House of Commons
Session 2003 - 04|
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Arrangement of Clauses (Contents)
These notes refer to the Energy Bill [HL]
1. These explanatory notes relate to the Energy Bill as brought from the House of Lords on 22nd April 2004. They have been prepared by the Department of Trade and Industry 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. These 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 Bill covers four main areas: UK energy strategy: security and integrity of supply;: the civil nuclear industry; renewable energy sources; and energy markets and regulation. It implements commitments made in the Government's White Papers "Our energy future: creating a low carbon economy" (Cm. 5761, February 2003) and "Managing the Nuclear Legacy - A Strategy for Action" (Cm. 5552, July 2002). The latter set out the Government's plans for improving the management of public sector civil nuclear liabilities, in particular through the establishment of the Nuclear Decommissioning Authority ("NDA"). It also outlined plans for the restructuring of British Nuclear Fuels plc ("BNFL") as part of new arrangements for funding the decommissioning and clean up of the public sector civil nuclear legacy
4. The Bill will also create a single wholesale electricity market for Britain, the British Electricity Trading and Transmission Arrangements ("BETTA"). Provisions covering electricity and gas interconnectors implement a number of requirements in the EU's 2003 Gas and Electricity Directives and its Electricity Regulation.
5. The Bill is in five parts with 23 Schedules. The main provisions of the Bill:
Part 1: UK Energy Strategy: Security and Integrity of Supply
[Bill 93EN] 53/3
Part 2: The Civil Nuclear Industry
Part 3: Renewable Energy Sources
Part 4: Energy Regulation
Part 5: Miscellaneous and Supplemental
TERRITORIAL EXTENT AND TERRITORIAL APPLICATION
6. Most of the Bill's content relates to reserved matters. Except as set out in paragraph 10 below, the Bill extends to the whole of the United Kingdom.
7. On 4 February 2004, the Scottish Parliament agreed that a number of provisions should cover functions devolved in Scotland. These include:
8. The NDA will have functions which relate to both reserved and devolved matters in Scotland and so will have the status of and be similar to a cross border authority. The Bill sets out the responsibilities which Scottish Ministers will have in relation to the operation of the NDA, and arrangements to ensure the accountability, where appropriate, to the Scottish Parliament as well as to Westminster. In respect of safety zones, the DTI and Scottish Executive have agreed that the Secretary of State will exercise the powers in the Bill after consultation with Scottish Ministers.
9. The Bill does not cover any areas where power has been devolved to the National Assembly for Wales except the provisions amending the Radioactive Substances Act 1993 (c.12) where functions of the Assembly are modified in the same way as functions of the Secretary of State and Scottish Ministers. Otherwise the Bill does not confer functions on the Assembly.
10. The Bill extends to Northern Ireland except:
EUROPEAN CONVENTION ON HUMAN RIGHTS
11. Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The statement has to be made before Second Reading. On 20 April 2004 the Secretary of State for Trade and Industry made the following statement:
12. Part 1 places a duty on the Secretary of State to ensure the integrity and security of electricity and gas supply.. In exercising this duty the Secretary of State will be required to act compatibly with Convention rights. Part 1 also requires the Government to publish information about the development of new energy sources as part of the annual report required under section 1 of the Sustainable Energy Act 2003.
13. Chapter 1 of Part 2 of the Bill gives the NDA powers in relation to installations, facilities and sites designated by the Secretary of State. It is considered that these powers are compatible with Article 1 of the First Protocol (right to possessions). That is because, unless such installations, sites and facilities are in public ownership, consent is required for the designations from the person in control of the installation, site or facility.
14. Chapter 2 of Part 2 is concerned with nuclear transfer schemes. Such transfer schemes may transfer property, rights and liabilities of certain specified persons. Where the transferor or transferee is outside the public sector, consent is needed from that person for that transfer. Further, although nuclear transfer schemes may override rights and entitlements of third parties, Schedule 5 contains compensation provisions for affected third parties. Any disputes about compensation may be referred to arbitration. These compensation and arbitration provisions are considered to be in accordance with Article 6 (fair trial rights) and Article 1 of the First Protocol (right to possessions).
15. Chapter 3 of Part 2 is concerned with the Civil Nuclear Constabulary. The Constabulary will possess a number of powers, the exercise of which may fall within the ambit of Article 1 of the First Protocol, or Article 8 (right to privacy). The Government considers those powers justified in light of the pressing need to preserve nuclear security. The restrictions on trade union membership of Constabulary members is considered to be justified for the same reason.
16. Chapter 4 of Part 2 provides for transfers of authorisations relating to radioactive waste. The transfer procedures are considered to be compatible with Article 6 (fair trial rights). Chapter 5 contains miscellaneous provisions relating to the nuclear industry. These provisions do not raise any ECHR issues.
17. Chapter 1 of Part 3 gives the Secretary of State the power to make a declaration extinguishing public rights of navigation insofar as they exist in respect of a site of a renewable energy installation. The Government considers that the public rights of navigation are unlikely to be 'possessions' within the meaning of Article 1 of the First Protocol. However, even if these rights do fall within that Convention right, it is considered that a fair balance has been struck between the rights of the wider community, and an individual's right of navigation. In relation to Article 6, it is the Government's view that the procedures set out in Schedule 8 of the Electricity Act 1989 (c.29) and Schedule 16 of the Bill, together with the potential for judicial review, meet the requirements of Article 6(1). Further, the offences that may arise in relation to the declaration of a safety zone have reverse burdens of proof. The Government considers these 'reverse burden' clauses are compatible with Article 6, because the offences themselves are quasi-regulatory, designed to protect both the renewable energy installation and users of the sea, rather than to punish moral wrong-doing.
18. Chapter 2 of Part 3 is concerned with decommissioning of offshore installations. This chapter creates an offence with a 'reverse burden'. Those provisions are considered to be compatible with Article 6, because the offence is quasi-regulatory, and the ability to show due diligence is within the ability of the defendant. This chapter also creates a strict liability offence, in relation to making a proposal to construct a renewable energy installation or related line in the Renewable Energy Zone (REZ), territorial sea or tidal waters without giving notice to the Secretary of State. This provision, designed to ensure that the correct person is required to prepare the decommissioning programme, is considered to be compatible with Article 6.
19. Chapter 3 of Part 3 has no ECHR implications.
20. Chapter 1 of Part 4 is concerned with electricity trading and transmission. The Chapter raises two main issues under the Convention: Article 6(1) and Article 1 of the First Protocol to the Convention. Article 6(1) is relevant in the context of the powers given to the Secretary of State in the Bill to amend electricity licences and the determination of disputes by GEMA under the property arrangements scheme. In relation to the powers granted to the Secretary of State it is felt that this is an exercise of policy and the availability of judicial review is sufficient to comply with Article 6(1). In relation to the property arrangements scheme, the Bill provides a process that is also compliant with Article 6(1).
21. The other issue is Article 1 of the First Protocol. The property arrangements scheme provides for the compulsory deprivation of property in certain circumstances. However the Bill limits the circumstances to those necessary or expedient for the implementation of the Chapter and provides for compensation if just in the circumstances.
22. Chapter 2 of Part 4 introduces a prohibition on participating in the operation of electricity and gas interconnectors without a licence or exemption. The Government considers that the provisions are in accordance with Article 1 of the First Protocol, as being in the public interest, and that the licensing regime complies with the procedural requirements of Article 6.
23. Chapter 3 of Part 4 introduces a special administration regime for energy network companies in financial difficulty. The Government considers that the continued operation of such companies, with possible increased losses to creditors, meets the 'fair balance' requirements of Article 1 of the First Protocol. There is a strong public interest in maintaining the operation of energy networks, and the creditors are aware that they are lending in a highly regulated environment. The provisions enabling the business of a company in special administration to be transferred by statutory transfer scheme are also considered to be compatible with Article 1 of the First Protocol. In approving a transfer scheme, the Secretary of State will be required to act compatibly with Convention rights.
24. Chapter 4 of Part 4 makes further provisions about regulation. The procedures governing appeals against decisions of GEMA to the Competition Commission, and the changes to the inquiry procedures under the Electricity Act 1989, are considered to be compatible with Article 6.
PART 1: UK ENERGY STRATEGY: SECURITY AND INTEGRITY OF SUPPLY
COMMENTARY ON CLAUSES
25. Security and integrity of supply
PART 2: THE CIVIL NUCLEAR INDUSTRY
SUMMARY AND BACKGROUND
26. Proposals for most of this Part were published for pre-legislative scrutiny as the draft Nuclear Sites and Radioactive Substances Bill in June 2003. Principal exclusions were Chapter 3, covering the Civil Nuclear Constabulary and the provisions on nuclear security, devolution, tax and structure and finance of transferee companies. The House of Commons Select Committee on Trade and Industry published a report on these proposals in October 2003 which can be found at:
http://www.parliament.the-stationery-office.co.uk/pa/cm/cmtrdind.htm - reports
Chapters 1 and 2: Nuclear Decommissioning and Transfers Relating to Nuclear Undertakings
27. Chapter 1 and its related Schedules deal with the establishment of the NDA, its functions (including its strategy, plans and reports in respect of its functions), powers and statutory duties and the funding of its activities.
28. The creation of the NDA and its functions will not affect the existing regulatory regime in respect of nuclear sites and storage and disposal of radioactive waste under the Nuclear Installations Act 1965 (c.57) and the Radioactive Substances Act 1993 (c.12) respectively. The powers of the Health and Safety Executive as the licensing authority and the Environment Agency and the Scottish Environment Protection Agency to enforce those requirements are also unaffected.
29. Chapter 2 gives the Secretary of State powers to make transfer schemes both to facilitate the restructuring of BNFL and to enable the NDA, where appropriate, to improve arrangements for the management of the nuclear sites for which it is given responsibility. It also consolidates the power of the Secretary of State to make transfer schemes under the Atomic Energy Authority Act 1995 (c.37).
30. The Government has also published other documents relating to the proposed NDA, so as to give stakeholders a better understanding of the overall framework within which the NDA would operate. Principal amongst these are a draft management statement outlining the intended relationship between Government and the NDA and a draft Memorandum of Understanding between the NDA and the nuclear regulators. These can be found at:
Chapter 3: Civil Nuclear Constabulary
31. Chapter 3 implements proposals in the White Paper, "Managing the Nuclear Legacy - A Strategy for Action" (Cm. 5552), to reform the governance arrangements for the UKAEA Constabulary, and to set it up on a statutory basis similar to that of other police forces.
32. The UKAEA Constabulary operates in England, Scotland and Wales but not in Northern Ireland. Accordingly the Constabulary provisions (with some minor exceptions) extend only to England, Wales and Scotland.
33. The Atomic Energy Authority Act 1954 (c.32) conferred power on UKAEA to nominate persons to be special constables for the purposes of section 3 of the Special Constables Act 1923 (c.11). The body of special constables so nominated by UKAEA and appointed under section 3 forms the existing UKAEA Constabulary. It has police powers to enable it to protect certain civil licensed nuclear sites and nuclear material in transit. It is currently part of UKAEA, and fully funded by the nuclear site licensees whose sites it polices (currently UKAEA, BNFL and URENCO). It is overseen by a non-statutory committee of UKAEA - the UKAEA Constabulary police authority - composed of representatives of the nuclear site licensees, the Director of the Office for Civil Nuclear Security (part of the DTI), an expert police adviser and another representative of DTI. The Chair rotates on an annual basis between UKAEA and BNFL.
34. The UKAEA Constabulary protects a number of the most sensitive civil nuclear sites and escorts sensitive nuclear material in the course of transport. It has a specialist anti-terrorist policing role focussed on the protection of proliferation-sensitive nuclear material. It is an integral part of the civil nuclear security framework and works within security parameters set by the Director of Civil Nuclear Security on behalf of the Secretary of State. The Constabulary has limited contact with the public or with general crime for which Home Office and Scottish Executive forces continue to have operational responsibility within the areas in which the Constabulary operates.
35. The Bill provides for the separation of the UKAEA Constabulary from UKAEA, and its transfer to a statutory Police Authority (a Non-Departmental Public Body) created by the Bill, to become the new Civil Nuclear Constabulary. The Police Authority will be accountable to the Secretary of State and have overall supervisory responsibility for the force and for ensuring that it carries out its role effectively.
36. The Anti-terrorism, Crime and Security (ATCS) Act 2001 (c.24) modified and extended the UKAEA Constabulary's jurisdiction to bring it into line with its core nuclear security role. This Bill essentially restates those provisions (with the consequent repeal of the relevant ATCS Act provisions). It makes minor changes to the Constabulary's current jurisdiction to focus this more firmly on its specialist nuclear security role, and gives the Constabulary police powers and privileges throughout Great Britain for any purpose connected with the core jurisdiction set out in clause 59(1) to 59(4). It also enables a senior officer of the Civil Nuclear Constabulary to authorise, under section 44 of the Terrorism Act 2000 (c.11), stop and search for articles which could be used in connection with terrorism without grounds for suspicion, and extends the offences of assault on constables and impersonation of police to members of the Civil Nuclear Constabulary. The existing staff of the UKAEA Constabulary (both constables and civilian support staff) will be transferred to the new Police Authority under the provisions of the Bill. The Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) will apply to the transfer, and employees will continue to be eligible for membership of the UKAEA pension scheme.
37. Members of the Constabulary will be prohibited from joining trade unions (subject to limited exceptions). This puts on a statutory footing the current informal arrangements, and the Constabulary will be brought into line with long established principles incorporated in other police legislation. For example, it will also be made an offence to induce a member of the Constabulary to withhold his services. The Bill also makes provision for recognition of a Civil Nuclear Police Federation, and requires the Police Authority to align any provision it makes about conditions of service with the provision made on such matters by police regulations (unless differences are justified due to the circumstances and structure of the Constabulary). This gives statutory recognition to the current informal arrangements. Civilian staff are not affected by these arrangements.
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