SCHEDULES

Section 7

SCHEDULE 1 CFD counterparties: transfer schemes

Power to make transfer schemes

1 (1) 5The Secretary of State may make one or more schemes for the transfer of
designated property, rights or liabilities of a person who has ceased to be a
CFD counterparty (“the transferor”) to a person who is a CFD counterparty
(“the transferee”).

(2) On the transfer date, the designated property, rights and liabilities are
10transferred and vest in accordance with the scheme.

(3) The rights and liabilities that may be transferred by a scheme include those
arising under or in connection with a contract of employment.

(4) A certificate by the Secretary of State that anything specified in the certificate
has vested in any person by virtue of a scheme is conclusive evidence for all
15purposes of that fact.

(5) In this Schedule—

• “designated”, in relation to a scheme, means specified in or determined
  in accordance with the scheme;

• “property” includes interests of any description;

• 20“the transfer date” means a date specified by a scheme as the date on
  which the scheme is to have effect.

Contents of a scheme

2 (1) A scheme may make provision—

(a) for anything done by or in relation to the transferor in connection
25with any property, rights or liabilities transferred by the scheme to
be treated as done, or to be continued, by or in relation to the
transferee;

(b) for references to the transferor in any agreement (whether written or
not), instrument or other document relating to any property, rights
30or liabilities transferred by the scheme to be treated as references to
the transferee;

(c) about the continuation of legal proceedings;

(d) for transferring property, rights or liabilities which could not
otherwise be transferred or assigned;

(e) 35for transferring property, rights and liabilities irrespective of any
requirement for consent which would otherwise apply;

(f) for preventing a right of pre-emption, right of reverter, right of
forfeiture, right to compensation or other similar right from arising
or becoming exercisable as a result of the transfer of property, rights
or liabilities;

(g) 5for dispensing with any formality in relation to the transfer of
property, rights or liabilities by the scheme;

(h) for transferring property acquired, or rights or liabilities arising,
after the scheme is made but before it takes effect;

(i) for apportioning property, rights or liabilities;

(j) 10for creating rights, or imposing liabilities, in connection with
property, rights or liabilities transferred by the scheme;

(k) for requiring the transferee to enter into any agreement of any kind,
or for a purpose, specified in or determined in accordance with the
scheme.

(2) 15Sub-paragraph (1)(b) does not apply to references in primary legislation or
in subordinate legislation.

Compensation

3 A scheme may contain provision for the payment of compensation by the
Secretary of State to any person whose interests are adversely affected by it.

Section 38

20SCHEDULE 2 Investment contracts

Part 1 Introductory

Meaning of “investment contract”

1 (1) 25In this Schedule an “investment contract” means a contract with an
electricity generator which—

(a) is entered into by the Secretary of State, whether before or after this
Schedule comes into force, on or before the earlier of 31st December
2015 and the date on which a definition of an “eligible generator”
30first comes into force by virtue of section 10(3),

(b) if it relates to an electricity generating station in Northern Ireland, is
entered into with the consent of the Department of Enterprise, Trade
and Investment,

(c) includes an obligation for the parties to make payments under the
35contract based on the difference between a strike price and a
reference price in relation to electricity generated,

(d) is laid before Parliament in accordance with sub-paragraph (4).

(2) If the contract is entered into before the coming into force of this Schedule,
the obligation referred to in sub-paragraph (1)(c) must be conditional on the
40being in force of this Schedule.

(3) In sub-paragraph (1)—

• “electricity generator” means—

  (a)

  a person who intends to establish an electricity generating
  station or alter an existing station;

  (b)

  5a person who intends to operate or participate in the
  operation of an electricity generating station that is to be
  established or altered;

  (c)

  a person who has an interest in a company falling within
  paragraph (a) or (b).

• 10“reference price” means the sum that is specified in, or determined
  under, the contract as the reference price in respect of electricity
  generated in the period specified in, or determined under, the
  contract;

• “Northern Ireland” includes so much of the internal waters and
  15territorial sea of the United Kingdom as are adjacent to Northern
  Ireland;

• “strike price” means the sum that is specified in, or determined under,
  the contract as the strike price in respect of electricity generated in
  the period specified in, or determined under, the contract.

(4) 20A contract is laid before Parliament in accordance with this sub-paragraph
if it is laid by the Secretary of State at any time after the introduction into
Parliament of the Bill that becomes this Act—

(a) with a statement falling within sub-paragraph (5), and

(b) after the Secretary of State has excluded from the contract any
25confidential information (see paragraph 3).

(5) A statement falls within this sub-paragraph if it is a statement—

(a) that the Secretary of State considers that payments falling within
paragraph 1(1)(c) which would be made under the contract would
encourage low carbon electricity generation,

(b) 30that the Secretary of State considers that without the contract there is
a significant risk that the electricity generation to which the contract
relates will not occur or will be significantly delayed, and

(c) summarising the regard that the Secretary of State has had, in
deciding to enter the contract, to the matters set out in subsection (2)
35of section 5.

(6) In sub-paragraph (5) “low carbon electricity generation” means electricity
generation which in the opinion of the Secretary of State will contribute to a
reduction in emissions of greenhouse gases; and “greenhouse gas” has the
meaning given by section 92(1) of the Climate Change Act 2008.

(7) 40The Secretary of State must publish an investment contract in the form in
which it was laid before Parliament as soon as reasonably practicable after it
is laid.

Varied investment contract

2 (1) An investment contract is a “varied investment contract” for the purposes of
45this paragraph if the variation—

(a) is agreed at any time before or after this Schedule comes into force,
and

(b) will, in the opinion of the Secretary of State, materially increase the
likely cost to consumers of electricity.

(2) A varied investment contract is an “investment contract” for the purposes of
this Schedule only if it is laid before Parliament (at any time after the
5introduction into Parliament of the Bill that becomes this Act)—

(a) with a statement of why, having regard to the likely cost to
consumers of electricity, the Secretary of State believes that the
variation is appropriate, and

(b) after the Secretary of State has excluded from it any confidential
10information (see paragraph 3).

(3) The Secretary of State must publish a varied investment contract in the form
in which it was laid before Parliament as soon as reasonably practicable after
it is laid.

(4) This paragraph does not apply in respect of a variation which is made in
15accordance with the terms of an investment contract.

Confidential information

3 (1) For the purposes of paragraphs 1 and 2, “confidential information” means
specified information to which sub-paragraph (3) applies and in relation to
which it is an initial term of the contract that it should not be disclosed.

(2) 20For the purposes of sub-paragraph (1)—

(a) a term is an initial term if it is agreed at the time the investment
contract is entered into or, in relation to a varied investment contract,
at the time the variation is agreed;

(b) “specified” means specified in the initial term.

(3) 25This sub-paragraph applies to information if it is—

(a) not the strike price or the reference price;

(b) information which, in the opinion of the Secretary of State at the time
the initial term is agreed, constitutes a trade secret;

(c) information the disclosure of which, in the opinion of the Secretary
30of State at that time, would or would be likely to prejudice the
commercial interests of any person;

(d) information the disclosure of which would, in the opinion of the
Secretary of State at that time, constitute a breach of confidence
actionable by any person.

35Interpretation for the purposes of this Schedule

4 (1) In this Schedule—

• “CFD” is to be construed in accordance with section 6(2);

• “CFD counterparty” is to be construed in accordance with section 7(2);

• “electricity supplier”, subject to any provision made by regulations,
  40means 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)S.I. 1992/231 (N.I.1));

Energy BillPage 114

• “investment contract counterparty” is to be construed in accordance
  with paragraph 5;

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

• “regulations” means regulations made under paragraph 6.

(2) References in this Schedule to a CFD counterparty (apart from the reference
in paragraph 9(1)(c), 9(1)(d) and 16) are to a CFD counterparty acting as a
10counterparty in relation to an investment contract (where any property,
rights or liabilities under the contract have been transferred to the CFD
counterparty by a scheme under paragraph 16).

Investment contract counterparty

5 (1) The Secretary of State may by order made by statutory instrument designate
15an eligible person to be a counterparty for investment contracts.

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

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

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

(3) 20A designation may be made only with the consent of the person designated.

(4) The Secretary of State may exercise the power to designate so that more than
one designation has effect under this paragraph, but only if the Secretary of
State considers it necessary for the purpose of ensuring that—

(a) liabilities under an investment contract are met,

(b) 25arrangements entered into for purposes connected to an investment
contract continue to operate, or

(c) directions given to an investment contract counterparty continue to
have effect.

(5) A designation ceases to have effect if—

(a) 30the 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 3 months’ notice in writing to the Secretary of State.

(6) As soon as reasonably practicable after a designation ceases to have effect
35the Secretary of State must make a transfer scheme under paragraph 16 to
ensure the transfer of all rights and liabilities under any investment contract
to which the person who has ceased to be an investment contract
counterparty was a party.

(7) If necessary for the purposes of a transfer scheme required to be made by
40virtue of sub-paragraph (6), the Secretary of State must, so far as reasonably
practicable, exercise the power to designate so as to ensure that at least one
designation has effect under this paragraph.

(8) Regulations may include provision about the period of time for which, and
the circumstances in which, a person who has ceased to be an investment
45contract counterparty is to continue to be treated as an investment contract
counterparty for the purposes of the regulations.

Part 2 Regulations: general

Regulations for the purposes of investment contracts

6 (1) The Secretary of State may by regulations make further provision about or
5in connection with investment contracts.

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

(3) Regulations may—

(a) include incidental, supplementary and consequential provision;

(b) 10make 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.

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

(5) 15An instrument containing regulations which make provision falling within
paragraph 7 or 8 (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 resolution of, each House of Parliament.

(6) Any other instrument containing regulations is subject to annulment in
20pursuance of a resolution of either House of Parliament.

Supplier obligation

7 (1) Regulations may make provision for electricity suppliers to pay the
Secretary of State for the purpose of enabling payments to be made under
investment contracts.

(2) 25Regulations must make provision for electricity suppliers to pay an
investment contract counterparty or a CFD counterparty for the purpose of
enabling payments to be made under investment contracts.

(3) Regulations may make provision for electricity suppliers to pay the
Secretary of State, an investment contract counterparty or a CFD
30counterparty for the purpose of enabling the person to whom the payments
are made—

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

(b) to hold sums in reserve;

(c) 35to cover losses in the case of insolvency or default of an electricity
supplier.

(4) In sub-paragraph (3)(a) “costs” means costs in connection with the
performance of any function conferred by or by virtue of this Schedule.

(5) Regulations may make provision to require electricity suppliers to provide
40financial collateral to the Secretary of State, an investment contract
counterparty or a CFD counterparty (whether in cash, securities or any other
form).

(6) Regulations which make provision by virtue of sub-paragraph (1) or (2) for
the payment of sums by electricity suppliers must impose on the person to
whom such sums are to be paid a duty in relation to the collection of such
sums.

(7) 5Provision made by virtue of this paragraph may include provision for—

(a) the Secretary of State, an investment contract counterparty or a CFD
counterparty to determine the form and terms of any financial
collateral;

(b) the Secretary of State, an investment contract counterparty or a CFD
10counterparty 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 the Secretary of State, an investment
15contract counterparty or a CFD counterparty to require the payment
or provision of such amounts;

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

(8) Provision made by virtue of sub-paragraph (7)(b) may provide for anything
which is to be calculated or determined under the regulations to be
20calculated 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.

(9) Provision made by virtue of sub-paragraph (7)(d) may include provision—

(a) about costs;

(b) 25about interest on late payments under notices;

(c) about references to arbitration;

(d) about appeals.

(10) The Secretary of State, an investment contract counterparty or a CFD
counterparty may recover from an electricity supplier, as a civil debt due,
30any sum which—

(a) the electricity supplier is required by virtue of regulations to pay to
the Secretary of State, the investment contract counterparty or the
CFD counterparty (as the case may be), and

(b) has not been paid by the date on which it is required by virtue of
35regulations to be paid.

Payments to electricity suppliers

8 (1) Regulations may make provision about the amounts which must be paid by
the Secretary of State, an investment contract counterparty or a CFD
counterparty to electricity suppliers.

(2) 40Provision made by virtue of this paragraph may—

(a) include provision for the person by whom sums are owed to
calculate or determine, in accordance with such criteria as may be
provided for by or under the regulations, amounts which are owed;

(b) provide for anything which is to be calculated or determined under
45the 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.

Application of sums

9 (1) Regulations may make provision for apportioning sums—

(a) received by the Secretary of State, an investment contract
counterparty or a CFD counterparty from electricity suppliers under
5provision made by virtue of paragraph 7;

(b) received by the Secretary of State, an investment contract
counterparty or a CFD counterparty under an investment contract,

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

(d) 10received by a CFD counterparty under a CFD,

in circumstances where the Secretary of State, an investment contract
counterparty or a CFD counterparty is unable fully to meet liabilities under
an investment contract or a CFD.

(2) Provision made by virtue of sub-paragraph (1) may include provision about
15the meaning of “unable fully to meet liabilities under an investment contract
or a CFD”.

(3) In making provision by virtue of sub-paragraph (1) the Secretary of State
must have regard to the principle that sums should be apportioned in
proportion to the amounts which are owed.

(4) 20Regulations may make provision about the application of sums held by the
Secretary of State, an investment contract counterparty or a CFD
counterparty.

(5) Provision made by virtue of sub-paragraph (4) may include provision that
sums are to be paid, or not to be paid, into the Consolidated Fund.

25Information and advice

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

(2) Provision made by virtue of sub-paragraph (1) may include provision—

(a) for the Secretary of State to require the national system operator to
30provide advice to the Secretary of State;

(b) for the Secretary of State to require an investment contract
counterparty, a CFD counterparty, the Authority, the Northern
Ireland Authority for Utility Regulation or the Northern Ireland
system operator to provide advice to the Secretary of State or any
35other person specified in the regulations;

(c) for the Secretary of State to require an investment contract
counterparty, a CFD counterparty, the national system operator,
electricity suppliers, the Authority, the Northern Ireland Authority
for Utility Regulation, the Northern Ireland system operator or a
40generator who is party to an investment contract 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 an investment contract counterparty, a CFD
45counterparty, a generator who is party to an investment contract or
the Northern Ireland system operator;

(e) for an investment contract counterparty or 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
5information;

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

(3) In sub-paragraph (2) “Northern Ireland system operator” means the holder
of a licence under Article 10(1)(b) of the Electricity (Northern Ireland) Order
101992 (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;

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

15does not apply to a disclosure required by virtue of this paragraph.

Investment contracts: functions of the Authority

11 Regulations may make provision conferring functions on the Authority for
the purpose of offering advice to, or making determinations on behalf of, a
party to an investment contract.

20Enforcement

12 (1) Regulations may include 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) 25by 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 sub-paragraph (1)(b) may be made in relation
30only 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.
1992/231 (N.I.1)).

Consultation

13 (1) Before making regulations the Secretary of State must consult—

(a) 35the Scottish Ministers,

(b) the Welsh Ministers,

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

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

(2) 40Before making regulations which contain provision falling within
paragraph 7, 8 or 14(3), the Secretary of State must also consult electricity
suppliers.

(3) Before making regulations which contain provision falling within
paragraph 9, the Secretary of State must also consult electricity suppliers and
any electricity generator who is party to an investment contract.

(4) Before making regulations which contain provision falling within
5paragraph 11 or 12(1)(a), the Secretary of State must also consult the
Authority.

(5) Before making regulations which contain provision falling within
paragraph 12(1)(a), the Secretary of State must also consult any person who
is a holder of a licence under section 6(1)(d) of EA 1989.

(6) 10Before making regulations which contain provision falling within
paragraph 12(1)(b), the Secretary of State must also consult the Northern
Ireland Authority for Utility Regulation and any person who is a holder of a
licence under Article 10(1)(c) of the Electricity (Northern Ireland) Order 1992
(S.I. 1992/231 (N.I.1)S.I. 1992/231 (N.I.1)).

(7) 15If regulations impose requirements by virtue of paragraph 10(2), the
Secretary of State must before making the regulations also consult any
person upon whom a requirement is imposed.

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

20Part 3 Further provision about an investment contract counterparty and a CFD
counterparty

Duties and liabilities of an investment contract counterparty and a CFD counterparty

14 (1) An investment contract counterparty and a CFD counterparty must act in
25accordance with—

(a) any direction given by the Secretary of State by virtue of this
Schedule;

(b) any provision included in regulations.

(2) An investment contract counterparty and a CFD counterparty must exercise
30the functions conferred by or by virtue of this Schedule to ensure that it can
meet its liabilities under any investment contract to which it is a party.

(3) Regulations may make provision—

(a) to require an investment contract counterparty or a CFD
counterparty to enter into arrangements or to offer to contract for
35purposes connected to an investment contract;

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

(c) conferring on the Secretary of State further powers to direct an
40investment contract counterparty or CFD counterparty to do, or not
to do, things specified in the regulations or the direction.

(4) Provision made by virtue of sub-paragraph (3)(b) or (c) includes provision
requiring consultation with, or the consent of, the Secretary of State in
relation to—

(a) 45the enforcement of obligations under an investment contract;