Energy Bill (HL Bill 30)

33 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
as they apply in relation to functions under Part 1 of that Act.

34 5Regulations 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
10different purposes;

(d) make provision subject to exceptions.

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

(a) the Authority,

(b) 15any 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
consult.

(3) Subsection (2) may be satisfied by consultation before, as well as consultation
20after, 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) the first set of electricity capacity regulations;

(b) regulations which make provision amending or repealing a provision
25of 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) A statutory instrument to which subsection (5) does not apply and containing
regulations under this Chapter is subject to annulment in pursuance of a
30resolution of either House of Parliament.

35 Capacity market rules: procedure

(1) Before the first exercise by the Secretary of State of the power to make capacity
market rules, the Secretary of State must lay a draft of the rules before
Parliament.

(2) 35If, within the 40-day period, either House of Parliament resolves not to
approve the draft, the Secretary of State may not take any further steps in
relation to the proposed rules.

(3) If no such resolution is made within that period, the Secretary of State may
make the rules in the form of the draft.

(4) 40Subsection (3) does not prevent a new draft of proposed capacity market rules
being laid before Parliament.

(5) In this section “40-day period”, in relation to a draft of proposed capacity
market rules, means the period of 40 days beginning with the day on which the
draft is laid before Parliament (or, if it is not laid before each House of
Parliament on the same day, the later of the 2 days on which it is laid).

(6) 5For the purposes of calculating the 40-day period, no account is to be taken of
any period during which Parliament is dissolved or prorogued or during
which both Houses are adjourned for more than 4 days.

(7) Before any exercise by the Secretary of State of a power to make capacity
market rules, the Secretary of State must consult—

(a) 10the Authority;

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

(c) any person who is a capacity provider;

(d) such other persons as the Secretary of State considers it appropriate to
15consult.

(8) In relation to any exercise by the Secretary of State or the Authority of a power
to make capacity market rules, the person making the rules must, as soon as
reasonably practicable after they are made, lay them before Parliament and
publish them.

36 20Capacity market rules: further provision

(1) Capacity market rules 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
25different purposes;

(d) make provision subject to exceptions.

(2) A power to make capacity market rules includes a power to amend, add to or
remove capacity market rules (and a person exercising such a power may
amend, add to or remove provision in capacity market rules made by another
30person).

(3) But subsection (2) is subject to provision made by electricity capacity
regulations.

37 Pilot scheme for electricity demand reduction

There may be paid out of money provided by Parliament expenditure incurred
35by the Secretary of State in connection with arrangements made—

(a) for the purpose of reducing demand for electricity, and

(b) wholly or partly for the purpose of determining provision to be
included in electricity capacity regulations.

CHAPTER 4 Investment contracts

38 Investment contracts

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

CHAPTER 5 Conflict of interest and contingency arrangements

39 5Modifications 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
(generation, transmission, distribution, supply and interconnector
licences);

(b) 10the 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
under section 6(1)(a) to (e) of that Act, or an agreement that gives effect
to a document so maintained.

(2) 15The 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) any other functions (including, in a case where a measure relates to a
20particular system operation function, other system operation
functions).

(3) “System operation functions” are—

(a) functions authorised under a transmission licence of co-ordinating and
directing the flow of electricity onto and over a transmission system by
25means 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
consequence of the conferral of EMR functions.

(5) 30In 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
35or 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

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
5functions, 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
10are 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
15in 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) 20to 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,

(b) 25the Authority, and

(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) 30In this section—

• “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
  35the same meaning as in Part 1 of EA 1989.

40 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) 40An order under subsection (1) may be made only if—

(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) 45it appears to the Secretary of State necessary or desirable to make the
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—

(i) 5encouraging 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—

(a) 10it 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,

(c) 15a 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
20person 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
25corporate,

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
30mentioned 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
35system 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—

(a) a different alternative delivery body, or

(b) the national system operator.

(8) 40“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
body a person other than the Secretary of State requires the consent of that
person.

(10) 45An 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.

(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);

• 5“energy administration order” has the same meaning as in Chapter 3 of
  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
  104(4) of that Act).

41 Orders under section 40: 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) 15The amount of any such fee is the amount specified in, or determined by or in
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) 20only to such of those functions as are specified in the order.

(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
25different purposes.

(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) 30A statutory instrument containing a transfer of functions order is subject to
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.

(9) 35If 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.

(10) 40In subsection (9) “licence modification power” means a power conferred by
section 20, 31 or 39 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
45of 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
  5operator” have the same meaning as in section 40;

• “transfer of functions order” means an order under section 40(1) or (7).

42 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”
10substitute “—

(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)
15insert—

“(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

(b) 20an order made under section 40 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
25efficient 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
30mentioned 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
35order is made under section 40 of the Energy Act 2013 as a result
of which the function is transferred from that company to
another person.”

CHAPTER 6 Access to markets etc

43 Power to modify licence conditions etc: market participation and liquidity

(1) 40The 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;

(c) 5a 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—

(a) 10facilitating 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
15electricity, 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
20or 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
25a 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).

For this purpose, “undertaking” and “group undertaking” have the same
30meanings as in the Companies Acts (see section 1161 of the Companies Act
2006).

44 Power to modify licence conditions etc to facilitate investment in electricity
generation

(1) The Secretary of State may modify—

(a) 35a 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
by virtue of section 8A of that Act;

(c) a document maintained in accordance with the conditions of licences
40under section 6(1)(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
purpose of facilitating investment in electricity generation by promoting
availability of arrangements for the sale of electricity generated.

(3) 45Modifications made by virtue of that power may include provision imposing
obligations in relation to arrangements for the purchase of electricity
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.

45 Licence modifications under sections 43 and 44: further provisions

(1) A modification of a licence under section 43(1) or 44(1) may in particular
5include 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;

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

(2) Before making modifications under section 43(1) or 44(1), the Secretary of State
10must consult—

(a) the holder of any licence being modified,

(b) the Authority, and

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

(3) 15Subsection (2) may be satisfied by consultation before, as well as by
consultation after, the passing of this Act.

CHAPTER 7 The renewables obligation: transitional arrangements

46 Transition to certificate purchase scheme

(1) EA 1989 is amended as follows.

(2) 20After section 32M insert—

“32N The certificate purchase obligation

(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) 25the purchasing body of GB certificates;

(b) the purchasing body of NI certificates.

(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) 30the purchasing body of NI certificates must pay the redemption
value of a NI certificate to the person presenting it.

(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
35the purchasing body of GB certificates.

(5) The purchasing body of NI certificates is—

(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—

(a) a CFD counterparty at the time when the designation is made,
or

(b) 5the 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
the designation is made.

(8) Subsection (3) is subject to sections 32O to 32Z1.

32O 10Further provision about the certificate purchase obligation

(1) A certificate purchase order may make provision generally in relation
to the certificate purchase obligation.

(2) A certificate purchase order may, in particular—

(a) specify the redemption value of certificates or provide for how
15the redemption value is to be calculated;

(b) provide for different redemption values for successive periods
of time;

(c) authorise the adjustment of redemption values from time to
time for inflation by a method specified in the order (including
20by 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
not the relevant purchasing body) to publish the redemption
value of certificates by a specified deadline;

(e) 25provide 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
certificates issued in respect of electricity generated—

(i) using specified descriptions of renewable sources,

(ii) 30by specified descriptions of generating stations,

(iii) in specified ways, or

(iv) in other specified cases or circumstances,

to apply only up to a specified number of the certificates that are
presented for payment in any specified period;

(g) 35provide that certificates 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,

40are to be issued only up to such number of certificates in any
specified period as may be specified or determined in
accordance with the order;

(h) provide that the certificate purchase obligation is not to apply
on presentation of a certificate unless—

(i) 45the certificate is presented by such a deadline as may be
specified or determined in accordance with the order,
and