Energy Bill (HL Bill 30)

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.

(3) 10A “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
is 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)
5of the Climate Change Act 2008.

(6) A decarbonisation order may amend a decarbonisation target range only if it
appears 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) 10The 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
range, 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
15budgetary periods) so that after “Act” there is inserted “or sections 1 to
4 of the Energy Act 2013”;

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

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

(a) 20include incidental, supplementary and consequential provision;

(b) make transitory or transitional provision or savings.

(10) A 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
25House of Parliament.

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

2 Matters to be taken into account

(1) 30The following matters must be taken into account by the Secretary of State in
setting or amending a decarbonisation target range.

(2) The matters are—

(a) scientific knowledge about climate change;

(b) technology relevant to the generation and storage of electricity and to
35the demand for and use of electricity;

(c) economic circumstances, and in particular the likely impact on the
economy 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) 40social circumstances, and in particular the likely impact on fuel
poverty;

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

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

(h) circumstances at European and international level;

(i) 45the duties of the Secretary of State under sections 1 and 4(1)(b) of the
Climate Change Act 2008 (carbon targets and budgets).

3 Further 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) 5Before laying the report under subsection (1), the Secretary of State must
consult 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
10order is made, and

(b) ending 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) 15Section 4 makes further provision in relation to subsection (3).

(5) The 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) 20In respect of any year in relation to which a decarbonisation target range is set,
the 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) 25the reasons why the carbon intensity in relation to that year was greater
than 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) 30The Secretary of State must send a copy of the statement required by
subsection (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”
35means grams of carbon dioxide equivalent emissions, measured per kilowatt
hour 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
40amount of any other greenhouse gas with an equivalent global
warming potential (calculated consistently with international carbon
reporting practice);

(b) “Great Britain” includes—

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

(ii) any 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) 5“greenhouse gas” has the meaning given by section 92(1) of the Climate
Change 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) 10the meaning of “carbon intensity of electricity generation in Great
Britain” (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) 15An order under this section is to be made by statutory instrument and a
statutory 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) 20include 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.

(7) 25Before laying before Parliament a draft of a statutory instrument containing an
order under this section the Secretary of State must consult the Scottish
Ministers and the Welsh Ministers.

Part 2 Electricity Market Reform

CHAPTER 1 30General considerations

5 General considerations relating to this Part

(1) In exercising the function of making—

(a) regulations under section 6;

(b) an order under section 17;

(c) 35a modification under section 20;

(d) regulations under section 21;

(e) a modification under section 31;

(f) a modification under section 39;

(g) an order under section 40;

40the Secretary of State must have regard to the matters mentioned in subsection
(2).

(2) The 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) the duty of the Secretary of State under section 1(1) of this Act
5(decarbonisation target range);

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

(d) the likely cost to consumers of electricity;

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

(3) 10In subsection (2)(e) “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.

(4) The Secretary of State must before 31st December in each year, beginning with
2014, prepare and lay before Parliament a report setting out how the Secretary
15of State has carried out during the year the functions under this Part of this Act.

(5) The Secretary of State must publish the report and send a copy of it to the
Department of Enterprise, Trade and Investment, the Scottish Ministers and
the Welsh Ministers.

CHAPTER 2 Contracts for Difference

6 20Regulations 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) A contract for difference is a contract—

(a) 25certain 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;

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

(3) 30For the purposes of this Chapter—

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

• “eligible generator” is to be construed in accordance with section 10(3);

• “low carbon electricity generation” means electricity generation which in
  the opinion of the Secretary of State will contribute to a reduction in
  35emissions of greenhouse gases;

• “regulations” means regulations under this section.

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

(5) The provision which may be made by regulations includes, but is not limited
40to, 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) make different provision for different cases or circumstances or for
different purposes;

(d) make provision subject to exceptions.

(7) 5Regulations 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
resolution of each House of Parliament.

(9) 10Any 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
an eligible person to be a counterparty for contracts for difference.

(2) 15A 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) a public authority, including any person any of whose functions are of
20a public nature.

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

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

(a) 25liabilities under a CFD are met,

(b) arrangements entered into for purposes connected to a CFD continue to
operate, or

(c) directions given to a CFD counterparty continue to have effect.

(6) 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.

(7) At any time after the first designation has effect, the Secretary of State must, so
35far 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) 40As 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 liabilities 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
circumstances 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 5Duties of a CFD counterparty

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

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

(b) any provision included in regulations.

(2) 10A CFD counterparty must exercise the functions conferred by or by virtue of
this Chapter to ensure that it can meet its liabilities under any CFD to which it
is a party.

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

9 Supplier obligation

(1) Regulations must make provision for electricity suppliers to pay a CFD
counterparty for the purpose of enabling the counterparty to make payments
20under CFDs.

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

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

(b) 25to hold sums in reserve;

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

(3) In subsection (2)(a) “costs” means costs in connection with the performance of
any function conferred by or by virtue of this Chapter.

(4) 30Regulations may make provision to require electricity suppliers to provide
financial collateral to a CFD counterparty (whether in cash, securities or any
other form).

(5) Regulations which make provision by virtue of subsection (1) for the payment
of sums by electricity suppliers must impose on the CFD counterparty a duty
35in relation to the collection of such sums.

(6) 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) a CFD counterparty to calculate or determine, in accordance with such
40criteria 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
provision of such amounts;

(d) 45the enforcement of obligations arising under such notices.

(7) Provision made by virtue of subsection (6)(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
5specified in the regulations.

(8) Provision made by virtue of subsection (6)(d) may include provision—

(a) about costs;

(b) about interest on late payments under notices;

(c) about references to arbitration;

(d) 10about appeals.

(9) A CFD counterparty may recover from an electricity supplier, as a civil debt
due to it, any sum which—

(a) the electricity supplier is required by virtue of regulations to pay to the
CFD counterparty, and

(b) 15has not been paid by the date on which it is required by virtue of
regulations to be paid.

(10) 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) 20section 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)).

10 Direction to offer to contract

(1) The Secretary of State or the national system operator may, in accordance with
25provision 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
30the 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) 35Provision 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
40specified 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
generating 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
5for circumstances in which consent under subsection (7) is not required.

(9) In subsection (7) “Northern Ireland” includes so much of the internal waters
and 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
10CFD counterparty to electricity suppliers.

(2) Provision made by virtue of this section may—

(a) include provision for a 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 the CFD counterparty;

(b) 15provide 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.

(3) In this section “electricity supplier”, subject to any provision made by
20regulations, 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 25Application of sums held by a CFD counterparty

(1) Regulations may make provision for apportioning sums—

(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,

30in circumstances where the CFD counterparty is unable fully to meet its
liabilities under a CFD.

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

(3) In making provision by virtue of subsection (1) the Secretary of State must have
35regard to the principle that sums should be apportioned in proportion to the
amounts which are owed.

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

(5) Provision made by virtue of subsection (4) may include provision that sums are
40to be paid, or not to be paid, into the Consolidated Fund.