Energy Bill - continued          House of Commons

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486.     The Bill extends to England and Wales, Scotland and Northern Ireland. However, amendments which the Bill makes to existing legislation will have the same extent as that legislation. Furthermore, a number of provisions, including those relating to gas and electricity meters and electricity safety, do not extend to Northern Ireland and Chapter 1 of Part 3 (decommissioning and clean-up of nuclear sites) does not extend to Scotland.

487.     Because the Sewel Convention provides that Westminster will not normally legislate with regard to devolved matters in Scotland without the consent of the Scottish Parliament, if there are amendments relating to such matters which trigger the Convention, the consent of the Scottish Parliament will be sought for them.


488.     The Bill is not expected to have any significant implications on public expenditure. The Bill is focussed on creating the right regulatory framework to ensure that private sector investment is made in accordance with the Government's energy policy objectives to ensure secure supplies of energy and tackle climate change by reducing carbon emissions. It does not make any commitments for public expenditure.

489.     In creating this regulatory framework, the Bill gives the Government and the Gas and Electricity Markets Authority the ability to recover the costs incurred in exercising their regulatory functions from those benefiting from the services provided. For example, the Bill enables the Secretary of State to recover the costs of administering the licensing regimes for offshore storage of natural gas and carbon dioxide storage from applicants for licences.

490.     Although the Renewables Obligation is not direct public expenditure, it provides for the subsidy of renewable generation by UK electricity consumers. Under existing legislation, the Renewables Obligation is expected to provide £21.5bn (on a discounted basis) of consumer subsidy for renewable electricity generation. The subsidy is passed onto consumers through increased electricity prices. The Department's modelling suggests that the proposed changes to the Renewables Obligation in the Energy Bill will increase the level of consumer subsidy by £1.7bn (on a discounted basis). Our modelling suggests that the banded RO proposal will deliver a 30% greater increase in annual renewable electricity generation from 2010 to 2015 than the increase delivered by the existing regime (under the banded RO, by 2015, the UK will be delivering 15.0TWh a year more than in 2010 compared to an equivalent increase of only 11.4TWh under the existing regime).


491.     The Bill is not expected to have any significant implications for public sector manpower. The provisions on offshore gas and carbon capture and storage allow for the appointment and remuneration of inspectors to ensure the regulatory regime is being adhered to. In practice, this power will allow Government to extend the duties of the existing oil and gas inspectors to cover the new types of infrastructure. The Department does not expect to appoint new inspectors to undertake these functions.

492.     In addition, the provisions on offshore transmission will allow Ofgem to recover costs of running tendering exercises for offshore transmission licences. As part of this, Ofgem may recruit small numbers of personnel to run individual tender exercises.


493.     The Bill is working towards the multiple policy objectives of carbon emissions reduction, security of supply and competitive energy markets, and therefore brings forward a number of different measures. The key policy proposals in the Bill that have the greatest impact have an individual Impact Assessment (IA) which discusses the options, rationale and costs and benefits in detail:

  • Offshore Gas Storage

  • Carbon Dioxide Storage

  • The Renewables Obligation

  • Offshore Electricity Transmission

  • Decommissioning of Nuclear Installations

  • Decommissioning of Oil and Gas Installations

  • Decommissioning of Offshore Renewable Installations

  • Oil and Gas Licensing

  • Third Party Access

494.     In many cases, the scale of the effects of the Bill, in terms of energy security and reductions in carbon emissions, is dependent on the subsequent decisions made by investors in the UK's energy market over the coming decades. For example, the carbon emission reduction effects derived from creating a regulatory regime for CCS projects is dependent on the number of proposals that come forward following the UK's demonstration project.

495.     Partly for the reason above, and partly because of the complexity and challenges of meaningfully monetising the different costs and benefits associated with the multiple objectives of energy policy, it is not possible to present a single cost benefit figure for the Bill. In many cases, the Bill should reduce the overall costs to business and consumers, for example, through increased certainty and decreased regulatory complexity or through increased cost efficiency (e.g. proposals to tender for offshore transmission licences).

496.     The main area where there will be increased costs as a result of our proposals is in the context of renewables. Renewables are generally more expensive than conventional, fossil fuel based electricity generation and therefore require market support to allow them to compete directly in the UK energy market. Although the proposals to change the Renewables Obligation will improve the mechanism's cost effectiveness (i.e. a lower consumer subsidy per unit of renewables electricity generation), the increased deployment of higher cost renewables that will result from our changes will increase the overall costs of energy to the UK economy.

497.     A full Impact Assessment is available to Members from the Vote Office and to the public from the BERR website at:


498.     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). John Hutton has made the following statement:

"In my view, the provisions of the Energy Bill are compatible with the Convention rights".


499.     In line with clause 94, the provisions of the Bill will come into effect as specified by the Secretary of State by order. This allows for different provisions to commence on different dates.


     The Authority - Gas and Electricity Markets Authority. A group of executive and non-executive members who govern Ofgem, the regulator of the downstream gas and electricity markets. The Authority determines strategy, sets policy priorities and takes decisions on a range of matters, including price controls and enforcement.

CCS - Carbon Capture and Storage is the process of capturing carbon dioxide produced during the burning of fossil fuels and its transportation and storage in a secure place (usually under the seabed).

     CNPA - Civil Nuclear Police Authority. This is the independent authority for the Civil Nuclear Constabulary. The CNPA aims to ensure that the Constabulary polices civil nuclear sites effectively.

The Crown Estate - land in the UK owned by the monarchy, the income from which is transferred to the Government.

     DWMP - Decommissioning and Waste Management Programme. Used in the context of the nuclear provisions in the Bill, a plan of work for decommissioning new nuclear power stations and the management of the radioactive waste they produce.

EA - Environment Agency. The leading public body responsible for protecting and improving the environment in England and Wales.

     ECHR - European Convention on Human Rights. Its full name is the Convention for the Protection of Human Rights and Fundamental Freedoms.

EOR - Enhanced Oil Recovery. Process by which carbon dioxide can be used to improve the recovery of oil and natural gas.

FEPA - Food and Environment Protection Act 1985.

HSE - Health and Safety Executive. A statutory body whose role is the enforcement of work related health and safety law under the general direction of the Health and Safety Commission established by the Health and Safety at Work Act 1974.

LNG - Liquefied Natural Gas. A natural gas which has been converted to liquefied form, and thereby a much lower volume, for ease of storage and transport.

     MWh - Megawatt hour. A watt is a measure of energy. One watt-hour is the amount of energy expended by a one-watt load in one hour. A megawatt is a million watts.

NFPA - Non-Fossil Purchasing Agency. An Agency set up in 1990 by the Regional Electricity Companies to act as their agent for the purpose of enabling them to enter into collective arrangements to meet their obligations in contracting a certain amount of their electricity from renewable sources.

     NII - Nuclear Installations Inspectorate. The Health and Safety Executive is the licensing authority for nuclear installations. The Nuclear Safety Directorate of HSE exercises this delegated authority through the Nuclear Installations Inspectorate which is responsible for regulating the nuclear, radiological and industrial safety of nuclear installations in the UK.

     NWML - National Weights and Measures Laboratory is an Executive Agency to the Department for Innovation, Universities and Skills and has responsibility for ensuring that all trade measurements are accurate, legal, and fair to buyer and seller.

OCNS - Office for Civil Nuclear Security. OCNS is part of the Health and Safety Executive and is the security regulator for the UK's civil nuclear industry. It is responsible for approving security arrangements within the industry and enforcing compliance.

     Ofgem - Office of Gas and Electricity Markets. The independent regulator of the downstream gas and electricity markets.

     OREI - Offshore Renewable Energy Installation. Most commonly this is an offshore wind turbine.

RO - Renewables Obligation. The RO places an obligation on electricity suppliers in the United Kingdom to source an increasing proportion of electricity from renewable sources. It is the main policy measure for supporting the development of renewable electricity in the UK.

ROC - Renewables Obligation Certificates. Certificates issued to electricity generators on the basis of them generating electricity from renewable sources.

     TWh - Terawatt hour. A watt is a measure of energy. One watt-hour is the amount of energy expended by a one-watt load in one hour. A terawatt is a trillion (1012) watts.

UKCS - United Kingdom Continental Shelf. The area of water surrounding the UK where it claims mineral rights, such as for the exploration and exploitation of North Sea oil and gas.

UNCLOS - United Nations Convention on the Law of the Sea 1982 is an international agreement which defines the rights and responsibilities of nations in their use of the world's oceans.

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Prepared: 14 January 2008