House of Commons - Explanatory Note
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Session 1999-2000
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Utilities Bill


These notes refer to the Utilities Bill
as introduced in the House of Commons on 20th January 2000 [Bill 49]





1. These explanatory notes relate to the Utilities Bill as introduced in the House of Commons on 20 January 2000. They have been prepared by the Department of Trade and Industry and the Department of the Environment, Transport and the Regions in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament.

2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any explanation or comment, none is given.


3. The Government published a Green Paper, "A Fair Deal for Consumers - Modernising the Framework for Utility Regulation" (Cm 3898) in March 1998, setting out a series of proposals for public consultation. In July 1998, the Government published a "Response to Consultation", summarising its conclusions in respect of those proposals. Two further consultation documents were published in Autumn 1998, one on establishing independent consumer councils; the other on the future of gas and electricity regulation. The Government published its response to consultation on the first document in April 1999, and on the second, in October 1999. Two changes to Government policy were announced by the Energy Minister on 27 July 1999 (Commons Hansard WA cols 306-307). Copies of these documents can be accessed on the DTI website ( The purpose of the Bill is to give effect to the proposals already announced by the Government.

4. The Bill covers the gas, electricity, telecommunications and water sectors. It has a number of objectives. It aims to achieve a fair balance between the interests of consumers and shareholders through changes to the regulators' duties, new powers for the regulator, and the establishment of an independent consumer council for each utility sector. It makes provision for regulators to have regard to Government guidance on its social and environmental objectives. It makes provision to make regulation more transparent, predictable and accountable. The Bill also updates the regulatory regime for the gas and electricity sectors, by making legislative provision for the alignment, where appropriate, of gas and electricity regulation and the separation of electricity supply and distribution licensing, and by providing the necessary powers to underpin the new electricity trading arrangements.

5. The main provisions of the Bill provide for:

Consumer provisions

  • in the telecommunications and energy sectors, a new principal objective for regulators to protect the interests of consumers, wherever appropriate, by promoting effective competition. (In this paragraph, the term "regulator" refers to the regulatory authorities for energy and telecommunications and, for water, to the Director General of Water Services);

  • in the water sector a similar objective to protect the interests of consumers, but to apply to the extent that it is consistent with the water regulator's existing primary duties;

  • a requirement for all regulators, in performing their functions, to have regard to the interests of low income consumers, the chronically sick, the disabled, pensioners and consumers in rural areas;

  • the establishment of independent consumer councils for each sector with the functions of seeking to resolve complaints, providing information of use to consumers, and advocating the interests of all consumers to regulators, Government and others whose activities may affect the interests of utility consumers;

  • powers for the regulators to impose financial penalties on companies for breaches of licence conditions, conditions of appointment, standards of performance and specified statutory requirements;

  • powers for the new consumer councils to publish utility information where this is in the interests of consumers, and does not seriously or prejudicially affect persons to whom it relates;

  • a power in the energy sector for the Secretary of State to raise a cross-subsidy in favour of identifiable groups of disadvantaged customers;

  • a requirement for price-regulated utilities to disclose any links between directors' pay and customer service standards;

Regulatory institutions and procedures

  • in the telecommunications and energy sectors, the replacement of individual regulators by regulatory authorities;

  • in the water sector, the appointment by the Secretary of State of an advisory panel to support the individual regulator;

  • a requirement for the regulators to give reasons for certain key decisions and to publish and consult on their forward work programmes;

  • a power for the Competition Commission to veto licence modifications developed by a regulator following a reference if, in its opinion, they do not remedy or prevent the adverse effects identified by the Commission in its report on the reference and, thereafter, to make the licence modifications;

  • the abolition of the Competition Commission's sector-specific utility panels, and their replacement with a single cross-utility panel;

Utility regulation and wider social and environmental objectives

  • a duty on each of the regulators, in the exercise of their statutory functions, to have regard to guidance issued by the Secretary of State on the social and environmental objectives relevant to their sector;

  • in the energy sector, new powers for the Secretary of State to make regulations to promote energy efficiency, and the generation of electricity from renewable sources;

  • in the water sector, new powers for the Secretary of State to initiate new or amended customer service standards, normally only in respect of standards raising environmental and public health issues;

Gas and electricity regulation

  • legislation to underpin the New Electricity Trading Arrangements;

  • separate licensing of electricity supply and distribution, and the introduction of a bar on supply and distribution licences being held by the same legal person;

  • powers for the regulatory authority to adapt the licensing regime to changing market structures in future without additional primary legislation (by statutory instrument under affirmative resolution);

  • new collective licence modification procedures for the electricity sector enabling the regulator to modify standard licence conditions without a Competition Commission reference even if some companies disagree; and

  • alignment where appropriate of the licensing and regulatory systems for gas and electricity.

6. The statutory framework for utility regulation is laid down principally by the Telecommunications Act 1984, the Gas Act 1986 (as amended by the Gas Act 1995), the Electricity Act 1989, and the Water Industry Act 1991. The provisions set out above are to be given effect, in the main, through amendments to these Acts.

7. In terms of geographical coverage, the proposals extend to: England and Wales in respect of water; to England, Wales and Scotland in respect of gas and electricity; and to England, Wales, Scotland and Northern Ireland in respect of telecommunications.

8. The Bill does not currently give effect to all the proposals set out in the Government's policy documents (paragraph 3 - above). Where this is the case, the Government intends to bring forward amendments later in the passage of the Bill through Parliament to give effect to them. The main proposals in this category are:

  • a requirement for each regulator to take into account the implications of its decisions for other regulated sectors within a multi-utility;

  • a requirement for regulators to give collective consideration to matters of common interest, and to publish the results;

  • a requirement for the regulators to establish a code of practice on their consultation and decision-making procedures;

  • amendment of the regulators' existing powers to publish information to align them with the equivalent powers of the new consumer councils so that the regulator can also publish information where this is in the interests of consumers;

  • measures consequential on the separation of electricity distribution and supply - including provision for transfer schemes for public electricity suppliers;

  • measures to increase competition on gas transportation; and

  • amendments to the procedures for referring licence modifications to the Competition Commission consequential on the new procedures for licence modifications (clause 32).


9. The Bill consists of five parts -

    Part I - Gas and electricity

    Part II - Telecommunications

    Part III - Water

    Part IV - The Competition Commission

    Part V - Miscellaneous and Supplementary


10. The Bill is drafted on a sector by sector basis. However, a number of provisions are common to each sector. Where this is the case, the substantive commentary is provided where the clause first appears in the Bill. Subsequent references to equivalent clauses refer back to the substantive commentary and, where appropriate, highlight any particular sector-specific variations.


Clauses 1 - 7 and Schedules 1 - 3: New Regulatory Arrangements

11. These Clauses and the Schedules establish the regulatory authority (to be called the Gas and Electricity Markets Authority), and the consumer council (to be called the Gas and Electricity Consumer Council), and provide for the drawing up of a memorandum between the two bodies to ensure effective co-operation between them.

12. Clause 1 and Schedule 1 provide for the establishment of the Gas and Electricity Markets Authority ("the Authority"). The Authority takes the place of the existing offices of the Director General of Gas Supply and the Director General of Electricity Supply. These offices are, in consequence, abolished. The Authority will be a body corporate and will comprise a chairman and at least two other members. The members of the Authority will be appointed by the Secretary of State, who will be required to consult the chairman in respect of the appointment of the other members. As a Non-Ministerial Government Department, the Authority will be a Crown body and the Authority's staff will be civil servants.

13. Schedule 1 sets out detailed provisions for the appointment and terms and conditions of members of the Authority. It also sets out provisions relating to the staff and procedures of the Authority. Provision for the financing of the Authority is contained in clause 131.

14. Clause 2 and Schedule 2 provide for the abolition of the existing consumer bodies (the Gas Consumers Council and the Electricity Consumer Committees) and the establishment of a single, independent Gas and Electricity Consumer Council ("the Council"). The Council will be a body corporate. Its members will be appointed by the Secretary of State, who will have discretion both as regards the number of appointments, and the skills and experience of those he appoints, except that he shall have regard to the desirability of appointing one or more persons who are or have been disabled, or have experience of work with disabled people. Members, other than the Chairman, will be appointed following consultation with the Chairman of the Council. The Council will not be a Crown body, but a Non-Departmental Public Body. The Council's staff will not be civil servants.

15. Schedule 2 sets out detailed provisions for the appointment and terms and conditions of members of the Council. It also sets out provisions affecting the staff of the Council, and about financial and procedural matters. Paragraph 5(3) of Schedule 2 and paragraph 19 of Schedule 5 make staff of the Council eligible to be members of the Principal Civil Service Pension Scheme even though they will not be Civil Servants.

16. Clause 3 and Schedule 3 provide for the transfer of the functions and property of the Director General of Gas Supply and the Director General of Electricity Supply to the Authority. It also transfers the property, rights and liabilities of the Gas Consumers Council to the new Council. Some of the equipment or property currently used by the Office of Electricity Supply (OFFER) and the Office of Gas Supply (OFGAS) may be more appropriately used by the Council. The clause, therefore, also contains a power for the Secretary of State to make a scheme for the transfer of property, rights and liabilities of these Offices to the Council. Paragraph 9 of Schedule 3 ensures that there is no break in the continuity of employment of staff transferring to the Council from either the GCC or the regulatory offices.

17. Clause 4 requires the Authority and - separately - the Council to consult on draft "forward work programmes", and then to publish the final versions. The forward work programmes are intended to contain a description of the non-routine projects which the bodies plan to undertake during the year and their associated objectives, together with an estimate of overall expenditure for the year on those projects.

18. Clause 5 requires the Authority to make an annual report to the Secretary of State which is to be laid before each House of Parliament. The equivalent annual report provision for the Council is provided at paragraph 6 of Schedule 2.

19. Clause 6 requires the Council and the Authority to draw up a memorandum setting out the arrangements for co-operation between them. The detailed contents of the memorandum are for the parties to agree. Examples of the ground that might be covered in the document include the arrangements for:

  • consultation between the parties (above the statutory minimum);

  • the co-ordination of work on consumer-related issues;

  • the co-ordination of information required from the utility companies to avoid unnecessary duplication; and

  • facilitating a common understanding of the tests for the disclosure of information.

Clause 7 provides powers for the Authority to insert licence conditions to allow for the recovery of the costs of the Council, and costs relating to the establishment of both the Authority and the Council. The Secretary of State may issue directions to the Authority on how the power should be exercised.

Clauses 8 - 11 and 12 - 15: General duties under the Gas Act 1986 and the Electricity Act 1989

20. These clauses set out changes to the general duties contained in the Gas Act 1986 and the Electricity Act 1989. For the purposes of these clauses, references in these notes to the Authority should be read to include also a reference to the Secretary of State to whom these clauses apply equally.

21. Clauses 8 and 12: Objectives and duties under the 1986 Act and the 1989 Act. These clauses replace the regulators' existing general duties which affect the manner in which they exercise their functions under the Gas Act 1986 and the Electricity Act 1989 respectively. The clauses give the Authority a principal objective in carrying out its functions in each sector, to protect the interests of consumers, wherever appropriate through promoting effective competition. The Authority will have a duty to further each principal objective.

22. The duty to further the principal objective incorporates the matters which form the regulators' existing primary duties. In other words, the Authority should have regard to the need to secure that all reasonable demands for the relevant utility are met. Likewise, the Authority should recognise that to the extent that the utilities legislation places obligations on utility companies (whether directly, through licence conditions or otherwise), such companies must be able to finance those obligations.

23. In determining the "interests of consumers" for the purpose of the principal objective, the Authority is entitled to take into account the interests of any group or class of consumer. However, the Authority should always have regard to the interests of consumers:

  • who are disabled or chronically sick;

  • who are of pensionable age;

  • with low incomes; or

  • who live in rural areas.

  •      Identifying groups of consumers in this way, however, does not oblige the Authority to give these consumers preferential treatment.

24. As well as the interests of existing consumers, the Authority is required to take account of the interests of those who will be consumers in the future.

25. The Authority's principal objective under the Gas Act 1986 (as amended) relates to consumers of gas. However, in furthering its principal objective under that Act, the Authority is entitled to have regard to the interests of consumers of electricity. Similarly, the Authority's principal objective under the Electricity Act 1989 (as amended) relates to consumers of electricity but, in furthering its principal objective, the Authority is entitled to have regard to the interests of consumers of gas.

26. To the extent that it is consistent with furthering its principal objective, the Authority should carry out its functions in relation to gas under the utilities legislation in the manner best calculated:

  • to promote efficiency and economy on the part of gas companies; and

  • to promote the efficient use of gas

  • while having regard to the effect on the environment of activities connected with the conveyance of gas.

27. In addition, to the extent that it is consistent with furthering its principal objective, the Authority should carry out its functions in relation to electricity under the utilities legislation in the manner best calculated:

  • to promote efficiency and economy on the part of electricity companies (other than electricity generators);

  • to promote the efficient use of electricity; and

  • to protect the public from dangers arising from the generation, transmission, distribution and supply of electricity

  •      while having regard to the effect on the environment of such activities.

28. Clauses 9 and 13: Guidance on social and environmental matters in relation to gas and electricity. These clauses require the Secretary of State to issue statutory guidance to the Authority. The guidance will set out the Government's social and environmental objectives and suggest ways in which the Authority might contribute to these objectives. It is intended to enable the Authority to make an appropriate contribution to the Government's sustainable development agenda. The guidance is intended to remain in force for a set length of time, for instance the length of a Parliament or the usual duration of a price control period.

29. These clauses require the Authority to have regard to this social and environmental guidance when discharging its statutory functions. Where duties on the Authority related to social and environmental matters already exist, for instance in respect of the elderly, disabled and energy efficiency these will be retained and the guidance may be used to indicate Ministers' views on the interpretation of these duties.

30. These clauses also set out the conditions under which the Secretary of State can issue the guidance. They stipulate that:

  • the Secretary of State should consult the Authority, the Consumer Council, licence holders and anybody else he thinks appropriate before issuing guidance;

  • the guidance can only be issued 40 sitting days after a draft has been put before both Houses and no motion has been carried against it.

31. There are broadly equivalent provisions for the telecommunications and water sectors.

32. Clauses 10 and 14: Health and safety in relation to gas and electricity. Under existing legislation the Directors General for Gas and Electricity Supply are under different obligations in respect of health and safety in the industries they regulate. These clauses are designed to bring the duties in the Gas and Electricity Acts into line.

33. Responsibility for health and safety in the gas and electricity industries, as in all other industries, rests primarily with the Health and Safety Executive. The Engineering Inspectorate of the Department of Trade and Industry also has certain duties in respect of safety in relation to electricity. These clauses do not affect that position: the Authority will be an economic regulator and will not be responsible for regulating health and safety issues. However, decisions taken by an economic regulator may have health and safety implications and it is important to ensure that these are taken into account where necessary.

34. The clauses therefore require the Authority to consult the Health and Safety Executive in any case where it appears to the Authority that its decision may have implications for gas and electricity safety, whether in relation to members of the public or persons employed in connection with the relevant industries. In the case of electricity, the Secretary of State may also require the Authority to consult him about particular safety matters. The Authority is under a duty to take account of any advice offered by the relevant health and safety body. This duty applies even if the Authority has not sought advice but it is offered at the instigation of the relevant health and safety body.

35. These clauses replace section 4A of the Gas Act 1986 and section 3(3)(d) and (e) of the Electricity Act 1989.

36. Clauses 11 and 15: Exceptions from the general duties under the 1986 and 1989 Acts. Clauses 8 to 10 and 12 to 14 affect the way in which the Authority is to exercise its functions under the Gas Act 1986 and Electricity Act 1989 respectively. Clauses 11 and 15 set out those of the Authority's functions to which clauses 8 to 10 and 12 to 14 do not apply. For both Acts, these are functions relating to the determination of disputes and concurrent functions under competition legislation. In relation to electricity, clauses 12 to 14 do not apply to the Secretary of State for the purpose of granting consents for the construction of generating stations and for the installation of overhead power lines.

37. Clauses 11 and 15 also establish that, to the extent that the Authority is obliged by any legislation (including EU obligations) to perform specific duties, nothing contained in clauses 8 to 10 or 12 to 14 (above) can be taken to detract from such obligations.

Clauses 16 - 24 and Schedule 2 (paragraphs 10 - 17): Functions of the Gas and Electricity Consumer Council

38. Clauses 16 - 24 set out the main functions of the consumer council which are broadly to: keep itself informed of consumer matters and the views of consumers throughout Great Britain; to provide advice and information to regulatory authorities, Government, companies and anyone else whose activities may affect the interests of consumers; to seek to resolve specific complaints from consumers; to provide information and advice to consumers; and to publish information in the interests of consumers. The clauses also give the council power to carry out investigations, and set out the arrangements for the exchange of information between the regulator and the council, and the arrangements for giving the council rights of access to information from the regulator and companies.

39. Clause 16 gives the Council the function of obtaining and keeping under review information about consumer matters and the views of consumers in different areas of Great Britain. To assist it in the task of obtaining information on consumer matters in different areas, the Council is required to establish one or more committees for both Wales and in Scotland, and has powers to establish one or more similar committees for England. The clause also gives the Council the right to receive any statutory notices issued by the Authority where the notice specifies a period within which representations may be made.

40. Schedule 2 (paragraphs 10 - 14) set out the procedures for establishing and appointing regional committees of the Council. These procedures include a requirement for the Council to obtain the Secretary of State's approval for the establishment or abolition of a regional committee, or the alteration of the areas for which a committee is established. The Council is also required to consult publicly on any proposals it has for establishing or abolishing a regional committee or altering the areas for which a regional committee is established. It has responsibility for appointing members of regional (and other committees), but must consult the Secretary of State before appointing a chairman to a regional committee. Chairmen and members of the regional committees can receive remuneration and other allowances. A regional or other committee does not have to include a member of the Council, but neither are Council members precluded from serving on regional committees.

41. Clause 17 gives the Council the function of giving advice and information to Ministers, regulatory authorities, licence holders and to any other body whose activities may affect the interests of consumers. The range of other bodies could include local authorities, religious organisations and trade unions as well as making its case in the media. The clause places restrictions on the disclosure of information by the Council in pursuit of this function when this may have serious and prejudicial consequences for persons to whom it relates.

42. Clause 18 gives the Council the function of providing information about consumer matters to the general public. This function is concerned solely with information which is publicly available from one source or another. Consumers face practical obstacles in making informed decisions about offers from utility companies because the relevant information is located in a variety of places, often in differing forms, so that comparison is difficult. The intention is that the Council should bring together this information, and make it available (both on its own initiative, and on request) in forms which will be useful to consumers. For example, the Council might set up a website so that consumers can enter details of their consumption and receive information on the services available.

43. In addition to the general function to provide information, the clause gives the council a specific duty to publish two sets of statistics on:

  • licence-holders' performance against the standards of performance, if any, that the Authority has prescribed; and

  • the numbers of complaints (whether made to the licence-holders, the Authority, or the Council) and the handling of those complaints.

44. The Council will have discretion over the form and frequency of the publication of the statistics. For example, it might choose to publish monthly details of performance against the Authority's specified standards, and to present these in league table form to facilitate comparisons with other licence-holders, and alongside previous months' performance details, to indicate trends in company performance. The same type of approach could be applied to complaints statistics. The current requirement on the gas and electricity regulators to publish similar information will cease to have effect.

45. Clause 19 equips the Council with general powers to publish information where it thinks that this will be in the consumer interest. This will enable it to publish material ranging from informal advice to individuals or groups to more formal reports available to anyone who is interested. The Council's publication powers will be subject to the restrictions and procedures set out in sub-sections (3) and (4).

46. Clause 20 provides for the Council to act as the first port of call for all consumer complaints against companies about regulated matters and sets out the circumstances in which the Council should seek to help resolve complaints. The Council is placed under a duty to refer all complaints which appear to raise licence enforcement issues to the Authority. The Memorandum of Understanding between the Council and the Authority is expected to cover the inter-relationship between the Council and the Authority, including procedures for handling complaints. The Council will have powers to obtain information relevant to a complaint from the company concerned in order to facilitate the process of seeking to resolve the complaint in a satisfactory manner. The Council does not have the power to impose an outcome on any complaint (ie to "determine" it). The Council is required to advise the consumer if he has a right to refer the dispute to the Authority for resolution.

47. Clause 21 gives the Council the scope to carry out investigations which go wider than the narrowly defined function of trying to resolve specific complaints. Investigations undertaken may range from making a telephone call to help a consumer establish the facts he or she needs to know, to in-depth research on a particular matter leading to the publication of a formal report. Where the Council produces a report based on an investigation it will be able to send the report to particular persons or bodies, without formally publishing it.

48. Clause 22 gives the Council rights to obtain information it needs to carry out its functions from the Authority, and licensees, subject to certain conditions. The intention is that the Council should approach the Authority first where it is seeking company information which the Authority might already have to minimise the risk of duplicate or similar requests being made to licensees. The Authority and the licence-holders have to provide the information as soon as reasonably practicable and in the form the Council wants. The Council is required to minimise the compliance burden for the Authority and the licence-holders. The clause gives the Secretary of State a power to make regulations setting out the categories of information which the Authority or a licensee may refuse to provide when the Council requests it. The clause also provides the means of resolving disputes between companies and Council over information requests. The Council can refer company refusals to supply information to the Authority, who will adjudicate on the validity of the request. Finally, the clause enables the Council to obtain reasons for a refusal by the Authority to supply information to it. It is also entitled in the event of a disagreement between the Council and a company, to the reasons why the Authority has declined to require the company to supply the information requested.

49. Clause 23 empowers the Council to publish the reasons that the Authority gives for refusing to supply, or oblige a company to supply, any information requested by the Council, provided that those to whom the information relates have consented, or it is already in the public domain, or it will not cause serious and prejudicial effects to those to whom it relates. The Council is obliged to consult such persons, and consider the opinion of the Authority, before deciding whether to publish.

50. Clause 24 requires the Council to supply to the Authority any information the latter wants for the exercise of its functions. The clause gives the Secretary of State powers to make regulations describing the information which need not be supplied. The Authority is entitled to reasons from the Council for a refusal to provide the information requested. The Authority is allowed to publish the reasons, subject to having regard to the need to exclude information whose publication might cause prejudicial harm to persons to whom it relates.

51. The Bill includes similar provisions setting out the functions of the consumer councils for telecommunications and water. Variations from the arrangements described above are identified in the commentary on the equivalent clauses.

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