Energy Act 2004

Energy Act 2004

2004 CHAPTER 20

Commentary on Sections

Chapter 2: Interconnectors for Electricity and Gas

Sections 145 to 148: licensing of electricity interconnectors

354. Section 4 of the Electricity Act provides that it is an offence to generate, transmit, distribute or supply electricity unless authorised by virtue of a licence and section 5 provides that in certain instances the Secretary of State may grant an exemption from this prohibition. Participation in the operation of an electricity interconnector is not addressed in the Act and is currently unregulated. There is no requirement for those participating in this activity to hold a licence or exemption.

355. Section 145 amends section 4 of the Electricity Act to make unauthorised participation in the operation of an electricity interconnector a prohibited activity. As a result, the unauthorised participation in the operation of an electricity interconnector becomes an offence in the same way as the other activities referred to in section 4 of the Electricity Act. It also defines the activity, what is meant by an electricity interconnector and, by amending sections 5 and 6, enables the Secretary of State, or where relevant GEMA, to authorise the activity by either a licence or exemption.

356. Section 145 also prevents an electricity interconnector licence being issued to the holder of any other type of licence under the Act and the latter from holding a licence to participate in the operation of an electricity interconnector. This is to prevent possible conflicts of interest in the allocation of capacity on interconnectors.

357. The procedures for determining standard licence conditions for electricity interconnectors are set out in section 146. These procedures are in line with those for existing licences. The concept of standard licence conditions is designed to ensure that all licences of a particular type contain the same licence conditions as far as appropriate and to facilitate the procedure in section 11A of the Electricity Act whereby licence conditions may be modified collectively. Section 146 gives the Secretary of State the power to draw up and publish the standard conditions of the electricity interconnector licence before the commencement of subsection (6). After that time the Secretary of State will have no further role in relation to the standard licence conditions although he may veto proposals made by GEMA to modify the standard licence conditions either on the grant of a licence or subsequently. Subsection (2) permits the standard conditions to make provision for a standard condition not to be brought into operation, to be suspended or be reactivated in circumstances specified in the condition. This is intended to allow more flexible licensing arrangements.

358. Subsection (6) of section 146 amends section 8A of the Electricity Act so that the standard licence conditions determined under the power in subsection (1) will be incorporated into all licences granted after subsection (6) comes into force. Section 8A also gives GEMA the power to modify the standard conditions determined by the Secretary of State, when granting a licence and sets out the process to achieve this.

359. Section 147 sets out the consequential amendments which the introduction of interconnector licensing will necessitate.

360. Section 148 gives the Secretary of State the power to grant electricity interconnector licences under section 6 of the Electricity Act to persons participating in the operation of an electricity interconnector when the prohibition enters into force. The normal licence application procedure will not apply but the Secretary of State must consult a prospective licence holder, GEMA and such other persons as he considers appropriate before issuing a licence.