Energy Bill [HL]

House of Commons

Session 2003 - 04
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Other Bills before Parliament

Energy Bill [HL]

Energy Bill [HL]
Part 3 — Energy Regulation
Chapter 2 — Interconnectors for electricity and gas
110

Gas interconnectors
142
Operators of gas interconnectors to be licensed
(1)
The Gas Act 1986 (c. 44) is amended as follows.
(2)
In subsection (1) of section 5 (prohibition on unlicensed activities)—
(a)
in paragraph (a), at the beginning insert “otherwise than by means of a
5
gas interconnector”; and
(b)
after that paragraph insert—
“(aa)
participates in the operation of a gas interconnector;”.
(3)
After subsection (5) of that section insert—
“(6)
A reference in this Part to participating in the operation of a gas
10
interconnector is a reference to—
(a)
co-ordinating and directing the conveyance of gas into or
through a gas interconnector; or
(b)
making such an interconnector available for use for the
conveyance of gas.
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(7)
For the purposes of subsection (6)(b) a person shall not be regarded as
making something available just because he consents to its being made
available by another.
(8)
In this Part ‘gas interconnector’ means so much of any pipeline system
as—
20
(a)
is situated at a place within the jurisdiction of Great Britain; and
(b)
subsists wholly or primarily for the purposes of the conveyance
of gas (whether in both directions or in only one) between Great
Britain and another country or territory.
(9)
For the purposes of this section a place is within the jurisdiction of
25
Great Britain if it is in Great Britain, in the territorial sea adjacent to
Great Britain or in an area designated under section 1(7) of the
Continental Shelf Act 1964.
(10)
In this section ‘pipe-line system’ includes the pipes and any associated
apparatus comprised in that system.”
30
(4)
In section 6A(1) (power of the Secretary of State to grant exemptions from
licensing), after “paragraph (a)” insert “, (aa)”.
(5)
In section 7(3) (no licence may be issued to holder of licence under section 7A),
after “under section” insert “7ZA or”.
(6)
After section 7 insert—
35
“7ZA  Licences for operation of gas interconnectors
(1)
Subject to subsection (2), the Authority may grant a licence authorising
any person to participate in the operation of a gas interconnector.
(2)
A licence shall not be granted under this section to a person who is the
holder of a licence under section 7 or 7A.
40
(3)
A licence under this section—

Energy Bill [HL]
Part 3 — Energy Regulation
Chapter 2 — Interconnectors for electricity and gas
111

(a)
must specify the interconnector or interconnectors in relation to
which participation is authorised; and
(b)
may limit the forms of participation in the operation of an
interconnector which are authorised by the licence.”
(7)
In section 7A(3) (no licence may be issued to holder of licence under section 7),
5
after “section 7” insert “or 7ZA”.
(8)
In—
(a)
the definitions of “licence” in sections 4AA(8) and 48(1), and
(b)
section 36(1) and (2)(d),

after “section 7” insert “, 7ZA”.
10
(9)
In section 24(1A)(a) (references to the Competition Commission for licence
modifications), after sub-paragraph (i) insert—
“(ia)
licences under section 7ZA above,”.
(10)
In section 41C(4) (addition of activities to prohibited activities), after paragraph
(a) insert—
15
“(aa)
participation in the operation of a gas interconnector;”.
(11)
In section 48(1) (interpretation) after the definition of “gas fittings” insert—

“‘gas interconnector’ has the meaning given by section 5(8);”.
143
Standard conditions for gas interconnectors
(1)
The Secretary of State must, before the commencement of subsection (6) of this
20
section, determine standard conditions for licences under section 7ZA of the
Gas Act 1986 (c. 44).
(2)
Those standard conditions may contain provision—
(a)
for a standard condition included in a licence under section 7ZA of the
Gas Act 1986 not to have effect until brought into operation in such
25
manner, and in such circumstances, as may be specified in or
determined under the standard conditions;
(b)
for the effect of a standard condition included in such a licence to be
suspended in such manner, and in such circumstances, as may be so
specified or determined; or
30
(c)
for a standard condition included in such a licence the effect of which
is for the time being suspended to be brought back into operation in
such manner, and in such circumstances, as may be so specified or
determined.
(3)
The Secretary of State must publish the standard conditions determined by
35
him under this section.
(4)
The publication must be in such manner as the Secretary of State considers
appropriate.
(5)
The standard conditions determined by the Secretary of State have effect
subject to any modifications made under Part 1 of the Gas Act 1986 or under
40
this Act.
(6)
In subsection (1) of section 8 of that Act (standard conditions)—
(a)
after “2000” insert “or section 143 of the Energy Act 2004”; and

Energy Bill [HL]
Part 3 — Energy Regulation
Chapter 2 — Interconnectors for electricity and gas
112

(b)
after paragraph (a) insert—
“(aa)
licences under section 7ZA above;”.
(7)
After subsection (6) of that section insert—
“(6A)
The Authority shall not make any modifications under subsection (3)
above of a condition of a licence under section 7ZA unless it is of the
5
opinion that the modifications are such that—
(a)
the licence holder would not be unduly disadvantaged in
competing with one or more other holders of licences under that
section; and
(b)
no other holder of a licence under that section would be unduly
10
disadvantaged in competing with the holder of the licence to be
modified or with any one or more other holders of licences
under that section.”
(8)
In sections 23(1)(b) and (2), 26(1A) and 27(1)(b) and (2) of that Act (which relate
to the modification of standard conditions), after “licences under section 7
15
above” insert “, licences under section 7ZA above”.
(9)
In sections 23(11) and 26(5) of that Act (which require the publication of
modifications of standard conditions), after “section 7” insert “, 7ZA”.
(10)
In section 26A(9) of that Act (which also relates to the modification of such
conditions), after “section 7” insert “or section 7ZA”.
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144
Disapplication of existing regimes
(1)
In each of sections 9(1A) and 9A(1A) of the Pipe-lines Act 1962 (c. 58) (pipe-
lines to which provision for construction of additional pipe-lines do not apply),
for “neither upstream petroleum pipe-lines nor gas pipe-lines” substitute “not
an upstream petroleum pipe-line, a gas pipe-line or a gas interconnector”.
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(2)
In section 10(1)(b)(ii) of that Act (pipe-lines excluded from provisions for
securing use of pipelines), for “is not” substitute “is neither comprised in a gas
interconnector nor”.
(3)
The following provisions of that Act shall cease to have effect—
(a)
section 10B (cases to which section 10C applies);
30
(b)
in section 10C(1) the words “to which this section applies (a ‘relevant
gas pipe-line’)”; and
(c)
in section 10C(2) to (11), the word “relevant” wherever occurring.
(4)
In section 66(1) of that Act (interpretation)—
(a)
for the definition of “gas pipe-line” substitute—
35

“‘gas pipe-line’ means a pipe-line used to convey gas to
premises, or to a pipe-line system operated by a gas
transporter (within the meaning of Part 1 of the Gas Act
1986), which—
(a)
is a pipe-line in respect of which an exemption
40
has been granted by or under that Act from the
requirement for a gas transporter’s licence; and
(b)
is not comprised in an upstream petroleum pipe-
line;”

Energy Bill [HL]
Part 3 — Energy Regulation
Chapter 2 — Interconnectors for electricity and gas
113

(b)
after the definition of “gas” insert—

“‘gas interconnector’ has the same meaning as in Part 1 of
the Gas Act 1986;”
(c)
in the definition of “owner”, for “10B” substitute “10C”.
(5)
In the Petroleum Act 1998 (c. 17)—
5
(a)
in section 17(1A) (exceptions to application of provisions for
acquisition of rights to use pipelines), for the words from “and”
onwards substitute “or to a gas interconnector (within the meaning of
Part 1 of the Gas Act 1986).”; and
(b)
sections 17A and 17B (special rules for interconnectors) shall cease to
10
have effect.
145
Grant of gas interconnector licences to existing operators
(1)
This section applies where a person is participating in the operation of a gas
interconnector at the time when the power of GEMA to grant licences under
section 7ZA of the Gas Act 1986 (c. 44) comes into force.
15
(2)
The Secretary of State shall have power to grant a licence to that person under
section 7ZA of the Gas Act 1986.
(3)
Sections 7B and 8 of the Gas Act 1986 (general provisions relating to licences
and licence conditions) shall have effect in relation to the grant of licences by
the Secretary of State by virtue of this section as if—
20
(a)
references in those sections to GEMA included references to the
Secretary of State;
(b)
sections 7B(1), (2) and (2A) were omitted; and
(c)
in section 8, the words “the Secretary of State, to” in subsection (5)(b)
and subsection (6) were omitted.
25
(4)
Before granting a licence to a person by virtue of this section, the Secretary of
State must consult—
(a)
that person;
(b)
GEMA; and
(c)
such other persons as the Secretary of State considers appropriate.
30
(5)
Subsection (4) may be satisfied by consultation that took place wholly or partly
before the commencement of this section.
(6)
In this section “participating in the operation of a gas interconnector” has the
same meaning as in Part 1 of the Gas Act 1986.
146
Extraterritorial application of Gas Act 1986
35
After section 64 of the Gas Act 1986 insert—
“64A
  Extraterritorial operation of Act
(1)
Where by virtue of this Act an act or omission taking place outside
Great Britain constitutes an offence, proceedings for the offence may be
taken, and the offence may for all incidental purposes be treated as
40
having been committed, in any place in Great Britain.
(2)
Provision made by or under this Act in relation to places outside Great
Britain—

Energy Bill [HL]
Part 3 — Energy Regulation
Chapter 3 — Special administration regime for energy licensees
114

(a)
so far as it applies to individuals, applies to them whether or not
they are British citizens; and
(b)
so far as it applies to bodies corporate, applies to them whether
or not they are incorporated under the law of a part of the
United Kingdom.”
5
Chapter 3
Special administration regime for energy licensees
Energy administration orders
147
Energy administration orders
(1)
In this Chapter “energy administration order” means an order which—
10
(a)
is made by the court in relation to a protected energy company; and
(b)
directs that, while the order is in force, the affairs, business and
property of the company are to be managed by a person appointed by
the court.
(2)
The person appointed in relation to a company for the purposes of an energy
15
administration order is referred to in this Chapter as the energy administrator
of the company.
(3)
The energy administrator of a company must manage its affairs, business and
property, and exercise and perform all his powers and duties as such, so as to
achieve the objective set out in section 148.
20
(4)
In relation to an energy administration order applying to a non-GB company,
references in this section to the affairs, business and property of the company
are references only to its affairs and business so far as carried on in Great
Britain and to its property in Great Britain.
(5)
In this Chapter—
25

“protected energy company” means a company which is the holder of a
relevant licence; and
“relevant licence” means—
(a)
a licence granted under section 6(1)(b) or (c) of the 1989 Act
(transmission and distribution licences for electricity); or
30
(b)
a licence granted under section 7 of the Gas Act 1986 (c. 44)
(licensing of gas transporters).
148
Objective of an energy administration
(1)
The objective of an energy administration is to secure—
(a)
that the company’s system is and continues to be maintained and
35
developed as an efficient and economical system; and
(b)
that it becomes unnecessary, by one or both of the following means, for
the energy administration order to remain in force for that purpose.
(2)
Those means are—
(a)
the rescue as a going concern of the company subject to the energy
40
administration order; and
(b)
transfers falling within subsection (3).

Energy Bill [HL]
Part 3 — Energy Regulation
Chapter 3 — Special administration regime for energy licensees
115

(3)
A transfer falls within this subsection if it is a transfer as a going concern—
(a)
to another company, or
(b)
as respects different parts of the undertaking of the company subject to
the energy administration order, to two or more different companies,

of so much of that undertaking as it is appropriate to transfer for the purpose
5
of achieving the objective of the energy administration.
(4)
The means by which transfers falling within subsection (3) may be effected
include, in particular—
(a)
a transfer of the undertaking of the company subject to the energy
administration order, or of a part of its undertaking, to a wholly-owned
10
subsidiary of that company; and
(b)
a transfer to a company of securities of a wholly-owned subsidiary to
which there has been a transfer falling within paragraph (a).
(5)
The objective of an energy administration may be achieved by transfers falling
within subsection (3) to the extent only that—
15
(a)
the rescue as a going concern of the company subject to the energy
administration order is not reasonably practicable or is not reasonably
practicable without such transfers;
(b)
the rescue of that company as a going concern will not achieve that
objective or will not do so without such transfers;
20
(c)
such transfers would produce a result for the company’s creditors as a
whole that is better than the result that would be produced without
them; or
(d)
such transfers would, without prejudicing the interests of those
creditors as a whole, produce a result for the company’s members as a
25
whole that is better than the result that would be produced without
them.
(6)
In this section “the company’s system”, in relation to an energy administration,
means—
(a)
the system of electricity distribution or of electricity transmission, or
30
(b)
the pipe-line system for the conveyance of gas,

which the company subject to the energy administration order has been
maintaining as the holder of a relevant licence.
(7)
In this section “efficient and economical”, in relation to a system for electricity
distribution or electricity transmission, includes co-ordinated.
35
149
Applications for energy administration orders
(1)
An application for an energy administration order in relation to a company
may be made only—
(a)
by the Secretary of State; or
(b)
with the consent of the Secretary of State, by GEMA.
40
(2)
The applicant for an energy administration order in relation to a company
must give notice of the application to—
(a)
every person who has appointed an administrative receiver of the
company;
(b)
every person who is or may be entitled to appoint an administrative
45
receiver of the company;

Energy Bill [HL]
Part 3 — Energy Regulation
Chapter 3 — Special administration regime for energy licensees
116

(c)
every person who is or may be entitled to make an appointment in
relation to the company under paragraph 14 of Schedule B1 to the 1986
Act (appointment of administrators by holders of floating charges); and
(d)
such other persons as may be prescribed by energy administration
rules.
5
(3)
The notice must be given as soon as reasonably practicable after the making of
the application.
(4)
In this section “administrative receiver” means—
(a)
an administrative receiver within the meaning given by section 251 of
the 1986 Act for the purposes of Parts 1 to 7 of that Act; or
10
(b)
a person whose functions in relation to a non-GB company—
(i)
are equivalent to those of an administrative receiver; and
(ii)
relate only to the affairs and business of the company so far as
carried on in Great Britain and to its property in Great Britain.
150
Powers of court
15
(1)
On hearing an application for an energy administration order, the court has the
following powers—
(a)
it may make the order;
(b)
it may dismiss the application;
(c)
it may adjourn the hearing conditionally or unconditionally;
20
(d)
it may make an interim order;
(e)
it may treat the application as a winding-up petition and make any
order the court could make under section 125 of the 1986 Act (power of
court on hearing winding-up petition);
(f)
it may make any other order which the court thinks appropriate.
25
(2)
The court may make an energy administration order in relation to a company
only if it is satisfied—
(a)
that the company is unable to pay its debts;
(b)
that it is likely to be unable to pay its debts; or
(c)
that, on a petition by the Secretary of State under section 124A of the
30
1986 Act (petition for winding up on grounds of public interest), it
would be just and equitable (disregarding the objective of the energy
administration) to wind up the company in the public interest.
(3)
The court must not make an energy administration order in relation to a
company on the ground set out in subsection (2)(c) unless the Secretary of State
35
has certified to the court that the case is one in which he considers
(disregarding the objective of the energy administration) that it would be
appropriate for him to petition under section 124A of the 1986 Act.
(4)
The court has no power to make an energy administration order in relation to
a company which—
40
(a)
is in administration under Schedule B1 to the 1986 Act; or
(b)
has gone into liquidation (within the meaning of section 247(2) of that
Act).
(5)
An energy administration order comes into force—
(a)
at the time appointed by the court; or
45
(b)
if no time is so appointed, when the order is made.