Summary: The Department for Business, Energy and Industrial Strategy has published a package of statutory instruments relating to the UK’s energy sector, dealing with the eventualities of a no-deal Brexit. This blog sets out a brief summary of each of these statutory instruments

On 18 December, it was announced that the government would be ramping up preparations for a no-deal Brexit, with £2 billion set aside to assist in the contingency planning.

As part of this preparation, the Department for Business, Energy and Industrial Strategy (“BEIS”) published five statutory instruments ("SIs") under the European Union (Withdrawal) Act 2018 (the “Withdrawal Act”).  The Withdrawal Act converts any directly applicable EU law into UK law, creating a smooth legislative transition upon leaving the EU.

The UK’s energy regulatory framework is deeply intertwined with the EU’s, so BEIS intends for the SIs to make retained EU legislation “workable” post departure and ensure the continued effective operation of energy legislation.

This blog sets out a brief summary of each of the SIs.

  1.  THE ELECTRICITY AND GAS ETC. (AMENDMENT ETC.) (EU EXIT) REGULATIONS 2019

    This SI will remove inoperabilities between legislation originating from the UK (including the Gas Act 1986 and Electricity Act 1989) and any retained EU legislation (including the Electricity and Gas Regulations). The amendments required are generally minor, such as removing any redundant EU specific references, but include a number of more significant amendments, including removing the competencies of the European Commission and other EU agencies.

  2.  THE GAS (SECURITY OF SUPPLY AND NETWORK CODES) (AMENDMENT) (EU EXIT) REGULATIONS 2019

    EU legislation relating to the security of gas supply, such as the Gas Regulation and other gas network codes, is largely framed in cross border, bilateral terms with reference to non UK entities, and contains many references to EU processes, obligations and institutions.

    This SI will:

    < >retain alignment with EU regulations to the greatest extent possible, but remove requirements for the UK to facilitate gas sharing with EU members;amend the Network Codes on:< >Interporability and Data Exchange Rules to maintain alignment, but will remove obligations for information sharing with other EU Transmission System Operators;Harmonised Transmission Tariffs for Gas; andGas Balancing of Transmission Networks (BAL), with BAL principles remaining in place at all UK and UK marine area balancing zones,amend the Network Code on Capacity Allocation Mechanisms in the Gas Transmission System (CAM) to retain alignment with CAM standards, rules, principles and technical specifications and all cross border gas trading.
  3.  THE ELECTRICITY NETWORK CODES AND GUIDELINES (MARKETS AND TRADING) (AMENDMENT ETC.) (EU EXIT) REGULATIONS 2019

    EU legislation allows for wholesale electricity trading and allocation of capacity. This will become redundant if the UK leaves without a deal, as the UK will no longer be able to participate in these mechanisms.

    This SI will:

    • revoke the Guidelines on Capacity Allocation and Congestion Management and the Forward Capacity Allocation Guideline which provide for harmonisation across the EU on electricity trading and sale of interconnector capacity (respectively). BEIS anticipate that trade arrangements may be put in place in respect of these;
    • largely retain the Guideline on Electricity Balancing in respect of Great Britain, with amendments being made to remove references to a European platform for the exchange of balancing energy, as the UK would not have access to such a platform; and
    • permit UK TSOs to continue to operate, whether or not they continue to participate in the Inter-Transmission System Operator Compensation (ITC) regime under the ITC Regulation, under which TSOs pay and are paid for the cost of hosting cross border flows of electricity.
  4.  THE ELECTRICITY NETWORK CODES AND GUIDELINES (SYSTEM OPERATION AND CONNECTION) (AMENDMENT ETC.) (EU EXIT) REGULATIONS 2019

    EU legislation relating to the operation of electricity systems creates common standards and allows for cross-border cooperation. Much of this legislation will become inoperable in the event of a no deal Brexit given the number of references to EU processes and institutions.

    This SI will:

    < >amend the Guideline on Electricity Transmission System Operation (“TSOG”) in the UK to remove provisions:establishing regional security coordinators, and relating to regional outage coordination and cross border imbalance settlement mechanisms; andrequiring information sharing with EU institutions and TSOs;amend the Network Code on Electricity Emergency and Restoration (“ER”) to:
    • limit the GB System Operator’s obligations to provide emergency assistance to neighbouring TSOs, to only assisting Northern Irish TSOs; and
    • remove the GB System Operator’s obligations to ensure consistency of system defence and restoration plans with neighbouring TSOs and to share information with non-UK TSOs; and
    • revoke EU laws relating to connections to electricity networks (“Connections Codes”). BEIS intend to incorporate the Connection Codes into UK domestic law separately (if required at a later date) under the Electricity and Gas (Powers to Make Subordinate Legislation) (Amendment) (EU Exit) Regulations 2018.
  5.  THE ELECTRICITY AND GAS (MARKET INTEGRITY AND TRANSPARENCY) (AMENDMENT) (EU EXIT) REGULATIONS 2019

    EU legislation has created a market abuse regime relating to energy markets. This legislation will be retained to ensure effective ongoing market surveillance and enforcement, but amendments are required to ensure domestic UK operability.

    This SI will:

    • amend retained EU legislation to address any inoperabilities to ensure effective transfer of the regulatory functions and frameworks into UK law;
    • modify the REMIT regime (and any implementing or consequential legislation) in order to ensure operability; and
    • require GB energy market participants to register with GEMA . This registration requirement will commence following a four week grace period post exit. GB regulators will retain the ability to recognise registrations under the EU regime.