Energy Bill (HC Bill 135)

(b) Article 63(1) of the Energy (Northern Ireland) Order 2003 (S.I. 2003/419S.I. 2003/419
(N.I.6));

does not apply to a disclosure required by virtue of this section.

14 Functions of the Authority

5Regulations may make provision conferring functions on the Authority for the
purpose of offering advice to, or making determinations on behalf of, a party
to a CFD.

15 Regulations: further provision

(1) Regulations may make provision—

(a) 10to require a CFD counterparty to enter into arrangements or to offer to
contract for purposes connected to a CFD;

(b) specifying things that a CFD counterparty may or must do, or things
that a CFD counterparty may not do;

(c) conferring on the Secretary of State further powers to direct a CFD
15counterparty to do, or not to do, things specified in the regulations or
the direction.

(2) Provision made by virtue of subsection (1)(b) or (c) includes provision
requiring consultation with, or the consent of, the Secretary of State in relation
to—

(a) 20the enforcement of obligations under a CFD;

(b) a variation or termination of a CFD;

(c) the settlement or compromise of a claim under a CFD;

(d) the conduct of legal proceedings relating to a CFD;

(e) the exercise of rights under a CFD.

16 25Enforcement

(1) Regulations may make provision for requirements under the regulations to be
enforceable—

(a) by the Authority as if they were relevant requirements on a regulated
person for the purposes of section 25 of EA 1989;

(b) 30by the Northern Ireland Authority for Utility Regulations as if they
were relevant requirements on a regulated person for the purposes of
Article 41A of the Energy (Northern Ireland) Order 2003 (S.I 2003/419
(N.I. 6)).

(2) Provision made by virtue of subsection (1)(a) may include provision about the
35enforcement of requirements imposed on the national system operator.

(3) Provision made by virtue of subsection (1)(b) may be made in relation only to
the enforcement of requirements imposed on the holder of a licence under
Article 10(1)(c) of the Electricity (Northern Ireland) Order 1992 (S.I. 1992/231S.I. 1992/231
(N.I.1)).

17 40Order for maximum cost and targets

(1) The Secretary of State may by order provide for—

(a) the power to give a direction under section 10 not to be exercisable if a
maximum cost incurred or to be incurred by a CFD counterparty has
been reached (such cost to be calculated in accordance with provision
made by or under the order);

(b) 5a power for the Secretary of State to direct the national system operator
not to give a direction by virtue of this Chapter if the Secretary of State
believes that by virtue of the direction being given a cost greater than
the maximum cost provided for by the order would be incurred;

(c) any other targets to be met or taken into account by the national system
10operator in the giving of directions under this Chapter.

(2) If more than one designation has effect under section 7, the reference in
subsection (1)(a) is a reference to all CFD counterparties.

(3) Provision made by virtue of subsection (1)(a) may provide for anything which
is to be calculated under the order to be calculated by such persons, in
15accordance with such procedure and by reference to such matters and to the
opinion of such persons, as may be specified in the order.

(4) Provision made by virtue of subsection (1)(c) may include targets relating to—

(a) the means by which electricity is to be generated;

(b) the generating capacity of electricity generating stations;

(c) 20the geographical location of electricity generating stations.

(5) An order under this section is to be made by statutory instrument and a
statutory instrument containing 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.

18 25Consultation

(1) Before making regulations under this Chapter or an order under section 17 the
Secretary of State must consult—

(a) the Scottish Ministers,

(b) the Welsh Ministers,

(c) 30the Department of Enterprise, Trade and Investment,

(d) any person who is a holder of a licence to supply electricity under
section 6(1)(d) of EA 1989,

(e) any person who is a holder of a licence under Article 10(1)(b) or (c) of
the Electricity (Northern Ireland) Order 1992 (S.I. 1992/231 (N.I.1)S.I. 1992/231 (N.I.1))
35(transmission or supply licence),

(f) the Authority,

(g) the national system operator, and

(h) such other persons as the Secretary of State considers it appropriate to
consult.

(2) 40The requirement to consult may be satisfied by consultation before, as well as
consultation after, the passing of this Act.

19 Shadow directors, etc.

Neither the Secretary of State nor the national system operator is, by virtue of
the exercise of a power conferred by or by virtue of this Chapter, to be regarded
45as—

(a) a person occupying in relation to a CFD counterparty the position of
director;

(b) being a person in accordance with whose directions or instructions the
directors of a CFD counterparty are accustomed to act;

(c) 5exercising any function of management in a CFD counterparty;

(d) a principal of a CFD counterparty.

20 Licence modifications

(1) The Secretary of State may modify—

(a) a condition of a particular licence under section 6(1)(a), (b) or (c) of EA
101989 (generation, transmission and distribution licences);

(b) the standard conditions incorporated in licences under that provision
by virtue of section 8A(1A) of that Act;

(c) a document maintained in accordance with the conditions of licences
under that provision, or an agreement that gives effect to a document
15so maintained.

(2) The Secretary of State may make a modification under subsection (1) only for
the purpose of—

(a) conferring functions on the national system operator in connection
with its functions by or by virtue of this Chapter;

(b) 20allowing or requiring services to be provided to a CFD counterparty;

(c) enforcing obligations under a CFD.

(3) Provision included in a licence, or in a document or agreement relating to
licences, by virtue of the power under subsection (1) may in particular include
provision of a kind that may be included in regulations.

(4) 25Before making a modification under this section, the Secretary of State must
consult—

(a) the Scottish Ministers,

(b) the Welsh Ministers,

(c) the holder of any licence being modified,

(d) 30any person who is a holder of a licence to supply electricity under
section 6(1)(d) of EA 1989,

(e) any person who is a holder of a licence to supply electricity under
Article 10(1)(c) of the Electricity (Northern Ireland) Order 1992 (S.I.
1992/231 (N.I.1)),

(f) 35the Department of Enterprise, Trade and Investment,

(g) the Authority, and

(h) such other persons as the Secretary of State considers it appropriate to
consult.

(5) Subsection (4) may be satisfied by consultation before, as well as by
40consultation after, the passing of this Act.

CHAPTER 3 Capacity Market

21 Power to make electricity capacity regulations

(1) The Secretary of State may by regulations make provision for the purpose of
providing capacity to meet the demands of consumers for the supply of
5electricity in Great Britain.

(2) Regulations under this section are referred to in this Chapter as “electricity
capacity regulations”.

(3) In subsection (1) “providing capacity” means providing electricity or reducing
demand for electricity; and electricity capacity regulations may make further
10provision about the meaning of “providing electricity” or “reducing demand
for electricity”.

(4) The provision that may be made in electricity capacity regulations includes,
but is not limited to, the provision described in this Chapter.

(5) In this Chapter “national system operator” means the person operating the
15national 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).

22 Capacity agreements

(1) Electricity capacity regulations may make provision about capacity
20agreements.

(2) Subject to any further provision made under this Chapter, a capacity
agreement is an instrument by virtue of which—

(a) the holder of the capacity agreement (“the capacity provider”) may be
required to provide capacity;

(b) 25all electricity suppliers may be required to make payments (“capacity
payments”) to or for the benefit of capacity providers;

(c) capacity providers may be required to make payments (“capacity
incentives”) to or for the benefit of all electricity suppliers.

(3) Provision included in electricity capacity regulations for the purposes of
30subsection (2) may make provision about the meaning of “electricity supplier”.

(4) Provision included in electricity capacity regulations by virtue of subsection (1)
may include provision about—

(a) the terms of a capacity agreement;

(b) the circumstances in which, and the process by which, a capacity
35agreement may or must be issued;

(c) the persons who may be capacity providers;

(d) the circumstances in which capacity must be available;

(e) the duration of a capacity agreement;

(f) the means by which capacity payments or capacity incentives are to be
40calculated;

(g) a person or body who is to administer the settlement of capacity
payments or capacity incentives (“a settlement body”);

(h) the enforcement of the terms of a capacity agreement;

(i) the resolution of disputes relating to a capacity agreement;

(j) the circumstances in which a capacity agreement may be terminated or
varied;

(k) 5the circumstances in which a capacity agreement may be assigned or
traded.

(5) Provision falling within subsection (4) includes provision—

(a) conferring on the national system operator the function of issuing
capacity agreements;

(b) 10relating to the outcome of a capacity auction (see section 23);

(c) about any conditions that must be satisfied by or in relation to a person
before that person may enter a capacity auction or become a capacity
provider;

(d) about any matters in relation to which a person must satisfy the
15national system operator before the person may enter a capacity
auction or become a capacity provider.

(6) Provision made by virtue of this section may include provision requiring a
person to consent to the inspection of plant or premises, either before or after
that person becomes a capacity provider.

23 20Capacity auctions

(1) Electricity capacity regulations may make provision for the determination on
a competitive basis of who may be a capacity provider (referred to in this
Chapter as a “capacity auction”).

(2) Provision included in electricity capacity regulations by virtue of subsection (1)
25may include provision—

(a) for the national system operator to run a capacity auction;

(b) about the circumstances in which a capacity auction may or must be
held;

(c) about the amount of capacity in relation to which a determination may
30be made;

(d) about the intervals at which a capacity auction may or must be held;

(e) about the process by which a capacity auction may or must be run;

(f) about the manner in which the Secretary of State may decide whether
and how to exercise any function in relation to capacity auctions;

(g) 35about appeals relating to eligibility for, or the outcome of, capacity
auctions.

(3) Provision falling within subsection (2)(a) may include provision—

(a) requiring the national system operator to prepare and publish rules or
guidance about capacity auctions;

(b) 40about any process to be followed in preparing and publishing any such
rules or guidance.

(4) Provision falling within subsection (2)(c) may confer on the Secretary of State
or the Authority (but not on any other person) the function of deciding the
amount of capacity in relation to which a determination may be made.

(5) 45Provision falling within subsection (2)(f) may include provision about—

(a) the frequency with which a decision will be made and reviewed;

(b) the persons who will be consulted before a decision is made;

(c) the matters to be taken into account in reaching a decision.

24 Settlement body

(1) Electricity capacity regulations may make provision for payments to be made
5by electricity suppliers or capacity providers to a settlement body (see section
22(4)(g)) for the purpose of enabling the body—

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

(b) to hold sums in reserve;

(c) 10to cover losses in the case of insolvency or default of an electricity
supplier or capacity provider.

(2) Electricity capacity regulations may make provision to require electricity
suppliers or capacity providers to provide financial collateral to a settlement
body (whether in cash, securities or any other form).

(3) 15Provision made by virtue of this section may include provision for—

(a) a settlement body to determine the form and terms of any financial
collateral;

(b) a settlement body to calculate or determine, in accordance with such
criteria as may be provided for by or under the regulations, amounts
20which are owed by an electricity supplier or capacity provider or are to
be provided as financial collateral by an electricity supplier or capacity
provider;

(c) the issuing of notices by a settlement body to require the payment or
provision of such amounts.

(4) 25Provision made by virtue of subsection (3)(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
reference to such matters and to the opinion of such persons, as may be
specified in the regulations.

25 30Functions of the Authority or the national system operator

Electricity capacity regulations may make provision to confer functions on the
Authority or the national system operator.

26 Other requirements

(1) Electricity capacity regulations may impose requirements otherwise than
35under a capacity agreement.

(2) The persons on whom requirements may be imposed by virtue of subsection
(1) include—

(a) any person who is a holder of a licence under section 6(1) of EA 1989;

(b) any other person carrying out functions in relation to capacity
40agreements;

(c) any other person who is, or has ceased to be, a capacity provider.

(3) Requirements which may be imposed by virtue of subsection (1) include
requirements—

(a) relating to the manner in which functions are to be exercised;

(b) relating to restrictions on the use of generating plant;

(c) relating to participation in a capacity auction;

(d) relating to the inspection of plant or property.

27 5Electricity capacity regulations: information and advice

(1) Electricity capacity regulations may make provision about the provision and
publication of information.

(2) Provision included in electricity capacity regulations by virtue of subsection (1)
may include provision—

(a) 10for the Secretary of State to require the Authority, the national system
operator or any other person specified in the regulations to provide
information or advice to the Secretary of State or any other person so
specified;

(b) for the Authority or the national system operator to require information
15to be provided to it by any person specified in the regulations for any
purpose so specified;

(c) for the Secretary of State to require capacity providers and electricity
suppliers to share information about the operation of capacity
agreements with each other or with any other person so specified;

(d) 20for the publication by any person so specified of any information or
advice so specified;

(e) for the classification and protection of confidential or sensitive
information.

(3) The prohibition on disclosure of information by section 105(1) of the Utilities
25Act 2000 does not apply to a disclosure required by virtue of this section.

28 Enforcement and dispute resolution

(1) Electricity capacity regulations may make provision about the enforcement of
any obligation or requirement imposed by the regulations.

(2) Provision in electricity capacity regulations about enforcement or the
30resolution of disputes may include provision conferring functions on any
public body or any other person.

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

(a) about powers to impose financial penalties;

(b) for requirements under the electricity capacity regulations to be
35enforceable by the Authority as if they were relevant requirements on
a regulated person for the purposes of section 25 of EA 1989;

(c) about reference to arbitration;

(d) about appeals.

29 Licence modifications for the purpose of the capacity market

(1) 40The Secretary of State may, for any purpose related to provision that is made
by this Chapter, or any purpose for which provision may be made under this
Chapter, modify—

(a) a condition of a particular licence under section 6(1)(a) to (e) of EA 1989
(generation, transmission, distribution, supply and interconnector
licences);

(b) the standard conditions incorporated in licences under those
5provisions by virtue of section 8A of that Act;

(c) a document maintained in accordance with the conditions of licences
under those provisions, or an agreement that gives effect to a document
so maintained.

(2) A modification under this section may in particular include a modification—

(a) 10to provide for a new document to be prepared and maintained in
accordance with the conditions of a licence;

(b) to provide for an agreement to give effect to a document so maintained;

(c) to confer functions on the national system operator.

(3) Provision included in a licence, or in a document or agreement relating to
15licences, by virtue of the modification power may in particular include
provision of any kind that may be included in electricity capacity regulations.

(4) Before making a modification under this section, the Secretary of State must
consult—

(a) the holder of any licence being modified,

(b) 20the Authority, and

(c) such other persons as the Secretary of State considers it appropriate to
consult.

(5) Subsection (4) may be satisfied by consultation before, as well as by
consultation after, the passing of this Act.

30 25Amendment of enactments

The Secretary of State may by regulations, for the purpose of or in connection
with any provision made by or by virtue of this Chapter—

(a) amend or repeal section 47ZA of EA 1989 (annual report by Authority
on security of electricity supply);

(b) 30amend section 172 of the Energy Act 2004 (annual report on security of
energy supplies);

(c) amend section 25 of and Schedule 6A to EA 1989 (enforcement of
obligations of regulated persons);

(d) make such provision amending, repealing or revoking any other
35enactment as the Secretary of State considers appropriate in
consequence of provision made by or by virtue of this Chapter.

31 Principal objective and general duties

Sections 3A to 3D of EA 1989 (principal objective and general duties) apply in
relation to functions of the Authority conferred by or by virtue of this Chapter
40as they apply in relation to functions under Part 1 of that Act.

32 Regulations under Chapter 3

(1) Regulations under this Chapter may—

(a) include incidental, supplementary and consequential provision;

(b) make 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.

(2) Before making any regulations under this Chapter, the Secretary of State must
5consult—

(a) the Authority,

(b) any person who is a holder of a licence to supply electricity under
section 6(1)(d) of EA 1989,

(c) such other persons as the Secretary of State considers it appropriate to
10consult.

(3) Subsection (2) may be satisfied by consultation before, as well as consultation
after, the passing of this Act.

(4) Regulations under this Chapter must be made by statutory instrument.

(5) An instrument containing (whether alone or with other provision)—

(a) 15the first set of electricity capacity regulations;

(b) regulations which make provision amending or repealing a provision
of an enactment contained in primary legislation,

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) 20A statutory instrument to which subsection (5) does not apply and containing
regulations under this Chapter is subject to annulment in pursuance of a
resolution of either House of Parliament.

CHAPTER 4 Investment contracts

33 Investment contracts

25Schedule 2 (which makes provision about investment contracts) has effect.

CHAPTER 5 Conflict of interest and contingency arrangements

34 Modifications of transmission and other licences: business separation

(1) The Secretary of State may modify—

(a) a condition of a particular licence under section 6(1)(a) to (e) of EA 1989
30(generation, transmission, distribution, supply and interconnector
licences);

(b) the standard conditions incorporated in licences under those
provisions by virtue of section 8A of that Act;

(c) a document maintained in accordance with the conditions of licences
35under section 6(1)(a) to (e) of that Act, or an agreement that gives effect
to a document so maintained.

(2) The Secretary of State may make a modification under subsection (1) only for
the purpose of imposing measures for or in connection with securing an
appropriate degree of business separation between the carrying on of—

(a) system operation functions (or any particular such function), and

(b) 5any other functions (including, in a case where a measure relates to a
particular system operation function, other system operation
functions).

(3) “System operation functions” are—

(a) functions authorised under a transmission licence of co-ordinating and
10directing the flow of electricity onto and over a transmission system by
means of which the transmission of electricity takes place, and

(b) EMR functions.

(4) A degree of business separation is “appropriate” for the purposes of subsection
(2) if the Secretary of State determines it to be necessary or desirable as a
15consequence of the conferral of EMR functions.

(5) In making that determination, the Secretary of State must have regard to the
extent to which a measure of the kind mentioned in subsection (2) may affect
the efficient and effective carrying on of system operation functions and other
functions authorised under a transmission licence.

(6) 20The measures referred to in subsection (2) include, in particular, measures for
or in connection with securing any of the following—

(a) the body corporate that carries on EMR functions does not carry on
other functions;

(b) limitations are in place in respect of the control or influence that may be
25exercised over that body by another group undertaking (within the
meaning of the Companies Acts - see section 1161 of the Companies Act
2006);

(c) separations are in place between—

(i) the locations where system operation functions, and other
30functions, are carried on;

(ii) the information technology systems used for the purposes of
the carrying on of system operation functions and other
functions;

(d) the accounting arrangements in relation to system operation functions
35are separate from those in relation to other functions;

(e) persons who participate in the carrying on of system operation
functions do not participate in the carrying on of other functions;

(f) persons with access to information obtained in the carrying on of
system operation functions do not have access to information obtained
40in the carrying on of other functions.

(7) The power conferred by subsection (1) may be exercised so as to impose a
requirement on a person holding a transmission licence—

(a) to prepare annual reports about how measures within subsection (2)
have been put in place for the year in question, and

(b) 45to submit such reports to either or both of the Secretary of State and the
Authority.

(8) Before making a modification under subsection (1), the Secretary of State must
consult—

(a) the holder of any licence being modified,