Energy Bill (HL Bill 57)

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

(b) the persons who will be consulted before a decision is made;

(c) the matters to be taken into account in reaching a decision.

30 Settlement body

(1) 5Electricity capacity regulations may make provision for payments to be made
by electricity suppliers or capacity providers to a settlement body (see section
28(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) 10to hold sums in reserve;

(c) to cover losses in the case of insolvency or default of an electricity
supplier 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) 15Electricity capacity regulations may make provision to require electricity
suppliers or capacity providers to provide financial collateral to a settlement
body (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
20collateral;

(b) a settlement body to calculate or determine, in accordance with such
criteria as may be provided for by or under the regulations, amounts
which are owed by an electricity supplier or capacity provider or are to
be provided as financial collateral by an electricity supplier or capacity
25provider;

(c) the issuing of notices by a settlement body to require the payment or
provision 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
30determined 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.

31 Functions of the Authority or the national system operator

Electricity capacity regulations may make provision to confer functions on the
35Authority or the national system operator.

32 Other requirements

(1) Electricity capacity regulations may impose requirements otherwise than
under a capacity agreement.

(2) The persons on whom requirements may be imposed by virtue of subsection
40(1) include—

(a) any person who is a holder of a licence under section 6(1) of EA 1989;

(b) any 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) relating to the manner in which functions are to be exercised;

(b) 5relating 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.

33 Electricity capacity regulations: information and advice

(1) Electricity capacity regulations may make provision about the provision and
10publication 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
operator or any other person specified in the regulations to provide
15information 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
purpose so specified;

(c) 20for 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
advice so specified;

(e) 25for 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.

34 Power to make capacity market rules

(1) 30The 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) 35section 27(3);

(ii) section 28(3);

(iii) paragraphs (f) or (g) of section 28(4);

(iv) section 28(5)(a);

(v) paragraphs (b), (c), (d) or (f) of section 29(2);

(vi) 40section 30;

(vii) section 35;

(b) provision 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) The conditions may in particular include conditions about consultation; and
5provision 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
section 6(1)(d) of EA 1989;

(b) 10any person who is a capacity provider.

(5) Provision made by virtue of subsection (3)—

(a) must secure that capacity market rules made by the Authority may not
confer functions on the Authority except with the consent of the
Secretary of State;

(b) 15may permit any such consent to be given either in relation to particular
capacity market rules or generally in relation to capacity market rules
of a particular kind.

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

(a) for the reference to the Secretary of State in section 33(2)(c) to have
20effect, for the purposes of capacity market rules and to such extent as
may be specified in the regulations, as a reference to the Authority;

(b) for section 33(3) to apply in relation to a disclosure required by virtue
of the capacity market rules.

35 Provision about electricity demand reduction

(1) 25This section applies where provision made by electricity capacity regulations
relates 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) 30For the purposes of provision made by virtue of subsection (2), the references
to the national system operator in—

(a) section 28(5)(a) and (d);

(b) section 29(2)(a) and (3)(a);

(c) section 31;

(d) 35section 33(2)(a) and (b);

(e) section 37,

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.

36 Enforcement and dispute resolution

(1) 40Electricity capacity regulations may make provision about the enforcement of
any obligation or requirement imposed by the regulations or by capacity
market rules.

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

(a) 5about 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
25 of EA 1989;

(c) 10about reference to arbitration;

(d) about appeals.

37 Licence modifications for the purpose of the capacity market

(1) The Secretary of State may, for any purpose related to provision that is made
by this Chapter, or any purpose for which provision may be made under this
15Chapter, 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) the standard conditions incorporated in licences under those
20provisions 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) A modification under this section may in particular include a modification—

(a) 25to 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) Provision included in a licence, or in a document or agreement relating to
30licences, 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) the holder of any licence being modified,

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

38 40Amendment 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
on 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) 5make 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.

39 Principal objective and general duties

Sections 3A to 3D of EA 1989 (principal objective and general duties) apply in
10relation 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.

40 Regulations under Chapter

3

(1) Regulations under this Chapter may—

(a) 15include 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.

(2) 20Before making any regulations under this Chapter, 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) 25such 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
after, the passing of this Act.

(4) Regulations under this Chapter must be made by statutory instrument.

(5) 30Subject to subsection (6), an instrument containing (whether alone or with
other provision) regulations under this Chapter 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 instrument containing only regulations within subsection (7) is subject to
35annulment in pursuance of a resolution of either House of Parliament.

(7) The regulations within this subsection are—

(a) electricity capacity regulations which—

(i) only make provision within section 33, and

(ii) are not the first set of electricity capacity regulations to make
40such provision;

(b) regulations under section 38 which do not make provision amending or
repealing a provision of an enactment contained in primary legislation.

(8) If, but for this subsection, an instrument containing electricity capacity
regulations would be treated for the purposes of the standing orders of either

House of Parliament as a hybrid instrument, it is to proceed in that House as if
it were not a hybrid instrument.

41 Capacity market rules: procedure

(1) Before the first exercise by the Secretary of State of the power to make capacity
5market rules, the Secretary of State must lay a draft of the rules before
Parliament.

(2) If, 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) 10If no such resolution is made within that period, the Secretary of State may
make the rules in the form of the draft.

(4) Subsection (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
15market 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) 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
20which 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) the Authority;

(b) any person who is a holder of a licence to supply electricity under
25section 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
consult.

(8) Subsection (7) may be satisfied by consultation before, as well as consultation
30after, the passing of this Act.

(9) 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.

42 35Capacity 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
40different 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
person).

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

43 5Pilot scheme for electricity demand reduction

(1) 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) wholly or partly for the purpose of determining provision to be
10included in electricity capacity regulations,

and such arrangements are referred to in this section as “a pilot scheme”.

(2) The Secretary of State must review the operation and effectiveness of any pilot
scheme.

(3) The Secretary of State must set out the results and conclusions of the review in
15a report to Parliament—

(a) by laying a copy of the report before each House of Parliament, or

(b) if the Secretary of State determines that the report should be made
orally, by making a statement to the House of Parliament of which that
Secretary of State is a member.

(4) 20A report under subsection (3) must be made as soon as reasonably practicable
after the conclusion of the pilot scheme to which the report relates.

CHAPTER 4 Investment contracts

44 Investment contracts

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

CHAPTER 5 25Conflict of interest and contingency arrangements

45 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
30licences);

(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
35to 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) 5any 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
10directing 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
15consequence 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) 20The 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) limitations are in place in respect of the control or influence that may be
25exercised 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
30functions, 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
35are 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
40in 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) 45to 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) 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
5consultation 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);

• 10“transmission”, “transmission licence” and “transmission system” have
  the same meaning as in Part 1 of EA 1989.

46 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
15delivery 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) 20the unsatisfactory performance condition is met (see subsection (3)),

(d) it 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) 25it otherwise appears to the Secretary of State necessary or desirable to
make the order in connection with furthering the purposes of—

(i) encouraging low carbon electricity generation (within the
meaning of Chapter 2), or

(ii) providing capacity to meet the demands of consumers for the
30supply of electricity in Great Britain.

(3) The unsatisfactory performance condition is met if—

(a) it 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) 35the Secretary of State has given notice in writing to the national system
operator providing particulars of the failure,

(c) a 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
40continuing.

(4) “Control”, in relation to the national system operator, means the power of a
person 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) 45as a result of any powers conferred by the articles of association or other
document regulating the national system operator or any other body
corporate,

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
5mentioned 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
10system 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) 15“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) 20An 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
  25operator by or by virtue of Chapter 2 (contracts for difference), Chapter
  3 (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
  30transmission 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).

47 Orders under section 46: fees and other supplementary provision

(1) A transfer of functions order may provide for an alternative delivery body to
35require 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) 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) 40to all EMR functions that the national system operator or the alternative
delivery 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) 45make transitory or transitional provision and savings;