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A

BILL

[AS AMENDED IN PUBLIC BILL COMMITTEE]

TO

Make provision for the setting of a decarbonisation target range and duties in
relation to it; for or in connection with reforming the electricity market for
purposes of encouraging low carbon electricity generation or ensuring
security of supply; for the establishment and functions of the Office for
Nuclear Regulation; about the government pipe-line and storage system and
rights exercisable in relation to it; about the designation of a strategy and
policy statement; about domestic supplies of gas and electricity; for extending
categories of activities for which energy licences are required; for the making
of orders requiring regulated persons to provide redress to consumers of gas
or electricity; about offshore transmission of electricity during a
commissioning period; for imposing fees in connection with certain costs
incurred by the Secretary of State; and for connected purposes.

Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—

Part 1 Decarbonisation

1 Decarbonisation target range

(1) It is the duty of the Secretary of State to ensure, in respect of each year in
5relation to which a decarbonisation target range is set, that the carbon intensity
of electricity generation in Great Britain is no greater than the maximum
permitted level of the decarbonisation target range.

(2) The Secretary of State may by order (“a decarbonisation order”) set or amend
a decarbonisation target range in relation to a year.

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(3) A “decarbonisation target range”, in relation to any year, means a range for the
carbon intensity of electricity generation in Great Britain.

(4) Section 4 makes further provision in relation to subsection (3).

(5) The earliest year in relation to which a decarbonisation target range may be set
5is 2030; and the first decarbonisation order may not be made before the date on
which the carbon budget for the budgetary period which includes the year
2030 is set by virtue of the duty of the Secretary of State under section 4(2)(b)
of the Climate Change Act 2008.

(6) A decarbonisation order may amend a decarbonisation target range only if it
10appears to the Secretary of State that significant changes affecting the basis on
which the decarbonisation target range was set (or previously amended) make
it appropriate to do so.

(7) The Secretary of State may not revoke a decarbonisation order unless, in
respect of each year in relation to which the order sets a decarbonisation target
15range, a decarbonisation target range remains in effect.

(8) A decarbonisation order may—

(a) amend section 23(4) of the Climate Change Act 2008 (alteration of
budgetary periods) so that after “Act” there is inserted “or sections 1 to
4 of the Energy Act 2013”;

(b) 20repeal section 5 of the Energy Act 2010 (reports on decarbonisation and
CCS progress).

(9) Provision made by virtue of subsection (8) may also—

(a) include incidental, supplementary and consequential provision;

(b) make transitory or transitional provision or savings.

(10) 25A decarbonisation order is to be made by statutory instrument and a statutory
instrument containing a decarbonisation order may not be made unless a draft
of the instrument has been laid before and approved by a resolution of each
House of Parliament.

(11) Before laying before Parliament a draft of a statutory instrument containing a
30decarbonisation order the Secretary of State must consult the Scottish Ministers
and the Welsh Ministers.

2 Matters to be taken into account

(1) The following matters must be taken into account by the Secretary of State in
setting or amending a decarbonisation target range.

(2) 35The matters are—

(a) scientific knowledge about climate change;

(b) technology relevant to the generation and storage of electricity and to
the demand for and use of electricity;

(c) economic circumstances, and in particular the likely impact on the
40economy and the competitiveness of particular sectors of the economy;

(d) fiscal circumstances, and in particular the likely impact on taxation,
public spending and public borrowing;

(e) social circumstances, and in particular the likely impact on fuel
poverty;

(f) 45the structure of the energy market in Great Britain;

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(g) differences in circumstances between England, Wales and Scotland;

(h) circumstances at European and international level;

(i) the duties of the Secretary of State under sections 1 and 4(1)(b) of the
Climate Change Act 2008 (carbon targets and budgets).

3 5Further duties of the Secretary of State

(1) As soon as is reasonably practicable after a decarbonisation order is made, the
Secretary of State must lay before Parliament a report setting out proposals and
policies for fulfilling the duty in section 1(1).

(2) Before laying the report under subsection (1), the Secretary of State must
10consult the Scottish Ministers and the Welsh Ministers; and the Secretary of
State must send a copy of the report to them.

(3) The Secretary of State must in respect of each year—

(a) beginning with the year after the first year in which a decarbonisation
order is made, and

(b) 15ending with the final year in relation to which a decarbonisation target
range is set,

lay before Parliament a statement of the carbon intensity of electricity
generation in Great Britain in relation to that year.

(4) Section 4 makes further provision in relation to subsection (3).

(5) 20The statement must include—

(a) a summary of the means by which the carbon intensity was calculated;

(b) in any statement after the first, a declaration of whether the carbon
intensity has decreased or increased since the previous statement.

(6) In respect of any year in relation to which a decarbonisation target range is set,
25the statement must also include—

(a) a declaration that the carbon intensity in relation to that year was no
greater than the maximum permitted level of the decarbonisation
target range, or

(b) the reasons why the carbon intensity in relation to that year was greater
30than the maximum permitted level of the decarbonisation target range.

(7) The statement required by subsection (3) must be laid before Parliament not
later than the 31st March in the second year following the year in respect of
which the carbon intensity is being stated.

(8) The Secretary of State must send a copy of the statement required by
35subsection (3) to the Scottish Ministers and the Welsh Ministers.

4 Meaning and calculation of “carbon intensity of electricity generation in
Great Britain”

(1) In sections 1 and 3, “carbon intensity of electricity generation in Great Britain”
means grams of carbon dioxide equivalent emissions, measured per kilowatt
40hour of electricity generated in Great Britain (calculated consistently with
international carbon reporting practice).

(2) For the purposes of subsection (1)—

(a) “carbon dioxide equivalent” means a gram of carbon dioxide or an
amount of any other greenhouse gas with an equivalent global

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warming potential (calculated consistently with international carbon
reporting practice);

(b) “Great Britain” includes—

(i) the territorial sea adjacent to Great Britain, and

(ii) 5any area for the time being designated by an Order in Council
under section 84(4) of the Energy Act 2004 (a “Renewable
Energy Zone” for the purposes of that Act).

(3) In this section—

(a) “greenhouse gas” has the meaning given by section 92(1) of the Climate
10Change Act 2008;

(b) “international carbon reporting practice” has the meaning given by
section 94(1) of that Act.

(4) But the Secretary of State may by order make further provision about—

(a) the meaning of “carbon intensity of electricity generation in Great
15Britain” (including, in particular, the meaning of “Great Britain”);

(b) the means by which the carbon intensity is to be calculated;

(c) the meaning of “in relation to any year”;

and subsections (1) to (3) are subject to provision made by any such order.

(5) An order under this section is to be made by statutory instrument and a
20statutory instrument containing such an order may not be made unless a draft
of the instrument has been laid before and approved by a resolution of each
House of Parliament.

(6) An order under this section may—

(a) include incidental, supplementary and consequential provision;

(b) 25make transitory or transitional provision or savings;

(c) make different provision for different cases or circumstances or for
different purposes;

(d) make provision subject to exceptions.

(7) Before laying before Parliament a draft of a statutory instrument containing an
30order under this section the Secretary of State must consult the Scottish
Ministers and the Welsh Ministers.

Part 2 Electricity Market Reform

CHAPTER 1 General considerations

5 35General considerations relating to this Part

(1) In exercising the function of making—

(a) regulations under section 6;

(b) an order under section 17;

(c) a modification under section 20;

(d) 40regulations under section 21;

(e) a modification under section 29;

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(f) a modification under section 34;

(g) an order under section 35;

the Secretary of State must have regard to the matters mentioned in subsection
(2).

(2) 5The matters are—

(a) the duties of the Secretary of State under sections 1 and 4(1)(b) of the
Climate Change Act 2008 (carbon targets and budgets);

(b) ensuring the security of supply to consumers of electricity;

(c) the likely cost to consumers of electricity;

(d) 10the target set out in Article 3(1) of, and Annex 1 to, the renewables
directive (use of energy from renewable sources).

(3) In subsection (2)(d) “the renewables directive” means Directive 2009/28/EC of
the European Parliament and of the Council of 23 April 2009 on the promotion
of the use of energy from renewable sources.

CHAPTER 2 15Contracts for Difference

6 Regulations to encourage low carbon electricity generation

(1) The Secretary of State may for the purpose of encouraging low carbon
electricity generation make regulations about contracts for difference between
a CFD counterparty and an eligible generator.

(2) 20A contract for difference is a contract—

(a) certain payments under which are to be funded by electricity suppliers
(see further section 9), and

(b) which a CFD counterparty is required to enter into by virtue of section
10;

25and such a contract is referred to in this Chapter as a “CFD”.

(3) For the purposes of this Chapter—

(4) In subsection (3) “greenhouse gas” has the meaning given by section 92(1) of
the Climate Change Act 2008.

(5) 35The provision which may be made by regulations includes, but is not limited
to, the provision described in this Chapter.

(6) Regulations may—

(a) include incidental, supplementary and consequential provision;

(b) make transitory or transitional provision or savings;

(c) 40make different provision for different cases or circumstances or for
different purposes;

(d) make provision subject to exceptions.

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(7) Regulations are to be made by statutory instrument.

(8) An instrument containing regulations which make provision falling within
section 9, 10 or 11 (whether or not also making any other provision) may not be
made unless a draft of the instrument has been laid before and approved by a
5resolution of each House of Parliament.

(9) Any other instrument containing regulations is subject to annulment in
pursuance of a resolution of either House of Parliament.

7 Designation of a CFD counterparty

(1) The Secretary of State may by order made by statutory instrument designate
10an eligible person to be a counterparty for contracts for difference.

(2) A person designated under this section is referred to in this Chapter as a “CFD
counterparty”.

(3) A person is eligible if the person is—

(a) a company formed and registered under the Companies Act 2006, or

(b) 15a public authority, including any person any of whose functions are of
a public nature.

(4) A designation may be made only with the consent of the person designated.

(5) More than one designation may have effect under this section.

(6) A designation ceases to have effect if—

(a) 20the Secretary of State by order made by statutory instrument revokes
the designation, or

(b) the person withdraws consent to the designation by giving not less than
28 days’ notice in writing to the Secretary of State.

(7) At any time after the first designation has effect, the Secretary of State must, so
25far as reasonably practicable, exercise the power to designate so as to ensure
that at least one designation has effect under this section.

(8) Schedule 1 (which makes provision about schemes to transfer property, rights
and liabilities from a person who has ceased to be a CFD counterparty to a
person who is a CFD counterparty) has effect.

(9) 30As soon as reasonably practicable after a designation ceases to have effect the
Secretary of State must make a transfer scheme under Schedule 1 to ensure the
transfer of all rights and obligations under any CFD to which the person who
has ceased to be a CFD counterparty was a party.

(10) Regulations may include provision about the period of time for which, and the
35circumstances in which, a person who has ceased to be a CFD counterparty is
to continue to be treated as a CFD counterparty for the purposes of the
regulations.

8 Duties of a CFD counterparty

(1) A CFD counterparty must act in accordance with—

(a) 40any direction given by the Secretary of State or the national system
operator by virtue of this Chapter;

(b) any provision included in regulations.

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(2) In this Chapter “national system operator” means the person operating the
national transmission system for Great Britain (and for this purpose
“transmission system” has the same meaning as in EA 1989 - see section 4(4) of
that Act).

9 5Supplier obligation

(1) Regulations must make provision for electricity suppliers to pay a CFD
counterparty for the purpose of enabling the counterparty to make payments
under CFDs.

(2) Regulations may make provision for electricity suppliers to pay a CFD
10counterparty for the purpose of enabling the counterparty—

(a) to meet such other descriptions of its costs as the Secretary of State
considers appropriate;

(b) to hold sums in reserve;

(c) to cover losses in the case of insolvency or default of an electricity
15supplier.

(3) Regulations may make provision to require electricity suppliers to provide
financial collateral to a CFD counterparty (whether in cash, securities or any
other form).

(4) Regulations which make provision by virtue of subsection (1) for the payment
20of sums by electricity suppliers must impose on the CFD counterparty a duty
in relation to the collection of such sums.

(5) Provision made by virtue of this section may include provision for—

(a) a CFD counterparty to determine the form and terms of any financial
collateral;

(b) 25a CFD counterparty to calculate or determine, in accordance with such
criteria as may be provided for by or under the regulations, amounts
which are owed by an electricity supplier or are to be provided as
financial collateral by an electricity supplier;

(c) the issuing of notices by a CFD counterparty to require the payment or
30provision of such amounts;

(d) the enforcement of obligations arising under such notices.

(6) Provision made by virtue of subsection (5)(b) may provide for anything which
is to be calculated or determined under the regulations to be calculated or
determined by such persons, in accordance with such procedure and by
35reference to such matters and to the opinion of such persons, as may be
specified in the regulations.

(7) Provision made by virtue of subsection (5)(d) may include provision—

(a) about costs;

(b) about interest on late payments under notices;

(c) 40about references to arbitration;

(d) about appeals.

(8) In this section “electricity supplier”, subject to any provision made by
regulations, means a person who is a holder of a licence to supply electricity
under—

(a) 45section 6(1)(d) of EA 1989, or

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(b) Article 10(1)(c) of the Electricity (Northern Ireland) Order 1992 (S.I.
1992/231 (N.I.1)).

10 Direction to offer to contract

(1) The Secretary of State or the national system operator may, in accordance with
5provision made by regulations, direct a CFD counterparty to offer to contract
with a person specified in the direction, on terms specified in the direction.

(2) A person may be specified in a direction under subsection (1) only if that
person is an eligible generator.

(3) Regulations must make provision defining who is an “eligible generator” for
10the purposes of a direction under this section.

(4) Regulations may make further provision about a direction under this section
and in particular about—

(a) the circumstances in which a direction may or must be given;

(b) the terms which may or must be specified in a direction.

(5) 15Provision falling within subsection (4) may include provision for—

(a) the determination of a matter on a competitive basis,

(b) calculations or determinations to be made under the regulations,
including by such persons, in accordance with such procedure and by
reference to such matters and to the opinion of such persons, as may be
20specified in the regulations.

(6) Regulations may make provision about appeals against a decision of the
Secretary of State or the national system operator not to issue a direction by
virtue of this section.

(7) A direction may not be given under this section in relation to an electricity
25generating station in Northern Ireland unless the Department of Enterprise,
Trade and Investment consent to the direction.

(8) But regulations may, with the consent of that Department, include provision
for circumstances in which consent under subsection (7) is not required.

(9) In subsection (7) “Northern Ireland” includes so much of the internal waters
30and territorial sea of the United Kingdom as are adjacent to Northern Ireland.

11 Payments to electricity suppliers

(1) Regulations may make provision about the amounts which must be paid by a
CFD counterparty to electricity suppliers.

(2) In this section “electricity supplier”, subject to any provision made by
35regulations, means a person who is a holder of a licence to supply electricity
under—

(a) section 6(1)(d) of EA 1989; or

(b) Article 10(1)(c) of the Electricity (Northern Ireland) Order 1992 (S.I.
1992/231 (N.I.1)).

12 40Application of sums held by a CFD counterparty

(1) Regulations may make provision for apportioning sums—

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(a) received by a CFD counterparty from electricity suppliers under
provision made by virtue of section 9;

(b) received by a CFD counterparty under a CFD,

in circumstances where the CFD counterparty is unable fully to meet
5obligations under a CFD.

(2) Provision made by virtue of subsection (1) may include provision about the
meaning of “unable fully to meet obligations under a CFD”.

(3) Regulations may make provision about the application of sums held by a CFD
counterparty.

(4) 10Provision made by virtue of subsection (3) may include provision that sums are
to be paid, or not to be paid, into the Consolidated Fund.

13 Information and advice

(1) Regulations may make provision about the provision and publication of
information.

(2) 15Provision made by virtue of subsection (1) may include provision—

(a) for the Secretary of State to require the national system operator to
provide advice to the Secretary of State;

(b) for the Secretary of State to require a CFD counterparty, the Authority,
the Northern Ireland Authority for Utility Regulation or the Northern
20Ireland system operator to provide advice to the Secretary of State or
any other person specified in the regulations;

(c) for the Secretary of State to require a CFD counterparty, the national
system operator, the Authority, the Northern Ireland Authority for
Utility Regulation, the Northern Ireland system operator or a generator
25who is party to a CFD to provide information to the Secretary of State
or any other person specified in the regulations;

(d) for the national system operator to require information to be provided
to it by a CFD counterparty, a generator who is party to a CFD or the
Northern Ireland system operator;

(e) 30for a CFD counterparty to require information to be provided to it by
electricity suppliers or the Northern Ireland system operator;

(f) for the classification and protection of confidential or sensitive
information;

(g) for the enforcement of any requirement imposed by virtue of
35paragraphs (a) to (f).

(3) In subsection (2)

(a) “Northern Ireland system operator” means the holder of a licence
under Article 10(1)(b) of the Electricity (Northern Ireland) Order 1992
(S.I. 1992/231 (N.I.1)S.I. 1992/231 (N.I.1));

(b) 40“electricity supplier”, subject to any provision made by regulations,
means a person who is a holder of a licence to supply electricity
under—

(i) section 6(1)(d) of EA 1989; or

(ii) Article 10(1)(c) of the Electricity (Northern Ireland) Order 1992
45(S.I. 1992/231 (N.I.1)S.I. 1992/231 (N.I.1)).

(4) The prohibition on disclosure of information by—

(a) section 105(1) of the Utilities Act 2000;

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