20.The Gas and Electricity Markets Authority is the independent economic regulator for the electricity and downstream gas markets in England, Wales and Scotland, generally known as the Office of Gas and Electricity Markets or “Ofgem”.
21.In the Energy White Paper (paragraph 9.15) the Government noted that Ofgem was committed to producing regulatory impact assessments, including environmental impact assessments, for all significant new policies and indicated that it would provide statutory backing for these assessments through primary legislation. Section 6 imposes a statutory duty on Ofgem to provide these assessments.
22.Section 6 inserts a new section 5A into the Utilities Act 2000 (c.27). The drafting follows the precedent of a near-identical provision in the Communications Act (c.21), which received Royal Assent on 17 July 2003. Section references in the following paragraphs are references to new section 5A of the Utilities Act.
23.Ofgem is required by the new section 5A to undertake and publish an assessment in respect of any of its proposals that appear to it to be important. There is provision within section 5A(1) for Ofgem to avoid the requirement to undertake an assessment if it needs to take action urgently (e.g. to address a fast-moving situation arising from the failure of a company). Section 5A(2) provides detail on what should be regarded as an important proposal. Section 5A(3) requires publication of the assessment, or a statement setting out reasons why Ofgem thinks an assessment is not necessary. Section 5A(9) also requires details of assessments and related decisions in any year to be included in Ofgem’s Annual Report, copies of which are required to be laid before Parliament.
24.Paragraphs (a) and (b) of section 5A(4) provide that an assessment carried out under section 5A must assess the likely effects on the environment of implementing the proposal, and must also relate to such other matters as Ofgem considers appropriate. Under section 5A(5) Ofgem must have regard to general guidance on the carrying out of impact assessments when determining what these matters are. The Cabinet Office produces extensive guidance on regulatory impact assessments and Defra has issued guidance on how to conduct environmental impact assessments. Section 5A(6) allows Ofgem to determine the form of assessments.
25.Section 5A(7) provides a power for representations to be made to Ofgem on the proposals. Ofgem must not implement a proposal unless the period for representations has ended, and the representations have been considered. Section 5A(8) provides that any consultation which Ofgem is required to undertake under any other provisions is additional to the requirements of section 5A. However, the consultations may be performed at the same time.
26.Sections 5A(11) and 5A(12) apply Ofgem’s principal objective and general duties, as set out in the Gas Act 1986 (c.44) and the Electricity Act 1989 (c.29), to the carrying out of impact assessments by Ofgem.