Sections 68 – 73 (electricity), Sections 98 - 99 and 102 (gas) and Section 103 (overall energy efficiency targets): Miscellaneous
127.Section 68: Modification of licences: electricity trading arrangements. This section provides a power for the Secretary of State to modify electricity licences and the standard conditions of electricity licences for the purpose of implementing the new electricity trading arrangements. (These are set out in ‘The New Electricity Trading Arrangements – OFGEM/DTI Conclusions Document’ published in October 1999. The document can be accessed on the OFGEM website – http://www.ofgem.gov.uk/elarch/netadocs.htm.) The power will be exerciseable at any time within a period of two years from the passing of the Act.
128.Sections 69 and 98: Assistance for disadvantaged groups of electricity and gas customers. These sections which apply to electricity and gas respectively insert new sections into the 1986 and 1989 Acts permitting the Secretary of State, by order, to make schemes which have the effect of providing a cross-subsidy in favour of disadvantaged customers in relation to the charges they pay for their electricity or gas. This is intended to be a reserve power. The sections provide for consultation on any proposal to make an order; for the information necessary for the running of any schemes to be passed between the various parties; and for the Authority to have a role in monitoring and reporting on the operation of the schemes and enforcement of breaches of them.
129.Sections 70 and 99: Energy efficiency requirements for electricity distributors and suppliers and for gas transporters and suppliers. These sections replace the existing provisions of the 1986 and 1989 Acts which allow the relevant Directors-General to impose standards of performance on gas suppliers and public electricity suppliers in connection with the promotion of the efficient use of gas and electricity by consumers. The new sections provide that the Secretary of State, rather than the Authority, may make orders imposing obligations on licensed gas and electricity suppliers, gas transporters and electricity distributors, to meet targets for the promotion of improvements in efficiency in consumers’ use of energy. A target will be the achievement of the saving of a specified amount of energy. There is provision to specify the way in which the amount of energy that will be saved by a given activity will be calculated. It will be for the licensee concerned to choose the activities (for example installations of home insulation or promoting the use of energy efficient appliances) it will undertake to meet the required energy saving. The Authority is to be responsible for the calculation and enforcement of the requirement, using its normal enforcement powers, including monetary penalties.
130.Section 103: Overall energy efficiency targets. This section allows the Secretary of State to set an overall energy efficiency target which covers both gas and electricity, which would be apportioned between the separate obligations under section 70 (energy efficiency requirements for electricity) and section 99 (energy efficiency requirements for gas).
131.Section 71: General duties of transmission licence holders in Scotland. Section 9(2)(b) of the 1989 Act imposes on any holder of a transmission licence a duty to facilitate competition in the supply and generation of electricity. Subsections (3) and (4), however, qualify this duty in the case of persons in Scotland who hold both a transmission licence and a licence to supply or to generate electricity. In the case of any such person, the duty is to make the transmission system available to competitors on terms which neither prevent nor restrict competition.
132.As competition in the Scottish market has developed it is thought that there is no longer any justification for treating transmission companies in Scotland on a different basis from the transmission company in England and Wales. This section therefore repeals subsections (3) and (4) of section 9.
133.Section 72: Uniform prices etc: Scotland. Section 2(2) of the 1989 Act puts the Director under an obligation to ensure that the prices charged to tariff customers in any area of Scotland specified in an order by the Secretary of State do not discriminate (whether directly or indirectly) between different parts of that area (the so-called "Common Tariff Obligation"). The abolition of tariffs effected by this Act means that the desired effect of ensuring that remote Scottish areas do not suffer discrimination can no longer be achieved in this way. Instead, this section provides a power for the Secretary of State to make orders requiring holders of transmission, distribution, and supply licences to charge prices and, in the case of suppliers, to offer contract terms which do not discriminate between customers in different parts of the specified area. The existing Common Tariff obligation is limited to tariff customers: essentially domestic and small business users. It is expected that the orders to be made under this section will be restricted to a broadly similar group of consumers (by virtue of the power in sub-section (4) to make different provisions for different cases).
134.Sections 73 and 102: Maximum prices for reselling electricity and gas. The existing provisions in the 1989 Act and the 1986 Act share the overall objective of preventing excessive prices being charged when electricity or gas is resold (e.g. by landlords to tenants), but differ in their details. These sections reconcile the differences so that the powers granted to the Authority are the same for the two fuels (except for the exemption for gas used for propelling motor vehicles).
135.Section 73 makes the power in the 1989 Act more flexible:
instead of having to fix actual prices, the Authority will be able to set a formula by which maximum prices are calculated;
the Authority may direct that interest be paid on sums charged in excess of the maximum price, and not just the value of the overpayment itself as at present; and
the Authority may direct that resellers provide information on their prices to purchasers (and the Authority may direct that the maximum price be reduced by an amount or percentage if the reseller fails to comply with this requirement).
These three changes align electricity with the relevant aspects of the current position in gas.
136.Section 102 changes the existing duty on the regulator to set maximum resale prices in gas into a power. This will allow the Authority to choose not to set a maximum resale price in relation to certain suppliers which may be useful where, for example, supply is unmetered. It also extends the ambit of the current power to include gas originally supplied by an exempt supplier (at present only gas supplied by a licensed supplier which is subsequently resold is covered). Both of these matters are already covered in the parallel electricity legislation.
