Duties
20. Each regulator has statutory
duties laid down in the legislation which provided for the privatisation
of the industry or in amending legislation. Most of these duties
are shared with the Secretary of State.
21. The duties of the energy
regulators are very similar. The original 1986 Gas Act ordered
the DGGS and the Secretary of State primarily "to secure
that those licensed to supply gas through pipes satisfy, as far
as it is economical to do so, all reasonable demands for gas in
Great Britain" and without prejudice to the generality of
this provision, to secure that they are able to finance the provision
of gas supply services.[13]
Subject to these duties, the DGGS is to exercise his or her functions
in such a way as to encourage consumer protection, promotion of
efficiency and economy in supply and use, protection of the public
from danger and the enabling of competition in supply of large
customers. Under the 1995 Gas Act the duties were extended to
include the securing of effective competition in the carrying
out of licensed activities and the considerations extended to
effects on the environment. There is also a special duty to take
into account the needs of the old, disabled and chronically sick.
By the terms of Section 3 of the Electricity Act 1989, the DGES
and the Secretary of State are required primarily "to secure
that all reasonable demands for electricity are met" and
"that licence-holders are able to finance the carrying on
of the activities for which they are licensed" and, subject
to provisions regarding discriminatory pricing, to promote competition
in generation and supply. Relevant considerations are quality
of supply, the promotion of efficiency and economy, the promotion
of research and development, protection of the public from danger,
promotion of the health and safety of the industry's employees
and the effect on the physical environment and the needs of the
old and disabled and those in rural areas.
22. While the Secretary
of State and the regulators have similar statutory duties in respect
of energy regulation, the DTI were not in doubt about the division
of responsibility. "The broad distinction is that the Government
is responsible for preparing the legislation and other instruments
which establish the regulatory framework and for appointing the
regulator, while the regulator is responsible for carrying on
the business of regulation within that framework".[14]
The regulators were equally clear.[15]
Some witnesses were less sure about the distinction, fearing
ministerial interference in regulatory decisions, particularly
since, as Enron and ICI pointed out,[16]
a DTI representative attends meetings between the Office of Gas
Supply (OFGAS) and the regulated companies. The Energy Intensive
Users Group (EIUG) complained that the relationship between Government
and the regulators is now clouded.[17]
The NGC called for greater clarity between the roles of the Secretary
of State and the regulator "if only to safeguard the regulator
from undue ministerial influence,"[18]
but they produced no evidence that such influence was exerted.
23. Apart from the possibility
that he might exercise pressure on the regulators, the Secretary
of State may issue general directions to them. OFFER told us
that these directions might cover considerations to which the
DGES should have regard in ordering his priorities in keeping
under review, and collecting information about, the electricity
industry in Great Britain and elsewhere; and considerations to
which the DGES should have particular regard in exercising any
of his functions.[19]
The DTI were at pains to point out that "this does not affect
the regulators' independence ... They must still make their own
decisions independently".[20]
No such directions have ever been issued.
24. While there was widespread
agreement that the freedom of the regulators from political control
was necessary,[21]
some witnesses felt that the Government should issue more guidance
on policy matters. The Electricity Association said "whilst
it is recognised that some discretion is clearly advantageous
in helping to take complex and contentious issues forward, a clearer
policy framework from Ministers would help to resolve the situation
that regulators may use their discretion to promote differing
agendas".[22]
Aileen McHarg also felt that "it is undesirable that an
unelected regulator should have complete freedom to determine
his own policy priorities. This gap is best bridged by an obligation
on Ministers to issue guidance from time to time setting out the
relative weights to be given to various policy considerations".[23]
Functions
25. The legislation allocates
not only duties but also functions. The functions of the regulators
include "the grant of licences; the giving of directions,
approvals etc within the terms of licences; enforcing compliance
with the conditions of licences; and proposing changes to the
conditions of licences". The Secretary of State's functions
are to appoint the regulator, to make the initial determination
of the standard conditions of gas licences or grant the general
authority for electricity; to decide whether or not to exercise
a veto over agreed licence modifications and certain Monopolies
and Mergers Commission's (MMC) references by the regulator; and
to perform numerous subsidiary functions including in relation
to statutory instruments, land, emergencies and security of supply.[24]
13 Gas Act 1986, Section 4. Back
14 Ev.
p.320. Back
15 Ev.
p.244, 271. Back
16 Ev.
pp.82, 119. Back
17 Ev.
p.111. Back
18 Ev.
p.42. Back
19 Ev.
pp.271-272. Back
20 Ev.
p.320. Back
21 eg.
Mem. p.47. Back
22 Mem.
p.84. See also Mem. p.33. Back
23 Ev.
p.173. Back
24 Ev.
p.320. Back
