Energy Bill (HL Bill 48)

32 Amendment of enactments

The Secretary of State may by regulations, for the purpose of or in connection
with any provision made by or by virtue of this Chapter—

(a) amend or repeal section 47ZA of EA 1989 (annual report by Authority
5on security of electricity supply);

(b) amend section 172 of the Energy Act 2004 (annual report on security of
energy supplies);

(c) amend section 25 of and Schedule 6A to EA 1989 (enforcement of
obligations of regulated persons);

(d) 10make such provision amending, repealing or revoking any other
enactment as the Secretary of State considers appropriate in
consequence of provision made by or by virtue of this Chapter.

33 Principal objective and general duties

Sections 3A to 3D of EA 1989 (principal objective and general duties) apply in
15relation 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 Regulations under Chapter 3

(1) Regulations under this Chapter may—

(a) include incidental, supplementary and consequential provision;

(b) 20make 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.

(2) Before making any regulations under this Chapter, the Secretary of State must
25consult—

(a) the Authority,

(b) any 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
30consult.

(3) Subsection (2) may be satisfied by consultation before, as well as consultation
after, 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) 35the first set of electricity capacity regulations;

(b) regulations which make provision amending or repealing a provision
of 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) 40A statutory instrument to which subsection (5) does not apply and containing
regulations under this Chapter is subject to annulment in pursuance of a
resolution 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) 5If, 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) 10Subsection (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
15Parliament on the same day, the later of the 2 days on which it is laid).

(6) For 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
20market rules, the Secretary of State must consult—

(a) the 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) 25such other persons as the Secretary of State considers it appropriate to
consult.

(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
30publish them.

36 Capacity 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) 35make different provision for different cases or circumstances or for
different 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
40amend, add to or remove provision in capacity market rules made by another
person).

(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
by the Secretary of State in connection with arrangements made—

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

(b) 5wholly 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 10Conflict of interest and contingency arrangements

39 Modifications 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
15licences);

(b) the 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
20to a document so maintained.

(2) The 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) 25any other functions (including, in a case where a measure relates to a
particular system operation function, other system operation
functions).

(3) “System operation functions” are—

(a) functions authorised under a transmission licence of co-ordinating and
30directing the flow of electricity onto and over a transmission system by
means 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
35consequence of the conferral of EMR functions.

(5) In making that determination, the Secretary of State must have regard to the
extent to which a measure of the kind mentioned in subsection (2) may affect
the efficient and effective carrying on of system operation functions and other
functions authorised under a transmission licence.

(6) The measures referred to in subsection (2) include, in particular, measures for
or in connection with securing any of the following—

(a) the body corporate that carries on EMR functions does not carry on
other functions;

(b) 5limitations 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) 10the locations where system operation functions, and other
functions, are carried on;

(ii) the information technology systems used for the purposes of
the carrying on of system operation functions and other
functions;

(d) 15the accounting arrangements in relation to system operation functions
are 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
20system operation functions do not have access to information obtained
in 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)
25have been put in place for the year in question, and

(b) to submit such reports to either or both of the Secretary of State and the
Authority.

(8) Before making a modification under subsection (1), the Secretary of State must
consult—

(a) 30the holder of any licence being modified,

(b) the 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
35consultation after, the passing of this Act.

(10) In 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);

• 40“transmission”, “transmission licence” and “transmission system” have
  the 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
45delivery body.

(2) An 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) it appears to the Secretary of State necessary or desirable to make the
5order 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) 10encouraging 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) 15it 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) 20a 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
25person 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
30corporate,

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
35mentioned 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
40system 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) 45“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) An order under subsection (7) providing for EMR functions to be carried out
5by 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
  103 (capacity market) or Chapter 4 (investment contracts);

• “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
  15“transmission system” has the same meaning as in EA 1989 - see section
  4(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
20functions conferred on the body by virtue of the order.

(2) The amount of any such fee is the amount specified in, or determined by or in
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
25delivery body is carrying out, or

(b) only 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) 30make different provision for different cases or circumstances or for
different 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) 35A transfer of functions order is to be made by statutory instrument.

(7) A 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
40effect.

(9) If the Secretary of State makes a transfer of functions order under which any
EMR functions of the national system operator are transferred to an alternative
delivery body, the Secretary of State must consider the extent to which (if at all)
a licence modification power should be exercised as a consequence of the
45national system operator ceasing to carry out the functions that are transferred.

(10) In 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) 5the standard conditions incorporated in such licences under section 8A
of that Act, or

(c) a document maintained in accordance with the conditions of such
licences, or an agreement that gives effect to a document so maintained.

(11) In this section—

• 10“alternative delivery body”, “EMR functions” and “national system
  operator” 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) 15In section 154 (energy administration orders), in subsection (3) for “section 155”
substitute “—

(a) section 155(1), and

(b) section 155(9) (if and to the extent that section 155(9) applies in relation
to the company).”

(3) 20In section 155 (objective of an energy administration), after subsection (7)
insert—

“(8) Subsection (9) applies if the company in relation to which an energy
administration order is made has functions conferred by or by virtue
of—

(a) 25Chapter 2, 3 or 4 of Part 2 of the Energy Act 2013, or

(b) an 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) 30that those functions are and continue to be carried out in an
efficient and effective manner; and

(b) that it becomes unnecessary, by one or both of the means
mentioned in subsection (2), for the energy administration
order to remain in force for that purpose.

(10) 35The duty under section 154(3), so far as it relates to the objective
mentioned in subsection (9)—

(a) applies only to the extent that securing that objective is not
inconsistent with securing the objective mentioned in
subsection (1);

(b) 40ceases to apply in respect of any function of a company if an
order 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

Market participation and liquidity

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

(1) The Secretary of State may modify—

(a) 5a 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) a document maintained in accordance with the conditions of licences
10under 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) facilitating participation in the wholesale electricity market in Great
15Britain, 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
electricity, including, in particular, obligations as to—

(i) 20the 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
or from group undertakings;

(c) 25provision 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
a group undertaking in relation to the other.

30For 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
meanings as in the Companies Acts (see section 1161 of the Companies Act
352006).

Power purchase agreement scheme

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

(1) The Secretary of State may modify—

(a) 40a 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
under 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
5purpose of facilitating investment in electricity generation by means of a power
purchase agreement scheme.

(3) For the purposes of this section and section 45—

(a) a power purchase agreement scheme is a scheme established by supply
licence conditions and regulations under section 45 for promoting the
10availability to electricity generators of power purchase agreements,
and

(b) “power purchase agreement” means an arrangement under which a
licensed supplier agrees to purchase electricity generated by an
electricity generator.

15For this purpose, “supply licence condition” means any condition, document
or agreement of a kind mentioned in subsection (1).

(4) Provision that may be made under subsection (1) in relation to a power
purchase agreement scheme includes provision—

(a) as to the eligibility of an electricity generator to enter into a power
20purchase agreement under the scheme;

(b) as to the terms of any power purchase agreement to be entered into
under the scheme, including provision—

(i) for determining the price at which electricity is to be purchased
under the agreement;

(ii) 25as to the duration of any such agreement;

(c) as to the circumstances in which a licensed supplier is or may be
required or permitted to enter, or offer to enter, into a power purchase
agreement under the scheme;

(d) for the provision of information in connection with the scheme.

(5) 30Provision within subsection (4)(c) includes provision for determining which
licensed supplier or suppliers is or are to be required or permitted to enter, or
offer to enter, into a power purchase agreement with an electricity generator in
any particular case.

(6) Such provision may in particular include provision for the licensed supplier or
35suppliers in question to be determined—

(a) by a process involving a determination or determinations by one or
more of the following—

(i) the Secretary of State;

(ii) the Authority;

(iii) 40the electricity generator;

(b) by auction or other competitive process;

and provision that may be made by virtue of paragraph (b) includes provision
as to the circumstances in which a licensed supplier is or may be required or
permitted to participate in an auction or other process.

(7) 45For the purposes of this section and section 45, “licensed supplier” means the
holder of a licence under section 6(1)(d) of EA 1989.

45 Power purchase agreement scheme: regulations

(1) The Secretary of State may by regulations make provision, in connection with
any modifications made under section 44, for or in connection with a power
purchase agreement scheme.

(2) 5Any such regulations may in particular—

(a) make provision for apportioning amongst licensed suppliers, or any of
them, all or any part of the value of any or all of the costs or benefits of
any licensed supplier in connection with the scheme;

(b) confer functions on the Secretary of State or the Authority (which may
10include provision for directions to be given to the Authority by the
Secretary of State);

(c) make provision for the delegation of functions conferred on the
Secretary of State or the Authority by the regulations or by virtue of
section 44;

(d) 15include provision for obligations imposed by the regulations on
licensed suppliers to be enforceable by the Authority as if they were
relevant requirements on a regulated person for the purposes of section
25 of EA 1989;

(e) make provision about the provision of information in connection with
20the scheme.

(3) Provision that may be included in regulations under this section by virtue of
subsection (2)(a) includes, in particular, provision—

(a) for requiring licensed suppliers to pay a levy to the Authority at
specified times;

(b) 25specifying how such a levy is to be calculated;

(c) conferring an entitlement on a licensed supplier to receive a payment
from the Authority.

(4) Provision which may be included in regulations by virtue of subsection (3)
includes provision for the Secretary of State or the Authority to determine what
30is to be taken into account as a cost or benefit of any licensed supplier in
connection with the scheme and its value.

(5) Regulations under this section may—

(a) include incidental, supplementary and consequential provision;

(b) make transitory or transitional provision or savings;

(c) 35make different provision for different cases or circumstances or for
different purposes;

(d) make provision subject to exceptions.

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

(a) 40licensed suppliers,

(b) the Authority, and

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

(7) Subsection (6) may be satisfied by consultation before, as well as by
45consultation after, the passing of this Act.

(8) Regulations under this section must be made by statutory instrument.