Electricity Regulations (Northern Ireland) 2007

Explanatory Note

(This note is not part of the Regulations.)

These Regulations inter alia amend the Electricity (Northern Ireland) Order 1992 (“the 1992 Order”) to ensure that it conforms with the requirements of Directive 2003/54/EC of the European Parliament and of the Council concerning common rules for the internal market in electricity (“the Directive”).

The 1992 Order provides for there to be a single holder of a supply licence Public Electricity Supplier (“PES”) for any given area. The PES is required to supply electricity to customers in that area on request and to recover charges for such a supply under a tariff and thereby act as supplier of last resort. Such customers are known as tariff customers. Any other supplier may only be licensed on more limited terms and there is not legislative provision enabling them to act as supplier of last resort. Such suppliers are known as second tier suppliers. Under the Directive, customers in Northern Ireland must be free to purchase electricity from the supplier of their choice. Moreover, all household customers must enjoy a universal service. And for that purpose the Directive allows for the appointment of a Supplier of Last Resort on the basis of a fair, reasonable and non-discriminatory process and criteria. Accordingly, Part II of these Regulations abolishes the separate categories of PES and private electricity supplier (regulations 4 and 6) and replaces these with a single licence category of electricity supplier. It also replaces the current arrangements for a Supplier of Last Resort, as provided for in the duty of the PES to supply electricity under Article 19 to 26 of the 1992 Order, with new arrangements for the provision of a universal service which complies with the requirements of the Directive (regulation 9). This includes provision for any holder of a supply licence to act as Supplier of Last Resort if it so chose.

The Directive also requires the legal and functional separation of distribution system activities from those of supply and generation. Part III of the regulations facilitates the restructuring of those PES licence holders whose corporate structure is incompatible with this restriction. It does so by providing for a property arrangement scheme and a complementary licensing scheme. The latter enables current PES licences to have effect as if it were a supply licence under the new provisions granted to an associate nominated by the former PES (regulation 35 to 38). The former enables the Northern Ireland Authority for Utility Regulation, on application by the holder of both a PES licence and a licence to participate in transmission (the nominating licensee), to transfer to the holder of the new supply licence of any property, rights and liabilities held by the nominating licensee or the creation of rights or liabilities in favour of such a new licence holder (regulations 12 to 34).

Consequential upon the abolition of the separate categories of suppliers and the restructuring of former PESs into separate supply and distribution businesses, Part II and Schedule 2 also make changes to other provisions of the 1992 Order. In particular-

(a) New Article 12 establishes a code which sets out the general duties of electricity distributors and transmission licence holders in place of a code for the PES (regulation 7).

(b) New Article 27 and Schedule 1 provides for a code in relation to the distribution and supply of electricity generally and not just supply by the PES (regulation 5).

(c) New Article 42 enables regulations to govern the standards of performance of all electricity suppliers and distributors in individual cases (regulation 10).

(d) New Article 42A provides for the resolution of disputes in such cases (regulation 10).

(e) New Articles 43, 43A and 43B provide for the determination of overall standards of performance for all electricity suppliers and distributors (regulation 10).

Part IV contains transitional provisions. In particular it provides for the conversion of former tariff customers supplied by the PES to customers supplied under contract by the holder of a supply licence. It also provides for the conversion of supply licences authorising supply of electricity within an authorised area or to specified premises to general supply licences (regulation 41). Current rights and obligations relating to PES are changed so as to apply, as appropriate, to electricity suppliers and distributors (regulations 42 to 58). The Department is given a general power to further modify licence conditions imposed under the 1992 Order where it is necessary or expedient to comply with the requirements of the Directive. Finally provision is made so that the enforcement regime under Part VI of the Energy (Northern Ireland) Order 2003 applies to the rights and obligations created or imposed under these Regulations (regulations 59, 61 and Schedule 3).