Energy Bill

Alex CookeDECC Legal

A

B I L L[AS AMENDED IN PUBLIC BILL COMMITTEE]

TO

PART 1: DECARBONISATION

PART 2: ELECTRICITY MARKET REFORM CHAPTER 1: GENERAL CONSIDERATIONS CHAPTER 2: CONTRACTS FOR DIFFERENCE CHAPTER 3: CAPACITY MARKET CHAPTER 4: INVESTMENT CONTRACTS CHAPTER 6: ACCESS TO MARKETS CHAPTER 7: RO TRANSITIONAL ARRANGEMENTS CHAPTER 8: EMISSIONS PERFORMANCE STANDARD

PART 3: NUCLEAR REGULATION

Energy Bill 2012-13

Energy Bill 2012-13

PART 4: GOVERNMENT PIPELINE AND STORAGE SYSTEM

PART 5: STRATEGY AND POLICY STATEMENT

PART 6: CONSUMER PROTECTION AND MISCELLANEOUS CHAPTER 1: CONSUMER PROTECTION Domestic tariffs Consumer redress

CHAPTER 2: MISCELLANEOUS Offshore transmission Fees

Overview

A “carry-over” Bill, starting in the House of Commons

• Introduction: 29th November 2012• 2nd Reading: 19th December 2012• Committee: 15th January to 7th February 2013• Report: ???

References to part, chapter and clause numbers are to those in the Bill as amended in Committee

Energy Bill 2012-13

Part 1: Decarbonisation

• power to set a target range by order

• duty on Secretary of State to ensure that carbon intensity of GB electricity generation does not exceed the upper limit of the target range

• decarbonisation target range cannot be set before 5th carbon budget, i.e. 2016

• calculation of carbon intensity uses standard international carbon reporting methodology

Energy Bill 2012-13

Part 2: Electricity Market Reform

• contracts for difference• capacity market• investment contracts• conflicts of interest• access to markets• renewables obligation transition• emissions performance standard

Energy Bill 2012-13

EMR: General considerations

• duties in relation to carbon targets and budgets• renewables target• security of supply• cost to consumers• duty to meet a decarbonisation target ???

Part 2, Chapter 1, clause 5

Energy Bill 2012-13

EMR: Contracts for difference

• contracts between a generator and a counterparty• available to low carbon generators• counterparty a government owned company• counterparty liabilities funded by a levy on suppliers• contracts entered-into following a direction from the

Secretary of State or the national system operator

Part 2, Chapter 2, clauses 6 to 20, Schedule 1

Energy Bill 2012-13

What is a CFD?• generators are

paid the difference between a strike price and a reference price

• if the reference price exceeds the strike price, the generator pays money back

Energy Bill 2012-13

Graphs to go here

EMR: Capacity market

• total amount of capacity required at peak times, including a margin, is calculated

• payments are made to people who enter agreements to be available at peak times

• the amount payable will be determined by auction• money flows from suppliers to generators; penalties

for non-compliance flow back• role for Demand Side Response – in a pilot scheme

at first.

Part 2, Chapter 3, clauses 21 to 32

Energy Bill 2012-13

EMR: Investment contracts

• investment contracts are CFDs for people who have to take final investment decisions fairly soon

• contracts are entered into by the Secretary of State and laid before Parliament

• if entered into before Royal Assent, they are conditional on Royal Assent

• contracts will be transferred to the CFD counterparty

Part 2, Chapter 4, clause 33, Schedule 2

Energy Bill 2012-13

EMR: Conflicts of interest

• the national system operator, National Grid, is the EMR delivery body

• power to put in place business separation arrangements to manage conflicts of interest

• power to transfer delivery functions to another person in certain situations

• amendment of special administration regime

Part 2, Chapter 4, clauses 34 to 37, Schedule 3

Energy Bill 2012-13

EMR: Access to markets

• power to improve electricity market liquidity if Ofgem proposals are inadequate or fail

• power to take action to improve the availability of Power Purchase Agreements, if necessary

• PPAs should be simpler with CFD scheme• much talk of a Green Power Auction Market to

provide PPAs and a reference price at the same time

Part 2, Chapter 6, clauses 38 to 40

Energy Bill 2012-13

EMR: RO transition

• transitional phase where generators can choose between the RO and the CFD

• it is proposed that the transition will end on 31st March 2017

• power to put in place arrangements from 2027 for certificates to be bought at a fixed price

Part 2, Chapter 7, clause 41

Energy Bill 2012-13

EMR: Emission performance standard

• the EPS limits the total amount of emissions from a power station in a year – effectively to 450 g/kWh

• it will prevent new coal stations without CCS fitted

• but it will allow new, efficient gas generating stations

• stations which have already been consented are unaffected

Part 2, Chapter 8, clauses 42 to 46, Schedules 4 & 5

Energy Bill 2012-13

Part 3: Nuclear regulation

• establishes the Office for Nuclear Regulation

• ONR’s role is to regulate the safety and security of next generation of nuclear power stations

• also deals with transport of nuclear materials, nuclear security and safeguards more generally

Part 3, clauses 51 to 100, Schedules 6 to 13

Energy Bill 2012-13

Part 4: GPSS

• the Government Pipeline and Storage System is used to transport aviation fuel around the country

• much of the GPSS was built on private land statutory powers

• these provisions will regularise ownership and rights

• makes it possible for ownership to be transferred

Part 4, clauses 101 to 112, Schedule 13

Energy Bill 2012-13

Part 5: Strategy and Policy Statement

• new statement to set out Government’s strategic priorities for the energy sector

• aim is to align strategic objectives of the Government and the regulator, Ofgem

• will replace existing guidance on social and environmental matters

Part 5, clauses 113 to 120

Energy Bill 2012-13

Part 6: Consumers and misc.

Consumer protection

• domestic tariffs

• consumer redress

Miscellaneous

• offshore transmission

• fees

Part 6, Chapter 8, clauses 121 to 130, Schedule 14

Energy Bill 2012-13

Domestic tariffs

• energy prices have been rising for several years, but switching rates remain low

• powers enabling the Secretary of State to simplify domestic tariff structures

• enable Secretary of State to require suppliers to move consumers off “dead tariffs”

Part 6, Chapter 1, clauses 121 to 124

Energy Bill 2012-13

Consumer redress

• Ofgem has long been able to fine energy companies which breach licence conditions, but has no power to require them to compensate consumers

• new powers will enable Ofgem to make consumer redress orders

• capped at 10% of turnover

Part 6, Chapter 1, clause 126, Schedule 14

Energy Bill 2012-13

Offshore transmission

• removing the requirement for a licence during the commission period for offshore transmission

Fees

• fee recovery for almost all government costs relating to nuclear decommissioning

Part 6, Chapter 2, clauses 127 to 129

Energy Bill 2012-13

Bill information

Parliament’s Bill website

http://services.parliament.uk/bills/2012-13/energy.html

Links on the left of the page provide more information, including links to evidence, debates and amendments

Energy Bill 2012-13

Bill information

DECC’s Bill website

https://www.gov.uk/government/organisations/department-of-energy-climate-change/series/energy-bill

Overview and links to impact assessments, statements and publications

Energy Bill 2012-13

Bill information

DECC’s EMR website

https://www.gov.uk/government/policies/maintaining-uk-energy-security--2/supporting-pages/electricity-market-reform

Links to more detailed publications on EMR

Energy Bill 2012-13