discussions with the likes of COSLA, do you anticipate the local authorities' needing between publication of the guidance and production of the plans? How are you going to ensure that there is sufficient time for the public bodies to prepare their final plans from the publication of that guidance? Our experience of working through the pilot phases of this gives us confidence that the local authorities, with the right resources and capacity in place, will be able to complete that work on the timescale that we have set out. As I said in my opening remarks, we have worked very well and closely with COSLA as a body and with individual local authorities that have been taking forward their pilots. I do not think that there has been significant concern raised from that point of view about the timescale for the first strategies. Moving on, you mentioned several times rightly so the point about resourcing and the need for presumably extra resourcing or repurposing of current staffing to provide these plans. What does the Scottish Government project that the cost will be to local authorities of that extra resourcing? Do you anticipate Scottish Government support in that resourcing? If so, is it covering the whole thing or just part of it? It would be inappropriate to tell you the outcome now or to predict the outcome now of the discussions that we are taking forward with COSLA. It needs to be done in a way that is co-operative and collegiate with local government. That is the spirit with which we are entering this. However, if I can give you an indicative example, the pilot phase most recently taken forward with local authorities offered the option for them to bid for up to £50,000 for staff capacity or consultant capacity to undertake their work in the pilot phase. I think that those who followed that through to its completion most were slightly over half of the £25,000 upwards to mid-30s. That is the level of funding that they drew down from that offer. I think that that is an indicative example of the kind of ballpark that we might be talking about. However, it would be wrong to pre-empt the discussion that we are having with COSLA and try to predict what the outcome of that discussion would be at that stage. That is helpful. No further questions. Thank you very much, Liam. Let me bring in Fiona Hyslop. Good morning, minister. You will be aware that the committee is conducting an inquiry into local government and its partners in delivery of net zero. In your statement, you said that those strategies and plans would need to be comprehensive and place-based. Clearly, if they are place-based, local authorities do not have control of all the levers or indeed ownership of properties or ownership of space or land within that place-based approach. They are really dependent on working in partnership with others. In our evidence, we have heard that although local councils understand their role in leadership, there are certain skills that they will not have. £50,000 for a consultant will not help with the finance, for example. You have indicated that you think that the finance is separate. It is quite clear that it will need to be integral in helping local authorities to mobilise both your private capital and so on. That is one of the skill bases that they have already said that they would need support on or to find better ways of collective approach. It might not be in the strategy and delivery plan duty, which is the order today—that makes common sense, we understand that—but it is perhaps in the guidance that there needs to be better, quicker and more comprehensive support for councils to ensure that they can deliver that comprehensive and place-based approach. Do you acknowledge that perhaps it is not just the case of providing a duty and responsibility and leaving councils to get almost things, but that integrated support through guidance and other aspects is going to be absolutely critical? Yes, I do. It is certainly nowhere near our intentions to simply give the duty to councils and leave them to get on with it. We intend to continue the very strong and collaborative work between central and local government, which has got us to this stage already, which has shown that, in many parts of the country, there is great enthusiasm for taking this agenda forward. Fiona Hyslop is quite right to say that the needs in terms of capacity and skills may change over time. What councils will need in order to go through the first iteration to get their first strategies and delivery plans published may be different than what they need two, three, five or seven years to align as they continue to implement the delivery of those strategies and as they see a range of different solutions in place. For example, there will be not only differences in building stock and geography and climate and so on, but there will be differences in terms of the mix of energy sources that local authorities have at the moment. Already some will have their own local energy companies delivering heat networks, delivering decarbonisation already. Others may not be at that stage yet, but they may see the opportunity to develop those. The capacity that has been developed through that experience will also vary from council to council. That is why we need to work with councils on their own terms and in a way that is empowering to them. Achieving the Scotland-wide net zero and fuel poverty targets but empowering each local authority to decide the best way to do that in their local circumstances. Mark Ruskell, who is joining us remotely, has a question. Mark, over to you. Mark Ruskell has obviously been a lot of debate around how we need to democratise energy minister. There has been much debate in the Parliament about the idea of a national energy company. Do you see the potential for local energy companies to be developed as a result of the work on this strategy? I think that you already mentioned that there are some examples, but do you see that as being something that could accelerate as local authorities work through what is appropriate for their own areas? That will also be one of the areas of work of the new national public energy agency, which will be launching later this year. When we published the heat networks delivery plan, for example, I visited Queen's Key in West Dunbartonshire, one example of where a local authority is already giving leadership, showing that the development of capacity in heat decarbonisation and in heat networks can be of benefit to the local economy, of benefit to democratisation within our energy system and also working in a way that will create opportunities for the private sector to connect to that network and to gain co-benefits. There will be other local authorities that have not yet gone down that road but would see the opportunity to do so in future, and they will need to support to share skills and to gain the capacity that is required to make that happen. The experience to date, as well as the potential support that will come from not only Scottish Government support and resourcing but also working with the new agency will show huge potential for that. That has been quite a good discussion. It seems that there is a lot of support for the order itself, but some issues have been raised about resourcing and capacity and timescale. It was good that we are having a proper discussion today. I agree with what you said about locally led planning. You really emphasised that in your opening remarks. Do you recognise that planning departments in local governments have been shrinking in recent years? We have heard at this committee in our inquiry that there has been a reduction of about 20 per cent in terms of planning officers, and we know that there is quite a lot of work to do on skills, particularly when we need a multi-decade approach to work. Alongside those discussions about resourcing, has the Government recognised that there has been quite a big reduction in the planning workforce and what has been done to actively address that? I think that the question of resourcing needs to respect the discussion that is continuing to take place between the Scottish Government and COSLA. Obviously, after the upcoming elections, we will see new leadership in some local authorities. We will see, hopefully, many local champions of this work across the political spectrum and across all local authorities. The Scottish Government will work actively and constructively with individual local authorities and with COSLA to address the issues of capacity. Once again, I have to say that the discussions on specific resourcing need to be allowed to continue. We will need to take account of the decision of Parliament in passing that order before we are able to specify exactly what that funding is going to be. Indeed. For clarity, I think that the deputy convener mentioned finance, as an example of some of the skillset that will be required. I wonder if you could be specific about some of the other skills that you feel are integral to this work so that we can deliver on the ambition for local heat and energy efficiency planning Scotland-wide. What are the examples of skills that you have in mind when we think about this discussion? I will ask my colleagues to say a little more about the pilot phase and the experience of local authorities in taking forward those and the types of skill sets that they have built up during that. Paul, would you like to jump in at this stage? In terms of the pilots, it is not just the planning teams at local authorities. This has been a real success story in bringing a lot of the local authority together and working across teams that never normally work alongside each other. There are energy services, housing, people in fuel poverty areas and planning as well as other parts of the local authority. It is bringing those expertise together and allowing them to look across the challenge that they have around heat decarbonisation, to address greenhouse gas emissions and to address aspects of building energy efficiency and fuel poverty and to work collectively there. It is the full skill of the local authority in a lot of those areas and procurement. On the ground skills, there is a technical element to the planning activity. Some local authorities have that capability in-house and others have chosen to procure consultants when they have had the opportunity to do so in terms of technical work around planning around visualisation of what those pathways might look like. However, there are skills around engagement as well and working with communities on reaching out in that sense. No, thank you. It is obviously going to be a real multidisciplinary approach. Just the last question then, because we have talked a little bit about routes into local government, including apprenticeships, we understand that there is an opportunity for planning apprenticeship in England, possibly Wales, but not in Scotland right now. Given the national importance of that work, what is Government doing to work with colleagues, perhaps in education skills, to make communities aware that those are really important jobs, really important green jobs, and to promote that work? Right now we have young people sitting in exams and thinking about life after school and perhaps local government does not seem like the most exciting place, but how can we promote that work and get people infused? I am sure that Monica Lennon and I would agree completely that local government is an extremely exciting place to work. Not only that, but the heating buildings agenda more generally. Beyond LHEs, we also have the clear commitment to introduce regulations on a phased schedule of regulations to ensure that our homes and buildings are brought up to standard, both in terms of energy efficiency and the transition to zero emissions heating. I think that that clear sense of a long-term agenda that the Scottish Government and the local government working together are committed to that long-term agenda will give confidence to the industry to invest in the recruitment, the training and the skills that are necessary, and that in turn will send strong signals, for example, to the FE sector about the opportunities there. I believe very firmly that there are not only good jobs but long-term high-quality careers to be had in that transition. It is a massive investment in the transformation of our building stock. It has to be done to a high quality and it has to be done in a way that meets people's needs in terms of fuel poverty as well, a just transition. That means that there is a huge amount of work that needs doing. The Scottish Government is committed not only to signalling the long-term commitment to seeing that work through but also to maximising the investment, both from public and private sources, to ensure that that work is well funded. I really think that we should see that more as an opportunity than just as a challenge. It is a huge technical challenge but it is a really big opportunity for our economy as well. Great, thank you. That is helpful. Thanks very much Monica. Minister, final question. You mentioned the national energy agency. The cabinet secretary Michael Matheson has told this committee that this will be a virtual only agency with no additional staffing. Given the scale of the challenge that you have just outlined, is this really a sufficient response to the challenges that you have outlined? I think that the launch of the agency on a virtual basis in the first instance is the right way forward. We have a huge amount of work already in this area that can be brought together under the auspices, under the heading of that agency and can continue and develop from there on. It would be a mistake simply to think that the creation of this agency is about a building and a front door and that kind of infrastructure rather than cracking on with the work that is already happening and continuing to develop it. The launch of the agency in the first instance on a virtual basis will support that continued incremental improvement to the entry end of that already being taken forward across Scotland. I see it as a huge opportunity as well for sharing the skills and the best practice that are going to be necessary to support both public, private and community sectors to take that forward. I understand the virtual part of it in terms of the speed of response but the no additional staffing part of it, I am struggling to understand given the scale of the challenge. Given that this is, again, separate from the LHEE's order that we are debating today, it might be appropriate for either myself or the cabinet secretary to write to the committee if there has not been a recent update on that. I think that very clearly, for example, the agencies and organisations that we work with already to deliver not just the in buildings agenda but support on fuel poverty, energy efficiency. That work has already resourced, it has already seen increases in resources since the beginning of the current cost of living crisis. We have been keen to ensure that we maximise uptake and availability of the grant loan and other advice services that are available. As we continue to develop and embed that throughout Scotland, the new agency will take on a key role in bringing that together but also improving the way that it is delivered throughout Scotland. Okay, thank you very much. There are no further questions for this session. The next agenda item is the formal consideration of motion 03605, calling for the committee to recommend approval of the local heat and energy efficiency strategies Scotland Order 2022. I now invite the minister to speak to or simply move this motion. Thank you, convener. I'm very happy to move the motion in my name, which seeks at the local heat and energy efficiency strategies Scotland Order 2022 to be approved. Thank you very much, minister. Are there any further contributions from members? No, okay, that's fine. Minister, do you wish to sum up or make any further remarks? I don't think that that's necessary. Great, thank you very much. The question, therefore, is that motion 03605 in the name of Patrick Harvey MSP be approved? Are we all agreed? That is agreed. The committee will report on the outcome of this instrument in due course. I invite the committee to delegate authority to me as convener to approve the draft report for publication. That is so approved. Thank you very much. Minister, thank you for joining us and for your officials for joining us this morning. I will now briefly suspend the meeting for the setup of the next item. Thank you. Have a good day. That's the word. Thank you very much. Welcome back everyone. Our next item is our second evidence session in relation to our inquiry into energy prices. This inquiry is looking into what is driving the increase in energy prices, what impact it is having and what can be done to alleviate that. Today we will hear from two panels. The first panel will focus on the impact of rising prices on consumers and the second panel is a panel of energy producers and suppliers. I'm pleased to welcome our first panel this morning who are joining us remotely. Chris Burt, Associate Director for Scotland, Joseph Rowntree Foundation, Fraser Scott, Chief Executive Officer, Energy Action Scotland and Alistair Wilcox, Senior Policy Officer Citizens Advice Scotland. Good morning everyone. Thank you very much for joining the committee this morning. We're delighted to have you this morning. We've allocated around 70 minutes for this panel session and we will move straight on to questions. In previous evidence sessions that we've had on this inquiry, we've heard that there is a significant amount of advice available to consumers, including those who are suffering from fuel poverty on measures that they can take to limit energy consumption as far as possible. However, we've also heard that this advice is highly fragmented and it's advice that comes across many different organisations and some consumers are struggling in terms of where to start looking for the best advice and there is a level of confusion. I would like to get the panel's views on how the Scottish Government and other organisations can make the best advice and information readily available and perhaps address some of the confusion that seems to be surrounding the availability of advice. Perhaps I'll put this question to all of our panel in the order of, first of all, Chris, then Fraser, then Alistair. Chris, over to you please. Thanks, convener. I defer to Fraser and Alistair on the specific advice that is available for people. I suppose that I'd make a more general point, though, that there is only so much advice that you can give to people when their bills are increasing by £500, £700, £1,000. Martin Lewis, the money expert, has put this quite succinctly in that saying that there is, in many respects, no way to budget yourself out of those issues. I think that it was a member of your panel last week who said that the cost of living crisis is being managed in homes across the country and not by Government. I think that that would be a key message that I would want to get across to the committee today and allow Alistair and Fraser to address your advice issue. However, I should say that it is sort of endemic across public services and advice services for people of low incomes that we have created systems that are myriad in their complexity and are incredibly difficult for people to navigate. Thanks very much, Chris. You raised a number of points that I know members will want to come in on in terms of points that go beyond availability of advice, so thank you very much for that. If I could bring in Fraser and then Alistair on the question of advice, Fraser, please. Thank you, convener, and thank you, committee members, for inviting us along this morning. In the 40 years of our charity, there has never been such a dreadful time. Sudden and dramatic increases the deepening of fuel poverty for so many households. It is hardly surprising that more and more people are looking for support and assistance. It is a dreadful time and incredibly worrying time for many and is putting the lives and the health and wellbeing of families across Scotland at incredible risk at this particular time. They need the best advice that they are able to get, but it has been fair to say that, over all of this time—since the beginning of the pandemic perhaps—the call on advice and support services has been tremendous and it has continued to ramp and continue to increase. As we sit today, many of our local trusted charity organisations out there, the front line of support, are having to put people off. They simply have their phone lines going on where they are being answered. There are now weeks-long, if not multiple weeks before advice can be delivered to people in crisis. People in crisis need support when they need it, and at the moment, we are all collectively failing those households. The consequence of that will be that detriment to health and wellbeing. You are right at this committee to be considering how best to support households at this time. One of the things that I would be keen to urge is that there ought to be a national information programme for this incredible difficult period that we are facing. October and the winter ahead will be absolutely dreadful for far too many households. Indeed, the expansion in the number of households from fuel poverty to over one in three households from pre-pandemic one in four households is a tremendous change. In some parts of Scotland, it is far deeper than that. To have almost 600,000 households in extreme fuel poverty by the Scottish Government's definition is an absolute dreadful position to be in. I am fearful of the winter in terms of the loss of life, as excess winter mortality is likely to increase. Without the right kinds of support and assistance, people need to be able to make choices. At this time, as Chris Brown said rightly, the choices are few and far between is becoming a case of where people are not having to choose between eating or eating at all, as they simply cannot afford to do enough of either. Therefore, we are facing one of the most difficult times that we will ever face. Thank you very much, Fraser, for that perspective. Alistair, perhaps I could address the same question to you, please. We cannot hear you at the moment, Alistair. I am going to ask my broadcast colleagues to unmute your microphone. Do you want to try again, Alistair? Thank you, convener. Can you hear me now? Yeah, that's better. Thank you. Thank you for the invitation to appear before you this morning. I just wish to start off by echoing many of Chris Brown and Fraser's comments. The importance of advice that you touched on is probably something that is now widely recognised, but there is probably an unanswered question still about how to co-ordinate that provision in a way that people can access advice when they need it. One of the things that we have been talking about for quite some time is that we feel that it is really important that consumers have the opportunity to get advice in locations and at times that are most suitable to them. There should be no wrong doors for advice. It should be all joined up in an ideal world. That advice should be wrapped around, so it should not just look to focus on one specific thing. It should try to refer on to partner organisations that are perhaps better placed to take specific areas of advice forward in greater detail. However, it is also really important to talk about how all this is funded. You can create frameworks that work perhaps a bit more effectively so that everything joins up together a bit more. I know that it is not just something in the advice sector and in government that gets talked about a lot. It is also something that gets talked about in the energy industry, with suppliers and with network companies as well, about how all this can come together, so that we work to the best effect together to deliver advice to consumers who are in need. One of the things that I think is lacking at the minute is a long-term joined-up approach to how all this is funded. The need to have effectively boots on the ground places in communities that people can go to to speak to, people about whatever it is that they need advice on is really important. That is not generally something that centralised national organisations are particularly effective at. We have a range of grassroots organisations all over the country that are very good, many if not all of them are extremely stretched at the minute. I have to say that one of the things that we found quite disappointing in the Scottish Government's recent fuel poverty strategy was that there was not a particularly comprehensive vision of how government and its industry and third party stakeholders can work most effectively together to make sure that our common objectives are delivered and that people can actually get the information that they need at the time they need it, where they need it, in a format that is actually most appropriate for them. Sometimes that's going to be in people's homes, sometimes that's going to be in an office on a high street somewhere, sometimes that's going to be over the phone or by web chat. It's important that all of these things are looked at, but we feel as though there's a kind of multi-stakeholder approach that's required and at the moment what we've not seen really is that kind of clarity from government that they see things in the same way as perhaps a lot of the stakeholders do. Thank you very much Alasdair. I have a supplemental question that relates to some of the issues brought up in those opening remarks. The significant increase in demand for your services is not surprising, but given that significant increase, have you, have each organisation been able to increase your staffing, been able to increase the level of advice that you're able to give in this area? Could the Scottish Government do more to support you in doing so? Perhaps I can put that question in reverse order, so Alasdair first, then Fraser and then Chris, please. In terms of resourcing, it has been a live issue for about 18 months or so now, but we actually don't know what's happening with the future of the worm home discount scheme in Scotland. Now a lot of people know the worm home discount scheme as an energy bill rebate scheme. In the past it's provided £140 a year off of certain consumers' bills if they are eligible for that support, but there is a portion of that money that is segmented for what the industry calls industry initiatives. Some of those industry initiatives support the provision of advice in communities across Great Britain. Some of those projects are in Scotland, and perhaps Fraser will come in and expand on that point, because I know that he's been very concerned about that as well. What has happened is that, because the energy suppliers have been unsure of what the situation on industry initiatives is going to be in Scotland, they have been unable to commit to continued funding of advice services in Scotland. We know that, certainly earlier in the year, there were potentially 35 full-time equivalent advice roles that were seriously threatened by this lack of clarity, and I accept that there has been some disagreement between Scottish Government and UK Government about what the way forward on worm home discount should be. I understand that we are shortly to see a consultation on what the scheme might look like in Scotland, but certainly from the figures that we had seen most recently from the Scottish Government when it was talking about its preferred option, which was to create what it preferred to be a single flexible pot of funding, which was money that would be levied from consumers energy bills for the energy company obligation and the worm home discount scheme. Effectively, the Scottish Government would have the opportunity to direct to a certain extent how that single flexible pot of funding would actually be spent. When we drilled down into the figures that we eventually got from Scottish Government in December, it looked to us as to the amount of money that would be available for the provision of advice. The provision of crisis support for energy consumers would be significantly less under the Scottish Government's proposals than it would have been under a scheme that operated more consistently with how things had gone before. The old schemes were not perfect. There were a lot of things that could be done to change them, but we were very concerned about the apparent lack of clarity in the field poverty strategy about the role for advice and how the Scottish Government would support that and facilitate that. At the same time, the idea that, through its ideas on a single flexible pot, the potential funding for advice would also be less than perhaps what we were used to when the entire sector was expecting, not just as a result of the energy crisis but as a result of the just transition to net zero. The demand for advice and the need for that advice will only increase. There is a mismatch, if you like, between the resources that seem to be being offered and the need for those services going forward. Alasdair, you covered a number of points there, which I am sure my colleagues will want to pick up on. Fraser, if I could ask the same question to you please. It is fair to say that, just to reiterate some of the points that Alasdair has made as well, yes, absolutely. The advice services that exist across Scotland are funded in a myriad of different ways. One of the main routes for a lot of the more dedicated advice on energy and energy debt would be things like a worm home discount, which we have yet to hear what will happen in Scotland, and it has caused real issues. That is not a time when organisations have been able to expand their staffing. In fact, many of the local organisations have struggled to recruit staff, and therefore we are losing capacity across Scotland at this particular time. Some of the organisations have lost capacity because of the uncertainty around funding, which comes on an annual basis. The worm home discount was a prime example of that because, as we say, we have yet to know what will happen to the worm home discount allocations in Scotland. Alasdair points out that it will indeed fall. It will probably fall from 10.1 per cent to 9.4 per cent of the amount of money that is available in GB, which is a significant fall. However, we have organisations right now that are going to fund on their reserves whilst they are awaiting decisions for funding, decisions that they are now not expecting until May of this year. Those organisations are not large financial institutions. Those are local, not-for-profit organisations, running on reserves and waiting on a decision against which there is always uncertainty. There is no real window for them at that point, other than services will simply stop or be reduced. That is what is happening at this particular time. There is a real risk that we will reduce our services. It is actually happening, and we are struggling to recruit people and then to train them so that they are at a position where they can provide high-quality support and advice. Face-to-face is absolutely the most effective kind of support for the most vulnerable of people. I think that we have heard time and time again publications from Glasgow Caledonian University. All of which proved that face-to-face advice is the most effective for vulnerable low-income households. We are seeing so much demand at this point in time. We really need an army of people out there supporting people to get the best results, but we are not there. We are quite a long way from where we need to be, because this is an absolute crisis. Let's make no mistake about it. We have never seen anything like this. This is an unprecedented moment, and I know that we have said that a lot over the past few years, but it is genuinely unprecedented times. We are perhaps facing a cliff edge in our communities in terms of affordability for people, and we simply do not have the capacity out there or the skilled people. Chris Burt, if I could address the same question to you, please. We do not directly provide advice services ourselves, so I will not add much simply to echo Fraser's closing remarks that we are in a deep crisis where we need to provide that army of support that Fraser has talked about. As he said, we are a long way from that. Thank you very much, Chris. Let me bring in Fiona Hyslop. Fiona, please. The sheer scale and speed of this energy-priced crisis is overwhelming our constituents. The concern is that, if we wait until October and a second potential price can't rise again, that that might be too late. There has already been policy funding and support by the Scottish Government and the UK Government, but I will ask you what immediate support needs to be put in place, what type of policy and funding trade is required, and whether it is the Scottish Government and the UK Government collectively, or indeed Parmintowns, is treating it as the crisis, most obviously. For policy advice, I will come to Chris Burt first, please. To answer your last question first, I do not think collectively as a society, as a Government, whether it is the UK or the Scottish Government, we are treating it as the deep crisis that it is. Perhaps that is explained by us just coming out of another one, but we are not even out of the Covid crisis. We know the impact that that has had on low-income families already, and then we are piling on top of that a frightening rise in people's energy bills in particular, and we see that pulling through into rising food prices, transport costs, et cetera, et cetera. However, I have heard that described as a perfect storm, but to me a storm is something that we cannot control. That is the weather. We can control how households are able to deal with those rising prices. It is not the rising prices that make this a crisis, it is that people's incomes have been eroded consistently for 10 years. We have just seen the biggest real-term cut in the basic rate of social security while inflation is at a 30-year high. That will deeply damage people across Scotland and across the UK. The UK Government's response to the crisis has been woefully inadequate. The £200 loan alone in this situation is ridiculous in and of itself. The £150 council tax rebate, which sadly has been copied by the Scottish Government and is a huge missed opportunity, is spreading support too thin. We constantly hear that Governments have to be able to pay for the support that they give to people and they cannot support everyone. Nobody is asking them to support everyone. They should be supporting the households that we need the most. What we should be seeing is far more targeted financial support to families who need it the most. From the UK Government through the social security system and the Scottish Government through things such as the child payment, which, to be fair, is increasing this year, and that will be a welcome support to families with children. We should not forget that, with the increase in prices, we have done calculations that show that single households after the housing costs will be spending half of the rest of their income on their energy bills, leaving them with about £6 a day to survive on. I think that the Scottish Government should be turning over every rock. As I said in the beginning, the crisis has been pushed on to families and to advise services that my colleagues have been talking about, but there is only so much that the crisis needs to come on to the deaths of Governments and immediately they need to take action, because lives are at risk. Can I ask Fraser the same question? Perhaps he might want to focus on single older people, for references that have already been made to children. I will echo a bit of what Chris has said. I do not think that people are taking this seriously or seriously enough. Quite clearly, the UK Government has not its woeful and adequate supports that it talks about, and I use that term loosely, the supports that I identify are all simply being eroded as energy prices and inflation rages, and therefore all of those supports are diminished in real terms. That £140 that may rise to £150 on the warm home discount once upon a time would have brought you a considerable amount more comfort than it will buy you now. In fact, the £10 increase may, by the time that we get to October, equate to a single day for an average GB household. That is not a huge support. I simply say that it has not been good enough thus far, that it simply has not been good enough. We know who many of the most vulnerable people are in society at this point. You are right to say that older households certainly will feel this particularly over all of this period. For the length of time that this is going to persist, I think that you have committees heard before that analysts are predicting that these higher than, say, 2020 prices will be with us for at least two to three years, which is an incredibly long time. The impact that that is going to have on households will be eroding households who had the luxury of having things like savings. They will just be eroded to the point at which they are no longer there. For far too many other households, they had none of those. No savings, nothing in place, they are struggling on a daily basis to budget. Yes, absolutely older households. I would ask of the Scottish Government where it can is to target better, to target those households where it knows the vulnerabilities exist. I look to things like people who have essential medical needs, who have equipment that cannot be switched off, who are absolutely terrified of energy bills at this point in time, whether they are refrigerating medicines or whether they have oxygen or dialysis machines. No one has offered them a quantum of scaled support to help those kinds of households at this point in time. It is the same support universally, thinly applied, and we need to do a lot better. We know that it is older households, people with medical conditions, single parent families with young children, all of whom are going to struggle, and we are offering at this point in time no scaled support. I think that I would echo what Chris said in his remarks about the support that has been offered just now by Scottish and UK Governments to a greater or lesser extent has been spread quite thinly. Although large sums of money by the time it filters down to individual households, the impact of that help is quite dilute. Although the energy crisis affects us all, it does not affect us all equally. Some of us have broader shoulders than others. At the moment, what we have not seen is that deep targeted support from either Government. What we heard last week from the large legacy suppliers who were given evidence to the Westminster committee was the unanimous view that the crisis is bigger than the industry can cope with on its own. They are looking very seriously for more help to come from UK Government. I think that we would absolutely echo those sentiments that this is bigger than any one industry or one player can actually fix by itself. However, that is not to say that the Scottish Government cannot do things by itself. What we have seen so far from both Governments is almost a sense of, we will wait and see what happens and will respond at the time. It might just be an appearance, but it appears that the support that is being offered is being cobbled together at fairly short notice. It is almost a knee-jerk response. We wrote to officials in September to set out our expectations that what we have seen in terms of market behaviour in the summer and the long-run costs from that, we were fully expecting that Scottish Government would need to think about how it would support the most vulnerable consumers possibly for a period of about 13 months. What we got in response at the time was a package of measures that would see us through the three months of the winter period. There is a mismatch in terms of the scale of the interventions that have been announced so far and the level in terms of the scale and longevity of the need. It should be said that we have since had further announcements from both the Scottish and UK Governments that will take that support further into this financial year. It is widely accepted that, in the current context, we have not yet seen enough support from either Government. In terms of what we would look for from the Scottish Government to do, it is absolutely not going to be able to fix everything, but there are things that it can do. If we look at it through the four drivers of fuel poverty, and we think about it in those terms, we can think about how we can increase household incomes with the budgets that we have. Is there any more that we can do there? Can we think differently about our plans for the devolution of winter heating benefits, for instance, one of which is going to be devolved this coming winter? We can think about energy efficiency. I know that the committee heard last week about how important energy efficiency would be, and can we accelerate our spending on energy efficiency? That is not just a good thing from a fuel poverty perspective. It is a good thing from a climate change perspective as well, and the committee will know that we are not just in a difficult place in terms of the fuel poverty numbers. Going into the pandemic, we were at one in four households in fuel poverty. I think that every estimate suggests that we are moving because of the external factors in the wrong direction just now, just because of what is going on in terms of the cost of energy and the cost of living crisis. In terms of what we can do in Scotland, could we turbocharger our investment in energy efficiency now, because that will save us money now, and it will also save us carbon emissions now, because let us not forget that we are also behind on our carbon targets as well. That has been every year since the legislation came in, so we are behind the curve on fuel poverty and climate change. To not have new money coming forward for energy efficiency, we saw in the budget a 3.5 per cent increase in the fuel poverty and energy efficiency spending for the Scottish Government. In the current climate, that is a real-terms cut still. Energy efficiency spending is no regrets. For there to be nothing yet coming forward from either UK Government beyond its energy company obligation extension out to 2026. Nothing from the Scottish Government related to accelerating its own plans to invest in energy efficiency, but us are really disappointing. It is something that we think could be addressed still and make a meaningful impact, because we do not think that this is going to be a crisis that just takes us through the summer or just even into next winter. It is going to be a multi-year period where bills are higher than we expect them to be traditionally. If we invest in energy efficiency now, it is going to just deliver benefits after benefits after benefits for everybody. The other thing that is missing is engaging with consumers about what they can do on an individual level. Behaviour change is a really important part, not just of dealing with fuel poverty, but also addressing the issue of climate change. What we have not seen yet from the Scottish Government is a detailed plan on how it intends to help consumers to understand how their own behaviours can be modified in a way that is helpful for them, but also that it is helpful for us all to meet our strategy climate change targets. It was Dr Lowe's when your panel last week talked about even simple things such as optimising your flow temperatures on your boiler could save perhaps about 8 per cent of your bill, and at current prices, just for context, that would be about £80 a year for a typical household. Again, for context, all the opposition parties at Westminster that represent consumers in Great Britain have called for that reduction on domestic fuel. At current prices, for a typical GB gas and electricity customer, that would save about £95 a year, so you are within the same kind of ballpark. The advantage of optimising your flow temperatures is that you are also addressing carbon emissions, and there is an absolute pressing need to reduce our emissions, but also reducing consumers' bills. However, what we have not seen yet is any real engagement strategy from anybody, either from the industry, other than one major supplier that I can think of, and certainly not from Government, about how we can, as individuals, take small actions that will actually add up to help in a package of wider support to keep costs under control. For us, that is a really easy win and something that can be done in the next couple of months that would actually have a real meaningful impact this winter and for the next few years. Thank you. Those are very valuable and insightful responses, but I am very conscious that colleagues will also want to ask questions, so we might need to keep our remarks a bit sharper. My final question is about international comparisons. If you work with other countries or you are aware of other countries and how they are handling the current crisis, I would like to hear about lessons that we can learn and perhaps I will just come to Chris Burt's phrase on that and then pass back to the convener, if that is okay for time-wise. Chris Burt, please. Thanks. I will just make a brief point then. One of the most important comparative figures that we should have in mind is that the UK has one of the lowest out-of-work social security support in the OECD. What that means is that, if people cannot work or fall out of work because they lose their jobs, that happens all the time, their income that they have to survive on is incredibly low, hence this crisis. If your energy bills go up by £1,000 while the social security support that is available to you is having a massive real-terms cut, that is what creates a crisis. It is a fundamental weakness in our society that needs to be reversed. I would say that one of the things that stands out most is that this is always a hindsight moment. The countries that we look to that are managing best are the ones who have much higher rates of energy efficiency in their homes, but that is the answer. If we had done that faster, sooner, we would be more resilient at this point in time. Beyond that, the other places to look to beyond those Scandinavian countries, whether that is in Sweden or similar, but you are looking at countries where efficiency had been a higher priority for a lot longer and they have moved a lot faster than we have. Beyond that, almost every country in Europe is struggling to deal with this at this particular time. What is incumbent on us is, can we do the best that we can do? In fact, can we be an example of what you can do to intervene and to support households in a meaningful way? I still have hope that I am still optimistic that it is possible for us to do so, but we will need Scottish Government and UK Government to work together on that in order to target and reach the people who are going to need help the most, because we have to maximise the lives that we can save this winter. I know that it sounds dramatic, and it always sounds dramatic, but every winter we lose over 2,600 people in excess winter mortality, a third of which pre-pandemic. Pre-pandemic, around 800 people would die directly because of fuel poverty. Fuel poverty has risen by 43 per cent. If that was a linear relationship, there would be a 43 per cent increase in fuel poverty-related deaths, but I fear that that is not the case and that we have inadequate information at this time. It is much more of a cliff edge that we face as we did with the pandemic, where we could see a catastrophic loss of life. We can only do what we can do but be the best that we can at this point in time and save the most lives. Thank you so much, convener. Thank you very much. Next up is Natalie Don, who is joining us remotely. Natalie, over to you, please. Thank you, convener, and good morning panel. You have answered quite a lot within your previous answers, so I will try to keep this short. Alasdair, you touched on some of those points previously, so I will come to Chris for your perspective on that. Do you have any additional policy solutions that could mitigate the worst impacts of that increase, and even an expected further increase in the price cap that could be implemented by Scotland right now? Or are there any actions that you feel that the UK Government could immediately take to assist in this crisis? I know that, for example, you have just spoken about increasing benefits. Could the UK Government go further in terms of their dealings with Ofgem, for example, limiting how much the cap could increase by? As I say, could I put that to Chris? Sure. In terms of UK Government actions, as I say, it is shocking and almost callous that social security levels are not keeping up with inflation while we are at the height of this price spike. At the absolute bare minimum, the UK Government should be doing that. I also believe that targeting support, as it has—and I use the term targeting closely through the council tax system in England—is a very bad way of targeting it. It has the social security system at its fingertips, which is fairly well targeted at those on low incomes, and it could make targeted support to low-income families in a way that is not really available to the Scottish Government. To me, that is a bit like the Covid crisis, although lots of public health powers are devolved to the Scottish Government, much like powers around energy efficiency, fuel poverty, tackling poverty more generally, are also devolved to the Scottish Government. However, that is an international and national crisis, where the UK Government, I think that we have to admit, does hold a lot of the most significant levers here, so I think that it is incumbent on them to act. That being said, I do not think that the Scottish Government pointing that out, which I think is perfectly reasonable to do, does not keep people's heating on. I think that if they can look to other ways, whether that is topping up the child payment, topping up the winter fuel benefits, looking for other more, as they did during the pandemic, targeting funds at the council tax reduction scheme, most people who are on that are going to be in very low incomes. The support that is available through the Scottish welfare fund is another way of getting money into the pockets of families who need it the most. However, I should say that the UK Government is very guilty of that. Ensuring that we have additional funds in crisis funds such as the Scottish welfare fund is an admission of failure of wider policy, because that is for a crisis. That is when people have reached the end of the line in terms of other support that they have. Now, do not get me wrong, sadly we need that and we need a lot of it, but that is a failure. We should, if we want to avoid being in this position again, some of the things that Alistair talked about in terms of energy efficiency. We have an opportunity here, our climate goals and our poverty tackling goals should align here. We should be desperate to increase the energy efficiency of our homes, because that reduces costs and our emissions. As I said to Fiona Hyslop, I do not feel that we are quite seizing the challenge that is in front of us just now. I think that it was your self that said at the beginning of this that it is not going to be a choice between heat and a rating, it is just going to be a fact that people have no money. I have, obviously, real concerns about how that will impact people's everyday lives. Obviously, we have people on prepayment meters. If you have no money, you have no money to put into a prepayment meter. I would like to see more advice coming from suppliers themselves as to how the differences between their debut meters and prepayment meters. I think that often information from suppliers is extremely complex, and I know that in terms of changing over, although prepayment meters do not work for everyone, I know that in terms of changing from a prepayment meter to a debut meter, there can be real complications, there can be credit checks. Would you like to see more from suppliers to assist people that are going to really struggle? Obviously, we are expecting people to get into debt with that, perhaps working with people, giving people a little bit more leeway over the coming months that are going to be extremely hard. I am putting that to Fraser, thank you. I think that you are right to point out that prepayment meter households have always struggled considerably, and there are multiple reasons why someone may be on a prepayment meter. They may be there because they have been forced into that situation because of debt. In fact, some people may have chosen to do that because they have afforded them a level of control. That is when prices were suppressed, whereas they are now in the direction that they are heading. Pre-payment meter households pay more than direct debit households. People with credit meters pay less than anyone who has a prepayment meter. There is a premium for prepayment meters for paying in advance, and the regulator believes that that is justifiable. We do not share the same view that it is justifiable. It should have different protections than it has, but it does not. In the paper that we have submitted, one of our colleagues at the Fuel Bank Foundation has tried to demonstrate the difference between a direct debit household who are able to equalise their costs across 12 months against a prepayment meter household who needs to pay when they need to use. Therefore, when they get to the winter months, a prepayment meter household could end up having to require double the amount of cash that a direct debit household would need simply to achieve the same levels of comfort in their home. For many, that is simply an unaffordable point, especially as those prices are ramping and we expect them to ramp further in October. I would like to see a lot more support being given to prepayment meter households. You are right that it is not easy because of the combination of the different kinds of prepayment meters that are still in existence in people's homes. We did research about a year ago with colleagues at National Energy Action in England and the Sport and Smart Energy GB to demonstrate the financial benefits that could be derived for suppliers and for households if they move to smart prepayment meters, making it easier for them to top up, for example, and making it easier for them to simply move. However, as debt builds and as the limits around the amount of debt that you can have at any one time that holds you to a supplier or holds you to a place in the system, it is going to be very difficult for people to get a better deal, because there actually are not any better deals out there. In our paper, we are pointing out that this is a time when almost all of us are on the same rates for our energy, because we have come off fixed deals that we are all moving towards pretty much all of us, the standard variable rate that is capped and therefore protected. However, that is an unprecedented moment. The fact that the market now has no differentiating elements, every supplier is essentially offering the same price. They are not mad keen to take new customers, why would they? Why would you move? You would have to move because you believe it to be a better place to be, but none of that exists at this point in time. I would like to see suppliers work harder to support their customers at this time and recognise the complexity. We simply have to move a lot faster on some of those technological changes, and we are behind on so many things that we are going to talk about now, behind where we need to be to be much more resilient to these moments. Absolutely. I would like to see considerably more effort put into supporting prepayment meter households at this time and some genuine recognition of the difference that there is between their experiences as pay-as-you-go customers and others who pay differently. However, it does not exist at this point in time. Thank you, Fraser. I will hand back to the convener now. Thank you very much, Natalie. Next up is Jackie Dunbar, but before I hand over to Jackie, if I could just suggest to our panel members that we have still quite a few members to bring into this very, very important discussion. If I can ask you to keep answers fairly concise, that would mean that we can bring in all members. Jackie, please. Thank you, convener, and good morning, panel. As Natalie said, you have dug down a lot of what we were trying to get out of today's panel, so if you do not mind, I will just maybe ask a small sub to what you have already asked. I think that maybe Fraser might be the best place to answer this one, because I was going to ask around about the support that has already been announced. As I said, you have gone on and explained all that, but I would like to touch on that the Scottish Government has increased the capacity at home energy Scotland by 20 per cent. Can I ask Fraser what your views on that are? Is it enough, or how much would be enough? I think that it would be hard to say that that is enough, not at this particular time, not when you are seeing a 43 per cent increase in the number of households who are in fuel poverty. That, in itself, is not just a reflection of all the people who have heightened concern at this time. All the organisations that we work with in our membership—indeed, I am sure that this is a very much the same case perhaps where I will still touch on that from citizens advice puros—is that the demand of services has simply gone through the roof. Doubling the kinds of support that is available would go some way, but we all fear that it is still going to be inadequate. I think that what we have not seen are enough multi-channel supports. Concern that households who can self-help should be really good support for them. The more of those people who go to the other services, the less likely it is that the most vulnerable low-income households will go there or will be able to get the support that they need simply because those services are full of the demand from households who have never experienced these situations before. I am concerned that we just have not got the right level of support available and in the different elements and dimensions. Yes, there needs to be national support, but at the same time local trusted face-to-face support, specialist face-to-face support for vulnerable households who perhaps have medical conditions because they trust those organisations the most. I think that what we need is a much better system than the one that we have now. Okay, thank you. I will just hand back to you, convener, because, as you said, time is short. Thank you very much, Jackie. Next up, Liam Kerr, please. Yes, thank you, convener. Good morning, panel. It is powerful evidence that we are here in this morning and I am grateful to you for it. I heard Alasdair, I will direct a question directly to you. I heard you earlier talking about the support requiring to be more targeted. Following on from that, the Scottish Government recently sought to address some of the issues that you have been telling us about through a discount, a blanket discount, to council tax. Do you think that this is the most targeted way or the best way to assist those most in need? I think that even the finance secretary herself recognised that it was an imperfect system. I think that that was in recognition of some of the criticisms that were being levied at the chancellor's similar scheme, albeit that our council tax reduction system works slightly differently in Scotland, and that actually works in our favour to design something that is a little bit better targeted. I think that it comes back to the question of sufficiency. Perhaps at the time that those commitments were announced, they were deemed to be proportionate to the level of need. Obviously, events have changed, not least of all, to horrific events in Ukraine just now, and the pressures that that is going to put on markets going forward and the uncertainty that is going to have in terms of the volatility, particularly in the energy industry. What we have seen since your panel last week was even more analysis from Cornwall Insight, which suggested that the volatility in the wholesale energy markets is likely to be significantly elevated for at least the next couple of years. It is confirming what we have been looking at for a while now in terms of this not just being a short-term crisis. What we do not have yet is something that really takes us beyond the current financial year, and we do not have anything that is responded to what has happened since those spending commitments were announced back in about February. In terms of what we have just now, we have a lot of money being spent quite thinly, but what we do not yet have is anything that comes on the back of that to target those who perhaps need that little bit extra help. That is probably what is missing and what is obviously next to come. What we are looking for for both Scottish and UK Governments to think about in terms of, well, we have done the big package of measures, but it is clear that it is not going to be enough. What more can we do and how can we direct that in a way that is meaningful? What we do not have at the minute is that deep targeted support. I think that we would probably look to use a different methodology, and we would be very open to having a discussion with the Scottish Government about how best we could get that support to the people who need it most, bearing in mind the support that has already been made available through the UK and Scottish Governments to this point. I am very grateful. I will no further questions. Liam McArthur, Monica Lennon, please. Thank you, convener, and good morning to the panel. I would like to raise the issue of households at risk of self-disconnection or self-rationaling their energy use due to unaffordable fuel costs. I recently had a response from the cabinet secretary, Michael Matheson, who has confirmed that an additional £10 million will be available for the fuel and security fund to deal with those issues. I wonder if I can come to Alasdair Wilcox and the Infraser Scots on that issue of self-disconnection and self-rationaling. Is that something that your advisers are hearing more about? How much of a risk is that? Will that £10 million be enough to cover that particular problem, Alasdair? To answer your first question, are we seeing more of that? Absolutely. If we look at the numbers and the advice that our bureaus are giving out in communities all across Scotland, we are seeing about two and a half times the level of demand from pre-Covid levels in terms of the affordability challenge for people in pre-payment metres and the risks that that brings if sufficient support is not made available or people cannot access that support for any one of a number of different reasons. That number is actually even higher than the peak numbers that we were seeing during Covid. If we look at our extra help unit, which is providing a service to vulnerable consumers across Great Britain, their priority cases, which are generally customers who have disconnected already or are imminent in the risk of being disconnected, tend to go up during the winter months. Of course, we saw that this winter, but what we saw this January to March period was their priority cases were 126 per cent of the level of the year before, so more than double. In April, the first few weeks of April, since the price cap came in, we saw an enormous spike in terms of the demand. It is very real, even though suppliers themselves are saying that they have not yet seen it in their very high level data in terms of the affordability challenge. If we get to next winter, when we are back into the heating season, where people are actually demanding more energy to try to stay warm, and we have another price rise to come, we can only speculate as to how difficult some of those choices are going to be for people and how much support is going to be made available. You are absolutely right to highlight the support that the Scottish Government has made available at this latest round when the fuel and security fund is another £10 million. We would reflect on the fact that this is now the third round of funding for that support. Each of those previous rounds have been £10 million, and they have only lasted for three months. However, if this is a package of support that it is supposed to see through the financial year, I think that it is fairly obvious that, with higher prices to come, that funding will not go as far as it has done in the past, and that is going to leave a lot of households with either getting less support because we are having to spread it more thinly, or we are going to have to basically say that there is no more money left. I do not think that that is a situation that will lead to good consumer outcomes. It is something that I hope can be addressed at some point over the summer if we can find the political will to find the money to boost that investment in those crisis funds, because, unfortunately, they are going to be very necessary for this next period of time. One of the things that I would say is that, across the country, we are seeing much more anecdotal evidence of the increase in the amount of self-disconnection and people at risk of self-disconnection, particularly in our rural communities, where tremendous amounts of moneys have been mobilised to support people in these crisis moments. However, what is very clear is that those bits of crisis support are now worth a lot less, because energy is nearly doubled in price. The level of space that it gives you, breathing space that people need, is simply shortened. Emergency credit for pre-payment metres is the same value that it was a year ago, but energy prices are double. Therefore, the amount of energy that emergency top-ups simply do not last as long as they once did. Even the fuel vouchers that you can get, £49 fuel vouchers, are only lasting half as long as they used to simply because prices are rising. The £10 million, although any kind of financial support is absolutely welcome, will not touch the sides of the issues that people will face. We will simply see people self-disconnecting at an incredible amount, because they simply cannot afford it. Their incomes are not rising, and benefits are not keeping pace. The only logical conclusion that you can make in that space is that domestic consumption will fall for many, many people, and the reason it will fall is that it is unaffordable. Thank you, Fraser. I would like to bring Chris in. I think that we are all keen to consider how the crisis is going to exacerbate inequality in our society. I want to give an example of the kind of inquiry that MSPs are getting right now. I have been contacted by someone who is struggling to afford to charge up their mobility scooter, so I have been asking the Scottish Government what support is available. I think that it was Fraser earlier on who talked about people who have additional medical needs, who need to charge equipment at home. Those are the kinds of practical issues that people are raising. In many areas, people can go out and charge their electric car for free, but people cannot even get out of their house with an electric mobility scooter. That is the scale of the challenge that we face. Thinking about social security policy, Chris, I know that you have talked about what needs to be done, but could you give a bit more sharpness to immediate actions that could be taken? From where I am sitting, it makes no sense for people to be stuck in the house when they cannot get out and spend money in the local community, they cannot support the high street, they become more isolated. What needs to be done to knock the heads of Government ministers together so that across the country we can help people to get out and live a life independently and with dignity? People cannot get out with their mobility scooters as what they are telling MSPs. Chris? I am not sure if I am muted. There is a lot in your question, but I think that it is a vital point. I could reel off 100 heartbreaking stories about what you are writing. The right temperature is not being able to switch the heat off because of respiratory illnesses. If they get too cold, they get sick. Part of it is that there is a very practical element to it. People then require NHS treatment and social care, and those are expensive and under enormous pressure already. It does not make any sense. The crisis should make a stop and think about those issues. The Covid pandemic shone a harsh light on the inequalities that exist in Scotland. You are more likely to die from coronavirus if you were from a poorer background. The cost-of-living crisis is only a crisis for those on low incomes. For everybody else, we all feel it a bit, but we are not in the same boat. I think that the social security system needs to—one of the things that is very welcome about the social security system in Scotland is that it recognises that A, it is an investment in our people and B, it has the opportunity to reduce poverty. That should be fairly obvious. Looking at things such as disability assistance and doing more than simply providing a more dignified system than the DWP, it seems that a very positive early science is what it will do, but how can the level of payment help to support and provide dignity in people's lives and giving them the independence and the quality of life that we all deserve? Those are the debates that we need to be having. Otherwise, every six months or so, another crisis comes along, and people like me complain about it. I do not want to be complaining about it. I want a Scotland where everyone lives in dignity and where poverty is a thing of the past. We need to use this crisis to push major change in our society. I am aware of time, so I will hand back to the convener. Thank you very much, Monica. The final questions are going to come from Mark Ruskell, who is joining us remotely. Mark Ruskell, let me hand over to you. Thanks, convener. It has been a very sobering and pretty moving session this morning. I wanted to try to wrap things up and get it because we have had a lot of information from you today. What do you think that the Scottish Government should be doing in the next three months, because we have got this window of opportunity in the summer when energy usage will be lower inevitably due to the weather? Obviously, with a cap coming off, energy usage going up in the autumn, we are facing this huge crisis that people are going to be in. What do you think that the Government should be doing to help with that demand reduction for energy over the summer? Where do you think that the actual priority should be? What are the programmes that the Government should be putting in to ramp up that capacity for advice and support quickly and ensure that it gets to the people who really need it in order to reduce their bills? I know that you covered some of that already, but I am looking for practical measures that the Government should be focusing on in terms of a programme that could run over this summer. Can we go back to Fraser for that one and Alasdair, and I will bring in Chris after that? Thanks, Mark. I will try to keep it brief, but touching on what Alasdair said, there are four drivers for fuel poverty and we need to address them all at this particular time. I would definitely like to have seen an emergency response that looks like we are about to insulate as many low-income vulnerable people's homes as possible in the next six months to lessen the impact of any price rises that have already taken effect but are likely to take effect from October beyond that. I would like to think that it is an emergency response. I would like to think that we are just about to mobilise the army to go out there and do this to people's homes at the scale that we have never done before, because the impact that that could have on the lives of people would be tremendous. I would like to think that we could mobilise that. On an income side, I would like to think that the Government could respond on things like the child payment and child winter assistance that we could make improvements there to try and target people who need help more. However, I would also like to think how we will respond at this point in time in some of the other areas, some of the most vulnerable in society, and find a way to reach them quicker by supporting local trusted organisations. I would love to see them remove the burden of the annual dreadful annual funding cycles, which inevitably creates hiatus and hiatus often at the worst possible times, as it has done this year, which has been dreadful. The Scottish Government to continue, as we do, to work with the UK Government on changes of a strategic nature to the prices that we pay for our energy right now to reflect fairness. I would say to remove the VAT burden. Energy is essential. It is not a luxury good for most people in any shape or form, but it is treated as such when we are about to pay several hundred million pounds of additional VAT to the UK chancellor as a consequence of rising energy prices. That is not fair, as are the excessive and obscene profits of many of our oil and gas companies. Many of the levies that we have built into our energy bills should be moved over into general taxation, with that ability to pay. However, the UK Government on all of those fronts will begin to make a difference and begin to address the inherent inequalities that we have. Can I ask you about rapid deployment of energy efficiency measures? Is that best done through ECO, which can work through the British and Social Landlord sector? Is there another scheme that should come in alongside that? We heard last week about those who are just about managing. They might not be in social rent but are being hit now by people in working poverty who are being hit hard with this cost of living crisis. Have we got a mechanism ready to go to start to do that work or do you think that there is still work that needs to be done on that? We have a good framework in place. We just need to mobilise it at a scale that we have never done before and find a way to finance it. There will be capacity issues, and there will be capacity issues among those organisations, such as the insulation organisations. They can be overcome with the right kinds of signals and the signals of longevity. The investment will therefore come forward to meet the ambition, but only where all of those things are being brought together. ECO needed to work in conjunction with area-based schemes, but what we also need to do is bring forward our legislation on the private rented sector, where many, many fuel-poor, vulnerable people live, who are not afforded anything like the same levels of support or access to finance, as provided to homeowners or, indeed, through registered social landlords. I think that there is more that we can do. We have the right kind of framework, but the scale has to be so much greater. I always think that Work and Home Scotland is a fantastic programme for the people that it helps, but there are many more people that it needs to help. It has celebrated 25,000 people that it has supported. We have 600,000 people in extreme fuel poverty. Moving to Alasdair, the practicalities are over the next few months. I think that in terms of the actions that the Scottish Government can take, one thing that is entirely within its gift—the kind of budget that is accepting—is to look at increasing the budget for things like Work and Home Scotland this year and potentially using that as an opportunity to expand the eligibility criteria. As Fraser said, there are a lot of people that it does not touch. The criteria that has been set in such a way that they target most of, but not all the types of people who are most likely to, under the legislation, be considered more likely to require an enhanced heating regime. Is there perhaps something that we could look to do that pulls out eligibility from the fuel poverty definition and the legislation around fuel poverty in Scotland that allows us to say that somebody with a long-term chronic health condition at the minute is currently, unless they are disabled by it, excluded from accessing Work and Home Scotland? With additional money, even if it is just a short-term thing, is there something that could be used as an opportunity to show that we are grasping this crisis with the seriousness that it deserves? I think that, as I said before, we are absolutely going to need to spend more energy efficiency. We are not spending enough yet by energy efficiency to meet our own targets. The targets are very stretching and very ambitious. Over the past few years, we have done some analysis ahead of the budget, and we have shown that the Scottish Government's spending commitments, unfortunately, are short of delivering their own targets, so that we are playing catch-up already. That is an opportunity for us to say that we are behind the curve and we need to turbocharge things. There has never been a better time than now to think about how we do that. Who would be best target that support at? It is people who are likely to be at home war who are on low incomes who are maybe not currently falling through the gaps just now with the support that is available because we have very tight budget constraints on it. If we can mobilise the funding and we can think about how best to target that support, I think that that would be a really good way. The other thing, which would be really low cost, would be to work with partner organisations to sort of try and start some public engagement on this and again on this behaviour change. I appreciate its small gains, but its small gains on bills, its small gains on climate change, and everybody wins over the peace. To talk about the little actions that we can take, whether it is the old advice about making sure that your thermostat is not turned up too high, a little public engagement campaign about that would be really useful, but also things about optimising your flow temperatures and your boiler like your panel last week talked about, but more technical does not cost anybody any money other than the money that needs to get in terms of the messaging. That would be really useful. The final thing is really quickly and it is setting us up for the longer term, but we were not alone last year in being quite disappointed by the fuel poverty strategy when it was finally published. One of the things that we said to your colleagues in the Social Justice and Social Security Committee when we gave evidence on that was that we felt as though the Scottish Government needed to do effectively some more work to make sure that it was fit for delivering the very stretching targets on fuel poverty. I know that the stakeholders across the industry are really keen to work with the Scottish Government to effectively address some of the things where there are maybe some gaps or some shortcomings just now. It would again be a really good response to this crisis to grasp this opportunity to say, right, how can we do better because we're going to be in a worse state coming out of the crisis in terms of fuel poverty numbers than we were going into it. So we're going to need to think about how do we set up a framework to allow us to springboard back to where we want to be and to just continue along and say, well, we've got a strategy and it'll do this for five years. Come the end of the current parliamentary term, we're not going to be where we need to be to deliver our 2030 targets either on climate change or fuel poverty, and I don't think anybody really wants us to be in that position. So to use the opportunity now to get ready for what happens next when we come out of the crisis would be a really, really good thing from our point of view. Thanks, message heard. Chris, anything you want to add to that before I go back to the convener? I'll be very quick. I think Fraser's point on the scale of Warmer Home Scotland is vital. That's what we should be doing. We should be focusing and supporting energy efficiency help on those with low incomes because it meets our climate ambitions and it will reduce poverty. But 25,000 in the context, 600,000 people on fuel poverty is not enough. I also think that because of the immediate challenges that people face, even before we were in the winter, we know that putting cash in people's hands makes a difference. We've heard of people who are not going to food banks because of the Scottish child payment. That is a good thing, that successful policy doing what it's supposed to be doing. I think that this is a challenge both to the Scottish Government and to MSPs who are across the political spectrum. If the UK Government does not provide additional funds, I think that it's time for the Scottish Government to have a hard look at its budget and see what we need to spend this year. Is it time for us to reprioritise spending to ensure that families across Scotland are not going cold and hungry? I think that that's a challenge that the Parliament faces and that the people of Scotland deserve for it to reach to that challenge. Thank you very much, Mark. That brings us to the end of our allocated time. Let me thank the panel for your comprehensive and insightful contributions this morning into our inquiry into this very important issue. I will now suspend the meeting briefly for a changeover of panel members. Welcome back everyone. We're now going to hear from our second panel this morning, a panel of energy producers and suppliers. I welcome Keith Anderson, chief executive officer Scottish Power, who is joining us in person. Good morning. Joining us remotely is Dan Alchin, director of regulation energy UK and Ross Dornan, market intelligence manager offshore energies UK. Thank you everyone for joining us this morning and sorry we're running briefly behind schedule. We'll move straight to questions. My first question is about how we can best balance the cost of living crisis. How can we best deal with the cost of living crisis in the short to medium term without compromising strategic emission reduction targets? In other words, to what extent will the energy price crisis undermine or accelerate the transition to net zero? Keith, perhaps I could address that question first to you, and then to Ross, and then to Dan. Keith, over to you please. I would look at the two issues separately. They should be kept separate and they can be kept separate. I think that the targets to get to net zero are incredibly important and what's going on in the gas market should not be seen as a diversion away from those targets. Ultimately, the move to net zero or whether you describe it as a move to energy security in the medium to long term actually helps to manage the gas crisis. It helps to take us away from the use of gas. It helps to take away the predominance of gas in terms of its feed-through into the price obviously in the gas market, but also its impact on the electricity price as well. Everything that we keep doing as a country to move towards net zero helps to move us away from that reliance on fossil fuels and helps to manage the price and bring the price of energy down at long term as well as reducing carbon emissions and providing greater security. In terms of the short term and the issues around the short term and the impact on consumers of the current gas crisis, that needs much more direct intervention and much more direct action because there is a big issue now that we see coming through the system with the move and the price cap from 1,277 to 1971 and then also what we're seeing is the continued price of gas in the market sending all of the indications and in October there will be a further price rise and that's the one that gives me real concern when I look at it from a customer's perspective. That additional cost that will come through in October really is putting the issue to a size and scale that's beyond I think what I can deal with as an individual company. I think it puts it beyond what the industry can deal with on its own and it clearly puts it to a level where I think it requires government to intervene and support the market and support customers. About a week ago we opened up a new phone line for customers to come through who had concerns about paying their bill and in that first week alone we had 8,000 phone calls of people saying they've got serious concerns about what they're going to do and how they're going to manage. Although we're not seeing, if you like, the impact in debt numbers or the impact in hard financial numbers of what this is doing to customers, that will happen, it will clearly happen. We are already seeing the levels of anxiety concern for our customers go up quite significantly about what they will do and how they will manage. My proposal for dealing with this requires a much more significant and structural shift in what policies the Governments have brought forward to date. The central proposal that I would put forward would be to create some form of deficit fund that would allow you to take £1,000 of this impact off those who are hardest hit by the impact of the bill increase. So, whether you use a definition of people on warm home discount or whether you use a definition of fuel poverty or a definition of vulnerability, that for those people £1,000 would be taken off their bill, that would put their bill roughly back to where it was before the gas crisis and allow them to manage through this period of time. The money could be put in a fund underwritten by the Government and that fund would be repaid over something like a 10-year period given the size and scale of it. There's an estimation to SNOW that we could see as many as 40 per cent of homes in the UK being deemed to be in fuel poverty by the time we reach October, so you are talking about £1,000 for 10,000 homes that's £10 billion, it's a significant amount of money. That's why I say that that level of intervention, that level of impact has got way beyond what I can do and way beyond what an industry can do in its own. It requires the backing of the Government in terms of doing that. As I say, you would then spread the cost of that over a 10-year period and deal with it that way, so the impact has taken away in the immediate term. However, the really, really important thing is that that should not be seen in any way, shape or form, as a reason not to push ahead with net zero and not to push ahead with energy security, because that will ultimately help all of us in the medium to long-term. Wind is the cheapest form of generation on the system. The more we invest in the future of wind, whether it's onshore or offshore, the more we invest in solar as a country, the more we will bring the cost of energy down and the more we will make the energy source and security better and stronger as well. Okay, thanks very much for that comprehensive answer, Keith. It's good to hear energy, your view that energy security and decarbonisation net zero are consistent goals. That's very encouraging to hear. Ross, if I could address the same question to you and then I'll bring in Dan Ross over to you, please. Yeah, thank you. Thanks for the opportunity to meet with you all today. My view on this is that this really underlines just how difficult the transition is going to be and how difficult it is going to clear the dynamic between sustainability and emissions, with affordability and with energy supply security. Addressing all three of these is really challenging and it requires some really difficult decisions to be made and fundamental conversations to be had. What I would emphasise is that the offshore sector and the oil and gas sector is committed to a net zero future through the North Sea transition deal and we are committed to playing our part in the transition, a fair and managed transition, and we think that we'll have a really important part to play in making it a reality. Coming back to your question, I think that it's really important that we take this as an opportunity to accelerate the transition to net zero rather than slowing it down. If you think about what's causing the issues at the moment, it's our exposure to international commodity markets. Energy is a heart of everything that we do within our economy. The exposure to the trends that we're seeing in the energy markets fuels inflation and that's creating a really horribly difficult situation for so many people across the country when I was listening to the end of the last session there. I think that that was very clear and very evident. I think that when we're looking forward and we're looking here and there, I'm looking forward to real strategic thinking to address both the short term and the longer term issues. Right here and now, consumers need support. I'm not the best person to comment on support levers but I'll probably reflect that they need cash to help with bills and payments in capital support to help finance the required changes that are going to help reduce oil and gas consumption in the future, things like supporting the cost of better home insulation. But when we think longer term, I think that we'll have to make sure it doesn't happen, is that a cost of living price and prices right now doesn't become a supply crisis in the future. We are really lucky in Scotland and the UK to have real diversity of energy sources for oil and gas, to wind, to hydrogen potential, tidal. We have all in here that we are the envy of many of our European neighbours and what's really important is that we have a framework which attracts, encourages and enables investment across that energy landscape. Our system is becoming more and more diverse, it's going to become more and more diverse in the future and we have to enable and attract investment across that diversity. We have to think long term and not just here and now when it comes to that, we support here and now but we also need to address the decisions that need to be made longer term that will accelerate our increased diversity of energy resources which includes investment in oil and gas as I'm sure we'll come on to which will help reduce our exposure to international markets whilst also helping to address security and also hopefully in turn affordability for consumers as well. Ross, thank you very much for those remarks. If I could ask Dan to address the same question, please, Dan. Thank you, convener. I think I'm going to agree with a large amount of what we've heard. I think in the long term, the net zero options, the net zero pathways on that journey, I think are consistent with the long-term solutions to the crisis we have and how we ensure in the future we avoid a repeat of this situation again. I'd agree with Keith on the short term that the crisis that we've heard about this morning that I think the speakers in the previous session sort of set out very well is bigger than one that the supply sector can handle on its own. It does require further action from government and I think we'll come on to that more later. I think that it's hopefully also gives us a steer to accelerate the transition as well. Noting the comments that we've just heard, particularly around things like energy efficiency, there are real opportunities there to start in the short to medium term to push further to go faster and start making a difference both on the net zero front and longer term on sort of the affordability side as well. Thanks very much, Dan. A brief follow-up, we've got a lot of ground to cover and I appreciate you've in the opening remarks covered a number of issues my colleagues will cover. I'm going to ask you for a forecast. I know it's difficult but what's your outlook for energy prices over the next 12 to 24 months based on what you're seeing in the market and in supply chains and how long should we expect to see elevated prices? I'll go in the same order. I do appreciate it's difficult to forecast this but some general trend analysis might be useful and Keith, maybe I can start in the same order. Keith, then Ross, then Dan. If you put that in the context of a customer's bill and look at it that way then I'd say you as you know that the price cap has gone from £1,277 to £1,971. The current projections for the cap in October are that we could see the cap move to around £2,500, £2,600. We are only part of the way through what's called the indexation period so the period of observation we're often looking at the prices in the market that are used to feed into the calculation of the cap so that that can change, move and fluctuate all the way up to the end of July. What's driving that as you all know it's been driven by gas and gas prices. Where are gas prices this now? Over the last few months we've seen gas prices go from what used to be a norm of 40, 50 pence a therm up to 800 pence a therm back down to 300 pence a therm. There's just been massive volatility. The volatility has calmed down a little at the huge spikes but the price is settling at somewhere in the region between 150 pence to 250 pence a therm. If you ask market analysts they can see that last thing for 9, 12, 18 months. I'm always very reluctant to predict what's going to happen. The gas price is you're into guesswork and trying to understand other geopolitical forces around but the gas price is saying it's showing no signs of coming back down to its not historic norm at this point in time. Most people would say it's unlikely and we're unlikely to see it come back down to that historic norm certainly in the next 12, 18 months. That's why most people think the price cap will move certainly in October to around those levels. Thank you very much. I appreciate those thoughts given it's such a difficult thing to predict. Ross, welcome your brief thoughts and then I can bring in Dan on the same question. It's hugely developed to predict these things and I think the current dynamic within the market and the challenges being faced really underlines that with the link to what you just heard on the swings in the gas price. You see what it levels that we've just never seen before within the gas price. When you look at gas being priced in pence per therm, we're used to talking about in the tens or 20, 30 perhaps pence per therm and now we're talking about it as you just heard, five to eight tonnes per therm. The dynamic is completely different from anything that we've ever faced before but if you look at the signals and indications from the market I think they probably do point to a more prolonged period of higher energy costs. If you look at for example the futures prices, so how much it would cost for delivery of oil and gas within the future that can be months ahead, it can be years ahead, the prices do indicate that we are in for a period of prolonged higher prices. We're also coming to the summer goal which coincides with lower domestic energy use but a really strange thing that's happened in the gas market recently is that the summer gas delivery price has actually been higher than the forward winter gas delivery price. That's something that we don't normally see before and all of this volatility and unusual things happening in the market really points to me that traders are struggling to price in the uncertainties that are taking place around the world, a lot of that being because of geopolitical events. As we look to six months into the future or even maybe even less in that, there seems to be consensus that we're heading towards a further increase in domestic energy price cap and that will increase, that will coincide with a period as we come into winter when domestic energy use tends to be higher. I think that we are looking at challenges being seen from a more prolonged period, a lot of what we're seeing at the moment in certainty is because of what's happening with Russia and Ukraine. Even if there was a rapid de-escalation in Ukraine, I think that there will be a lasting impact on the markets. The direction of travel from many major energy consumers, especially those that rely on energy on Russian supplies, is clear that they are looking to move away from Russian supply, displace Russian supply and what that does is it brings challenges of replacing that supply within the international markets. Competition increases significantly, that heats up the market, that raises prices and to make sure that we've got secure supplies that we have to be able to compete with that. All that points towards a more prolonged period of challenging prices. Thank you very much, Ross. Dan, the same question, if you don't mind. Yeah, I'm going to agree with what a lot has been said already. None of us have a crystal ball, none of us can predict right, but I think it's fair to say that there probably was a feeling among some earlier this year that this would be a short-term problem that could be addressed would be a 2022 problem. I think that it's clear that something is going to last longer than that and be more of a medium-term issue. I think that we also need to recognise that there are costs associated with the crisis that we've gone through, things like the cost of supply failure, the Government's energy bill support scheme, that will mean that the costs of this are going to be felt for consumers for many years to come, even if and when prices do start to come off. Thank you, Dan, and thank you to our other panel members for setting the scene so well. Let me bring in Fiona Hyslop. Fiona, please. I want to address energy market reform. I'll come to Dan first. You've just referred there that this will be a prolonged issue to the medium term, so therefore do you think that this absolutely makes the case for energy market reform and that it needs accelerated and what needs to be done to make sure that we have that secure, affordable and sustainable energy market? Obviously, there's a reference to marginal generation technology continuing to set the price. Should that be the case? Obviously, it's gas currently, so what other options are there? I noticed a huge topic, but if we're looking at strategic solutions here, could you set out what needs to be done and when it needs to be done? I'm not necessarily sure that I've got all of the answers. I think that, as you said, it is a ginormous topic and one that needs to be looked at very carefully and considered properly alongside thinking about what we can do in the short term as well. I think that it's therefore hugely welcome that, in its recent energy security strategy, the Westminster Government announced that it would be taking forward its review of electricity market arrangements, where it's clearly going to be one of those topics that we're going to have to explore and we're going to have to carefully consider and think about the impact it has, not just for the electricity market but what it means for consumer pricing, what it means for a just transition, what it means for fairness across the piece. I think that it's hugely welcome that that work is beginning to be undertaken, that it's being undertaken alongside a review of the retail market arrangements, that obviously have a direct impact in terms of how consumers engage in the market. Unfortunately, it's one of those where I don't necessarily have the answers as of right today. I'll now move on to Keith Anderson if you could answer that question, particularly in relevance to Scotland and our energy supply. If I look at the market in two bits, the electricity market and the gas market, it is important to split them. On the gas market, I'm not too sure that there is any method of reform other than moving to net zero that will tackle that issue, because the gas price is just a straight pass through of wholesale power prices, wholesale gas prices. Any of the retailers in this market in terms of its end price to consumer are buying their gas off the wholesale gas market, which is an internationally driven market, and it's just a straight pass through, down through the pipe, with the associated price. The way we deal with that in terms of volatility, the way we deal with that in terms of future impact on people is to move away from gas, and that's the net zero strategy, the heat pump strategy, the EV strategy, etc. It takes you away from that. In terms of electricity, and this is where people often want to focus and look at it understandably, why is it the price of gas hitting all the electricity costs? It's because of its impact on the use of CCGTs to produce electricity, so gas plants making electricity from burning that gas, and that sets and dominates the wholesale power price. That will change over time naturally, because again we're moving to net zero, so you're seeing more and more fixed price generation come on the system. What do I mean by that? Right now, when the governor is about to run the next contract for difference auction, all of the wind farms, whether onshore or offshore, whether it's solar plants, will all bid in for a contract at a fixed price. Even if the wholesale electricity price is higher, then the generator will only get the fixed price, and the additional income goes back in effect into the Government and into the sector. The more we move along that route, then the less impact gas and the less dominance gas has on setting the price. There are other things that can be done in the short term, which is looking at can you use a different marker or a different way of calculating the wholesale price for power? You would need significant market reform, because in effect the way power is bought and sold on that market, it drives it towards the gas price and the price of gas generation on that system, because you have to match your customer's demand with your access to power. It is very difficult to do that directly with a wind farm because of the variability of wind, so what you tend to find is that from your wind farm you would sell the power into the wholesale market, and then buy back fixed power at a fixed price, which means that you end up having the impact of the gas price on your electricity. There would need to be a significant bit of work to look at whether you could break that linkage earlier than naturally through the build-out of renewables. It's a difficult thing to do. I could maybe ask Ross Ross that and what he thinks about decoupling gas from electricity in terms of the market and how soon that can be done and whether that needs to be accelerated. Very honestly, the energy market reform is not my area of expertise, but I can consult with some of my colleagues and maybe provide a more comprehensive offline view on that, but some reflections for me on what has been said there does need to be change to allow us to move to this more diverse, lower carbon and renewable-based energy mix, which allows us to address the dynamic between sustainability, costs and supply security, many more effectively than it is being managed at the moment. There are things like the business models, the commercial models and the regulatory models, which allow us to move forward at pace with things like more offshore wind development, hydrogen developments, carbon capture and storage developments, which allow us to enable some of the hydrogen production as well. What I would emphasise, and I think it's important to look at electricity and other energy, so electricity is something like a fifth of all the energy that we use in the country. When we think about gas, it's not just about electricity. I don't have the specifics for Scotland, but if we look across the UK, I think it's similar for Scotland, I think about 85 per cent of all the homes that we have in the UK are heated by gas boilers. If we were to reflect briefly on the oil side of things, almost all of our transport within the UK, 95 per cent or so, is fuelled on oil-based products. We can address electricity, but we have to go a lot further than that if we really want to decouple the impact of the commodity markets from our energy system, because we still have significant driving influence on transport and heating, which are by far our largest energy uses within Scotland and across the UK. It's really important that we look at the energy system holistically. Yes, good progress is made on electricity, more progress is coming, but we need to do more on heating and transport as well to see ourselves move away from the market impacts. My second area of questioning is in relation to, I suppose, wider energy markets and post-Brexit UK energy markets. I should emphasise obviously that energy markets are reserved to the UK Government, but post-Brexit, they remain closely aligned with the EU. Realistically—I'll just ask for Brevity Dan and then Ross—can domestic energy market reform change without wider EU reform? Is your insight on what the EU is likely to do on energy market reform going to be accelerated by other resilience issues, not least the security issues in relying on Russian gas? Therefore, the need and the impetus for the EU to rapidly embrace renewables and the security of renewables from the European countries, including the potential for Scotland, to help to provide that impetus. How do you see that? I'll come to Dan first and then to Keith. Taking the first question, you can move forward with market reform independently from Europe, but you have to be conscious and acknowledge the fact that we are an interconnected market, where electricity flows like waves, we are part of a global gas market, and therefore, in looking at and considering reform of our markets, we need to be conscious of changing what is being made elsewhere, what impacts that change is going to have on the decisions that we have at Ardyspo, what decisions we can make, and at the speed at which we work. Yes, it is possible, but you cannot do it in a vacuum. You need to be aware of conscious and responsive to the changes that are being made in the wider markets that have impacts on ours. Keith Anderson, if I can ask you to comment on that and then pass back to you. I agree with what Dan has just said. Our markets are commercially connected, but they are also physically connected. There are gas pipes between us and Europe, and there are electricity cables between the UK and Europe. That power and the gas flows across those markets. We operate very different commercial structures within countries, in terms of different incentivisation mechanisms. There has been a sort of co-ordination effort to make sure that there is no big commercial advantage or disadvantage in terms of the way that power flows, but the UK's methodology for incentivising investment in renewables is very different than an awful lot of other European countries. There is nothing to stop us from changing that and doing that in a different way. The contract for difference mechanism, which has been incredibly effective in the UK, is driving, particularly driving, the massive acceleration of investment into offshore wind in the future of that. That is a UK-specific mechanism and works specifically in the UK. If we want to drive faster to get away from gas and the reliance on gas through the roll-out of heat pumps, if we want to start moving away faster from the use of diesel and petrol through EVs, then those policies can be driven from the UK through devolved administrations as well, without having to be too concerned about what other countries do. We can do that, we can fund it, we can incentivise it in different ways. The hydrogen market for the UK will be an international market hydrogen, I have no doubt, but there is a lot that we can do in the UK to start incentivising customer or business pool demand for the use of hydrogen, as well as incentivising the production of green hydrogen. There is an awful lot that you can do separately in the UK. As Dan said, you need to pay attention to the other international markets, because some of them are based off commodities that flow very freely across the world. Next up, we have Natalie Dawn. Natalie, let me bring in you at the stage. Given the large number of failures in the UK energy market, despite the significant increase in the energy bills, is OfGM's price cap fit for purpose? Will OfGM's proposals to boost resilience in the energy sector, for example financial stress testing for suppliers and increase in the number of times a year that the price cap can be adjusted to make a material impact on the market? If I could put that one to Dan first, please. Of course. I will take the price cap first and then I will come on to the financial stress testing piece of it. I think that we need to remember and have a think about what the objectives and what the purpose of the price cap was when it was first introduced. It was introduced to ensure that customers paid a fair price for the energy that they were using. It was to ensure that no customer was being overcharged. It was to address what we called the loyalty penalty. It was not a social price support scheme. It was not about ensuring affordability. It was not about tackling fuel poverty. It was about ensuring that customers are paid a price that reflects the cost of energy, and that is what it does. I think that that is a fair question of are those still the objectives and goals that we want from any market intervention, and that is a discussion that we can have. I think that we need to recognise that the price cap was meant to do one thing and probably over the past six months, particularly over the winter period, it was doing a very different thing in the sense that it was shielding a lot of customers from the true cost of energy at that time as prices were rapidly escalating. As the price cap has been that cost has started to flow through. If I turn to the financial stress testing piece, I think that the action plan that Ofgem announced just after Christmas is incredibly welcome. Ofgem had taken some action over the past few years to try and put improved testing of supplies, financial resilience and controls in place. I think that was welcome, but it was probably too little, too late in all honesty. I think that the additional protections that they have announced since Christmas are broadly in principle welcome, and I think that we should ensure that we have a more stable and resilient supply sector going forward. The devil is, of course, always in the detail. We are still waiting to see lots of the detail on the many other policies that will come out of it from Ofgem, but I think that it is broadly then heading in the right direction. Thanks, Dan. Just following up on your first points, do you feel then that energy suppliers are genuinely trying to keep costs down and that, without continued increase in the price cap that private energy firms would struggle? Do you feel that those increases are necessary, but energy firms are still achieving high profits? I think that I challenged that last part of it. If you look at the energy supply sector, I think that generally over the past few years, going back to probably the last normal year before the global pandemic, average returns across the five largest supplies were something like minus 1 per cent. It is not a sector that generally has been making money. In terms of the price cap, 29 supplies go out of business largely because they were not able to recover the costs that they were incurring and simply were not able to keep going. I think that the price cap, unfortunately, had to increase because the cost of the basic commodity that suppliers are supplying had increased. If that had not been the case yet, we would have seen further financial difficulties for suppliers and potentially further failures. We have already seen the 29 failures to date. A certain device estimate that is going to add about £2.8 billion to consume the bills, at least from the 28 that has gone through the supply of last resort process, and further supply failures would have simply continued to increase that number in place and further cost on customers' bills. Again, follow-up from that. Scottish Power's parent company, as I understand it at Iberdrola, has announced that it is forecasting a net profit for 2022. If somewhere between £4 billion and £4.2 billion, we have taken those profits into consideration, how can Scottish Power justify increasing household utility bills by 54 per cent in line with the increase in the energy cap? The profit number that you quoted is clearly the profit for Iberdrola Group, which is a huge international energy company. In a UK context, I would not say that that is a particularly relevant or fair benchmark to use in terms of what we should be doing around prices in the UK. In the UK, we operate three businesses. We operate a renewables business, a networks business and a retail business. Our retail business in the year just passed lost £267 million. We are not making money retailing gas and electricity. It was a loss of £267 million. The year before that, we lost £42 million doing the same thing. The year before that, we lost £200 million doing the same thing. Over the last five years, we have lost over £500 million retailing gas and electricity. It is not a profitable sector and it is not a sustainable sector. The price cap theoretically should allow me to make a 1.9 per cent margin. That is not happening at this point in time in any way, shape or form. That is the context that I would put around it. In terms of the cap being fit for purpose, I think that anybody would now look at the cap and the regulator has now looked at the cap and said that the current methodology and the current version of the cap is not fit for purpose. It has not been able to cope with the volatility that we have seen in the marketplace. It has not been able to cope with the significant shifts that we have seen in the marketplace as well. There are a lot of changes being proposed and discussed to the price cap and some of those are also around financial resilience of companies that operate in the marketplace. We have seen 30 companies go bankrupt and shut down. I would put those into two categories. There were a number of them that were just clearly not running a sustainable business model and they were running a model that was based off accelerated growth, based off using customer credit balances to fund that growth and eventually the real life caught up with them. They ran out of money because of the volatility in the market and they have shut down. There were a number of other companies that have probably gone bust and were running a more realistic and more sustainable business model and unfortunately just because of the size and scale of the volatility and the amounts of money involved in that volatility have been unable to survive. When I talk about the volatility, I will give you an example. If you look at trading positions that you need to take to put in place the forward hedges to protect yourself in this marketplace and during the worst weeks of the gas price fluctuations, during a week from a day-to-day basis, we quite often had margin calls in our hedge positions of plus or minus £600 million or £700 million of cash collateral going in and out of the business on a daily basis. That is the kind of level of volatility, but it also gives you an idea of when you look at the resilience, the sustainability and the security of the companies in this sector, you need to be able to withstand those kind of shocks and those kind of financial movements if you want to be able to survive in this marketplace. I think that it was one of the myths in the lead-up to the cap, which there were a lot of good things and I perfectly understand why the cap was introduced, but one of the myths in the lead-up to the introduction of the cap was that this was a low-risk industry. It is quite clearly not a low-risk industry. There are significant risks in operating in this industry and that is why it becomes so important to make sure that there are proper financial resilience controls that the regulator should look at. The regulator is consulting on those to SNOW. You could argue that it is too late, but it is better late than never. I think that it will be a good thing to look at those resilience controls. That will also cover the use of and the protection of customer credit balances as part of that financial resilience to make sure that any company operating in this market has the balance sheet, has the cash strength, has the financial strength that, if it gets into trouble, it is not losing customers' money. What do I mean by that? In total, the failed companies that have gone out of this marketplace have caused a £63 additional charge to everybody's electricity bill in the United Kingdom. That is the size and scale of the cost of those companies going bust. People often talk about that the price cap has protected customers during this period. To an extent, it has delayed the price increases coming through. However, the price cap has also allowed all of those and the regulation of all those failures to come through this market. It is customers that are picking up the bill for that failure. It is all going on in customers' bills. An additional £63 for every customer in this country for those failed companies going out of this marketplace. That is why I would say to you that if you wanted a one-word answer, it is the price cap fit for purpose. The answer I would give is no. That is why it is being reformed so radically to SNOW in terms of its methodology. That is why there is so much reform going on to SNOW in terms of financial resilience controls for companies that operate in this marketplace. I am fortunate to come back to your earlier comment that I am part of a group that is very successful, that is very large, and on the back of the huge, massive investments that we have made in renewables and the massive investments that we have made in networks in this country and across the world, we have the financial strength and financial resilience to withstand taking a £267 million loss in this marketplace. That puts me in a very fortunate position. In terms of the profit that we make in this country from our renewables business and from our networks business, every year across those last five years, I have invested more in the United Kingdom than I have ever made in a profit and I have invested more in the United Kingdom than I have ever, ever paid in a different end. We are investing hugely in the future of this country. On average, over £1.5 billion a year of investment in new wind farms, solar plant, battery technology, transmission systems and distribution systems. Maybe there was a perception before this crisis that this was a sector of regulated utilities operating in a low-risk environment, but that is clearly not the case. I thank you for that background. My question is going to be round about the transition to net zero. If I could go to Scotland and possibly maybe Dan, if you would like to add in anything. I would like to ask what the potential impact on the Governments, both the UK and Scotland, for their plans for blue hydrogen due to the spike of gas prices? What changes should or need to be made? What was seen in the energy security strategy within the last few weeks was a significant increase in the hydrogen ambition within the UK Government's energy strategy. We have, within that commitment, at least to come from low-carbon hydrogen, which leaves the remainder to come from blue hydrogen or that that is reformed from natural gas. I do not have the analysis to my hand to be able to say definitively on what the current gas market means for blue hydrogen production. However, I do know that it presents a more generally a more near-term opportunity from both a technological and an economic point of view. I did see something in the press this morning, where one of Australia's energy UK members, Kelass Midstream, is looking at moving forward with a £750 million investment in blue hydrogen production in the UK. That tells me that there is still opportunity to be seen in this area and that companies are still moving forward with their plans on that. I can speak to some of my colleagues at the UK and see if I can come back with a more comprehensive answer on that and see if we can do a little bit more analysis on the impact of the gas prices on that. However, it does come back that there is a lot of work to be done to make those robust and sustainable and to get into position where companies are able to take on the investment risk in moving the investments forward. However, I was encouraged to see some of the news from some of our members this morning and they are still looking really seriously at moving forward with those hydrogen models at pace. I look at the convener and I really appreciate the information coming back to the committee if that is at all possible. Dan, would you like to add in anything? More generally, I suppose, on hydrogen, we probably all agree that it has clearly got an important role to play on the journey to net zero, as the Commission on Climate Change and others have set out. On the topic of blue hydrogen in particular, it probably still has a role in the short term as a bridge to getting us to a cleaner, more renewable system. We need to remember with it that it is not necessarily carbon neutral and we need to keep that in mind as we look towards our net zero ambitions and our ultimate aims and ambitions. More generally, on hydrogen, we also need to remember—one of the key questions—we need to be having those open honest conversations about when and where hydrogen can be best used and where it has the potential to have the most impact to help us on that journey, sectors such as transport and heavy industry. I am thinking about how we can use it there to fill the gaps that potentially electrification needs behind. Thank you very much, but it is your turn, convener. Thank you, Jackie, for that. Let me bring in Liam Kerr, Liam, please. Thank you, convener. Good morning, panel. I will direct my questions to Ross Dornan, if I may. Ross, a matter that arises from the useful answer that I thought Keith Anderson just gave earlier on around profits. Many of your members reported large profits this year, prompting some to call for a windfall tax. Dan said earlier that we need to accelerate the transition to renewables, and from my visits to many of your members, I am aware that they are investing huge sums in both North Sea production, which of course positively impacts jobs and energy security, but also, crucially, in research development and the transition to renewables and green jobs. Two questions for you. The first is arising from the answer that Keith Anderson gave. Do record profits for your members mean record dividends to the shareholders? Secondly, what impact does talk of a windfall tax and or negative PR, or bringing in a windfall tax, have on companies and investors' willingness to invest in the basin, to invest in renewables development and to invest in what you earlier called a fair and managed transition to a better energy mix? Ross, you are on silent at the moment. Apologies, Apologies. That was my own fault, sorry. Thanks for your question, sorry, I was just saying, and I think you've raised a number of really important and fundamental issues that are worth, I'm picking, one by one. Firstly, building on some of the answers to one of the previous questions about company profits, yes, we can't get away from the fact that our member companies, oil and gas producers, have posted higher profits in the last 12 months as commodity prices have rebounded, but, as was said, it is really important to understand the full dynamic that is at play here, and, similar to the answer to the previous question, to look at the situation over a period of years. If you look at the last five, maybe eight years, there has been significant volatility within the commodity markets, where the profitability within that period of companies that produce oil and gas in the UK has been marginal at best. If we just look at 2020, not last year but the year before, some of the results posted by companies were amongst the largest corporate losses that have ever been filed in UK history. That is from oil and gas producers in the UK. It takes time for companies to rebalance their finances and their businesses after going through periods like this, and, similar to what Keith Brown said about Scottish Power, we have to recognise the global nature of the companies in question. When you see the large profits being posted by some of the companies, we have to reflect that, often, the UK proportion of the oil and gas production is less than 5 per cent of their global oil and gas production. Therefore, the UK only accounts for a relatively small proportion of their business, and they pay taxes on profits around the world where they operate. Because of that, in essence, the vast majority of the profits are being recorded by companies that are not accessible to the UK tax regime. The UK oil and gas industry is one of the highest-tax industrial sectors in the UK—a 40 per cent effective rate, which is double the effective rate of wider UK corporation tax. It has paid £375 billion in only production taxes in the past 50 years. If we look over the next five years, the industry has forecast to pay £23 billion in the next five years, which is £13 billion more than was forecast by the Office for Budget Responsibility for Taxes to Come from Our Sector just six months ago. A significant uplift in taxes being paid by our sector is because of the increased profitability of companies and their commodity prices. Link to your other points about investment, we have to reflect that companies are doing a lot with their finances—more with their finances than they have done in the past, as they diversify in many cases across the energy sector. Their investment has fallen in line with the pandemic and other challenges that companies are facing, but they are still spending significant amounts on oil and gas production in the UK to the tune of something like £12 billion per year across capital investments, operational expenses and decommissioning expenses. On top of that, they are leading the way in terms of many low-carbon energies and their development, partners in many of the largest offshore renewable projects around the UK, key partners in leading the way in all of the industrial clusters—the hydrogen, carbon, capture and industrial clusters around the UK. Those are new sectors for these companies. They are re-risking their investments in it, but there is significant money being flowed in that direction. We look at the balance of expenditure from companies who are transitioning from oil and gas. The vast majority is in oil and gas developments at the moment as they transition, but as we look to the future, that transition can really start to see it happen. If you move five years into the future, you are probably getting to a position where it is maybe a 50-50 split, and by the end of the decade, you are potentially in a position where you are looking at most of the investment from companies in the UK, which we traditionally think of as oil and gas companies, directing more money towards lower-carbon projects than there are towards oil and gas projects. When companies are looking at the wider picture, it is really important that they have the stability of investment conditions. That comes down to the fiscal regime, to regulatory regimes, and it comes down as well as more generally towards the holistic support from our political stakeholders towards energy investments in the UK. It is really important that we have that enduring support, that stability and predictability of conditions, not just now, but also in the future as well. I have one more question. I will stick with you, Ross Dornan, if I may. In your opening remarks, you talked about the location of supply, and you mentioned increased competition from a refocusing of the gas markets. Keith Anderson talked about moving away from gas, but I was reading a report by McKinsey this morning that suggests that gas demand will continue to rise until 2035. The UK Government energy security strategy, which you mentioned earlier, will launch an oil and gas offshore licensing round with the aim of improving energy security and affordability. We also know that imported LNG has about two to three times the carbon footprint of domestically produced gas. What is the impact on energy security and the price of consumers of greater North Sea production of gas? What are the environmental consequences of that? It is a really comprehensive question, which I will try to break down into a few different parts of my answer. You are right to say that there are a range of scenarios out there for how oil and gas use within the UK Scottish and global economies is going to evolve. If we look at some of them closer to home at the UK level, for example, the base scenarios, the net zero scenarios, that are compatible with net zero delivery pathways as part of their energy strategy, or for example the climate change committee's balance pathway to net zero, which are both scenarios that are compatible with net zero outcome in the UK. They both outline the need or the requirement or the enduring requirement for oil and gas within a more diverse energy sector. We are going to see growth in renewables, we are going to see growth in electrification and more carbon energies, but there are some areas that are really hard to decarbonise and that is where we are going to see a real enduring need for continued oil and gas use. If you take them, take the climate change committee's forecast, for example, if you were to aggregate all of the energy within that scenario over the next 30 years, you see that about half of that enduring energy needs is supplied by oil and gas and things like heating and things like transport across different parts of the economy. We need to think carefully about how we supply those enduring needs. The best thing to do to manage that as best we can is to invest in our domestic production to make sure that we effectively manage the decline rates in the coming years. It is really important that we have the right investment conditions for that. As I said in my previous answer, that investment framework spans a number of areas. It all comes together, which will dictate on how effective we can secure new investments. If we can really drive more investment in the basin, we are probably looking at an overall supply decline rate of oil and gas in the UK of about 5 per cent per year over the next five to 10 years on average. If we do not invest it, we are probably looking at a decline rate that is far quicker than our oil and gas consumption is going to decline of something of a production decline rate of maybe 15 per cent per year. Investment helps to manage that profile in line with demand, and that helps to manage an exposure to international markets as well. We have to recognise that it is not just about energy security, it is about skills, it is about supply chain development and how we can support those skills, transition, supply chains to transition and support low-carbon energy developments in the future alongside oil and gas developments. New licence and rounds, as you mentioned, are really crucial to all of that. It is an important show of commitment from the Government as part of the energy security strategy. It shows that the Government recognises the future row of oil and gas with a more diverse energy system. That Government support is really important to company decision making. Political risk can be as important as market risk or financial returns when companies are looking at the investment appraisals. As I said previously, we need to see that stability in confidence and signals like the fiscal regime, the licensing regime, is going to endure is really important for investor confidence. In the oil and gas sector, bear in mind that the same companies are going to drive many of our lower-carbon energy sources. On your admissions point, it is important to note that future licensing will be done in line with implementation of the climate compatibility checkpoint, which adds transparency, rigor and robustness to the process. You mentioned that domestic supply is done at a lower rate than many of our imports of energy when it comes to emissions. What I would add to that is that when we look to the future, we have greater ambitions than many of those international supply sources when it comes to reducing our emissions forward here in the UK. By 2030, our production emissions will be less than half of what we were in 2018. By 2040, 90 per cent more than we were in 2018. By 2050, we are committed to being a net zero production basis. The right thing to do is to support our industry, to work with our industry on the path to net zero because we have a shared net zero ambition and to show how the oil and gas sector in Scotland in the UK can be an exemplar for net zero oil and gas supplies that other countries can also follow in the future. I am very grateful for your evidence. No further questions, convener. Okay, thank you very much. Liam, next up, Monica. Let me bring you in, Monica, thank you. Thank you, convener. Good afternoon to our panel. We heard from this morning's panel, which included Joseph Rowntree Foundation, Energy Action Scotland and Citizens Advice Scotland, that this is a collective failure, so it doesn't sound like it reflects well on Governments or the industry itself. We also heard fears that the crisis will lead to a catastrophic loss of life, so it doesn't really get more serious than that. Keith Anderson, is there a compelling case for a freeze on the energy cap in October? No, I don't think that there is a compelling case for a freeze on the cap. I think that the problem, if you do that without any support coming into the industry in the sector, then I think that you really risk seeing more and larger company failures because of the size of the losses that have already been experienced in the sector. That's why, as I said earlier, I think that we need to move to a position where we end up with some kind of fund being created that alleviates a significant proportion of the impact on pain for consumers. There is absolutely no doubt that this is going to affect a huge number of people. It's going to affect them really, really hard. I've said in the past that it could be truly horrific for a large number of people and that they need help and support, but what we also need is an energy retail sector that's sustainable and makes business sense. The way in which I would try to balance those two things is by creating this deficit fund. It takes the pain away from those who will feel that pain the hardest and it spreads the cost of that over a 10-year period. The other thing that I would say that we should do going forward is to move away from the cap in its current format to bringing in place a social tariff. One of the other issues that exists with the price cap right now is that it prices prepayment metres more expensively than a direct-debit geofuil account. Therefore, I know that there's not a direct or a 100 per cent match between prepayment and fuel poverty, but there's a big overlap. To deliberately have a methodology that makes those people pay more money for their energy I think is slightly perverse. I would bring in a social tariff, so my stage one would be bringing in the deficit fund, take the immediate pain away, spread the impact on the cost of it over 10 years and then once the market moves and comes back to a more stable footing I would bring in a social tariff. You have a group of people across the whole of the country who can afford to pay for their energy and they should pay the true proper cost-reflect of price for their energy and then you have a group of people who will struggle to cope with that and they should pay a lower price and that should be deemed through a social tariff and that's the system I would move to. Thank you for that answer. I think that many people will disagree that there is actually a moral case for the freeze. Natalie Dawn picked up the issue of profits and you've given quite a comprehensive answer on that. Another figure that I read, which is just from some media sources in recent months, is that the big six energy firms banked more than £7 billion in operating profit in just five years. Do you understand, Keith, why some people feel quite offended when their energy companies are not seeing their own but others have told people to hug their pets, put on socks, jump up and down? Can you see why people do feel let down and when they hear companies say, no, don't freeze the cap but let's bring in the social tariff? Do you see why we need people who feel that maybe the Government and the companies themselves need to do more? Look, I absolutely understand and I listen to calls that come in through our call centre. I get emails directly from customers. I totally understand the pain, the anxiety and the worry that exists out there right now. Particularly even more so now, there are large groups of people who've probably never experienced this form of financial pressure and they're going to go through this for the first time and they're really seriously, seriously worried. I don't look at any of these things lightly and I would never make stupid suggestions about putting on jumpers or doing daff things. It's just insulting to people to say that kind of thing. This is a serious, serious issue. The reason I come to the conclusions is because it's got so big, I think, it's beyond what I can deal with as a company on my own and I think it's beyond what the industry can deal with on its own because of the size and scale of the financial pressure that it's put on, not just individuals but the entire industry and the entire sector. That's why I would move to the proposal that I've got. I mean, we are and we always have had a lot of processes in place to try and help customers and the first thing I would say, always say and we continue to say to all of our customers is speak to us, please, please communicate with us. We know it's difficult, we know lots of people sometimes feel embarrassed about contacting us but it's absolutely the best thing anyone can do is approach us, talk to us and we'll find a way of helping. Whether that's helping through putting them in touch with some of the agencies, whether it's helping through things like the warm home discount, whether it's through helping through, we've got a £5 million hardship fund, there are lots of ways we can help. At the really, really sharp end we've put in place a process with citizens advice and with food banks to give people direct access to credit on a prepayment meter so they don't self-disconnect. So the stuff like that we can do and we will continue to do but if you look at this in terms of £1,000 on someone's energy bill, I can't deal with that. I don't have the financial strength or backing to take all of that pain away and that's why I think it needs a larger government support scheme. So I think it is welcome that you went to the House of Commons last week, you set out a proposal, you've said to the UK Government that there should be a social tariff that would take £1,000 off people's bills, people who are struggling the most. If government doesn't agree to do that, what will be the consequence? Without a social tariff, what do you fear will happen? So I think that what I've heard from the UK Government is that there appears to be a recognition that more needs to be done but I think that the conversation just now seems to be about waiting until October to wait and see what the impact is of the next price cap rise. That concerns me because of the anxiety that is causing people already and that's a long time for people to wait to understand the answer. Is that too late? Yes, I think that it is too late. We are pushing the Government very hard to do something in the summer to announce further measures or look at announcing further measures in the summer and that would be absolutely my preference in doing that. The other reason that I would do it that way, is that it then gives the industry and others time to implement the solution. If you take, for example, the announcement of the £200 discount against the energy bill that then gets repaired over the following three or four years, that was announced at about the time of the last price cap announcement. There is still a process on the way to look at how that will get implemented and delivered in October. Those things take time to implement. If we don't think about what we're going to do and don't look at having that agreed by June, July, then I find it impossible to believe that it can be implemented by October unless it's a very blunt, wide scheme, i.e., another discount or the Government could obviously look at things and they've looked at policies such as VAT on bills or taking other money off bills. You could do that. The nice thing about the deficit fund is that you target it at those people who require it most. The nice thing about transitioning it to a social tariff is that you target it at those people who need to help the most. That's why I would drive it down that route, but I honestly believe that we should be looking at having an agreement on what we're going to do by the summer. We'll agree that this is very urgent. I think that we're out of time, so I will hand back to the convener, but perhaps if the other panellists have anything to add, they could do so in writing. That's fantastic, Monica. Thank you very much. Final set of questions from Mark Ruskell, who's joining us online. Mark, let me pass over to you. Mark Ruskell, perhaps I could pick up where we just left off. That proposal for a deficit fund and how we fund that seems to be absolutely critical. Can I turn to Ross Dornan from the oil and gas sector? Does the oil and gas sector recognise that it could potentially have a role in supporting vulnerable consumers directly? I point to the fact that, over the last five years, the sector has not paid tax in the North Sea. BP has specifically not paid any tax in the North Sea. I think that it was in February this year that BP's finance officer said, and this is a quote, that it's possible that we're getting more cash than we know what to do with. Surely paying more tax and enabling the Treasury to put money into deficit fund would be one way to do that. Thanks for your question. We, as a sector, completely recognise the echo of sentiments that have been heard. This is such a tough time for everybody across the nation when it comes to what's happening within the energy markets. We would love to play our part in doing this. I don't recognise your comment that the industry does not pay tax. It has only been two years in the industry's history that it was in a negative tax position. I think that it was in 2016 and 2017, and it was very marginally a negative tax. Last year, it paid more than £1.7 billion in taxes. Yes, there are some companies that have been in a negative tax-paying position, but they are for single years over a period of 50 years. It is because of how the tax and the tax regime in our industry work. Our industry has some very large business expenses, just like any business across the country has business expenses. We can treat them in the same way in which we can offset those business expenses against profits that are made and cash flows that are made within your business. However, the difference in our sector is that a huge amount of our business expenses come at the end of the life of a field after the revenues that have been made and after the cash flows that have been made. That is because of our significant decommissioning liabilities. Because of that, we have the ability to offset those decommissioning costs—a portion of those decommissioning costs—of against revenues that were made in previous years. It is not a way of our industry avoiding paying tax. It will be paid a minus tax—a negative tax—of 44 per cent 2019. Especially in a single year, you have to look at an isolation where they have been paying billions and billions of pounds of taxes over the last 50 years in the UK. They will return to a position of being a taxpayer within the years to come. It is because of decommissioning liabilities within certain years. If you look at our industry as a whole, as I said, over all of the next five years we will be paying £23 billion in taxes. That is even after decommissioning cost rebates have been paid from the UK Treasury. That is a net figure of £23 billion, which is £13 billion more than we were expected to be paid just six months ago. For this year, I think that the forecast from the OBR for the financial year 2022-23 is now £8.7 billion or £9 billion that our industry will pay in taxes. The right thing to do is to direct the taxis in the most effective way as possible in order to support consumers. That is what I encourage the Government to do in that position. Another question for you. You mentioned earlier in answer to Liam Kerr about the transition and about companies' investment in the transition to get us away from that expensive gas that is driving the energy price. However, in 2020, gas companies invested only around 1 per cent of their capital expenditure in clean energy. That is according to the international energy agency. Do you think that that is a fast enough transition? When do you think that you can get up to 70 per cent? That is the figure of a global figure. What I can talk to is what is happening in the UK. I mentioned some companies that are on BP have committed that over the next 10 years for everyone pounds that they make from oil and gas sector in the UK, they will invest £2 in low-carbon energy transition. Shell have committed to investing £25 billion within the UK energy sector. What is the proportion of that as capital expenditure? I do not think that I just want a proportion. When do we get to the point where the majority of the capital expenditure that oil and gas companies are making is in the transition, is in clean energy rather than expanding for oil and gas? Within some analysis that we have done recently, we looked at the investment in oil and gas across capital investment, decommissioning and operating expenses. We looked at the offshore wind, hydrogen and carbon capture storage. In our current estimate, between 2022 and 2030, investment expenditure across those areas will be in excess of £200 billion. That is off. When you aggregate oil and gas, when you aggregate them over the period, about 60 per cent is directed towards low-carbon energy and about 40 per cent is directed towards oil and gas expenditure over that period. When you get to the position where total expenditure from companies that are transitioning from the oil and gas sector is in the region of £15 billion to £20 billion per year into the UK energy system, that is a huge amount of money. It does not happen on its own. It needs support from across the political spectrum in order to mobilise that investment to facilitate it and attract it to the UK. That is why it is really important that we have the investment frameworks. Companies are investing for decades into the future. For example, the investment is being made now. The time horizons are talking about energy production into the 2030s, 40s and into 2050s. There needs to be more certainty or as much certainty as possible on what the future of the political support, the fiscal regimes and the regulatory models is going to look like in order to really install investor confidence. We do not need to seize political consensus if we see fiscal regimes changing, if we see Government support levels changing and another stakeholder support levels changing on shorter cycles. That is going to damage the way that companies view the holistic energy investments in the UK in the decades to come. We need to be looking at that as holistic energy investments and not necessarily just looking at oil and gas, hydrogen, wind and all. We have said that there are huge synergies across them and some of the biggest investors across them are diversifying from oil and gas. They look at what is happening in the UK. If there is damage to the oil and gas investment regime in terms of the fiscal stability, that could have a knock-on investment to how they view investment in other ways in the UK. Ross, I am afraid that we have to see the investment come together to help achieve a net zero future. It will not happen on its own. Mark, I am afraid that I do not want to bring the discussion to an end, but we are up against the clock and, in fact, we are well through the clock. That brings us to the end of our allocated time. Let me thank our panel members for attending for your comprehensive insights and recommendations. We very much appreciate you taking time out to appear before the committee. If any panel member would like to follow up in writing, if you feel that you did not have the chance to address some issues that were raised, appreciate timing was quite tight, then if you could follow up with the committee in writing, that would be very much appreciated. We will now move into private session. Enjoy the rest of your day. Thank you.