The Electricity and Gas (Internal Markets) Regulations 2011

3.—(1) The standard conditions of an electricity distribution licence are amended as follows.

(2) In condition 1 (definitions for the standard conditions)—

(a) after the definition of “De Minimis Business” insert—

““Directive” means Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC(1).”;

(b) after the definition of “Public Electronic Communications Network” insert—

““Regulation” means Regulation 2009/714/EC of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchange in electricity and repealing Regulation 2003/1228/EC(2).”.

(3) In condition 4 (no abuse of the licensee’s special position), in paragraph 4.9, for “If the licensee is a Distribution Services Provider, it” substitute “The licensee”.

(4) In condition 6 (provision of Information to the Authority), in paragraph 6.1, after “under any legislation”, insert “or in pursuance of any requirements of the Directive or the Regulation”.

(5) In condition 12 (requirement to offer terms for use of system and connection), after paragraph 12.7, insert—

“12.7A.   Where the licensee refuses to offer to enter into an agreement for Use of System for one of the reasons in paragraph 12.7 duly substantiated reasons must be given for such refusal.”.

(6) In condition 13 (charging methodologies for use of system and connection), in paragraph 13.3—

(a) in sub-paragraph (c), at the end omit “and”;

(b) in sub-paragraph (d), at the end, for the full stop at the end substitute “; and”;

(c) after sub-paragraph (d), insert—

“(e) compliance with the Regulation and any relevant legally binding decisions of the European Commission and/or the Agency for the Co-operation of Energy Regulators.”.

(7) In condition 13A (common distribution charging methodology)—

(a) after paragraph 13A.6, insert—

“13A.6A.   The first Relevant Objective is compliance with the Regulation and any relevant legally binding decisions of the European Commission and/or the Agency for the Co-operation of Energy Regulators.”;

(b) in paragraph 13A.7, for “first” substitute “second”;

(c) in paragraph 13A.8, for “second” substitute “third”;

(d) in paragraph 13A.9, for “third” substitute “fourth”;

(e) in paragraph 13A.10—

(i) for “fourth” substitute “fifth”;

(ii) for “13A.7” substitute “13A.6A”.

(8) In condition 13B (EHV distribution charging methodology)—

(a) after paragraph 13B.7, insert—

“13B.7A.   The first Relevant Objective is compliance with the Regulation and any relevant legally binding decisions of the European Commission and/or the Agency for the Co-operation of Energy Regulators.”;

(b) in paragraph 13B.8, for “first” substitute “second”;

(c) in paragraph 13B.9, for “second” substitute “third”;

(d) in paragraph 13B.10, for “third” substitute “fourth”;

(e) in paragraph 13B.11, for “fourth” substitute “fifth”.

(9) In condition 21 (the Distribution Code)—

(a) in paragraph 21.4—

(i) in sub-paragraph (b), at the end, for the full stop at the end substitute “; and”;

(ii) after sub-paragraph (b), insert—

“(c) efficiently discharge the obligations imposed upon distribution licensees by the distribution licences and comply with the Regulation and any relevant legally binding decision of the European Commission and/or the Agency for the Co-operation of Energy Regulators.”;

(b) re-number paragraph 218.A as paragraph 21.8A;

(c) in that paragraph—

(i) after “The review undertaken under paragraph 21.8 must” insert—

“:

(a) where the Authority reasonably considers it necessary to comply with or implement the Regulation and/or any relevant legally binding decisions of the European Commission and/or the Agency for the Co-operation of Energy Regulators proceed in accordance with any timetable(s) directed by the Authority under this paragraph in relation to the progress of the review and/or implementation of any modifications to the Distribution Code; and”;

(ii) re-number the wording from “involve an evaluation” to the end as sub-paragraph (b);

(d) in paragraph 21.11, after “as may be specified in the direction”, insert “and the licensee shall forthwith comply with any such directions”.

(10) In condition 22 (Distribution Connection and Use of System Agreement)—

(a) in paragraph 22.2—

(i) in sub-paragraph (c), at the end omit “and”;

(ii) in sub-paragraph (d), at the end, for the full stop at the end substitute a semicolon;

(iii) after sub-paragraph (d), insert—

“(e) compliance with the Regulation and any relevant legally binding decisions of the European Commission and/or the Agency for the Co-operation of Energy Regulators; and

(f) in relation to the Common Distribution Charging Methodology or the EHV Distribution Charging Methodology, the Relevant Objectives listed in Part B of Standard Licence Condition 22A.”;

(b) in paragraph 22.5—

(i) in sub-paragraph (a), after “any other party to the DCUSA,” insert, “the Authority (in relation only to amendments which it reasonably considers are necessary to comply with or implement the Regulation and/or any relevant legally binding decisions of the European Commission and/or the Agency for the Co-operation of Energy Regulators),”;

(ii) in sub-paragraph (c), at the end omit “and”;

(iii) in sub-paragraph (d), at the end, for the full stop at the end substitute a semicolon;

(iv) after sub-paragraph (d), insert—

“(e) amendment proposals made by the Authority or the licensee in accordance with paragraphs 22.5(a) and 22.5(f)(i) respectively are:

(i) to be accepted into the DCUSA amendment procedures by the panel;

(ii) where they are raised by the licensee, not to be withdrawn without the Authority’s prior consent; and

(iii) to proceed in accordance with any timetable(s) directed by the Authority in accordance with paragraph 22.5(f); and

(f) the licensee and (where applicable) the panel are to comply with any direction(s) issued by the Authority under this paragraph setting and/or amending a timetable (in relation to an amendment proposal which the Authority reasonably considers is necessary to comply with or implement the Regulation and/or any relevant legally binding decisions of the European Commission and/or Agency for the Co-operation of Energy Regulators) for the:

(i) licensee to raise an amendment proposal; and/or

(ii) completion of each of the procedural steps outlined in Part C, to the extent that they are relevant; and/or

(iii) implementation of an amendment proposal.”;

(c) in paragraph 22.10, for sub-paragraph (a) substitute—

“(a) a proposed implementation date either:

(i) in accordance with any direction(s) issued by the Authority under paragraph 22.5(f)(iii); or

(ii) where no direction has been issued by the Authority under paragraph 22.5(f)(iii), that would enable any proposed amendment to take effect as soon as practicable after the decision to implement it has been reached, taking into account the complexity, importance, and urgency of that amendment; and”;

(d) after paragraph 22.13 insert—

“22.13A.   They must ensure that completion of each of the procedural steps outlined in this Part C, to the extent that they are relevant, is in accordance with any timetable(s) directed by the Authority under paragraph 22.5(f).”.

(11) In Appendix 1 (Schedule of DCUSA contents) to condition 22, after paragraph A3, insert—

“A3A.   Amendment proposals raised by the Authority or the licensee under paragraphs 22.5(a) and 22.5(f)(i) respectively and/or any amendment proposal in respect of which the Authority has issued a direction(s) under paragraph 22.5(f) require Authority approval.”.

(12) In condition 22A (governance and change control arrangements for relevant charging methodologies)―

(a) re-number paragraph 22A.15 as 22A.16;

(b) re-number paragraph 22A.14 as 22A.15;

(c) re-number paragraph 22A.13 as 22A.14;

(d) re-number paragraph 22A.12 as 22A.13;

(e) re-number paragraph 22A.11 as 22A.12;

(f) re-number paragraph 22A.10 as 22A.11;

(g) after paragraph 22A.9, insert—

“22A.10.   The fifth Relevant Objective is that compliance with the CDCM facilitates compliance with the Regulation and any relevant legally binding decisions of the European Commission and/or the Agency for the Co-operation of Energy Regulators.”.

(13) In condition 23 (Master Registration Agreement), after paragraph 23.3, insert—

“23.4.   The Master Registration Agreement must be compliant with the Regulation and any relevant decisions of the European Commission and/or the Agency for the Co-operation of Energy Regulators.

23.5.   The arrangements referred to in paragraph 23.3(d) shall provide:

(a) for proposals for the variation of the Master Registration Agreement to be made by the Authority (in relation only to variations which it reasonably considers are necessary to comply with or implement the Regulation and/or any relevant legally binding decisions of the European Commission and/or the Agency for the Co-operation of Energy Regulators);

(b) for variation proposals made by the Authority or the licensee in accordance with paragraphs 23.5(a) and 23.5(c)(i) respectively:

(i) to be accepted into the Master Registration Agreement variation procedures by the committee;

(ii) where they are raised by the licensee, not to be withdrawn without the Authority’s prior consent; and

(iii) to proceed in accordance with paragraph 23.5(c);

(c) for compliance by the licensee and (where applicable) the committee with any direction(s) issued by the Authority under this paragraph setting and/or amending a timetable (in relation to a variation proposal which the Authority reasonably considers is necessary to comply with or implement the Regulation and/or any relevant legally binding decisions of the European Commission and/or the Agency for the Co-operation of Energy Regulators) for the:

(i) licensee to raise a variation proposal; and/or

(ii) completion of each of the procedural steps outlined in the direction, to the extent that they are relevant; and/or

(iii) implementation of a variation.”.

(14) After condition 31 (undertaking from ultimate controller), insert—

“Chapter 7A: Standard conditions 31A to 31C: Independent Distribution Network Operators

Condition 31A. Accounts

Provisions applying to Independent Distribution Network Operators Provisions applying to Independent Distribution Network Operators

31A.1.   This condition and standard conditions 31B (Independence of the Distribution Business and restricted use of Confidential Information) and 31C (Appointment of Compliance Officer) apply where the licensee is not a Distribution Services Provider.

Keeping accounts at the disposal of the public

31A.2.   The licensee shall draw up, submit to audit and publish its annual accounts in accordance with any obligations to which it is subject under national company law.

31A.3.   To the extent that the licensee is not subject to an obligation to draw up and submit to audit annual accounts under national company law, the licensee shall draw up, submit to audit and publish its annual accounts as if it were a limited liability company within the meaning of sections 1 and 3 of the Companies Act 2006.

31A.4.   The licensee shall keep a copy of its annual accounts at the disposal of the public at its principal place of business.

Internal accounting

31A.5.   The licensee, in its internal accounting, shall:

(a) keep separate accounts for its distribution activities and each if any of its transmission activities as if such activities were carried out by separate undertakings, to avoid discrimination, cross-subsidisation between these activities and distortion of competition;

(b) keep accounts, which may be consolidated, for other electricity activities not relating to transmission or distribution.

(c) ensure that revenue from ownership of the interconnector operation of the distribution system is separately identifiable;

(d) where appropriate, keep consolidated accounts for other non-electricity activities;

(e) include a balance sheet and a profit and loss account for each activity in the accounts.

Audit

31A.6.   The licensee must at its own expense enter into a contract of appointment with an Appropriate Auditor for the completion of Agreed Upon Procedures in relation to the prohibition of cross-subsidy and discrimination generally and in particular under standard condition 31B.

31A.7.   The contract must require that Agreed Upon Procedures are conducted in relation to each Regulatory Year and that the licensee will arrange for the Appropriate Auditor to address a report to the Authority by 31 July following the end of each Regulatory Year which states that he has, in a manner consistent with the relevant auditing standards, completed the Agreed Upon Procedures issued by the Authority in respect of the Regulatory Year under report and which sets out his findings.

31A.8.   If the Authority is satisfied that the report referred to in paragraph 6 above demonstrates that the licensee has complied with the obligation to avoid discrimination and cross-subsidies that is specified in Article 31 of Directive 2009/72/EC of the European Parliament and the European Council of 13 July 2009 and is imposed on the licensee by the condition of this licence referred to in paragraph 6 above, the report is deemed to represent the results of an audit of that obligation, as required by the Article.

Interpretation

31A.9.   In this condition:

Agreed Upon Procedures means procedures from time to time agreed between the Authority, the Appropriate Auditor and the licensee for the purpose of enabling the Appropriate Auditor to review and report to the Authority on matters relating to the licensee’s compliance with the obligation mentioned at paragraph 7.

Appropriate Auditor means:

(a)

in the case of a licensee that is a company within the meaning of section 1 of the Companies Act 2006(3) a person appointed as auditor under Chapter 2 of Part 16 of that Act;

(b)

in the case of any other licensee that is required by the law of a country or territory within the European Economic Area to appoint an auditor under provisions analogous to those of Chapter 2 of Part 16 of that Act, a person so appointed; and

(c)

in any other case a person who is eligible for appointment as a company auditor under Part 42 of that Act.

National company law means:

(a)

in the case of a licensee that is a company within the meaning of section 1 of the Companies Act 2006, that Act;

(b)

in the case of any other licensee that is required by the law of a country or territory within the European Economic Area to comply with obligations to draw up, audit and publish annual accounts, that law.

Condition 31B. Independence of the Distribution Business and restricted use of Confidential Information

31B.1.   This condition applies where the licensee is not a Distribution Services Provider but is part of a Vertically Integrated Undertaking.

Licensee’s obligations

31B.2.   The licensee must put in place and at all times maintain managerial and operational systems that prevent any Relevant Licence Holder from having access to Confidential Information except and to the extent that such information:

(a) is made available on an equal basis to any Electricity Supplier, gas supplier, or gas shipper;

(b) is referable to a Customer who at the time to which the information relates was a Customer of the Relevant Licence Holder; or

(c) is of a type that has been confirmed by the Authority in Writing as corporate information.

Compliance Statement must always be in place

31B.3.   Except with the Authority’s consent, the licensee must at all times have in place a Compliance Statement, approved by the Authority, that describes the practices, procedures, and systems which the licensee has adopted (or intends to adopt) to ensure compliance with paragraph 2.

31B.4.   If the Authority does not direct the licensee to amend the Compliance Statement within 60 days of receiving it, the statement is to be treated as approved by the Authority.

31B.5.   The licensee must take all reasonable steps to ensure that it complies with the terms of the Compliance Statement in place under this condition.

Specific contents of the Compliance Statement

31B.6.   The Compliance Statement must, in particular, set out how the licensee will:

(a) maintain the full managerial and operational independence of the Distribution Business from any Relevant Licence Holder;

(b) maintain the branding of the Distribution Business so that it is fully independent from the branding used by any Relevant Licence Holder; and

(c) manage the transfer of employees from the Distribution Business to any Relevant Licence Holder.

31B.7.   The Compliance Statement must also ensure that any arrangements to which the licensee is party that fall within any of the descriptions given in paragraph 8 are such as to prevent any breach of the requirements of paragraph 2.

31B.8.   The arrangements referred to in paragraph 7 are those that enable any Relevant Undertaking, or any person engaged in or in respect of the activities of such a Relevant Licence Holder, to have any use of or access to:

(a) premises or parts of premises occupied by persons engaged in, or in respect of, the management or operation of the Distribution Business;

(b) systems for recording, processing, or storing data to which persons engaged in, or in respect of, the management or operation of the Distribution Business also have access;

(c) equipment, facilities, or property employed for the management or operation of the Distribution Business; and

(d) the services of any persons who are (whether or not as their principal occupation) engaged in, or in respect of, the management or operation of the Distribution Business.

Revision and publication of Compliance Statement

31B.9.   The licensee may, with the Authority’s approval, revise a Compliance Statement prepared in accordance with paragraph 3.

31B.10.   The licensee must publish a copy of every Compliance Statement prepared in accordance with paragraph 3 (or revised in accordance with paragraph 9) on its Website (if it has one) within 21 days of its approval by the Authority.

Interpretation

31B.11.   In this condition:

Confidential Information means information relating to, or derived from, the Distribution Business that is not published or otherwise legitimately in the public domain.

Relevant Licence Holder means any holder of:

(a)

a Supply Licence; or

(b)

a gas supply licence; or

(c)

a gas shipper licence; or

(d)

an electricity generation licence;

that is also an Affiliate or a Related Undertaking of the licensee.

Vertically Integrated Undertaking means an electricity undertaking or a group of electricity undertakings where the same person or the same persons are entitled, directly or indirectly, to exercise control, and where the undertaking or group of undertakings perform in the European Economic Area at least one of the functions of transmission or distribution, and perform in the European Economic Area at least one of the functions of generation or supply of electricity. Terms within this definition shall have the meaning given to them by the Directive.

Condition 31C. Appointment of Compliance Officer

Application to Vertically Integrated Undertakings

31C.1.   This condition applies where the licensee is not a Distribution Services Provider but is part of a Vertically Integrated Undertaking.

Purpose of appointment

31C.2.   The licensee must ensure, following consultation with the Authority, that a competent person (who is to be known as the Compliance Officer) is appointed for the purpose of facilitating the licensee’s compliance with the Relevant Obligations.

Appropriate tasks for the Compliance Officer

31C.3.   The licensee must at all times ensure that the Compliance Officer is engaged for the performance of such duties and tasks as the licensee considers it appropriate to assign to him for the purpose specified at paragraph 2.

31C.4.   Those duties and tasks for the Compliance Officer must include:

(a) providing relevant advice and information to the licensee for the purpose of facilitating its compliance with the Relevant Obligations;

(b) monitoring the effectiveness of the practices, procedures, and systems adopted by the licensee in accordance with the Compliance Statement required under paragraph 3 of standard condition 31B (Independence of the Distribution Business and restricted use of Confidential Information);

(c) advising whether, to the extent that the implementation of such practices, procedures, and systems requires the co-operation of any other person, they are designed so as reasonably to allow the required co-operation;

(d) investigating any complaint or representation made available to him in accordance with paragraph 6;

(e) recommending and advising on the remedial action that any such investigation has demonstrated to be necessary or desirable;

(f) providing relevant advice and information to the licensee for the purpose of ensuring its effective implementation of the practices, procedures, and systems referred to at sub-paragraph (b), and of any remedial action recommended in accordance with sub-paragraph (e); and

(g) reporting annually to the licensee’s directors about his activities during the period covered by the report, including the fulfilment of any other duties assigned to him by the licensee under this condition.

Licensee’s duties to the Compliance Officer

31C.5.   The licensee must ensure that the Compliance Officer is sufficiently independent to comply with the requirements of Article 26(2)(d) of the Directive and that he:

(a) is provided with such staff, premises, equipment, facilities, and other resources; and

(b) has such access to the licensee’s premises, systems, information, and documentation,

as he might reasonably expect to require for the fulfilment of the duties and tasks assigned to him.

31C.6.   The licensee must give the Compliance Officer a copy of any complaint or representation that it receives from any person about a matter arising under or because of the Relevant Obligations.

Licensee’s own Compliance Report

31C.7.   The licensee must, as soon as is reasonably practicable after receiving each annual report of the Compliance Officer under paragraph 3(g), produce a report (“the Compliance Report”):

(a) about its compliance during the relevant year with the Relevant Obligations; and

(b) about its implementation of the practices, procedures, and systems adopted in accordance with the Compliance Statement required under paragraph 3 of standard condition 31B.

31C.8.   The Compliance Report produced in accordance with paragraph 6 must, in particular, do the things described in paragraphs 9 to 11.

31C.9.   It must detail the activities of the Compliance Officer during the relevant year.

31C.10.   It must refer to such other matters as are or may be appropriate in relation to the licensee’s implementation of the practices, procedures, and systems adopted in accordance with the Compliance Statement required under paragraph 3 of standard condition 31B.

31C.11.   It must set out the details of any investigations conducted by the Compliance Officer, including:

(a) the number, type, and source of the complaints or representations on which those investigations were based;

(b) the outcome of the investigations; and

(c) any remedial action taken by the licensee following them.

Publication of Compliance Report

31C.12.   The licensee must:

(a) give the Authority a copy of every Compliance Report; and

(b) publish each such report on, and in a way that is readily accessible from, its Website (if it has one).

Interpretation

31C.13.   For the purposes of this condition, Relevant Obligations means:

(a) the requirements of standard condition 31B (Independence of Distribution Business and restricted use of Confidential Information);

and, so far as they relate to relationships with Relevant Licence Holders within the meaning of standard condition 31B, the requirements of:

(b) paragraph 9 of standard condition 4 (No abuse of the licensee’s special position) (which prohibits cross-subsidy between the licensee’s Distribution Business and any other business of the licensee or of an Affiliate or Related Undertaking of the licensee); and

(c) paragraph 1 of standard condition 19 (Prohibition of discrimination under Chapters 4 and 5) (which prohibits the licensee from discriminating between any person or class or classes of persons when providing Use of System or connections or carrying out works for the purposes of connection).”.

(15) In condition 42 (independence of the distribution business and restricted use of confidential information), in paragraph 42.10—

(a) in the definition of “Relevant Licence Holder”, in sub-paragraph (c), for “,” substitute “; or”;

(b) after sub-paragraph (c), insert—

“(d) an electricity generation licence,”.

(16) In condition 43 (appointment of compliance officer), in paragraph 43.4 after “The licensee must ensure that the Compliance Officer” insert “is sufficiently independent to comply with the requirements of Article 26(2)(d) of the Directive and that he”.

(1)

OJ No L 211, 14.08.2009, p. 55.

(2)

OJ No L 211, 14.08.2009, p. 15.

(3)

2006 c. 46. Amendments have been made that are not relevant for these purposes.