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Energy Act 2010

Exploitation of electricity trading and transmission arrangements

Commentary on Sections
Section 18: Power to make modifications

101.Subsection (1) provides the Secretary of State with the power to introduce a modification to electricity generation licences (including standard conditions incorporated in licences and documents maintained in accordance with the conditions of licences (such as industry codes) or agreements that give effect to those documents). When exercising powers under this section, the Secretary of State (and Ofgem) must carry out functions in accordance with the principal objective and general duties set out in sections 3A to 3D of the Electricity Act 1989 (section 30).

102.Subsection (2) limits the power in subsection (1) so that it may only be exercised for the purpose of limiting or eliminating the circumstances in which a generation licence holder may obtain excessive benefits from electricity generation in a particular period. Subsection (3) provides that a licence holder will be taken to obtain an excessive benefit if they have entered into arrangements regarding the generation of electricity with the transmission system operator and one or more of the conditions set out in subsections (4)-(7) is met. These conditions are:

  • the licence holder does not notify electricity generation that would have been economic to carry out and may receive excessive payments in connection with an increase in electricity generation in the relevant period;

  • the licence holder may pay an excessively low amount, or may receive an excessively high amount, in connection with a reduction in electricity generation in the relevant period;

  • the licence holder is paid an excessively high amount for an inter-trip arrangement; or

  • there is an increase or reduction in the licence holder’s electricity generation in a specific period, compared to their notified generation, as a result of which the licence holder may obtain an excessive benefit.

103.Subsection (8) provides that modifications may include provisions relating to operation of power stations, amounts payable to generation licence holders or offers by the licence holder to pay amounts.

104.Subsection (9) requires the Secretary of State to consult on the detail of any modification made under subsection (1) before it is implemented. Those consulted must include any generation licence holders, Ofgem and such other persons as the Secretary of State considers appropriate. Subsection (10) specifies that this requirement may be satisfied by consultation either before or after the passing of the Act.

105.Subsections (11) to (14) contain definitions and interpretation provisions for the purposes of this section. In particular, subsection (11) specifies the meaning of “notified electricity generation” for a period, and subsection (12) defines references to an increase or reduction in electricity generation in a period.

Section 19: The Authority’s interpretation and enforcement of modifications

106.This section requires Ofgem to publish a document that will set out how they will approach the interpretation and enforcement of the MPLC. Before publishing the document, subsection (2) requires Ofgem to consult generation licence holders, the Secretary of State and any other persons they consider appropriate. This consultation may occur before or after commencement of this power.

Section 20: Final and provisional orders: appeals

107.This section sets out a special process for appealing against any order which Ofgem makes under section 25 of the Electricity Act 1989 (“Orders for securing compliance”) for the enforcement of the MPLC. Subsection (2) allows licence holders who are the subject of an order to appeal to the Competition Appeal Tribunal (“the CAT”) against the order. Under subsection (3), the CAT can decide whether it wishes to decide on all or part of the matter, or whether it wishes to remit all or part of the matter back to Ofgem (or, indeed, do both). Subsection (4) provides for what the CAT may do in the event it re-determines an appealed matter: permitting it to uphold, set aside or substitute its own final or provisional order.

108.Appeals to the CAT will be subject to the Tribunal’s rules, and subsection (6) provides that subsections (2) to (5) will be subject to those rules.

109.Subsection (7) prevents an order for securing compliance from being challenged by any form of legal proceedings other than an appeal to the CAT under this section. Subsection (8) provides that any decision by the CAT will have the same effect, and will be enforced in the same manner, as a decision of Ofgem.

Section 21: Penalties: appeals

110.This section allows generation licence holders to appeal to the CAT regarding a penalty imposed by Ofgem under section 27A of the Electricity Act 1989 in relation to the MPLC. Subsection (2) provides that an appeal can be made against the imposition of a penalty, the size of that penalty and the date on which they have been directed to pay the whole, or part, of that penalty. Subsection (3) enables the CAT to uphold the penalty, set aside the penalty, substitute another amount for the penalty or vary the date by which the penalty, or any part of it, is required to be paid.

111.This section has a number of provisions that are identical to those in section 20. Any decision by the CAT will have the same effect, and will be enforced in the same manner, as a decision by Ofgem (subsection (7)). Furthermore, appeals to the CAT will be subject to the Tribunal’s rules, and subsections (2) to (4) are subject to those rules (subsection (5)). Subsection (6) ensures that it will not be possible to challenge penalties imposed by Ofgem except by an appeal to the CAT under this section.

Section 22: Further appeals

112.This section provides for further appeals from specified decisions of the CAT to appropriate courts (the Court of Appeal or, in Scotland, Court of Session).

Section 23: Expiry of power

113.Subsection (1) ensures that there is a limited time period within which an MPLC can be in force. This period is initially 5 years, but subsection (2) allows the Secretary of State to make an order to extend this period by up to 2 years. Before making any such order, subsection (4) requires the Secretary of State to consult generation licence holders, Ofgem and any other appropriate person.

114.Subsection (5) provides that any licence modifications made under this Part will cease to have effect after the expiry date set by subsections (1) and (2). Under subsection (6), however, any actions (including the imposition of penalties or other enforcement actions) that have previously been taken by Ofgem, or any other party, would not be affected.

115.Subsection (7) allows the Secretary of State to modify a regulatory instrument (which includes a licence) as a consequence of the powers to make licence modifications expiring. Subsection (8) provides that the Secretary of State must consult the holder of any generation licence, Ofgem and any other such persons considered appropriate before making any such modification.

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