3.The Government published a Green Paper, “A Fair Deal for Consumers - Modernising the Framework for Utility Regulation” (CM 3898) in March 1998, setting out a series of proposals for reforms to the system of regulation of the utility industries. In July 1998, the Government published a “Response to Consultation”, summarising its conclusions in respect of those proposals. More detailed consultation took place subsequently, principally on the proposals for establishing independent consumer councils for the utility sectors, and on the future of gas and electricity regulation. Copies of these documents can be accessed on the DTI website (http://www.dti.gov.uk/urt/).
4.The Act gives effect to the Government’s final proposals for the gas and electricity sectors in England, Scotland and Wales. It does not extend to Northern Ireland. The Act has a number of purposes. It establishes a single Gas and Electricity Markets Authority (“the Authority”), in place of the twin posts of Director-General of Gas Supply and Director-General of Electricity Supply. It aims to achieve a fair balance between the interests of consumers and shareholders by setting new duties and powers for the Authority and establishing an independent Gas and Electricity Consumer Council (“the Council”). It contains provisions to enable the gas and electricity sectors to make an appropriate contribution to the Government’s social and environmental objectives. It contains provisions to make regulation more transparent and predictable. The Act also updates the regulatory regime for the gas and electricity sectors to take account of and to facilitate further competition, and to reflect increasing convergence between the two sectors. It provides the powers needed to bring in new electricity trading arrangements.
5.The main provisions of the Act provide for:
a new principal objective for the Gas and Electricity Markets Authority to protect the interests of consumers, wherever appropriate, by promoting effective competition;
a requirement for the Authority, in performing its functions, to have regard to the interests of low income consumers, the chronically sick, the disabled, pensioners and consumers in rural areas;
powers for the Authority to impose financial penalties on utility companies for breaches of licence conditions and other specified statutory requirements;
the establishment of an independent Gas and Electricity Consumer Council with the job of seeking to resolve complaints, providing information of use to consumers, and advocating the interests of all consumers to the regulatory authorities, Government, utility companies and anyone else whose activities can affect the interests of consumers;
powers for the Council to publish utility information where this is in the interests of consumers and does not seriously and prejudicially affect persons to whom it relates;
a requirement for price-regulated gas and electricity utilities to disclose any links between directors’ pay and customer service standards;
legislation to underpin new electricity trading arrangements;
separate licensing of electricity supply and distribution, and the introduction of a bar on supply and distribution licences being held by the same legal person;
powers to adapt the licensing regime to changing market structures in future without additional primary legislation (by statutory instrument under affirmative resolution);
alignment where appropriate of the licensing and regulatory systems for gas and electricity (for example by introducing the concept of standard conditions for electricity licences);
new “collective” licence modification procedures enabling the Authority to modify standard licence conditions without a Competition Commission reference even if some utility companies disagree;
a duty on the Authority, in the exercise of its statutory functions, to have regard to guidance issued by the Secretary of State on the social and environmental objectives relevant to the gas and electricity sector;
new powers for the Secretary of State to make regulations to promote energy efficiency, the generation of electricity from renewable sources, and to provide for a cross-subsidy for the benefit of disadvantaged consumers;
the replacement (mentioned earlier) of the individual gas and electricity regulators with an Authority of at least three members appointed by the Secretary of State;
a requirement for the Authority to give reasons for key decisions and to publish and consult on its forward work programmes;
powers for the Competition Commission to veto licence modifications developed by the Authority following a reference if, in its opinion, they do not remedy or prevent the adverse effects identified by the Commission in its report on the reference and, thereafter, to make the licence modifications; and
the establishment of a single, specialist gas and electricity panel of the Competition Commission, one or more of whose members will be selected to serve on relevant reference enquiries.
6.The statutory framework for gas and electricity regulation is laid down principally by the Gas Act 1986 (as amended, inter alia, by the Gas Act 1995), and the Electricity Act 1989. The provisions set out above are given effect, in the main, through amendments to these Acts which are referred to throughout this document as, respectively, “the 1986 Act” and “the 1989 Act”.