In review: energy regulation in United Kingdom & More News Here

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Regulation

i The regulatorsGas and Electricity Markets Authority

Great Britain’s fuel and electrical energy markets are regulated by the Gas and Electricity Markets Authority (GEMA), which consists of a panel of people appointed by the Secretary of State. GEMA is solely unbiased from authorities and has no stakeholder involvement, in neither of GEMA’s regulatory or operational choices. The powers and duties of GEMA are set out in a variety of statutes, together with the Gas Act, the Electricity Act, the Utilities Act 2000 (the Utilities Act), the Competition Act 1998, the Enterprise Act 2002 (the Enterprise Act) and the Energy Acts of 2004, 2008, 2010 and 2011. As a results of Brexit and onshored (retained) EU laws, the function of GEMA has been expanded to cowl new capabilities (as an example, roles that had beforehand been carried out by the EU Agency for the Cooperation of Energy Regulators (ACER) have been reassigned to GEMA). The day-to-day administration of GEMA’s capabilities are carried out by the Office of Gas and Electricity Markets (Ofgem), which was shaped from the amalgamation of the Office of Gas Regulation and the Office of Electricity Regulation in November 2000. GEMA defines Ofgem’s technique, units coverage priorities and makes choices on a variety of regulatory issues, together with value management and enforcement.

The aims of GEMA are set out in Sections 4AA to 4D of the Gas Act and Sections 3A to 3F of the Electricity Act. The principal goal of GEMA is to guard the pursuits of present and future prospects. This goal contains selling the decreasing of energy costs, the dealing with of complaints in opposition to suppliers and the safety of susceptible prospects, in addition to the broader pursuits of shoppers, such because the discount of greenhouse gases, the safety of provide of fuel and electrical energy, contributing to the achievement of sustainable improvement or the advance of effectivity and high quality of providers. Furthering the principal goal of defending prospects’ pursuits might, at any time when applicable, additionally embrace fostering efficient competitors. For this cause, GEMA has concurrent authority with the Competition and Markets Authority (CMA), the function and powers of that are mentioned in element beneath. Further, GEMA’s duties additionally embrace making certain that licence holders are able to financing their actions, a operate that’s of accelerating significance in regulated markets (notably price-controlled networks and, extra just lately, provide markets).

GEMA’s powers and duties are such that the regulatory framework stays aware of adjustments in the market. Acting inside its statutory remit, GEMA has the power to change licence situations and the assorted trade codes that comprise the detailed operational and technical guidelines governing the trade; nonetheless, that is usually finished in a clear method and in session with market members. The Secretary of State has the facility, by advantage of Section 134 of the Energy Act 2004, to change licence situations whether it is thought of needed or expedient for the aim of implementing new buying and selling and transmission preparations. Under the Gas Act and the Electricity Act, the Secretary of State additionally has powers to introduce secondary laws to reply to extra structural adjustments in the market.

Northern Ireland Authority for Utility Regulation

Electricity, fuel, water and sewerage industries in Northern Ireland are regulated by the Northern Ireland Authority for Utility Regulation (NIAUR). The NIAUR is an unbiased non-ministerial authorities division that carries the duty to guard short-term and long-term pursuits of electrical energy, fuel, water and sewerage shoppers in respect of pricing and normal of service. Further duties of this authority embrace the promotion of a strong and environment friendly water and sewerage trade, the supply of high-quality providers, the promotion of competitors and the promotion of the event and upkeep of an financial and coordinated pure fuel trade.

Northern Ireland operates a wholesale electrical energy market often called the only electrical energy market (SEM), which is separate from that of Great Britain and is built-in with the wholesale electrical energy market of the Republic of Ireland. To adjust to the European Third Energy Package, the SEM was reformed in October 2018, giving rise to a brand new set of buying and selling preparations between the governments of the Republic of Ireland and Northern Ireland, known as the Integrated Single Electricity Market (I-SEM). Under I-SEM, wholesale electrical energy in the Republic of Ireland and Northern Ireland is traded on an all-island foundation, whereby the island of Ireland is handled as one entity for a lot of regulatory functions. The market is collectively regulated by the NIAUR and the Commission for Regulation of Utilities in the Republic of Ireland. The decision-making physique that governs the market is the SEM Committee.

By advantage of the Protocol on Ireland and Northern Ireland to the Brexit Withdrawal Agreement (the Withdrawal Agreement 2018),² Northern Ireland stays throughout the EU inside energy market and continues to be topic to EU regulation. It is due to this fact handled in another way from Great Britain (comprising England, Scotland and Wales).

Competition and Markets Authority

The Competition and Markets Authority (CMA) was established in April 2014 underneath the Enterprise and Regulatory Reform Act 2013 (ERRA). It regulates the whole United Kingdom and is liable for strengthening enterprise competitors and lowering anticompetitive actions. The CMA is an unbiased non-ministerial division. In April 2014, it introduced collectively the present competitors and shopper safety capabilities of the Office of Fair Trading and the tasks of the Competition Commission.

As talked about above, GEMA has concurrent powers with the CMA with regard to competitors in the energy sector. They work intently collectively because the ERRA requires any sectoral regulator to contemplate the influence underneath competitors regulation earlier than making use of its sector-specific powers. By advantage of Section 5 of the Enterprise Act, the CMA capabilities by conducting research of the capabilities of competitors inside a given market in the UK as an entire, relatively than conducting investigations on particular actions of corporations. When the findings of a market research give rise to affordable grounds for suspecting {that a} characteristic – or mixture of options – of a market prevents, restricts or distorts competitors, the CMA can provoke a focused investigation. For the CMA to hold out a market-wide investigation in any of the electrical energy or fuel sector markets, Ofgem might refer any of these markets to the CMA or the CMA might instruct Ofgem to switch a case.

Prior to the UK’s withdrawal from the EU, the CMA labored intently along with the European Commission on competitors regulation enforcement and merger investigations throughout all sectors. Since 1 January 2021, this has modified and the function of the CMA has been expanded to cowl new capabilities. In December 2020, the CMA printed steering setting out the scope of its capabilities in element.³

Other related regulators

In addition to the aforementioned regulators, a key function in Great Britain’s energy market is carried out by the next regulators and authorities departments.

The Department for Business, Energy and Industrial Strategy (BEIS), though by definition not a regulator, performs a key half in the regulation, organisation and administration of the energy market. BEIS is a division of the Government of the United Kingdom that was created in 2016, taking up from the Department of Energy and Climate Change, and is supported by 41 businesses and public our bodies. As a results of Brexit and onshored EU laws, the function of BEIS has been expanded to cowl capabilities beforehand assigned to EU authorities and new cross-government working teams have been arrange. The Secretary of State is liable for BEIS, which is accountable to Parliament on issues together with safety of provide and sustainability in Great Britain’s energy sector. In gentle of the mixing of the Northern Irish energy sectors into the I-SEM, the division liable for the energy sector in Northern Ireland is the Department for the Economy.

The Oil and Gas Authority (OGA) was established in April 2015 as an govt company of BEIS, with the purpose to maximise the financial restoration of the oil and fuel assets obtainable in the UK. In October 2016, nonetheless, the OGA was included as an unbiased authorities firm, with BEIS as its sole shareholder.

The OGA has the facility to manage the exploration and improvement of the UK’s offshore and England’s onshore oil and fuel, the UK’s carbon and fuel storage and offloading actions. The OGA additionally has a vital function in encouraging funding in the UK, selling alternatives to transition to a decrease carbon economic system and influencing a tradition of higher collaboration throughout the energy trade. To fulfil its function, the OGA has been given a variety of powers underneath the Petroleum Act 1998, the Energy Act 2011 and the Energy Act 2016.

The Health and Safety Executive is a nationwide unbiased regulator liable for regulation and enforcement of well being and security in the office and for producing steering and finishing up analysis in relation to occupational dangers.

The Office for Nuclear Regulation (ONR), an unbiased statutory company established in April 2014, is the regulator for the UK nuclear trade. The ONR experiences to the Department for Work and Pensions; nonetheless, it really works intently with BEIS. The goal of the ONR is to supply environment friendly and efficient regulation of the nuclear trade, holding it to account on behalf of the general public. This contains granting nuclear web site licences, regulating the transport of nuclear supplies and making certain compliance with safeguarding obligations for the UK.

The Financial Conduct Authority (FCA) is the UK authority liable for the regulation of companies providing monetary providers. By advantage of the broad definition of economic providers in the Financial Services and Markets Act 2000, sure energy merchandise are captured and due to this fact a wide range of electrical energy and fuel market members are topic to their oversight. These market members should both change into authorised with the FCA or search certainly one of numerous obtainable exemptions, such because the one for transmission system operators (TSOs) or for the supply of ancillary providers. The FCA is moreover liable for the oversight of the anti-market abuse regime in the energy sector.

Environmental regulation in the UK is a devolved operate, with England, Wales, Scotland and Northern Ireland every having adopted a special strategy. In England, the Environment Agency (EA) is liable for the safety and enhancement of the surroundings. It is a non-departmental public physique that’s organised into eight directorates. The Department for Environment, Food and Rural Affairs is partly liable for the funding of the EA and is liable for the appointment of the chairman and the board. Environmental affairs are the duty of Natural Resources Wales (NRW) in Wales, the Scottish Environment Protection Agency (SEPA) in Scotland, and the Northern Ireland Environment Agency (NIEA) in Northern Ireland.

Finally, a key function in the event of energy infrastructure in the UK is performed by the native planning authorities (LPAs). Where market members want to develop an energy venture, consent usually must be obtained from the related LPA, which is generally the borough, district or unitary council for the realm, as required underneath both the Planning Act 2008 or the Town and Country Planning Act 1990.

ii Regulated actions

The electrical energy and fuel sectors are structured in an analogous method, in that they function by way of a hierarchy of statutes, statutory devices, licences and trade codes underneath the supervision of Ofgem to make sure the proper functioning of the regulatory framework. Both the Gas Act and the Electricity Act set out a basic prohibition on finishing up a licensable exercise with no licence. A breach underneath both Act is triable on the instruction of the Secretary of State or GEMA, punishable by a positive as much as the statutory most if tried summarily and an infinite positive on indictment.

Licences are granted and administered by Ofgem and all the time correspond to the entity finishing up the exercise relatively than the particular asset. As such, licences don’t connect to an asset or the land on which an asset is located and due to this fact they can’t robotically switch on the sale of the asset or land.

Under sure circumstances, an entity could also be granted an exemption from the licence requirement. Exemptions are made by statutory instrument and take the type of both a category exemption, which is out there to all supplied that sure necessities are met, or a particular exemption, which is private to a particular licence holder. In line with the precept of unbundling and certification necessities underneath the Gas Act and the Electricity Act, a licence holder might not maintain a technology or provide licence if she or he already is in possession of a transmission, distribution or interconnection licence.

Licences in each the fuel and electrical energy sectors are topic to straightforward licence situations (Section 8 of the Gas Act and Section 8A of the Electricity Act). These situations apply to all licence holders, though some licences could also be granted topic to particular situations or have sure normal situations disapplied or amended. The breach of a licence situation entitles Ofgem to revoke the related licence.

Electricity

Section 6(1) of the Electricity Act states {that a} licence is required by an entity that needs to hold out the next actions:

1. the technology of electrical energy;
2. participation in the transmission of electrical energy;
3. distribution of electrical energy;
4. provide of electrical energy to premises;
5. participation in the operation of an electrical energy interconnector; and
6. provision of a wise meter communication service.

Licences could also be restricted in geographical space and provide licences might differentiate between the availability to home and non-domestic (i.e., industrial and industrial) premises. In apply, Ofgem grants fewer licences for provide to home premises as these licences embrace strict situations referring to the supply of specific providers to prospects.

As supplied above, one of many two methods in which an entity could also be exempt from the requirement to carry a licence is by falling inside a particular exempt class. These are set out in the Electricity (Class Exemptions from Requirement for a Licence) Order 2001. By means of instance, two generally used class exemptions are these for producing stations with capability of lower than 50MW, and for on-site provide to premises, which is out there to embedded mills supplying on to the location the place the producing station is located.

Gas

Sections 5 and seven to 7B of the Gas Act require a licence to be held to hold out the next actions:

1. the transportation of fuel (i.e., the conveyance of fuel by way of pipes to premises or to a pipeline system operated by one other fuel transporter);
2. the operation of a fuel interconnector;
3. the delivery of fuel (i.e., the making of preparations with a fuel transporter for fuel to be put into, conveyed by way of or taken out of that fuel transporter’s pipeline system);
4. the availability of fuel; and
5. the supply of a wise meter communication service.

As with electrical energy licences, fuel licences could also be restricted in geographical space and provide licences differentiate between home and non-domestic prospects. The guidelines making use of to exemptions from the requirement to carry a licence when finishing up a licensable exercise are the identical as these underneath the electrical energy regime: class exemptions are set out in the Gas (Exemptions) Order 2011 and particular exemptions could also be issued through statutory instrument by Ofgem or the Secretary of State.

Storage and improvement

In respect of the storage of fuel and electrical energy, the provisions in the related statutes differ. Gas storage, whereas being topic to regulation, will not be individually licensed. The provisions on electrical energy storage have been unclear for a while, together with whether or not it needs to be handled as technology. However, in October 2020, Ofgem issued a call clarifying that electrical energy storage is topic to the identical guidelines and rules as electrical energy technology.⁴ Minor adjustments to the licence situations of electrical energy technology licences have been made to make sure that electrical energy storage is captured by the licensing requirement as effectively, and these licence adjustments took impact on 29 November 2020.

A licence underneath the Gas Act or the Electricity Act authorises the licence holder to hold out the desired exercise; nonetheless, it doesn’t confer another rights. As such, a licence doesn’t entitle the entity to assemble infrastructure. When creating an influence station, fuel pipeline or electrical energy community, as an example, separate licences and consents have to be obtained from related authorities with respect to, inter alia, land and entry rights, planning permission and decommissioning.

Codes

The normal licence situations require holders to be a celebration to a number of trade codes that set out technical guidelines and procedures for particular areas key to the operation of Great Britain’s energy trade. All trade codes have an analogous authorized construction, in that they take the type of an ordinary doc or contract and new events accede to those by way of an accession settlement. These trade codes have initially been ready by the Secretary of State; nonetheless, these paperwork are maintained by devoted entities, that are liable for any modifications by way of trade session and consent by Ofgem.

There are 9 trade codes that apply to the electrical energy sector, of which the next 4 are of best relevance:

1. the Balancing and Settlement Code (BSC), to which all technology and provide licence holders should be a celebration and which is run by Elexon, incorporates guidelines for wholesale buying and selling and settlement of electrical energy. Non-physical merchants who aren’t licensed additionally have to accede to the BSC;
2. the Connection and Use of System Code (CUSC) units out the principle rights and obligations of connection to, and use of, the nationwide transmission system, and extra provisions on ancillary providers and balancing providers. The code administrator of the CUSC is National Grid Electricity System Operator Limited (NGESO) as TSO;
3. the Grid Code units out technical guidelines for issues comparable to connection situations, scheduling, dispatch, operational liaison and security coordination, and all materials technical elements of connections to, and the operation and use of, the transmission system. All licensed mills and transmission operators are required to signal each the CUSC and the Grid Code. The Grid Code is run by NGESO; and
4. the Distribution Connection and Use of System Agreement (DCUSA) is a multi-party contract between licensed electrical energy mills, suppliers and distributors, and regulates the connection to and use of the electrical energy distribution networks. The code administrator of the DCUSA is Electralink.

In addition to the nationwide trade codes, numerous EU community codes for electrical energy exist underneath the remit of Regulation (EC) No. 2019/943, the purpose of which is the harmonisation of technical, operational and market guidelines governing the European electrical energy grids. These set out the foundations for issues comparable to system operation, balancing actions, demand connection, grid connection for mills, and capability allocation and congestion administration. As EU Regulations, these community codes had direct applicability to the UK previous to the top of the Brexit implementation interval on 31 December 2020 and due to this fact existed in parallel with the nationwide trade codes outlined above. By advantage of the European Union (Withdrawal) Act 2018 (as amended) (Withdrawal Act 2018),⁵ these community codes have been transposed into nationwide regulation and due to this fact stay in impact post-Brexit as onshored EU laws. While the intention of EU community codes is the harmonisation of requirements between EU Member States, the appliance of the onshored EU community codes is successfully restricted to Great Britain given the present lack of bilateral agreements making a cross-border regulatory framework.

With respect to the fuel sector, there are 5 trade codes, probably the most central of which is the Uniform Network Code (UNC). The UNC is a contractual framework that types the idea of preparations between the homeowners and operators of the fuel transportation methods in Great Britain and the customers of those methods. It is run by the Joint Office of Gas Transporters.

Similarly to the electrical energy sector, EU community codes for fuel have been launched by Regulation (EC) No. 715/2009 (EU Gas Regulation). These community codes facilitate cross-border community entry and market integration and, as EU Regulations, have been immediately relevant in the UK previous to the top of the Brexit implementation interval. As with the electrical energy community codes, the fuel community codes have been transposed into nationwide regulation underneath the European Union (Withdrawal) Act 2018 and due to this fact stay in drive in parallel with the nationwide trade codes talked about above.

In addition to connection agreements that accede the related events to the UK nationwide trade codes, numerous agreements regulate entry to and exit from the community, together with community exit agreements and turn-down agreements.

iii Ownership and market entry restrictions

Although there are not any particular restrictions regarding the international possession of electrical energy corporations or belongings in the UK, a further certification course of requires the evaluation of whether or not international possession or management poses a safety of provide threat in the UK. This evaluation is to be carried out by Ofgem in session with BEIS.

Following Brexit, electrical energy corporations or belongings of EU Member States are now not protected underneath the equal therapy precept in the UK. The Ofgem evaluation regime for international licence holders due to this fact now additionally contains licence holders from EU Member States. However, the TCA ensures that open and truthful competitors by way of established market ideas (comparable to aggressive markets, unbiased regulators, market integrity, third-party entry, and so forth.) will proceed.

iv Transfers of management and assignments

All licences comprise a provision allowing task; nonetheless, the task requires the prior written consent of Ofgem. Obtaining this consent would contain the assignee of the licence satisfying the Secretary of State that it will possibly meet the licence obligations, which, in apply, entails an virtually an identical process to that required when making use of for a brand new licence. There are not any particular restrictions on change of management in any of the licences; nonetheless, transmission, distribution and interconnection licences do comprise provisions that create a regulatory ring fence across the regulated asset. This offers a further layer of management for Ofgem.

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