Energy Bill (HL Bill 48)

(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,

in circumstances where the CFD counterparty is unable fully to meet its
5liabilities 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
regard to the principle that sums should be apportioned in proportion to the
10amounts 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
to be paid, or not to be paid, into the Consolidated Fund.

13 15Information and advice

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

(2) Provision made by virtue of subsection (1) may include provision—

(a) for the Secretary of State to require the national system operator to
20provide advice to the Secretary of State;

(b) for the Secretary of State to require 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 other person specified in the regulations;

(c) 25for the Secretary of State to require a CFD counterparty, the national
system operator, the Authority, the Northern Ireland Authority for
Utility Regulation, the Northern Ireland system operator or a generator
who is party to a CFD to provide information to the Secretary of State
or any other person specified in the regulations;

(d) 30for the national system operator to require information to be provided
to it by a CFD counterparty, a generator who is party to a CFD or the
Northern Ireland system operator;

(e) for a CFD counterparty to require information to be provided to it by
electricity suppliers or the Northern Ireland system operator;

(f) 35for the classification and protection of confidential or sensitive
information;

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

(3) In subsection (2)—

(a) 40“Northern Ireland system operator” means the holder of a licence
under Article 10(1)(b) of the Electricity (Northern Ireland) Order 1992
(S.I. 1992/231 (N.I.1)S.I. 1992/231 (N.I.1));

(b) “electricity supplier”, subject to any provision made by regulations,
means a person who is a holder of a licence to supply electricity
45under—

(i) section 6(1)(d) of EA 1989; or

(ii) 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)).

(4) The prohibition on disclosure of information by—

(a) section 105(1) of the Utilities Act 2000;

(b) 5Article 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

Regulations may make provision conferring functions on the Authority for the
10purpose 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) to require a CFD counterparty to enter into arrangements or to offer to
15contract 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
counterparty to do, or not to do, things specified in the regulations or
20the 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) the enforcement of obligations under a CFD;

(b) 25a 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.

(3) Regulations must include such provision as the Secretary of State considers
30necessary to ensure that a CFD counterparty can meet its liabilities under any
CFD to which it is a party.

16 Enforcement

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

(a) 35by the Authority as if they were relevant requirements on a regulated
person for the purposes of section 25 of EA 1989;

(b) by 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
40(N.I. 6)).

(2) Provision made by virtue of subsection (1)(a) may include provision about the
enforcement 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 5Order 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
10made by or under the order);

(b) a 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) 15any other targets to be met or taken into account by the national system
operator 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
20is to be calculated under the order to be calculated 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 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) 25the generating capacity of electricity generating stations;

(c) the 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
30Parliament.

18 Consultation

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

(a) the Scottish Ministers,

(b) 35the Welsh Ministers,

(c) the 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
40the Electricity (Northern Ireland) Order 1992 (S.I. 1992/231 (N.I.1)S.I. 1992/231 (N.I.1))
(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
45consult.

(2) The 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
5the exercise of a power conferred by or by virtue of this Chapter, to be regarded
as—

(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
10directors of a CFD counterparty are accustomed to act;

(c) exercising 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) 15a condition of a particular licence under section 6(1)(a), (b) or (c) of EA
1989 (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
20under that provision, 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—

(a) conferring functions on the national system operator in connection
25with its functions by or by virtue of this Chapter;

(b) allowing 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
30provision of a kind that may be included in regulations.

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

(a) the Scottish Ministers,

(b) the Welsh Ministers,

(c) 35the holder of any licence being modified,

(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 to supply electricity under
Article 10(1)(c) of the Electricity (Northern Ireland) Order 1992 (S.I.
401992/231 (N.I.1)),

(f) the 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
consultation after, the passing of this Act.

CHAPTER 3 Capacity Market

21 Power to make electricity capacity regulations

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

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

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

(4) The provision which may be made about the meaning of “reducing demand for
15electricity” includes provision that reducing the consumption of electricity
reduces demand for electricity.

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

(6) In this Chapter “national system operator” means the person operating the
20national 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
25agreements.

(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) 30all electricity suppliers may be required to make payments (“capacity
payments”) for the benefit of capacity providers;

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

(3) Provision included in electricity capacity regulations for the purposes of
35subsection (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
40agreement 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
calculated;

(g) 5a 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
10varied;

(k) the 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
15capacity agreements;

(b) relating 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) 20about any matters in relation to which a person must satisfy the
national system operator before the person may enter a capacity
auction or become a capacity provider.

(6) Provision made by virtue of subsection (4)(f) and (g) may—

(a) include provision for a settlement body to calculate or determine, in
25accordance with such criteria as may be provided for by or under the
regulations, amounts which are owed as capacity payments or capacity
incentives;

(b) provide for anything which is to be calculated or determined under the
regulations to be calculated or determined by such persons, in
30accordance with such procedure and by reference to such matters and
to the opinion of such persons, as may be specified in the regulations.

(7) 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 35Capacity 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)
40may 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
45be 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) about appeals relating to eligibility for, or the outcome of, capacity
auctions.

(3) 5Provision 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) about any process to be followed in preparing and publishing any such
rules or guidance.

(4) 10Provision 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) Provision falling within subsection (2)(f) may include provision about—

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

(b) 15the 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
by electricity suppliers or capacity providers to a settlement body (see section
2022(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) to cover losses in the case of insolvency or default of an electricity
25supplier or capacity provider.

(2) In subsection (1)(a) “costs” means costs in connection with the performance of
any function conferred by or by virtue of this Chapter.

(3) Electricity capacity regulations may make provision to require electricity
suppliers or capacity providers to provide financial collateral to a settlement
30body (whether in cash, securities or any other form).

(4) Provision 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
35criteria as may be provided for by or under the regulations, amounts
which 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
40provision of such amounts.

(5) Provision made by virtue of subsection (4)(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
45specified in the regulations.

25 Functions 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) 5Electricity capacity regulations may impose requirements otherwise than
under 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) 10any other person carrying out functions in relation to capacity
agreements;

(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) 15relating 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 Electricity capacity regulations: information and advice

(1) 20Electricity 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) for the Secretary of State to require the Authority, the national system
25operator 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
to be provided to it by any person specified in the regulations for any
30purpose 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) for the publication by any person so specified of any information or
35advice 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
Act 2000 does not apply to a disclosure required by virtue of this section.

28 40Power to make capacity market rules

(1) The Secretary of State may make capacity market rules which, subject to
subsection (2), may contain any provision that may be made by electricity
capacity regulations.

(2) Capacity market rules may not make—

(a) provision falling within—

(i) section 21(3);

(ii) section 22(3);

(iii) 5paragraphs (f) or (g) of section 22(4);

(iv) section 22(5)(a);

(v) paragraphs (b), (c), (d) or (f) of section 23(2);

(vi) section 24;

(vii) section 29;

(b) 10provision for the Secretary of State to require a person to provide
information or advice to the Secretary of State.

(3) Electricity capacity regulations may make provision to confer on the Authority,
to such extent and subject to such conditions as may be specified in the
regulations, the power to make capacity market rules.

(4) 15The conditions may in particular include conditions about consultation; and
provision made by virtue of subsection (3) must provide that, before any
exercise of the power to make capacity market rules, the Authority must
consult—

(a) any person who is a holder of a licence to supply electricity under
20section 6(1)(d) of EA 1989;

(b) any person who is a capacity provider.

(5) Provision made by virtue of subsection (3) may include provision—

(a) for the reference to the Secretary of State in section 27(2)(c) to have
effect, for the purposes of capacity market rules and to such extent as
25may be specified in the regulations, as a reference to the Authority;

(b) for section 27(3) to apply in relation to a disclosure required by virtue
of the capacity market rules.

29 Provision about electricity demand reduction

(1) This section applies where provision made by electricity capacity regulations
30relates to the provision of capacity by reducing demand for electricity.

(2) Where this section applies, the Secretary of State may, instead of conferring
functions on the national system operator, confer functions on such other
person or body as the Secretary of State considers appropriate.

(3) For the purposes of provision made by virtue of subsection (2), the references
35to the national system operator in—

(a) section 22(5)(a) and (d);

(b) section 23(2)(a) and (3)(a);

(c) section 25;

(d) section 27(2)(a) and (b);

(e) 40section 31,

are to be read as if they included a reference to a person or body on whom a
function is conferred by virtue of this section.

30 Enforcement and dispute resolution

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

(2) 5Capacity market rules may make provision about the enforcement of any
obligation or requirement imposed by the rules.

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

(4) 10Provision made by virtue of this section may include provision—

(a) about powers to impose financial penalties;

(b) for requirements under the electricity capacity regulations or under
capacity market rules to be enforceable by the Authority as if they were
relevant requirements on a regulated person for the purposes of section
1525 of EA 1989;

(c) about reference to arbitration;

(d) about appeals.

31 Licence modifications for the purpose of the capacity market

(1) The Secretary of State may, for any purpose related to provision that is made
20by 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) 25the 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 those provisions, or an agreement that gives effect to a document
so maintained.

(2) 30A modification under this section may in particular include a modification—

(a) to 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) 35Provision included in a licence, or in a document or agreement relating to
licences, 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) 40the holder of any licence being modified,

(b) the 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
45consultation after, the passing of this Act.