Overview of the Structure of the Act
6.The Act is in four Parts with one Schedule:
Part 1: Carbon Capture and Storage and Decarbonisation
These provisions create the framework for a financial mechanism to support CCS demonstration projects on commercial-scale electricity generation (which may be powered by any kind of fuel). The Government’s intention is for the mechanism to support four CCS demonstration projects on coal-fired power stations, including the winner of the original competition for a CCS demonstration project launched in 2007. The mechanism will, should it be needed, be able to provide support for additional CCS capacity to be fitted to these initial demonstration projects. There will be a levy imposed on electricity suppliers and funds will be disbursed through assistance schemes or via contractual means to projects selected by a competitive process.
In addition, there is a requirement for the Government to prepare regular reports on the progress that has been made on the decarbonisation of electricity generation in Britain and the development and use of CCS.
Part 2: Schemes for Reducing Fuel Poverty
These provisions create the framework for schemes that will oblige energy suppliers to provide benefits to vulnerable consumers, for the purposes of reducing fuel poverty, when the current Voluntary Agreement(1) with energy suppliers comes to an end in March 2011. An integral part of these schemes will be social price support which, subject to consultation, will be in the form of an electricity bill rebate to a specified group of households.
Part 3: Regulation of Gas and Electricity Markets
This Part contains a number of provisions relating to the energy market framework –
General duties of the Gas and Electricity Markets Authority and the Secretary of State – clarification of Ofgem’s principal objective in relation to tackling climate change, ensuring secure energy supplies and the role of measures other than competition in protecting the interests of consumers.
Exploitation of electricity trading and transmission arrangements – powers for the Secretary of State to introduce a Market Power Licence Condition for electricity generators that will make it easier for Ofgem to address certain issues arising from the exploitation of market power where there are constraints on the amount of electricity that can be transmitted.
Time limit for the imposition of financial penalties by the Gas and Electricity Markets Authority – extension of the time limit within which Ofgem can impose financial penalties for breaches of licence conditions from twelve months to five years.
Notification period for changes to domestic gas and electricity supply contracts – introduction of a power for the Secretary of State to modify supply licences for the purpose of ensuring that domestic consumers are notified about changes, by their gas or electricity supplier, to the terms of their contracts or the price charged for their gas or electricity, within a specified period.
Adjustment of energy charges – introduction of a power for the Secretary of State to address situations where cross-subsidies between gas and electricity businesses lead to groups of consumers being disadvantaged.
Part 4: Final Provisions
This Part contains provisions concerning the application of the general duties of the Secretary of State and Ofgem under the Gas Act 1986 and the Electricity Act 1989, statutory instruments, the modification of licences, interpretation and the extent, commencement and short title of the Act. It also introduces a Schedule containing consequential amendments to the Gas Act 1986, the Electricity Act 1989 and the Utilities Act 2000.
7.Annex A to these notes contains a glossary of terms used in the Act and the explanatory notes.
Government negotiated an agreement with the energy suppliers that will deliver £125m spend on social programmes for vulnerable consumers in 2009-10, rising to £150m in 2010-11.
