339.This section gives the Secretary of State the power to make provision in contracts for difference (CFD) regulations (see section 6), capacity market regulations (see section 27) or regulations relating to investment contracts (see paragraph 6 of Schedule 2) to limit the national system operator’s liability to pay damages if a civil claim was brought against it in respect of its role, or a particular element of its role, as the delivery body for the CFD and capacity market schemes and in relation to investment contracts. A limit on liability in damages could extend to the acts or omissions of the national system operator, its directors, employees, officers or agents.
340.This section does not allow the Secretary of State to limit liability in cases where an act or omission is in bad faith, where the act or omission would be unlawful under section 6 of the Human Rights Act 1998, or where the national system operator has breached an order for securing compliance issued by the Authority under the enforcement powers in the Electricity Act 1989.
341.Subsection (4) places a reporting duty on the Secretary of State. If the Secretary of State confers a CFD, capacity market or investment contracts delivery function on the national system operator and does not limit the national system operator’s liability in damages in respect of that function, the Secretary of State must publish a statement setting out the reasons why.
342.This section provides more detail about the licence and industry code modification powers in sections 26 (contracts for difference), 37 (capacity market), 45 (conflicts of interest), 49 and 50 (access to markets etc) and paragraph 19 of Schedule 2 (investment contracts). It describes the parliamentary scrutiny procedure, the full scope of the powers, duties to publish modifications and other technical requirements.
343.Subsections (2) to (7) set out the parliamentary scrutiny procedure, which is a variation of the “draft negative” procedure used for some statutory instruments. Subsections (2) and (3) provide that before making modifications, the Secretary of State must lay a draft before Parliament for a period of 40 days, during which either House of Parliament may reject the draft modifications. If the modifications are not rejected during the 40-day period the Secretary of State can bring them into effect (subsection (4)). Subsections (6) and (7) explain how the 40-day period is calculated.
344.Subsections (8) and (9) set out the full scope of the licence modification powers:
subsection (8) allows the Secretary of State to use the licence modification powers to make modifications which are general (i.e. applicable to all licence holders) or specific (for example, to make different provision for small suppliers or generators). It also allows the Secretary of State to make different modifications of different licences and to make incidental, supplemental, consequential or transitional modifications;
subsection (9) enables provisions included in a licence or industry code by a modification made under these powers to make different provision for different cases (i.e. it allows a licence to be modified in a way that requires or allows the licence holder to deal with other people in different ways). It also makes it clear that any provisions imposed by such a modification need not relate to the activities (e.g. generation, supply) that the licence authorises. Subsection (9)(c) enables a licence condition which is imposed under these powers to confer certain functions on the Secretary of State or the Authority, to the same extent as section 7(2A), (3) or (4) of the Electricity Act 1989. For example, this could require a licence holder to comply with a direction given by the Authority or the Secretary of State.
345.Subsection (10) requires the Secretary of State to publish the details of any modifications as soon as reasonably practicable after he or she brings them into effect.
346.Subsections (11) and (12) make provision about the relationship between licence modifications made under the power and standard conditions:
subsection (11) requires the Authority to incorporate modifications to standard conditions of licences in future licences and to publish the modifications. The standard conditions of electricity licences are governed by section 33 of the Utilities Act 2000 (in relation to generation, distribution and supply licences), section 137(3) of the Energy Act 2004 (electricity transmission licences) and section 146 of the Energy Act 2004 (electricity interconnector licences). Section 8A of the Electricity Act 1989 provides that the conditions which, by virtue of those enactments, are standard conditions for a particular type of licence are incorporated by reference in all licences of a particular type;
subsection (12) states that a modification to a part of a standard condition of a licence does not prevent any other part of the condition from continuing to be regarded as a standard condition for these purposes.
347.Subsection (13) explains that a power to modify a licence or code is a continuing power, like a power to make statutory instruments. Modifications made at a later date could amend, add to or remove earlier modifications, or make completely new modifications.
348.This section makes minor amendments to other legislation to ensure the coherence of electricity law. Subsection (1) has the effect of requiring the Secretary of State and the Authority, whenever they apply the “principal objective” under section 3A of the Electricity Act 1989 (the principal objective is to protect the interests of present and future consumers), to have regard to the need to secure that licensees are able to finance their obligations under the Energy Act 2013.
349.Subsections (2) to (4) add the Energy Act 2013 to three lists of legislation; where an Act is on the list, licence modification powers contained in the Act can be used modify the standard conditions of electricity licences.
350.This section requires the Secretary of State to carry out a review of much of Part 2, as soon as is reasonably practicable five years after Royal Assent, and report the conclusions to Parliament. In the report, the Secretary of State must set out the objectives of the provisions which are under review, the extent to which the objectives have been achieved, whether the objectives are still appropriate and, if they are, whether there might be other ways of achieving them which impose less regulation.