House of Commons - Explanatory Note
Energy Bill - continued          House of Commons

back to previous text

Clause 181: Adjustment of Transmission Charges:

     429.     Clause 181 provides the Secretary of State with the power to adjust electricity transmission charges for renewable generators within a single area that can be shown to be of high renewable energy potential, and where evidence would indicate that unadjusted transmission charges might have a material impact on development of the generation of electricity from renewable sources. Subsection (2)(b) requires any costs arising from the scheme to be spread across all GB supply companies. The area to which the scheme is to be applied must be specified (subsection 3) and there can only be one scheme in operation at any one time (subsection 9). Subsections (10) and (11) specify that an order can be for a maximum of 5 years and that the order making power will last for a maximum of ten years. Subsection (14) provides for an order establishing any scheme to be subject to the affirmative resolution procedure.

     Clause 182: Restrictions on disclosure of information

     430.     This clause provides for the protection of information provided under the Hydrobenefit replacement scheme (Clause 180 - assistance for areas with high distribution costs) and the adjustment of transmission charges for renewable generators scheme (Clause 181) through the application of Section 105 of the Utilities Act 2000. It will be an offence to disclose information provided under these schemes, except in those circumstances specified under Section 105.

Clause 183: Payments of sums raised by fossil fuel levy

     432.     Clause 183 provides a power for Scottish Ministers to direct GEMA to pay into the Scottish Consolidated Fund monies from funds paid to GEMA and arising from the auctioning of electricity generated under Scottish Renewables Obligation (SRO) contracts. There is also a corresponding duty on Scottish Ministers to include provision in budget proposals to the Scottish Parliament that monies thus raised shall be used to promote the use of energy from renewable sources. This will enable the Scottish Executive to provide the additional support necessary to meet its commitment to increasing the amount of renewable energy produced in Scotland. Similar powers as regards monies arising from the auctioning electricity generated under NFFO (Non Fossil Fuel Obligation) contracts in England and Wales are contained in section 7 of the Sustainable Energy Act 2003 (c.30).

     433.     The SRO was the support scheme for electricity generated from renewable sources that was introduced under the original sections 32 and 33 Electricity, which were executively devolved to Scottish Ministers. Under the SRO scheme, Orders were made which required Scottish public electricity suppliers (the successors to the old nationalised electricity boards) to buy electricity generated from renewable sources under "SRO contracts". The price paid for the electricity under those contracts was above the market price for electricity and the public electricity suppliers were compensated for this by payments out of the money collected through the Fossil Fuel Levy that was provided for in section 33 of the Electricity Act. The levy was charged on the electricity supplies of all licensed electricity suppliers and was paid out to the smaller number of electricity suppliers which were subject to the SRO Orders.

     434.     Sections 62 to 65 of the Utilities Act inserted into the Electricity Act new sections 32 to 32C, which contain provisions allowing the introduction of the GB Renewables Obligations, the successor to the SRO scheme and its English / Welsh equivalent. This scheme has been implemented in Scotland by the Renewables Obligation (Scotland) Order 2002 (S.S.I. 2002/163). The scheme requires each licensed electricity supplier to produce evidence that it has supplied a specified proportion of its electricity from renewable sources or that other electricity suppliers have done so. The evidence that it has to produce is Renewable Obligation Certificates (ROCs) issued by GEMA. If the supplier does not produce the necessary number of Certificates, it has to make a payment (the buy-out price) to GEMA. It is this that gives the Certificates a value.

     435.     The SRO contracts are long-term, and the last of them will not expire until 2018. The price paid by the suppliers for the electricity under those contracts is above the market price, and they are compensated by payments out of the Fossil Fuel Levy. SRO output is also eligible for ROCs under the Renewables Obligation (Scotland), and the proceeds of the sale by auction of such ROCs is now used to reduce Fossil Fuel Levy costs. As a result, there is no need at present to raise Levy funds via electricity bills, and the Levy rate (set by GEMA) is currently set at zero.

     436.     The income currently being realised through the auction of SRO ROCs exceeds its expenditure, owing to the value of the Renewable Obligation Certificates associated with the NFFO electricity. The Scottish supply successor companies are required, under subsection (5A) of section 33 of the Electricity Act (as that section is now amended and preserved in Scotland by Orders under section 67 of the Utilities Act), to pay to GEMA (the person prescribed under section 33(1)(b) of the Electricity Act) the surplus that arises from the auctioning of ROCs for electricity generated under SRO contracts, thereby avoiding a double subsidy to electricity generators with SRO contracts. Section 33 does not, however, make provision for the disposal of this surplus by GEMA, but this is now addressed by this clause.

     437.     In order to give Scottish Ministers the required power over the surpluses in the Scottish Levy fund, a separate clause, covering section 33 of the Electricity Act as it applies in Scotland, requires to be inserted in the Bill at Westminster. Although the existing powers under section 33 were executively devolved to Scottish Ministers, and have subsequently been amended, the legislation on using the surplus in Scotland has to be obtained through the Westminster procedures because it amends the Electricity Act in a way that is not consistent with the Executive's limited devolved power to amend section 33 of that Act.


Imposition of charges

438.     Clause 184 enables a consistent and transparent charging regime to be put in place that covers a range of energy services that the Secretary of State currently provides, primarily those relating to the exploration for, and production and transmission of, oil and gas. Existing legislation already provides a power for charges to be levied on certain services, such as the approval of decommissioning plans. Regulations which arise from these new powers will allow charges to be levied for individual services where full recovery of the direct costs of providing that specific service will be applied.

International agreement relating to pipelines and offshore

     439.     Clause 185 provides the power for Her Majesty to modify the Petroleum Act 1998 by Order in Council to give effect to international agreements relating in whole or in part to the construction, operation, use, decommissioning or abandonment of a pipeline or offshore installation.

     440.     The power includes the power to provide for provision made by or under the Petroleum Act 1998 (c.17) to have effect in relation to areas outside the UK and its waters and to apply to individuals and to bodies corporate whether or not they are British citizens or incorporated under the law of a part of the UK.

     441.     A modification could reflect the fact that an international agreement might provide that disputes over access to a pipeline on the UK Continental Shelf and the Continental Shelf of another State could either be the subject of co-determination by the UK and the other State in accordance with English law or the law of the other State or fall for sole determination by the UK or the other State. Section 17F of the Petroleum Act 1998 (c.17) currently gives the Secretary of State the power to make such a determination in relation to a pipeline in UK waters.

Clauses 186 and 187: Application of general duties to part 4 functions etc and Supplementary provision about licence condition powers

442.     These clauses provide that, where appropriate in relation to Part 4 (as well as in relation to certain provisions in Part 3) of the Bill, the principal objectives and general duties laid down in sections 4AA to 4B of the gas Act 1986 and sections 3A to 3D of the Electricity Act 1989 shall apply to the exercise of functions conferred by Part 4 (and as mentioned above, Part 3) of the Bill on the Secretary of State or GEMA. In particular, under clause 186, the principal objectives and general duties will apply in the case of any provisions in Part 4 which provide for the granting of licences and the determination or modification of licence conditions and to functions which relate to companies which hold electricity or gas licences (which includes, for example, the energy administration provisions in Chapter 3 of Part 4). Clause 187 ensures that, where any powers granted under Part 4 (and certain powers granted under Part 3) relating to the granting of licences or the determination or modification of their conditions are exercised, provisions of the Gas and Electricity Acts which are relevant to these activities are applicable.

Service of notifications and other documents in electronic form

443.     Clause 189 sets out the basis on which those provisions of the Bill requiring the giving of a notification or the sending of a document to a person may be satisfied. It has effect subject to clause 190 which makes provision for electronic delivery of notifications and documents. Clause 191 makes provision for the Secretary of State to specify the timing and location of things done electronically in order to comply with any of the provisions of the Bill. These powers are required in order to enable the NDA to meet the Government's targets for electronic delivery of services and in order to remove any scope for uncertainty about the form in which notifications and documents may be supplied electronically.


444. Clause 193 and Schedule 23 provide for a number of repeals, including repeal of the following provisions:

  • Repeal of the bulk of the provisions of the Atomic Energy Authority Act 1995 (c.37), with a saving in respect of the provisions relating to transfer schemes already made under that Act. The repealed provisions are no longer necessary in light of the extensive transfer scheme powers in the Bill.

  • Repeal of sections 11(1) and (2), of the Atomic Energy Authority Act 1971 (c.11) ("the 1971 Act"). These powers are no longer needed, in light of the transfer scheme powers in the Bill.

  • Disapplication of loan and guarantee powers in section11(4) and section 12(1) of the 1971 Act, and section 1(1) and (2) of the Nuclear Industry (Finance) Act 1977, in relation to Amersham plc (formerly the publicly owned Radiochemical company). These amendments remove the Government's power to take ownership of Amersham shares currently held by UKAEA, subscribe for shares in Amersham, and make and guarantee loans to Amersham. Now that Amersham plc is privately owned these powers are no longer necessary or appropriate.

  • Repeal of 11(3) of the 1971 Act. Repeal of section 11(3) will remove the requirement on the Secretary of State to hold more than 50% of the shares in BNFL and is a necessary first step for the proposed restructuring of BNFL. There is also a consequential repeal of section 1(6) of the Atomic Energy (Miscellaneous Provisions) Act 1981 (c.48).

  • Repeal of section 20(4) of the 1971 Act. This provision is spent.

?     Repeal of the provisions setting out the current status and jurisdiction of the UKAEA Constabulary, including the identified paragraphs in Schedule 3 of the Atomic Energy Authority Act 1954 (c.32); the identified paragraphs in Schedule 1 of the Nuclear Installations Act 1965 (c.57); section 6(3) and (4) of the Police and Criminal Evidence Act 1984 (c.60); and the identified provisions in the Ministry of Defence Police Act 1987 (c.4), the Criminal Justice and Police Act 2001 (c.16), the Anti-Terrorism Crime and Security Act 2001 (c.24) and the Police Reform Act 2002 (c.30). These provisions are otiose given the creation of the Civil Nuclear Police Authority and the specific provision made in the Bill for the role and jurisdiction of the Civil Nuclear Constabulary.


Schedule 1: The Nuclear Decommissioning Authority

445.     This Schedule contains detailed provisions relating to clause 4.

446.     Part 1 of Schedule 1 contains detailed provisions dealing with

  • the terms of appointment, remuneration and pensions of the Chairman and other non-executive members and the circumstances in which the Secretary of State may remove them from office;

  • the terms and conditions of the Chief Executive and other executive members; and

  • the staffing of the NDA.

447.     Although paragraph 1(3) provides that a non-executive member may be reappointed on any number of occasions, this is to allow for exceptional cases. The Government intends to follow OCPA rules which provide that, save in exceptional cases, a person may be reappointed on one occasion for a total period of service of ten years.

448.      Paragraph 4 sets out the constitution of the NDA during the "initial period" which is defined in paragraph 4(6). Paragraph 4(1) provides that, for the initial period, the NDA is to consist of just those members who have been appointed. Paragraph 4(2) requires the Chairman to appoint a chief executive first. Paragraph 4(3) provides that after the appointment of chief executive subsequent members may be appointed. Paragraph 4(4) provides that the quorum rules in paragraph 9(1) do not apply in respect of decisions for as long as the chairman is the only non-executive member. Paragraph (5) requires the chairman to keep proper records of everything that he does while he is the only non-executive member. Paragraph (6) provides that the initial period begins from the time the NDA is established until either seven members have been appointed or at the time specified by the Secretary of State to the NDA, whichever occurs first. The provisions on the NDA's constitution during the initial period are designed to facilitate the start up of the NDA as soon as is practicable in order for the NDA to be ready for its first year of operation, expected to be on 1 April 2005.

449.     Part 2 of the Schedule deals with the proceedings of the NDA. Paragraph 7 gives it the power to establish committees for the carrying out of its functions and for advisory purposes - subject, in every case, to a committee including at least one person who is a member of the NDA. Advisory committees may include persons who are neither members of the NDA nor members of its staff provided they are not authorised to do anything on the NDA's behalf. All other committees must be made up of members and staff of the NDA. Paragraphs 8 to 13 set out detailed requirements regarding the delegation of functions; quorums for Board meetings; rules of procedure; the recording of proceedings; and the authentication of NDA decisions.

450.     Part 3 of the Schedule provides for the extension to the NDA of relevant provisions of the Public Records Act 1958, the Parliamentary Commissioner Act 1967, the House of Commons Disqualification Act 1975, the Northern Ireland Assembly Disqualification Act 1975 and the Freedom of Information Act 2000.

Schedule 2: Procedural requirements applicable to NDA's Strategy

451.     Schedule 2 sets out various procedural arrangements for preparing and revising the NDA's strategy, required under clause 14.

452.     As regards timing, paragraph 2 requires the NDA to prepare its first strategy within twelve months of clause 14 coming into force and, under paragraph 3, thereafter to review its strategy at least every five years. Paragraph 3(5), however, leaves it open to the NDA to revise its strategy at any time and, in the NDA's early years at least, the expectation is that it will amend and adjust it on a more frequent basis.

453.     The initial strategy, and any subsequent revision of it which significantly alters the NDA's priorities as between different installations or sites, changes its objectives for an installation or site or significantly increases the cost of giving effect to its strategy, are subject to approval by the Secretary of State (paragraph 5). As a minimum, the strategy must also be submitted for re-approval every five years (paragraph 3). This reflects the fact that, whilst the NDA is intended to have substantial management freedom and to operate at arms length from Government, Ministers must exercise strategic control over its activities and be accountable for its actions. Approval of the strategy and the annual work plan (clause 16) is the means by which this strategic control is to be exercised.

454.     Paragraph 4 of the Schedule expressly requires the NDA, in preparing, revising or reviewing its strategy to consult the nuclear regulators; relevant local authorities; those persons with control of installations or sites for which the NDA is responsible, their employees and their Trade Union representatives; and any bodies such as site liaison committees which have been, or may be, established for the purpose of consulting local stakeholders about activities carried on at, or in connection with, a relevant installation or site. Whilst each of these must be consulted, there is no constraint on the NDA consulting other stakeholder groups or the public at large. Equally, the Schedule does not prescribe the basis on which consultation should take place - the Government's view is that it should be left open to the NDA and stakeholder groups to develop and, as necessary subsequently change arrangements which best serve their purposes. The NDA is required to have regard to all representations made to it (paragraph 4(3)). Paragraph 4(5) provides that consultation can take place in relation to a designated installation, site or facility that has been designated by a direction which has not yet come into force (see the notes for clause 8(1) for more on the timing of designation directions). This takes account of the fact that when it is first established the NDA will need to start work on preparing its annual plan in readiness for its first year of operation, expected to be 1 April 2005. The designations will come into force on that date.

455.     Consistent with the Government's policy that the NDA should operate in an open and transparent way, paragraph 6 requires the strategy, and representations made on the strategy, to be published so that it is brought to the attention of those affected.

456.     Paragraph 5(2) of the Schedule, read in conjunction with clause 15 (2)(f), requires the NDA, when submitting its strategy for approval or re-approval, to provide a report on the representations made to it by stakeholders and to explain the reasons for the recommendations contained in the strategy. Paragraph (5)(3) requires the Secretary of State to consult the Scottish Ministers before approving anything relating to responsibilities in clause 9(3). In addition, paragraph 5(4) requires that before approving the strategy, the Secretary of State must consult Scottish Ministers on any proposals for sites in England and Wales relating to the non processing treatment, storage or disposal of hazardous material that would have an effect on the management of hazardous material in Scotland, or the availability of a site in England and Wales for the treatment, storage or disposal of hazardous material located in Scotland. Paragraphs 5(6) to 5(8) deal with the situation where, for whatever reason, the Secretary of State decides not to approve the strategy as recommended and, in particular, give him the power to make directions requiring the NDA to modify the strategy in respect of any of the matters specified in paragraph 5(7). The rationale for this is that those matters are so important that they must be subject to strategic control by Ministers and that, in the event of a fundamental disagreement, their views should prevail. However, as paragraph 5(10) makes clear, in respect of other matters there will still be an onus on the NDA to produce a strategy that Ministers will approve. The NDA and the regulators must be consulted before any direction is given (paragraph 5(9)).

457.     Paragraph 6 of the Schedule requires the NDA to publish its strategy, as approved, in the manner which, in its opinion, is most appropriate for bringing it to the attention of stakeholders and, on the same basis, to publish a report on the representations made to it by stakeholders on what the strategy should contain. In both cases, however, publication is subject to exclusion of anything which the Secretary of State considers to be against the interests of national security or which the NDA considers would seriously and prejudicially affect the interest of an individual or particular body of persons. In determining whether to exclude any information from publication the NDA must have regard to whether the harm caused by publication is likely to outweigh the benefits.

Schedule 3: Procedural requirements applicable to NDA's annual plans

458.     This Schedule is described in the notes to clause 16.

Schedule 4: Supplemental taxation provisions for exempt activities

459.     Under clause 30, trading income from exempt activities of the NDA or a relevant site licensee is not taxed, nor can the exempt activities give rise to tax losses. Subsection (2) of that clause gives effect to this Schedule, which makes further, detailed provisions for the exemption.

460.     Schedule 4 comprises supplemental provisions concerning the exempt activities which provide machinery to enable the exemption to work more easily in practice and safeguards to ensure that no unintended tax advantage arises from the tax exemption.

461.     The aim of paragraphs 1 and 2 is to ensure that income and expenditure associated with exempt activities is kept separate for tax purposes from taxable income and expenditure and to clarify the treatment of accounting periods when companies begin or cease to carry on exempt activities. Paragraph 1 ensures that exempt activities are treated as a separate trade from non-exempt activities. Paragraph 2 ensures that accounting periods end for tax purposes when any entity becomes an NDA company, is no longer an NDA company or begins or ceases to carry on exempt activities.

462.     Paragraphs 3 and 4 are also concerned with ensuring expenditure and allowances associated with exempt activities do not qualify to be tax deductible. Paragraph 4 prevents capital allowances being claimed by the NDA or an NDA company in respect of assets used in exempt activities through finance leasing the assets to the NDA or an NDA company.

463.     Paragraph 5 ensures where an industrial building has an identifiable part that is used by the NDA or an NDA company for exempt activities and part for a taxable trade, then no industrial buildings allowances may be claimed in computing the profits of the taxable trade in respect of the part of the building used for exempt activities.

464.     Paragraph 6 ensures that the purchaser does not obtain a tax benefit from the fact that the NDA or NDA company has not been able to claim industrial buildings allowances by reason of the fact it has been engaged in exempt activities. Accordingly, where an industrial building is disposed of by the NDA or an NDA company to a company which is neither the NDA nor an NDA company, the amount of qualifying expenditure in respect of which industrial allowances may be claimed by the purchaser is calculated as if the activities that the NDA or the NDA company had been engaged in were not exempt activities and all writing down allowances had been claimed by the NDA or the NDA company on the basis that the activities were not exempt activities.

Schedule 5: Supplementary provisions about nuclear transfer schemes

465.     This Schedule is described in the notes to clause 41.

Schedule 6: Structure etc of the transferee companies

466.     This Schedule is described in the notes to clause 42.

Schedule 7: Finance and accounts of transferee companies

467.     This Schedule is described in the notes to clause 48.

Schedule 8: Pensions

468.     This Schedule is given effect by clause 49 and is divided into five parts:

  • Part 1 sets out definitions including the pension schemes to which it applies;

  • Part 2 enables the NDA to modify, by direction, a relevant pension scheme (for example the BNFL group scheme) firstly to extend the groups of persons who can participate in the scheme to include employees and directors or other officers of an employer which has received employees by nuclear transfer scheme; and secondly to give NDA a role in administering the scheme. Modifications can only be made following consultation with the scheme trustees and employees representatives. The NDA is not permitted to modify the schemes in such a way as to deprive members of their accrued rights. It is not the intention to use these statutory powers to alter the pensions of existing members of the BNFL Group scheme from a final salary scheme to a defined contribution scheme.

  • Part 3 deals with the application of the UKAEA scheme to the employees who are transferred to a 'relevant public sector employer'. 'Relevant public sector employer' is defined in paragraph 1 of the Schedule to include UKAEA, NDA, or a 'publicly controlled company'. 'Publicly controlled company' is in turn defined in clause 53, and in general terms covers companies in which the majority of the voting rights are held by a public sector body. The effect of Part 3 is that where employees of BNFL and UKAEA are transferred to a relevant public sector employer, for NDA purposes, they will be entitled to retain their membership of the scheme or their eligibility or potential eligibility to become members. In relation to a relevant public sector employer that is a publicly controlled company, its employees cease to be entitled to membership of the UKAEA scheme when such a company ceases to be publicly controlled. Paragraphs 5 to 7 give the Secretary of State powers to direct the UKAEA to amend the rules of the scheme. Paragraph 8 provides for payments to the UKAEA by relevant public sector employers in order to meet their obligations as participating employers under the rules of the scheme. In the event of the parties not being able to reach agreement, the Secretary of State may determine the payments involved.

  • Part 4 deals with the position where employees are transferred for NDA purposes, whether by nuclear transfer scheme or otherwise, and they are required to leave their current pension scheme by reason that transfer. Part 4 applies both to transfers from the public to private sector, and to transfers within the private sector, for example from one management contractor to another.

469.     Paragraph 9 sets out in detail the circumstances in which employees are protected upon transfers for NDA purposes. It includes transitional provision to ensure that employees are protected during the initial stages of restructuring. It does this by disapplying the employment condition for the first transfer of employees (as many will not have had the chance to work on NDA related matters for six months), and by ensuring that employees are protected if they are transferred for a second or third time within a period of six months from their first transfer. Paragraph 9(3)(b) also makes it clear that employees' pensions are protected under Schedule 8 when their employment is not transferred but ownership of their employer is transferred (for example when a new site management contractor takes ownership of a site licensee company).

470.     Paragraph 10 relates to situations arising from the making of transfer schemes. Paragraph 11 relates to transfers made by other arrangements. In each case the effect is that the employees concerned are entitled to membership of an alternative scheme offering benefits which, taking into account other benefits offered by the new employer, are no less favourable than the provisions of the scheme of which the employees were originally members. In other words, if an employee is transferred on a number of occasions, and becomes a member of a number of different pension schemes as a result of those transfers, the test to be applied upon each transfer is whether the new pension scheme being offered is no less favourable (overall) than the original pension scheme of which he was a member. Where employees are transferred by virtue of a transfer scheme the Schedule places a duty on the Secretary of State, to satisfy himself (before the transfer scheme comes into force) that the new pension scheme (taken as a whole) meets this requirement. In other cases, the same duty applies to the NDA. In all cases prior consultation is required. In practice, we anticipate that the alternative pension scheme will be that established by the NDA under its powers in clause 10(1)(a) ('NDA pension scheme').

471.     Paragraph 12 enables the NDA and Secretary to modify the NDA pension scheme in order to meet the requirements set out in previous paragraphs of the Schedule. Before the Secretary of State makes a modification he must consult the NDA and employees' representatives, before the NDA makes a modification it must consult employees' representatives and obtain the consent of the Secretary of State.

472.     Part 5 enables the UKAEA pension scheme to apply to employees of designated New BNFL companies, while such companies are publicly controlled.

previous Section contents continue
House of Commons home page Houses of Parliament home page House of Lords home page search Page enquiries index

© Parliamentary copyright 2004
Prepared: 23 April 2004