On 8 December 2010 the Energy Bill 2010/11 had its first reading in the House of Lords. The Bill establishes the framework to implement the Coalition Government's "Green Deal" plans, intended to improve the energy efficiency of properties in the UK.
The Bill was published a day before Alistair Buchanan announced at a conference in London that the Government's eagerly anticipated electricity market reform package proposals will be revealed on Thursday 16 December 2010.
To some extent the publication of the draft Bill is overshadowed by the imminent consultation on the Government's electricity reform proposals. However, it contains provisions which are key to the implementation of the Government's wider energy policy.
The majority of the Bill consists of provisions which establish a framework for the Government's Green Deal energy efficiency scheme, which it believes will "revolutionise the energy efficiency of British properties".
The framework enables private firms to offer consumers energy efficiency improvements to their homes, community spaces and businesses at no upfront cost to the owner/occupier, and recoup the costs through a charge added to their energy bill.
To benefit from the scheme:
- the property must be eligible;
- the energy efficiency improvements must be "qualifying energy improvements";
- conditions must be satisfied relating to the assessment of the property by an authorised green deal assessor and green deal provider and the terms of the plan; and
- a relevant supplier must supply the property.
The Bill enables the Secretary of State to make regulations to flesh out the framework and authorise people to act as green deal assessors, providers and installers and to regulate their conduct.
Electricity and gas suppliers participating in the green deal scheme, who will bear the upfront costs of the energy efficiency improvements, are protected through amendments to the underlying gas and electricity legislation which will enable them to take action if a bill payer defaults on payments due in connection with green deal improvements, and also allow sums due to be collected via prepayment meters.
The framework established by the Bill leaves it open to the Government to make the scheme applicable to domestic properties and commercial properties.
The Government has specifically targeted the rental sector and the Bill contains provisions requiring the Secretary of State to conduct a review of the energy efficiency of private rented properties, both domestic and non-domestic, and to publish a report by 1 April 2014. Following the publication of the report, the Secretary of State is empowered to make regulations which would require landlords to make energy efficiency improvements to properties they own.
Property owners will be obliged to disclose the fact that a property is participating in a Green Deal plan and secure an acknowledgement from prospective purchasers or tenants that the bill payer will be bound by the plan.
"Energy Company Obligation"
The Bill contains powers to enable the creation of an "Energy Company Obligation" (ECO), which the Government intends to use to replace existing obligations imposed by the Carbon Emissions Reduction Target and the Community Energy Saving Programme when they end in 2012.
The Government's policy intention is that the ECO will be used to underpin the market-led Green Deal scheme and help to ensure that all households can access energy efficiency measures.
The Bill will amend the Secretary of State's powers, contained in the Energy Act 2008, the Gas Act 1986 and the Electricity Act 1989, to implement the roll out of smart meters. The amendments are intended to ensure that the Government has the appropriate powers to address any unforeseen issues which arise in the later stages of the roll out and ensure that projected economic benefits are achieved.
Security of energy supplies
The Government acknowledges that the increase in low carbon generation will cause significant changes to the way the electricity market operates and that this will require the market to be closely monitored to ensure that sufficient capacity is available to meet demand.
The Bill therefore contains measures which will require Ofgem to report annually to the Secretary of State giving an assessment of how much capacity Great Britain will need in the future (Northern Ireland has a separate electricity market). The Secretary of State will then publish his assessment of the level of capacity that is needed.
More regarding how the electricity market will operate, and how the availability of capacity will be incentivised and secured, will be known when the Government's electricity market reform package is released this week.
The Bill will give Ofgem the power to review the current gas emergency arrangements with a view to strengthening the market incentive mechanism for ensuring that sufficient gas is available to meet demand. Government envisages that Ofgem could use this power, following consultation with industry, to implement changes that would allow for more effective management of a gas supply emergency, for example by allowing the gas price charged to suppliers who are short of gas to be responsive to market prices.
Third party access to upstream petroleum infrastructure
To facilitate third party access to oil and gas infrastructure the Bill includes provisions which re-enact and streamline existing legislative provisions for third party access and replace them with one set of requirements covering access to all platforms, pipelines and terminals.
A procedure is set out to deal with situations where a person has sought access but has not been able to reach an agreement with the owner – an application may be made to the Secretary of State for a notice requiring the owner to grant access.
Special administration for energy supply companies
The current arrangements on insolvency of an energy supply company provide for Ofgem to revoke the insolvent company's licence and appoint another supplier (known as a "supplier of last resort") to take on its customers. Whilst the process has been tested on several occasions in the last few years, the Government is concerned that the process may not be effective if a large supplier were to become insolvent due to the significant volumes of customers that would need to be transferred.
The Bill therefore creates a special administration regime designed to supplement the supplier of last resort mechanism. The provisions allow the Secretary of State (or Ofgem with the Secretary of State's consent) to apply to court for a special administration order. Provided the statutory insolvency tests are satisfied and the order is granted a special administrator would be appointed who would continue to contract to supply gas and electricity to the insolvent company's customers until the company was rescued, sold or its customers transferred to other companies.
UK Continental Shelf re-designation
The Bill enables Orders designating the UK Continental Shelf to be revoked, thereby providing the Government with flexibility regarding the management of the Continental Shelf. The Government intends, for example, to use these powers to re-designate two small areas currently designated to Ireland to the UK (in exchange for the transfer of two areas of the same size to Ireland). The Government intends the increased flexibility to contribute to energy security as it will allow for better management of hydrocarbon resources.
The Bill amends the Electricity Act 1989 to allow the Secretary of State to make an order extending Ofgem's powers to make property transfer schemes relating to the transfer of transmission assets to offshore transmission system owners by the generators who built them.
Through the extension of Ofgem's powers the Government seeks to enable the implementation of an enduring offshore transmission regime, with a generator build option beyond 2010.
Decommissioning nuclear sites
The Bill amends the powers granted to the Secretary of State in the Energy Act 2008 to approve and propose modifications to funded decommissioning programmes. Through the amendments the Government aims to provide greater clarity and certainty to the person who submits a programme regarding how the Secretary of State's power to modify an approved programme will be exercised.
Extension of the remit of the Coal Authority
As currently drafted the Bill will allow the Coal Authority, which has developed expertise in the treatment of mine workings and mine shafts, the management of surface hazards, subsidence and the remediation of contaminated mine water, to offer services relating to the alleviation of the effects of subsidence and the treatment of water discharges resulting from causes other than coal mining.
Measures not included in the Bill
Following the Queen's Speech in May 2010, the Government announced that in addition to implementing the Green Deal scheme the Bill could also include measures to:
- regulate the carbon emissions from coal-fired power stations;
- reform energy markets to deliver security of supply and ensure fair competition;
- put in place a framework to guide the development of a smart grid that would revolutionise the management of supply and demand for electricity; and
- create a Green Investment Bank to support investment in low carbon projects to transform the economy.
As these measures are not included in the Bill it is likely that they will be implemented by alternative means and through further legislation.
The second reading and general debate in the House of Lords on all aspects of the Bill is due to take place on 22 December
The draft Bill and details of its progress are available here on the UK Parliament website.