The Utilities Act 2000 (Commencement No. 6 and Transitional Provisions ) Order 2001

Explanatory Note

(This note is not part of the Order)

This is the sixth Commencement Order made under the Utilities Act 2000 (“the Act”).

Article 2 of the Order brings into force on 1st October 2001 those provisions of the Act listed in the Schedule to the Order for the purposes specified therein. These provisions comprise the bulk of the Act which has not already been commenced in the earlier Commencement Orders and the provisions are commenced either in their entirety or for all remaining purposes.

A principal effect of the Order is the commencement of provisions (a number of which are described below) which make important changes to the regulation of the electricity industry, as provided for in the Electricity Act 1989 (“the Electricity Act”). Section 30 of the Act amends section 6 of the Electricity Act so that the Gas and Electricity Markets Authority (“the Authority”) has the power to grant licences for the generation, transmission, distribution and supply of electricity. Further, the amendment ends the granting of public electricity supply licences and prohibits the same person holding both a distribution licence and a supply licence. Additionally, section 30 introduces new procedures for the application for the grant of a licence.

Section 29 of the Act amends section 5 of the Electricity Act which provides order-making powers for the Secretary of State in respect of exemptions from the requirement to hold a licence to generate, transmit, distribute or supply electricity.

Section 33(3) of the Act inserts section 8A into the Electricity Act. This provides that all licences granted after the commencement date will (subject to certain powers of modification) contain standard licence conditions, determined initially by the Secretary of State under section 33(1) of the Act. Sections 34 and 35 of the Act (the latter section commenced for all remaining purposes) provide powers of modification in relation to individual and standard licence conditions.

Sections 36 to 39 of the Act amend and expand upon the Electricity Act provisions relating to licence modification references to the Competition Commission. Section 39 of the Act introduces a new section 14A of the Electricity Act which provides a power for the Competition Commission to veto licence modifications which the Authority proposes to make after a Competition Commission report on a modification reference.

Section 41 of the Act introduces section 7A of the Electricity Act which permits the transfer of licences.

Section 42 inserts section 49A of the Electricity Act which requires the Authority or Secretary of State to give reasons for certain decisions.

Section 43 of the Act inserts sections 56A to F into the Electricity Act which provide a power for the Secretary of State to alter the activities for which a licence is required under the Electricity Act.

Sections 44 to 50 of the Act amend the Electricity Act to impose duties on electricity distributors. Further, section 45 of the Act revokes section 18 of the Electricity Act, thereby abolishing charging by reference to tariffs.

Sections 54 to 58 of the Act amend those provisions of the Electricity Act which deal with standards of performance. In particular, standards of performance are introduced for electricity distributors.

Section 59 of the Act which inserts sections 27A to 27F into the Electricity Act is brought fully into force. These sections provide for the payment of a financial penalty by a licence holder in certain circumstances.

Section 61 of the Act inserts section 42C into the Electricity Act. This requires licence holders whose activities are subject to price regulation to disclose to the Authority arrangements which link directors' remuneration to electricity service standards set by or under licence conditions, prescribed or determined by the Authority in exercise of its powers in relation to standards of performance or set or agreed to by the licence holder itself.

Sections 62 (for all remaining purposes) and 63 to 65 of the Act are brought into force. These provisions relate to electricity from renewable sources and make amendments to the application and operation of the existing obligations on public electricity suppliers in relation to electricity from such sources.

Section 69 of the Act inserts section 43A and 43B into the Electricity Act. This provides an order-making power for the Secretary of State in relation to the adjustment of charges to help disadvantaged groups of electricity customers.

The Order also commences a number of provisions which make changes to the regulation of the gas industry, as provided for in the Gas Act 1986 (“the Gas Act”). Although, these changes are not so numerous as those affecting the Electricity Act, a number mirror those provisions referred to above.

Section 76 of the Act is commenced. This provides that the authorised areas of public gas transporters shall no longer be exclusive and the term “public gas transporter” is replaced by “gas transporter”. Sections 77 and 78 of the Act deal further with the removal of exclusivity, whilst section 79 of the Act deals with the duty of gas transporters to facilitate competition and section 80 with the duty to make a connection.

Sections 82 and 83 of the Act amend those provisions of the Gas Act which deal with the modification of the conditions of gas licences.

Section 85 of the Act amends those provisions of the Gas Act which deal with the transfer of licences by the substitution of a new section 8AA of the Gas Act. The provisions relating to exemptions from the requirement to hold a gas licence are also amended by section 86 of the Act.

Section 88 of the Act inserts into the Gas Act sections 41C to H which provide a power for the Secretary of State to alter the activities for which a licence is required under the Gas Act.

Sections 89 to 94 of the Act amend those provisions of the Gas Act dealing with standards of performance.

Section 95 of the Act is brought fully into force. Amongst other matters, it inserts sections 30A to 30F, dealing with payment of a financial penalty in certain circumstances, into the Gas Act.

Section 97 of the Act inserts section 33F, dealing with the disclosure of links between directors' remuneration and gas service standards, into the Gas Act. The provisions closely follow those which section 61 of the Act inserts into the Electricity Act.

Section 98 of the Act inserts sections 41A and 41B into the Gas Act. These provide for an order-making power, mirroring that which 69 inserts into the Electricity Act.

Section 101 of the Act inserts a new section 16 into the Gas Act. This enables the Authority to prescribe standards of gas quality.

Further, certain minor, consequential and transitional provisions are commenced by article 2. These provide for minor amendments of both the Electricity and Gas Acts and, in certain instances, other legislation referring to these Acts. They also provide for repeal of provisions where appropriate.

The transitional provisions in articles 3 to 20 deal with circumstances where arrangements need to be made to address matters which are on-going at the time of commencement. They also deal with on-going agreements for the recovery of outstanding debts for electricity and gas charges through the use of pre-payment meters and establish the first financial year for which licence holders must submit a report in relation to links between directors' remuneration and service standards.