|Utilities Bill - continued
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Clauses 50 - 55: Electricity from renewable sources
99. These clauses replace the Secretary of State's powers to impose obligations designed to promote the generation of electricity from non-fossil sources with a power for the Secretary of State to impose obligations in relation to renewables generation only (i.e. excluding nuclear generation) on all licensed electricity suppliers. An obligation will be based on the requirement that a proportion of total supply of electricity to consumers must be renewable electricity.
100. Clause 51(1) provides flexibility in imposing an obligation in relation to its duration and size, including the possibility that it can increase or decrease over time, the types of generation that may be used in its fulfilment, and the provision of information necessary to set and determine the fulfilment of suppliers' individual obligations.
101. Clause 51(2) provides that the renewables obligations will be enforceable by the regulator using its general enforcement powers, including the power to impose monetary penalties, rather than by criminal sanction as is the case for existing non-fossil obligations.
102. Clause 52: Green certificates. This clause allows for 'green certificates', which will be tradable certificates of the production of renewable electricity issued by the regulator, the possession of which will count towards a supplier's obligation.
103. Clause 53 provides an alternative way of meeting an obligation by making a payment to the Authority. The Authority must pay the amounts received to electricity suppliers in line with a system of allocation specified by the Secretary of State.
104. Clause 55: Transitional and saving provisions. This clause provides powers for the Secretary of State to make orders for the purpose of ensuring the continuation of outstanding contracts entered into by the public electricity suppliers with renewables generators in compliance with non-fossil fuel orders (in Scotland, Scottish renewables orders) made under section 32 of the 1989 Act. In particular it will enable provision to be made for the continuation of the fossil fuel levy with respect to the outstanding contracts and for the transfer of the contracts themselves from the public electricity suppliers to their licensed distributor or supplier successors, as a consequence of the separation of licensing of electricity supply and distribution.
Clauses 56 - 61 (electricity) and Clauses 78 - 79 and 82 (gas): Miscellaneous
105. Clause 56: Electricity trading arrangements. This clause provides the power for the Secretary of State to modify electricity licences and the standard licence conditions for the purpose of implementing the new electricity arrangements. The power will be exerciseable at any time within a period of two years from the commencement of the section.
106. Clauses 57 and 78: Assistance for disadvantaged groups of electricity and gas customers. These clauses which apply to electricity and gas respectively insert new sections into the 1986 and 1989 Acts permitting the Secretary of State, by order, to make schemes which have the effect of providing a cross-subsidy in favour of disadvantaged customers in relation to the charges they pay for their electricity or gas. The clauses provide for the information necessary for the running of such schemes to be passed between the various parties and for the regulator to have a role in monitoring the operation of the schemes and enforcement of breaches of them.
107. Clauses 58 and 79: Energy efficiency requirements for electricity distributors and suppliers and for gas transporters and suppliers. These clauses replace the existing provisions of the 1986 and 1989 Acts allowing the regulator to impose standards of performance on gas suppliers and public electricity suppliers in connection with the promotion of the efficient use of gas and electricity by consumers. The clauses provide that the Secretary of State, rather than the Authority, may make orders imposing requirements on licensed gas and electricity suppliers, gas transporters and electricity distributors, to carry out activities aimed at promoting the efficient use of gas and electricity by consumers. A requirement will be to achieve the saving of a specified amount of energy. It will be for the licensee concerned to choose the activities (for example installations of home insulation or promoting the use of energy efficient appliances) it will undertake to meet the required energy saving. There is provision to specify the way in which the amount of energy that will be saved by a given activity will be calculated. The Authority is to be responsible for calculation and enforcement of the requirement, using its normal enforcement powers including monetary penalties.
108. Clause 59: General duties of transmission licence holders in Scotland. Section 9(2)(b) of the 1989 Act imposes on any holder of a transmission licence a duty to facilitate competition in the supply and generation of electricity. Subsections (3) and (4), however, qualify this duty in the case of persons in Scotland who hold both a transmission licence and a licence to supply or to generate electricity. In the case of any such person, the duty is to make the transmission system available to competitors (defined in sub-section (4) as any other person authorised, whether by licence or exemption, to supply or generate electricity) on terms which neither prevent nor restrict competition.
109. The precise meaning of this qualification is unclear. But as competition in the market becomes more prevalent there is no justification for treating transmission companies in Scotland on a different basis from those (in fact there is only one) in England and Wales. This clause therefore repeals subsections (3) and (4) of section 9.
110. Clause 60: Uniform prices etc: Scotland. Section 2(2) of the 1989 Act puts the Director under an obligation to ensure that the prices charged to tariff customers in any area of Scotland specified in an order by the Secretary of State do not discriminate (whether directly or indirectly) between different parts of that area (the so-called "Common Tariff Obligation"). The abolition of tariffs effected by this Bill means that the desired effect of ensuring that remote Scottish areas do not suffer discrimination can no longer be achieved in this way. Instead, this clause provides a power for the Secretary of State to make orders requiring holders of transmission, distribution, and supply licences to charge prices and, in the case of suppliers, to offer contract terms which do not discriminate between customers in different parts of the specified area. The existing Common Tariff obligation is limited to tariff customers: essentially domestic and small business users. It is expected that the orders to be made under this clause will be restricted to a broadly similar group of consumers (by virtue of the power in sub-section (4) to make different provisions for different cases).
111. Clauses 61 and 82: Maximum prices for reselling electricity and gas. The existing provisions in the 1989 Act and the 1986 Act share the overall objective of preventing excessive prices being charged when electricity or gas is resold (e.g. by landlords to tenants), but differ in their details. These clauses reconcile the differences so that the powers granted to the Authority are the same for the two fuels (except for the exemption for gas used for propelling motor vehicles).
112. Clause 61: Maximum prices for reselling electricity. This clause makes the power in electricity more flexible:
113. These three changes align electricity with the relevant aspects of the current position in gas.
114. Clause 82: Maximum prices for reselling gas. This clause changes the duty on the Authority to set maximum resale prices in gas into a power (this allows the regulator to choose not to set a maximum resale price in relation to certain suppliers which may be useful where, for example, supply is unmetered). It also extends the ambit of the current power to include gas originally supplied by an exempt supplier (at present only gas supplied by a licensed supplier which is subsequently resold is covered). Both matters are already included within the existing electricity legislation and are retained in the substituted clause.
Clauses 62 - 68: Gas licensing
115. The commentary on Clauses 62 (Gas licensing conditions) and 63 (Exception from s.5) is provided in the electricity licensing section above.
116. Clause 64: Gas transporters. This clause ends the geographic exclusivity of public gas transporters (PGTs). Section 7(2)(a) of the 1986 Act has the effect that any given area may only be within the "authorised area" of a single public gas transporter, so that only that PGT may convey gas to premises through pipes in that area. In other words, PGT licences are currently geographically mutually exclusive. The main purpose of this clause is to end that exclusivity (with the intention of promoting competition and, in this respect, to comply with the EC Gas Directive (98/30/EC)). The amendments to section 7(2)(a) of the 1986 Act in subsection (3) achieve this purpose by removing the reference to PGT licences relating to areas which are not specified in the licences of other PGTs.
117. Subsection (3) also repeals section 7(7) of the 1986 Act, so that a gas transporter may if it wishes apply for a licence covering a large area (e.g. all of Great Britain) without being required to prove that it intends to operate in every part of that area. Section 7(7) prevents a transporter with no plans to lay pipes within a certain area depriving another transporter, who does have such plans, of that possibility by allowing for the removal of that area from the latter's licence. But, in future, including an area in a second transporter's authorised area will not prevent the first transporter from continuing to be able to lay pipes there, and so this subsection is no longer required.
118. The intention is that the ability to apply once and for all for a licence covering a large area, rather than having to request piecemeal extensions only when able to prove the intent to operate in each particular area, should reduce bureaucratic burdens on gas transporters.
119. The commentary on Clause 65: (Transfer of gas licences); Clause 66: (Exemptions from gas licensing); Clause 67 (Reasons for decisions); and 68: (Altering activities requiring gas licence) is provided in the electricity licensing section above.
Clauses 69 - 74: Gas performance standards
120. The commentary on these clauses is provided above alongside the equivalent provisions for electricity.
Clauses 75 - 76: Enforcement of obligations of gas licence holders
121. The commentary on these clauses is provided above alongside the equivalent provisions for electricity.
Clause 77: Remuneration and service standards
122. The commentary on this clause is provided alongside the equivalent provisions for electricity.
Clauses 78 - 82: Miscellaneous
123. The commentary on clauses 78-79 is provided alongside the equivalent provisions for electricity.
124. Clause 80: Exercise of power to make regulations. This clause amends the 1986 Act so that regulations made by the Authority under this part are not subject to Parliamentary amendment. This is in line with the principle of arm's length regulation by the regulatory authority and aligns the procedure with that which currently applies in the 1989 Act.
125. Clause 81: Standards of quality for gas transporters. The present regulatory regime does not provide a clear allocation of responsibility for regulating gas quality issues which do not have a significant safety aspect but which may nevertheless have a substantial impact on consumers. The clause will address this gap by conferring on the Authority a power to make regulations regulating the quality of gas which may be conveyed by gas transporters to premises or to pipe-line systems operated by other gas transporters in relation to pressure and purity, and other standards with respect to the properties, condition and composition of gas so conveyed.
126. The Authority's exercise of this power is to be subject to the consent of the Secretary of State. The Authority is to be required to consult such persons and organisations as it considers appropriate before making any regulations.
127. The Health and Safety Executive has, and will retain, a power to regulate gas quality insofar as safety may be affected. The new power for the Authority will ensure that there is no regulatory gap in relation to non-safety issues of gas quality. The duty on the Authority to consult the Health and Safety Executive on safety matters should ensure that, where a gas quality issue has both safety and non-safety aspects, the issue is identified and addressed by the appropriate body.
128. The commentary on clause 82 (Minimum prices for re-selling gas) is provided alongside the equivalent clause for electricity.
PART II: TELECOMMUNICATIONS
Clauses 84 - 88: New regulatory arrangements
129. Clause 84 and Schedule 1 provide for the establishment of the Telecommunications Authority and the consequential abolition of the office of the Director General of Telecommunications. The provisions relating to the appointment of members, staff and procedures of the Authority and the reporting provisions are similar to those for the Gas and Electricity Markets Authority. Provision for the financing of the Authority is contained in clause 131.
130. Clause 85 and Schedule 1 provide for the establishment of the Telecommunications Consumer Council, and the abolition of the advisory bodies for matters affecting England, Scotland, Wales and Northern Ireland established under section 54 of the Telecommunications Act 1984 ("the 1984 Act"). Schedule 7 provides for the abolition of the section 54(4) advisory bodies for matters affecting small businesses and for matters affecting persons who are disabled or of pensionable age. The regulatory authority will retain the section 54(3) power to establish such advisory bodies as it thinks fit.
131. A more substantive commentary on the similar provisions for the Gas and Electricity Markets Authority and the Gas and Electricity Consumer Council is provided above.
Clauses 89 - 91: Objectives of regulation of telecommunications
132. 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.
133. Clause 89: Objectives and duties under 1984 Act. This clause replaces the regulators' existing general duties which affect the manner in which they exercise their functions under the 1984 Act. The Authority is to be given a principal objective in the carrying out of its functions, to protect the interests of consumers of telecoms services and apparatus, wherever appropriate through promoting effective competition. The Authority will be under a duty to further that principal objective. The commentary on the new regulatory objective and duties of the Gas and Electricity Markets Authority above, applies equally to this clause. Consumers include purchasers and users of telecoms services and apparatus.
134. To the extent that it is consistent with furthering the principal objective, the telecoms regulator should carry out its functions under the utilities legislation in the manner best calculated:
135. Clause 90: Guidance to Authority on social and environmental matters. Commentary on the equivalent clauses for gas and electricity is provided above. Those clauses are broadly similar to clause 90.
136. Clause 91: Exceptions from the general duties under the 1984 Act. Clauses 89 and 90 affect the way in which the Authority is to exercise its functions under the 1984 Act. Clause 91 sets out those of the Authority's functions to which clauses 89 and 90 do not apply (or apply only in part). The functions to which clauses 89 and 90 are disapplied entirely are functions relating to the determination of disputes, concurrent functions under competition legislation as well as anything done by the Secretary of State in the interests of national security or inter-Governmental relations. As regards certain functions to do with the Telecommunications Code and the Authority's power to give assistance in relation to proceedings, only those aspects of clause 89 that reflect the matters forming the regulators' existing primary duties apply to the exercise of those functions.
137. Clause 91 also makes it clear that to the extent that the Authority is obliged by any legislation (including EU obligations) to perform specific duties, nothing contained in clauses 89 or 90 can be taken to detract from such obligations.
Clauses 92 - 96: Functions of the Council
138. These clauses are similar to equivalent clauses for the Gas and Electricity Consumer Council. The commentary on these is provided above.
Clauses 97 - 98: Enforcement of obligations
139. Clause 97: Financial penalties. The substantive commentary on this clause is provided above. However, it should be noted that the time limits which apply to the imposition of financial penalties in the telecommunications sector, in cases where enforcement action has been initiated, are slightly shorter than the equivalent time limits for the other sectors. This is a consequence of requirements imposed by EC Directive 97/13 ('the Licensing Directive').
140. Clause 98: Licence enforcement. Commentary on the equivalent clauses for gas and electricity is provided above. These clauses are broadly similar to clause 98.
Clause 99: Remuneration and service standards
141. Clause 99: Links between directors' pay and telecommunications service standards. The commentary on this clause is provided above, alongside the equivalent clauses for the gas and electricity sector.
Clauses 100 - 103: Miscellaneous
142. Clause 100: Reasons for Authority's decisions under the 1986 Act. This clause is similar to the equivalent clauses for the gas and electricity sectors, commentary for which is provided above. However, for reasons associated with national security, in the telecoms sector, the duty to give reasons does not apply to the Secretary of State.
143. Clause 101: Standards of performance by designated operators: procedures. This clause is similar to the equivalent clauses for the gas and electricity sectors. Commentary on those clauses is provided above.
144. Clause 102: Systemless service providers. This clause applies the provisions on financial penalties to systemless service providers in the telecommunications sector in respect of obligations imposed by the Telecommunications (Open Network Provision) (Voice Telephony) Regulations 1998. A "systemless service provider" means a person who provides publicly available telecommunications services, but does not run a telecommunications system within the meaning of Section 4 of the 1984 Act. Systemless service providers provide retail services to customers by reselling the network services of network operators (eg mobile service providers who resell mobile network operators' airtime to retail customers).
PART III: WATER
Clauses 104 - 108 and Part I of Schedule 4: New regulatory arrangements
145. Clause 104 and Part I of Schedule 4 establish an Advisory Panel to advise the Director General of Water Services on the major decisions he takes in exercising his functions. The objective is to create a formal sounding board to provide the Director with a variety of views.
146. The Secretary of State will establish the Panel and will appoint the members (after consulting the Director General and the National Assembly for Wales), and determine their terms of appointment. He will have powers to dismiss them in specified circumstances.
147. In the case of companies operating wholly or mainly in Wales the National Assembly for Wales will determine which matters must be referred to the Panel for advice and in what circumstances, and will be able to adjust the Panel's remit in the light of experience. The Secretary of State will have the same powers of determination in the case of other companies. The Director will also be able to request advice from the Panel in relation to other matters. The Director will be required to consider the Panel's advice, but will not be obliged to follow it.
148. Clause 105: The Consumer Council for Water. This Clause and Part II of Schedule 4 establish the Council, which replaces the existing Customer Service Committees. These provisions set out the arrangements for establishing committees of the Council for England and Wales and the purposes of these committees. There are differences from the equivalent provisions for the other sectors because, in the water sector in the case of companies operating wholly or mainly in Wales the National Assembly for Wales will decide on the number of committees and which companies will be allocated to them and the Secretary of State will decide these matters for all other companies The clause requires the Council to reach agreement with the Director on arrangements for co-operation between them. In addition, and unlike the other sectors, the Council also has duties to reach similar agreements with the Secretary of State and with the National Assembly for Wales reflecting the need for close co-operation between them on water quality issues and the handling of water quality complaints.
149. Part II of Schedule 4 sets out detailed provisions for the appointment of members of the Council, provisions affecting the staff of the Council and financial and procedural matters, including the preparation of annual reports and accounts. Paragraph 11 set out the arrangements for appointments to regional committees. The Secretary of State is responsible for appointing the chairmen of these committees with the exception of the committee(s) for companies operating wholly or mainly in Wales, where the chairmen will be appointed by the National Assembly for Wales. Other members are appointed by the Council taking account of any guidance issued by the Secretary of State, or the National Assembly for Wales for committees established for the Welsh companies.
150. Clause 106. The clause provides the Secretary of State power to make a transfer scheme to provide the Council with staff and property.
151. Clause 107 gives the Director power to modify conditions of appointment to provide for the recovery of the costs of the Council and the Water Advisory Panel. There is a requirement to consult companies before making any change. The power is only exercisable within 2 years of commencement.
152. Clause 108: Forward work programme and annual reports. This clause is similar to the equivalent one provided for the electricity and gas sector, but there are differences reflecting the responsibilities of the National Assembly for Wales for the water industry in Wales. For example, there is a formal requirement for a copy of the annual reports of the Director General and the Council to be sent to the National Assembly.
Clauses 109 - 112: Objectives of regulation of water industry
153. Clause 109: Objectives and duties under the 1991 Act. This clause amends existing general duties which affect the manner in which the Director, the Secretary of State and the National Assembly for Wales exercise specified functions under the Water Industry Act 1991 ("the 1991 Act). They are given a new consumer objective to protect the interests of consumers of regulated water and sewerage services, wherever appropriate through promoting effective competition. They are under a duty to further that objective, to secure that the functions of water undertakers and sewage undertakers are properly carried out throughout England and Wales and to secure that companies holding appointments are able to finance the proper carrying out of those functions.
154. To the extent that it is consistent with furthering the primary duties mentioned above, the water regulator will carry out his functions under the utilities legislation in the manner best calculated:
155. The clause establishes that the duties imposed by subsections (1B) to (3) do not detract from other duties imposed on the Secretary of State, Assembly or Director.
156. Clause 110: Guidance to Director on social and environmental matters. This clause is similar to the equivalent clause for gas and electricity, but with the main difference that, for companies operating wholly or mainly in Wales, the guidance will be issued by the National Assembly for Wales.
157. Clauses 111 and 112: Standards of performance in relation to water supply and sewage services. These clauses amend the arrangements by which service standards can be set. Clause 111 deals with standards in relation to water supply. Clause 112 deals with standards in relation to sewerage services. Service standards define the standards customers are entitled to expect from the water and sewerage undertakers in the delivery of their services. Regulations may provide for compensation payments to customers in the event that a water or sewerage undertaker does not meet a minimum level of performance required.
158. Service standards can currently be set by the Secretary of State only in response to a specific proposition from the Director General of Water Services. These clauses will mean that the existing arrangements will be extended so that the Secretary of State (in respect of companies operating wholly or mainly in England), and the National Assembly for Wales (in respect of companies operating wholly or mainly in Wales) can initiate proposals for new or amended service standards on matters falling outside the remit or expertise of the Director.
159. Before using the new procedures the Secretary of State (or the Assembly) must ensure that the people or groups listed in new subsection (8) have been consulted. Before making any regulations under this procedure, the Secretary of State (or the Assembly) is required to ensure that there has been appropriate research to establish the views of a representative sample of persons likely to be affected by the regulations, and to consider the results of that research.
160. The new procedure will normally only be exercised by the Secretary of State and the National Assembly for Wales in respect of standards which contribute towards the attainment of policies relating to public health or the environment (for example, standards setting leakage targets preventing the waste of valuable water resources or standards requiring a wholesome supply of drinking water). The procedure, however, could also be exercised with respect to service standards which extend beyond these issues if the Secretary of State (or the Assembly) considers there to be exceptional reasons why it is otherwise in the public interest to set service standards.
|© Parliamentary copyright 2000
|Prepared: 25 January 2000