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Energy Act 2010

Commentary on Sections

Section 12: Reconciliation mechanism: licence modifications

61.This section provides that the Secretary of State may, for the purposes of creation or operation of a reconciliation mechanism, modify the conditions of transmission licences or supply licences issued under the Electricity Act 1989 or documents or agreements related to such licences, such as codes of practice (subsection (1)). This provides the Government with two possibilities in relation to the implementation of the reconciliation mechanism. The first would allow Government to amend the Balancing and Settlement Code (BSC) to allow the operator of the balancing and settlement mechanism to be the operator of the reconciliation mechanism. To do this it may be necessary to make an initial amendment to National Grid’s transmission licence. The second possibility would be to create a new industry code specifically to govern the operation of the reconciliation mechanism.

62.Subsection (2) provides that modifications to licences, or a document or agreement relating to licences, need not relate to the activities authorised by the licence. This means, for example, that if a reconciliation mechanism were to be operated by the current operator of the balancing and settlement mechanism, the Secretary of State may modify the BSC to include detail about the operation of the mechanism (even though that does not relate to the activity of electricity transmission). The Secretary of State would also be able to apply the modifications only to parties to the BSC which are to participate in the reconciliation mechanism.

63.Subsection (3) provides that modifications to a document or agreement relating to licences may make different provision for different cases.

64.Before making modifications, the Secretary of State is required to consult the holders of any licence being modified, Ofgem and any other persons the Secretary of State considers appropriate (subsection (4)). This consultation may occur before or after commencement of this power.

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