House of Commons - Explanatory Note
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Clause 161: Restrictions on enforcement of security.

370.     This clause provides that security over the property of a protected energy company cannot be enforced unless the Secretary of State and GEMA have been notified of the intention to enforce the security and at least 14 days have elapsed since the service of the last of those notices.

Clause 162: Grants and loans

371.     This clause enables the Secretary of State, with the consent of the Treasury, to give a grant or loan to a company in energy administration where this appears to her to be appropriate to achieve the objective of energy administration.

372.     Subsections (2), (3), (4) and (5) enable the Secretary of State to set the terms of a grant or loan including: requiring whole or part of a grant to be repaid if other terms on which the grant is made are breached and setting terms for the grant of any loan - i.e. terms for repayment of a loan, the rates of interest due on it and changing these loan terms by direction.

373.     Subsection (6) requires the Secretary of State to secure Treasury consent before giving grants or loans and giving any directions in respect of the terms on which any loan is granted under sub-section (5) of this clause.

Clause 163: Indemnities

374.     This clause enables the Secretary of State, with the consent of the Treasury, to indemnify persons in respect of liabilities incurred or loss or damage sustained in connection with the exercise of the energy administrator's powers and duties.

375.     Subsections (2), (3), (4) and (5) enable the Secretary of State to set the terms of an indemnity including requiring that where any sums are paid out by him in respect of the indemnity to the energy administrator, to direct that the protected energy company pay such amounts as are directed towards the repayment of those sums and interest on them.

376.     Subsection (6) provides that subsection (4) does not apply if the sums paid out by the Secretary of State are paid to the company in energy administration.

377.     Subsection (7) requires the Secretary of State to secure Treasury consent before setting any of the terms of an indemnity under subsections (2), (4) and (5).

378.     Paragraph (b) of subsection (8) enables the Secretary of State to agree to indemnify persons who become relevant to the energy administration subsequent to the initial agreement e.g. persons who become employees of the energy administrator in the course of the energy administration.

379.     Subsection (9) specifies the categories of person who may be indemnified under the terms of this clause.

Clause 164: Guarantees where energy administration order is made.

380.     This clause enables the Secretary of State, with consent of the Treasury, to provide guarantees in relation to a protected energy company in energy administration.

381.     Subsections (2) and (3) set out that the Secretary of State may guarantee sums borrowed by the protected energy company, the payment of interest on those sums and the discharge of any other related financial obligation, and that he may set the terms of the guarantee as he sees fit.

382.     Subsection (4) requires the Secretary of State to lay a statement before Parliament as soon as practicable after any guarantee is made.

383.     Subsections (5) and (6) enable the Secretary of State, where any sums are paid out by her in respect of the guarantee to direct that the protected energy company pay such amounts as are directed towards the repayments and interest as directed on those amounts whilst they are outstanding.

384.     Subsections (7) and (8) require the Secretary of State to make a statement before Parliament about any sum paid out under such a guarantee as soon as practicable after the end of the first financial year in which a payment is made and at the end of every subsequent year until the company has discharged the liability.

385.     Subsection (9) requires the Secretary of State to get Treasury consent before giving any guarantee or direction under sub-section (5) or (6) of this clause.

Clauses 165-166: Licence modifications relating to energy administration.

386.     These clauses enable the Secretary of State to modify the conditions of gas and electricity licences. It outlines that such modifications can provide for circumstances where there is a shortfall in the property of a protected energy company, which is or has been in energy administration, for meeting the costs of energy administration. In particular, the Secretary of State can require that in such circumstances the protected energy company or its successor raises a levy on other protected energy companies and uses the sums raised to discharge debts incurred during energy administration. These will include sums paid by the Secretary of State under clauses 162, 163 and 164.

Clause 165 Modifications of particular or standard conditions

387.     This clause enables the Secretary of State to modify gas and electricity licences of protected energy companies.

388.     Subsection (1) enables the Secretary of State to modify the conditions of any one particular licence and the standard conditions of gas and electricity licences.

389.     Subsection (2) extends the power under subsection (1) to include the making of incidental, consequential or transitional modifications.

390.     Subsection (3) and (4) require the Secretary of State to consult the holder of any licence being modified and anyone else she thinks appropriate before making a modification.

391.     Subsections (5) and (6) require the Secretary of State to publish modifications made under this clause.

392.     Subsection (8) requires GEMA to incorporate any modification of standard conditions made by the Secretary of State into new licences it grants and to publish these modifications.

393.     Subsection (9) limits the exercise of the powers of this clause to the eighteen months after commencement of this clause.

Clause 166: Licence conditions to secure funding of energy administration

394.     This clause outlines how the Secretary of State can amend the conditions of gas and electricity licences to secure the funding of energy administration.

395.     Subsection (1) specifies that the modifications that the Secretary of State can make to gas and electricity licences include requiring the holder of the licence to raise the charges imposed by him so as to raise such amounts as may be determined and to pay the amounts raised to specified persons for the purpose of making good a "shortfall" (as defined in subsection (3)) in the property of a protected energy company available to meet the expenses of energy administration, or for contributing to the making good of such a shortfall.

396.     Subsection (2) provides that the modifications may require a licence holder to which the sums raised under subsection (1) are paid to apply those sums towards discharging the "shortfall".

397.     Subsection (3) defines a "shortfall" in meeting the expenses of energy administration as the property of the company being insufficient to meet the costs of energy administration. It also defines making payment to make good the shortfall as discharging "relevant debts" which cannot otherwise be met out of the available property.

398.     Subsection (4) defines "relevant debts". These include obligations to repay the grants, loans, sums paid out under indemnity and sums paid out under guarantees under clauses 162, 163 and 164.

Clause 167: Modification of Chapter 3 of Part 4 under Enterprise Act 2002

399.     This clause provides that the power to modify or apply enactments which is conferred on the Secretary of State by sections 248, 277 and 254 of the Enterprise Act (c.40) includes a power to make consequential modifications to this Chapter of the Bill (i.e. these energy administration provisions) where the Secretary of State considers this appropriate in connection with other provisions made under the powers conferred by those sections.

Clause 168: Interpretation of Chapter 3 of Part 4

400.     This clause defines the terms used in clauses 151-167.

CHAPTER 4: FURTHER PROVISIONS ABOUT REGULATION

Clause 169: Appeals to the Competition Commission

401.     This clause sets out on what grounds a permission for an appeal may be granted, and by whom, and gives the Secretary of State powers to designate by order what codes come within the scope of the appeals procedure and what sort of decisions are excluded.

402.     Subsection (2) restricts appeals to decisions on modifications to those codes designated by the Secretary of State, which do not match the description of decisions that are excluded by the Secretary of State under subsection (7). It enables the Secretary of State to make an order by negative resolution designating the codes where modification decisions are to be appealable. The Government will consult on the codes to be designated, but its initial view is that the appeals mechanism to be applicable to modifications to the Transco Network Code for gas, and, the Balancing and Settlement Code ("BSC") and the Connection and Use of System Code ("CUSC") for electricity.

403.     Subsection (3) restricts the right of appeal to people "materially affected" by the decision or bodies representing people so "materially affected". Those "materially affected" are likely to include but may not be restricted to: parties to the framework agreement applicable to the code which is the subject of the appeal; persons holding licences granted under section 6 of the Electricity Act 1989 (c.29) and sections 7 and 7A of the Gas Act 1986 (c.44) who are obliged by licence condition to comply with the relevant code; Energywatch and other interested groups representing consumer, licensee or other trading party interests. All applicants for appeal will have to meet the "materially affected" test in the circumstances of the particular appeal.

404.     Subsections (4) and (5) provide that the Competition Commission may refuse permission to appeal if the appeal is trivial or vexatious or has no reasonable prospect of success.

405.     Subsections (6) and (7) enable the Secretary of State, after consultation with GEMA and other appropriate persons, to make an order by negative resolution excluding certain types of decision from the appeals process. The Government will consult on the terms of the order, but its initial view is that decisions should be excluded which are urgent or where the delay occasioned by an appeal could impact on security of supply or where GEMA's decision agrees with the recommendation of the panel in the case of the BSC, or with a certain proportion of code participants in the case of the CUSC and the Transco Network Code.

Clause 170 and Schedule 22: Procedure on appeals

406.     The effect of clause 170 and Schedule 22 is to set out an appeals procedure whereby applicants have 15 working days (counting from the day after the day on which GEMA's decision is published) to submit an appeal against a GEMA decision on a code modification to the Competition Commission. An application for permission to appeal must be accompanied by all such information as the Competition Commission may require under its appeal rules. The Competition Commission has 10 working days from the submission of the application to decide whether to grant or refuse the application for permission to appeal. GEMA has 15 working days after the submission of the application for permission to appeal to submit its representations or observations, should it choose to do so. The Competition Commission will then carry out a review to a tight timetable of whether GEMA discharged its duties correctly; this may include a permission hearing at which the parties can make representations and answer questions, and a further hearing to determine the appeal. It must normally reach its decision within 30 working days following the last day for the making of representations or observations by GEMA but it can extend this period by a maximum of 10 working days if necessary. The Competition Commission will be able to confirm or quash the original decision, or remit it to GEMA with directions to reconsider taking into account certain factors. This time line is presented below:

407.     Further information can be found in the notes to Schedule 22.

Clause 171: Determination of appeals

408.     This clause sets out how the Competition Commission is to reach its decisions on appeals and what it must do on reaching a decision.

409.     Subsection (2) provides that in determining the appeal the Competition Commission must have regard, to the same extent as GEMA, to the statutory duties which are placed on GEMA. Subsection (3) provides that the Competition Commission must not have regard to any matter which GEMA was not entitled to have regard to when making its decision, though it may consider fresh evidence if GEMA would have been entitled to have regard to it had it had the opportunity to do so. Subsection (4) provides that the Competition Commission may allow the appeal only if it is satisfied: that GEMA failed to have proper regard to the applicable code objectives, or to the regulator's statutory obligations, or failed to give the proper weight to one or more of the above; that the decision was based on an error of fact and/or that the decision was wrong in law.

410.     Subsection (6) provides that if the appeal is successful that Competition Commission must do one or more of the following: (i) quash the decision, (ii) remit it to GEMA with directions for reconsideration and determination or, (iii) if it is quashing a refusal of consent, give appropriate directions for securing that the relevant condition has effect as if the consent had been given.

411.     Subsection (9) sets out the way in which the Competition Commission is required to publish its decision, including the reasons for the decision.

412.     Subsection (10) allows the Commission to exclude certain information from the reasons for its decision on the grounds of confidentiality when publishing its decision for the attention of persons beyond the parties under subsection (9).

Clause 172: Specialist members of Competition Commission

413.     This clause provides that the Competition Commission's functions with respect to appeals are to be treated as functions of the Competition Commission under section 104 of the Utilities Act 2000 (c.27).

Clause 173: Modifications of standard conditions for funding appeals

     414.     This clause gives the Secretary of State power, after consulting licence holders, to make an order amending gas and electricity licences to change the licence charges in order to fund the appeals mechanism provided for in clauses 167-170, and the existing arrangements for licence modification references. It is intended to use this power in respect of appeals to allow GEMA to raise the funds it needs to the pay the costs of an appeal as ordered by the Commission. Where an appeal is upheld this will consist of its own costs, possibly the costs of the appellant and the costs of the Competition Commission. It is intended to use this power in respect of licence condition references to give the Competition Commission, rather than GEMA, the discretion to allocate the Competition Commission's costs in licence modification references. These costs will then be recovered by GEMA, after the Competition Commission has indicated the proportions that individual licensees should pay of the Competition Commission's costs.

Clause 174: Duty to have regard to best regulatory practice

415. Clause 172 inserts a subsection in to section 4AA of the Gas Act 1986 and section 3A of the Electricity Act 1989 which provides that the Secretary of State and GEMA are to have regard to the principles of best regulatory practice when performing their functions in accordance with the principal objective and general duties. The key principles of best regulatory practice are: transparency, accountability, proportionality, consistency and targeting.

Clause 175: Meaning of electricity supply

     416.     Clause 175 provides for electricity conveyed by a transmission system to a substation, and then supplied from there to premises, to be brought within the definition of supply in section 4 of the Electricity Act 1989 (c.29), as amended by the Utilities Act. This will close an anomaly in the definition of supply which defines electricity supply as supply by means of a distribution system and therefore excludes the conveyance of electricity to customers whose supply of electricity does not pass through a distribution network.

     Clause 176: Meaning of "high voltage line"

     417. This clause defines "high voltage line" in respect of offshore electric lines as such lines which are of a nominal voltage of 132 kilovolts or more. This is the same as the definition of high voltage lines in Scotland. The Clause does not change the definition of "high voltage line" in respect of onshore electric lines in Great Britain.

Clause 177: Prepayment meters

418. Clause 177 provides the Gas and Electricity Markets Authority (GEMA) with the power, with the consent of the Secretary of State, to make regulations to extend the range of sums that could be collected from a prepayment meter. GEMA is required to consult interested parties, including the Gas and Electricity Consumers Council, before making regulations.

419. At present, sums recovered through a prepayment meter may only be in respect of an individual fuel and may only be in respect of supply to the premises at which the meter is sited or the provision of the meter. The clause makes clear that the extended range of sums that could be collected includes debts owed to a person other than the current gas or electricity supplier, debts accrued in respect of other premises, or debts accrued in respect of the supply of other fuels. Any sums covered by the new regulations may only be recovered with the agreement of the consumer, the circumstances in which such an agreement may be made being set out in the regulations.

Clause 178: Additional inspectors

     420.     Clause 178 fulfils the Government's commitment set out in paragraph 4.33 of the Energy White Paper, "Our energy future - creating a low carbon economy" (Cm 5761), to apply proposals by Government for major infrastructure projects handled in the planning process in England to major energy projects in England and Wales where consents are awarded by the Secretary of State for Trade and Industry. The proposals are to streamline the public inquiry process by allowing lead inspectors to be assisted by further inspectors to share the work and allow issues to be considered concurrently rather than sequentially as at present. These proposals for major infrastructure projects are contained in the Planning and Compulsory Purchase Bill (HC Bill 168), clause 43, currently before Parliament. This clause seeks to allow that approach to be adopted for power stations and overhead line developments considered by the Secretary of State for Trade and Industry under section 36 and section 37 respectively of the Electricity Act.

     421.     The Energy White Paper noted that such an approach should help streamline planning processes for large renewable energy developments and other large generation plant and for major upgrades of the transmission network. It was not anticipated that it would be used for all public inquiries into power stations and overhead line developments since some inquiries could be adequately handled by a single inspector. But it would be an option available if a particular development warranted it.

     422.     The clause provides for the Secretary of State to direct an Inspector appointed for a public inquiry into a particular development to expressly consider the handling of that inquiry and for that Inspector to then make recommendations on that to the Secretary of State. It is anticipated that one of the handling issues would be whether the inquiry could be effectively, and more efficiently, handled by having some issues handled concurrently. In the light of the Inspector's recommendations the Secretary of State would then appoint an appropriate number of additional inspectors for the public inquiry. These additional inspectors would then work to the inspector initially appointed (the lead inspector) handling particular issues. The lead inspector would then report to the Secretary of State taking account of the reports of the additional inspectors on particular issues.

     423.     This alternative approach to the handling of a public inquiry it is anticipated will require some adjustment to the current public inquiry rules governing procedural matters which are based on a single inspector considering matters, the Electricity Generating Stations and Overhead Lines (Inquiries Procedure) Rules 1990 (SI 1990/528). Revised rules would therefore need to be drawn up in consultation with the Department for Constitutional Affairs and placed before Parliament for scrutiny in due course.

     424.     The clause covers the exercise of the Secretary of State for Trade and Industry's powers and as such would extend to proposals in England and Wales, the territorial sea adjacent to England and Wales, and to proposals in Renewable Energy Zones established under Part 3 of this Bill. Decisions on section 36 and 37 developments in Scotland and in the territorial sea adjacent to Scotland are handled by Scottish Ministers.

     Clause 179: Exclusion of Confidential Information from the Register

     425.     Clause 179 inserts new sub-sections into the Electricity Act 1989 and the Gas Act 1986 which allow GEMA, when entering information on the registers it is required to maintain under section 49 of the Electricity Act 1989 and section 36 of the Gas Act 1986, to exclude details in certain circumstances. GEMA can exclude such details as it considers appropriate to maintain the confidentiality of matters, relating either to an individual or a body of persons, where publication of those details might, in GEMA's opinion, seriously and prejudicially affect the individual or body of persons.

Clause 180: Assistance for areas with high distribution costs

     426.     This clause gives the Secretary of State the power to make an order to establish a scheme requiring authorised transmitters (in practice the Great Britain System Operator) to make a payment to a distributor when that distributor faces costs that are significantly higher than other areas of Britain. The power will be exercisable in respect of a single area to be specified in the order. In order to qualify for a payment, the distributor must be one which distributes electricity by means of a distribution network when at least 100,000 premises are connected to that same network. The payment must be passed from the distributor to suppliers within the relevant area. The scheme will be funded by charges on suppliers across Britain.

     427.     The Secretary of State must consult before establishing a scheme, and must carry out a review of the scheme every three years.

     428.     This clause is intended to replace a licence condition formerly imposed on SSE Generation Limited known as "Hydrobenefit" which was removed in January 2004. It is intended that this clause will benefit customers in the North of Scotland, where there are the highest distribution costs in Britain by a significant margin.

 
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Prepared: 23 April 2004