Energy Bill

House of Commons

Session 2013 - 14
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Energy Bill

Energy Bill
Part 2 — Electricity Market Reform
Chapter 5 — Conflict of interest and contingency arrangements
19

(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)
The measures referred to in subsection (2) include, in particular, measures for
5
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
exercised over that body by another group undertaking (within the
10
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
functions, are carried on;
15
(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
are separate from those in relation to other functions;
20
(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
in the carrying on of other functions.
25
(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)
to submit such reports to either or both of the Secretary of State and the
30
Authority.
(8)
Before making a modification under subsection (1), the Secretary of State must
consult—
(a)
the holder of any licence being modified,
(b)
the Authority, and
35
(c)
such other persons as the Secretary of State considers it appropriate to
consult.
(9)
Subsection (8) may be satisfied by consultation before, as well as by
consultation after, the passing of this Act.
(10)
In this section—
40
“EMR functions” means functions conferred by or by virtue of Chapter 2
(contracts for difference), Chapter 3 (capacity market) or Chapter 4
(investment contracts);
“transmission”, “transmission licence” and “transmission system” have
the same meaning as in Part 1 of EA 1989.
45

Energy Bill
Part 2 — Electricity Market Reform
Chapter 5 — Conflict of interest and contingency arrangements
20

35
Power to transfer EMR functions
(1)
The Secretary of State may by order provide that EMR functions carried out by
the national system operator are instead to be carried out by an alternative
delivery body.
(2)
An order under subsection (1) may be made only if—
5
(a)
the national system operator has requested the making of the order,
(b)
an energy administration order is in force in relation to the national
system operator,
(c)
the unsatisfactory performance condition is met (see subsection (3)),
(d)
it appears to the Secretary of State necessary or desirable to make the
10
order as a result of a change, occurring after the coming into force of
this section, in the persons having control of the national system
operator (see subsection (4)), or
(e)
it otherwise appears to the Secretary of State necessary or desirable to
make the order in connection with furthering the purposes of—
15
(i)
encouraging low carbon electricity generation (within the
meaning of Chapter 2), or
(ii)
providing capacity to meet the demands of consumers for the
supply of electricity in Great Britain.
(3)
The unsatisfactory performance condition is met if—
20
(a)
it appears to the Secretary of State that the national system operator has
been failing to carry out its EMR functions in an efficient and effective
manner,
(b)
the Secretary of State has given notice in writing to the national system
operator providing particulars of the failure,
25
(c)
a period of at least 6 months has passed since the giving of the notice,
and
(d)
it appears to the Secretary of State that the failure so specified is
continuing.
(4)
“Control”, in relation to the national system operator, means the power of a
30
person to secure—
(a)
by means of the holding of shares or the possession of voting power in
relation to the national system operator or any other body corporate, or
(b)
as a result of any powers conferred by the articles of association or other
document regulating the national system operator or any other body
35
corporate,

that the affairs of the national system operator are conducted in accordance
with the person’s wishes.
(5)
The Secretary of State must, subject to subsection (6), consult the national
system operator before making an order under subsection (1) on the grounds
40
mentioned in subsection (2)(e).
(6)
Subsection (5) does not apply where the Secretary of State considers the
urgency of the case makes it inexpedient to consult the national system
operator before making the order.
(7)
Where an EMR function has previously been transferred from the national
45
system operator to an alternative delivery body by an order under subsection
(1), the Secretary of State may by a further order provide that the function is
instead to be carried out by—

Energy Bill
Part 2 — Electricity Market Reform
Chapter 5 — Conflict of interest and contingency arrangements
21

(a)
a different alternative delivery body, or
(b)
the national system operator.
(8)
“Alternative delivery body”, in relation to an order under subsection (1) or (7),
means such person as may be specified in the order.
(9)
An order under subsection (1) or (7) that specifies as the alternative delivery
5
body a person other than the Secretary of State requires the consent of that
person.
(10)
An order under subsection (7) providing for EMR functions to be carried out
by the national system operator requires the consent of the national system
operator.
10
(11)
In this section—
“EMR functions” means functions conferred on the national system
operator by or by virtue of Chapter 2 (contracts for difference), Chapter
3 (capacity market) or Chapter 4 (investment contracts);
“energy administration order” has the same meaning as in Chapter 3 of
15
Part 3 of the Energy Act 2004 (see section 154(1) of that Act);
“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).
20
36
Orders under section 35: fees and other supplementary provision
(1)
A transfer of functions order may provide for an alternative delivery body to
require fees to be paid for, or in connection with, the performance of any EMR
functions conferred on the body by virtue of the order.
(2)
The amount of any such fee is the amount specified in, or determined by or in
25
accordance with, the order.
(3)
A transfer of functions order may relate—
(a)
to all EMR functions that the national system operator or the alternative
delivery body is carrying out, or
(b)
only to such of those functions as are specified in the order.
30
(4)
A transfer of functions order may—
(a)
include incidental, supplementary and consequential provision;
(b)
make transitory or transitional provision and savings;
(c)
make different provision for different cases or circumstances or for
different purposes.
35
(5)
Consequential provision made under subsection (4)(a) may amend, repeal or
revoke any provision made by or under an Act, whenever passed or made
(including this Act).
(6)
A transfer of functions order is to be made by statutory instrument.
(7)
A statutory instrument containing a transfer of functions order is subject to
40
annulment in pursuance of a resolution of either House of Parliament.
(8)
Schedule 3 (which confers power on the Secretary of State to make transfer
schemes in connection with the making of transfer of functions orders) has
effect.

Energy Bill
Part 2 — Electricity Market Reform
Chapter 5 — Conflict of interest and contingency arrangements
22

(9)
If the Secretary of State makes a transfer of functions order under which any
EMR functions of the national system operator are transferred to an alternative
delivery body, the Secretary of State must consider the extent to which (if at all)
a licence modification power should be exercised as a consequence of the
national system operator ceasing to carry out the functions that are transferred.
5
(10)
In subsection (9) “licence modification power” means a power conferred by
section 20, 29 or 34 to modify—
(a)
a condition of a transmission licence granted to the national system
operator under section 6(1)(b) of EA 1989,
(b)
the standard conditions incorporated in such licences under section 8A
10
of that Act, or
(c)
a document maintained in accordance with the conditions of such
licences, or an agreement that gives effect to a document so maintained.
(11)
In this section—
“alternative delivery body”, “EMR functions” and “national system
15
operator” have the same meaning as in section 35;
“transfer of functions order” means an order under section 35(1) or (7).
37
Energy administration orders
(1)
The Energy Act 2004 is amended as follows.
(2)
In section 154 (energy administration orders), in subsection (3) for “section 155”
20
substitute “—
(a)
section 155(1), and
(b)
section 155(9) (if and to the extent that section 155(9) applies in relation
to the company).”
(3)
In section 155 (objective of an energy administration), after subsection (7)
25
insert—
“(8)
Subsection (9) applies if the company in relation to which an energy
administration order is made has functions conferred by or by virtue
of—
(a)
Chapter 2, 3 or 4 of Part 2 of the Energy Act 2013, or
30
(b)
an order made under section 35 of that Act (power of Secretary
of State to transfer certain functions).
(9)
The objective of an energy administration (in addition to the objective
mentioned in subsection (1)) is to secure—
(a)
that those functions are and continue to be carried out in an
35
efficient and effective manner; and
(b)
that it becomes unnecessary, by one or both of the means
mentioned in subsection (2), for the energy administration
order to remain in force for that purpose.
(10)
The duty under section 154(3), so far as it relates to the objective
40
mentioned in subsection (9)—
(a)
applies only to the extent that securing that objective is not
inconsistent with securing the objective mentioned in
subsection (1);
(b)
ceases to apply in respect of any function of a company if an
45
order is made under section 35 of the Energy Act 2013 as a result

Energy Bill
Part 2 — Electricity Market Reform
Chapter 6 — Access to markets etc
23

of which the function is transferred from that company to
another person.”
Chapter 6
Access to markets etc
38
Power to modify licence conditions etc: market participation and liquidity
5
(1)
The Secretary of State may modify—
(a)
a condition of a particular licence under section 6(1)(a) or (d) of EA 1989
(generation and supply licences);
(b)
the standard conditions incorporated in licences under those
provisions by virtue of section 8A of that Act;
10
(c)
a document maintained in accordance with the conditions of licences
under section 6(1)(a) or (d) of that Act, or an agreement that gives effect
to a document so maintained.
(2)
The Secretary of State may exercise the power in subsection (1) only for the
following purposes—
15
(a)
facilitating participation in the wholesale electricity market in Great
Britain, whether by licence holders or others;
(b)
promoting liquidity in that market.
(3)
Modifications made by virtue of that power may include—
(a)
provision imposing obligations in relation to the sale or purchase of
20
electricity, including, in particular, obligations as to—
(i)
the terms on which electricity is sold or purchased, and
(ii)
the circumstances or manner in which electricity is sold or
purchased;
(b)
provision imposing restrictions on the sale or purchase of electricity to
25
or from group undertakings;
(c)
provision imposing obligations in relation to the disclosure or
publication of information.
(4)
For the purposes of subsection (3)(b), electricity is sold to or purchased from a
group undertaking if the transaction is between undertakings one of which is
30
a group undertaking in relation to the other.

For this purpose, “undertaking” and “group undertaking” have the same
meanings as in the Companies Acts (see section 1161 of the Companies Act
2006).
39
Power to modify licence conditions etc to facilitate investment in electricity
35
generation
(1)
The Secretary of State may modify—
(a)
a condition of a particular licence under section 6(1)(d) of EA 1989
(supply licences);
(b)
the standard conditions incorporated in licences under that provision
40
by virtue of section 8A of that Act;
(c)
a document maintained in accordance with the conditions of licences
under section 6(1)(d) of that Act, or an agreement that gives effect to a
document so maintained.

Energy Bill
Part 2 — Electricity Market Reform
Chapter 7 — The renewables obligation: transitional arrangements
24

(2)
The Secretary of State may exercise the power in subsection (1) only for the
purpose of facilitating investment in electricity generation by promoting
availability of arrangements for the sale of electricity generated.
(3)
Modifications made by virtue of that power may include provision imposing
obligations in relation to arrangements for the purchase of electricity
5
including, in particular, obligations in relation to—
(a)
the terms of any such arrangements, including the terms on which
electricity is purchased, and
(b)
the circumstances or manner in which any such arrangements are made
or offered.
10
40
Licence modifications under sections 38 and 39: further provisions
(1)
A modification of a licence under section 38(1) or 39(1) may in particular
include a modification—
(a)
to provide for a new document to be required to be prepared and
maintained in accordance with the conditions of such a licence;
15
(b)
to provide for an agreement to give effect to a document so maintained.
(2)
Before making modifications under section 38(1) or 39(1), the Secretary of State
must consult—
(a)
the holder of any licence being modified,
(b)
the Authority, and
20
(c)
such other persons as the Secretary of State considers it appropriate to
consult.
(3)
Subsection (2) may be satisfied by consultation before, as well as by
consultation after, the passing of this Act.
Chapter 7
25
The renewables obligation: transitional arrangements
41
Transition to certificate purchase scheme
(1)
EA 1989 is amended as follows.
(2)
After section 32M insert—
“32N
The certificate purchase obligation
30
(1)
The Secretary of State may make a certificate purchase order.
(2)
A certificate purchase order is an order which imposes the certificate
purchase obligation on—
(a)
the purchasing body of GB certificates;
(b)
the purchasing body of NI certificates.
35
(3)
The certificate purchase obligation is that—
(a)
the purchasing body of GB certificates must pay the redemption
value of a GB certificate to the person presenting it;
(b)
the purchasing body of NI certificates must pay the redemption
value of a NI certificate to the person presenting it.
40

Energy Bill
Part 2 — Electricity Market Reform
Chapter 7 — The renewables obligation: transitional arrangements
25

(4)
The purchasing body of GB certificates is—
(a)
the Authority, or
(b)
such other eligible person as may be designated by the order as
the purchasing body of GB certificates.
(5)
The purchasing body of NI certificates is—
5
(a)
the Northern Ireland authority, or
(b)
such other eligible person as may be designated by the order as
the purchasing body of NI certificates.
(6)
A person is an “eligible person” for the purposes of designation under
subsection (4)(b) if the person is—
10
(a)
a CFD counterparty at the time when the designation is made,
or
(b)
the Secretary of State.
(7)
A person is an “eligible person” for the purposes of designation under
subsection (5)(b) if the person is a CFD counterparty at the time when
15
the designation is made.
(8)
Subsection (3) is subject to sections 32O to 32Z1.
32O
Further provision about the certificate purchase obligation
(1)
A certificate purchase order may make provision generally in relation
to the certificate purchase obligation.
20
(2)
A certificate purchase order may, in particular—
(a)
specify the redemption value of certificates or provide for how
the redemption value is to be calculated;
(b)
provide for different redemption values for successive periods
of time;
25
(c)
authorise the adjustment of redemption values from time to
time for inflation by a method specified in the order (including
by reference to a specified scale or index, as it has effect from
time to time, or to other specified data of any description);
(d)
require the relevant purchasing body or the Secretary of State (if
30
not the relevant purchasing body) to publish the redemption
value of certificates by a specified deadline;
(e)
provide for the manner in which a certificate is to be presented
to the relevant purchasing body;
(f)
provide for the certificate purchase obligation in relation to
35
certificates issued in respect of electricity generated—
(i)
using specified descriptions of renewable sources,
(ii)
by specified descriptions of generating stations,
(iii)
in specified ways, or
(iv)
in other specified cases or circumstances,
40

to apply only up to a specified number of the certificates that are
presented for payment in any specified period;
(g)
provide that certificates in respect of electricity generated—
(i)
using specified descriptions of renewable sources,
(ii)
by specified descriptions of generating stations,
45
(iii)
in specified ways, or
(iv)
in other specified cases or circumstances,