PROPOSAL 2.1: The Government proposes to provide in legislation for the appointment by the Secretary of State of a combined energy regulator (in the shape of an executive board) in place of the Directors General of Electricity Supply and Gas Supply.
PROPOSAL 2.2: The Government proposes that the regulator should have a power to take a broad view in the exercise of his duties across both electricity and gas markets. This power would have to be exercised reasonably, in accordance with normal provisions of administrative law. Views are sought on whether any additional safeguards on the exercise of such a power might be desirable.
PROPOSAL 2.3: The Government believes that the new energy regulator should operate under one combined set of duties. It invites views on whether there are certain distinctions between the duties which should be retained.
PROPOSAL 2.4: The Government does not propose to move from separate gas and electricity licences to combined energy licences.
PROPOSAL 2.5: The Government proposes that there should be a system of standard licence conditions for electricity (following the gas model). It invites views on whether or not the power to grant individual licence exemptions should be continued, and on the abolition of the Secretary of State’s reserve power to grant electricity licences.
PROPOSAL 2.6: The Government supports the principle of collective licence modifications for certain licence conditions. It invites views:
- as to how this can best be achieved to ensure that the licensing regime can evolve to meet the changing needs of the market, while retaining fairness and transparency for market participants;
- on the models for collective licence modification set out in this document, and – in the case of the “enhanced gas model” – the percentages which should be applied to determine the level of the “blocking minority”;
- on whether different procedures might apply to different types of licence and, if so, what they might be.
PROPOSAL 2.7: The Government invites views on whether it would be of benefit to introduce mechanisms for adapting types of licence, such as any or all of those described above, without the need to resort to primary legislation.
PROPOSAL 2.8: The Government invites views on whether some of the activities currently undertaken by shippers should instead be undertaken by suppliers and/or customers; and/or whether gas shippers’ licences might be abolished altogether.
PROPOSAL 2.9: The Government invites views on the proposal to bring the two regimes into alignment either by abolishing the ability to assign gas licences or by introducing it to electricity licences.
3.Separation of Supply and Distribution of Electricity
PROPOSAL 3.1: The Government does not propose, in legislating for separate licences for supply and distribution, to require the supply and distribution businesses to be held separately. Instead, the Government is attracted to the proposal that the supply and distribution businesses should be required to be held in separate legal entities (which could be in common ownership). It nevertheless notes that there may be issues involved with this proposal – in particular with the transfer schemes needed to effect the separation into two companies of a PES’s assets and liabilities. The Government invites views on this proposal, in particular on any difficulties involved in such a separation and how they might be mitigated, and on the associated costs.
PROPOSAL 3.2: The Government accepts the logic behind operational separation, and recognises that the detailed aspects are a matter for the regulator to pursue.
PROPOSAL 3.3: The Government believes, as in England and Wales, that steps should be taken in Scotland to improve the transparency and effectiveness of the regulatory regime and provide for greater competition. It therefore invites views on the proposals to:
- require the generation, transmission, distribution and supply activities of the integrated Scottish companies to be carried on by separate Companies Act companies;
- require independent operation of the transmission activities of the integrated companies; and
- to remove the qualification of the duty on transmission licence–holders to facilitate competition in the supply and generation of electricity.
4.Changes consequent on separate Electricity distribution and supply Licences
PROPOSAL 4.1: The Government considers that all suppliers should be placed on an equal footing in the competitive electricity supply market, on the basis of a requirement to offer contract terms on request. It invites views on the best way to achieve this, while ensuring that all groups of customers have access to electricity supply on reasonable terms.
PROPOSAL 4.2: The Government proposes to extend to electricity the provision for deemed contracts that exists in gas. It invites views on the operation of this scheme, and on any threshold to the size of contract above which it might not apply.
PROPOSAL 4.3: The Government proposes that a mechanism be put in place to ensure that there is a supplier of last resort. It invites views on which mechanism would be best, and which customers should be protected by such a mechanism.
PROPOSAL 4.4: The Government invites views on the definition, scope, rights and obligations of the separate activity of electricity distribution.
PROPOSAL 4.5: The Government invites views on the changes that will be necessary to adapt the electricity legislation as a consequence of separate licensing of supply and distribution.
5.Metering
PROPOSAL 5.1: The Government supports the introduction of full competition in meter reading and meter provision. It invites views as to how this can best be achieved to ensure that its benefits accrue to all consumers including the disadvantaged. It further invites views on any necessary restructuring of gas and electricity legislation to reflect the development of competition and on the desirability of introducing separate licensing of metering.
6.Other Specific Provisions
PROPOSAL 6.1: The Government proposes to introduce a provision for the appointment of a special administrator is the event of the insolvency of an energy network business. The Government seeks views on funding arrangements.
PROPOSAL 6.2: The Government invites views on whether it should take powers to appoint a special administrator in the case when enforcement proceedings are being taken against a licensed network company.
PROPOSAL 6.3: The Government invites views on:
- what legislative changes might be necessary to support the implementation of new trading arrangements;
- whether legislation could be used to overcome contractual problems caused by the demise of a recognised Pool price;
- what legislative changes might be required to support new governance arrangements and the regulation of the balancing and settlements arrangements.
PROPOSAL 6.4: The Government invites views on how statutory duties in respect of safety and continuity of supply should be correctly apportioned.
PROPOSAL 6.5: The Government invites views on whether these amendments to the powers of the Engineering Inspectorate should be introduced.
PROPOSAL 6.6: The Government invites views on whether to end the geographic exclusivity of Public Gas Transporter licences.
PROPOSAL 6.7: The Government invites views on any further aspects of the issues discussed in this document that would be relevant to the adaptation of the regulatory framework for gas and electricity.
Last updated October 1998
