Nuclear Energy (Financing) Act 2022

Part 2: Revenue collection contracts

Section 15: Regulations about revenue collection contracts

117. This section sets out the Secretary of State’s power to make regulations relating to revenue collection contracts between a revenue collection counterparty and a nuclear company, and the required parliamentary process for making those regulations.
118. Subsection (1) sets out the Secretary of State’s power to make regulations about revenue collection contracts (‘revenue regulations’). The terms of a revenue collection contract would be bilaterally negotiated between the Secretary of State and an eligible nuclear company designated under Part 1. There are a number of sections in this Part which set out the types of provision that may be included in revenue regulations, in particular within sections 16 to 24 inclusive of this Part.
119. Subsection (2) defines a revenue collection contract as a contract:
     1. between a revenue collection counterparty and a nuclear company for which a designation was in effect (under section 2(1)) immediately before the contract was entered into;
     2. under which certain payments are to be funded by electricity suppliers;
     3. those payments may be made both before and after the start of generation of electricity by the relevant nuclear project;
     4. and is entered into by the revenue collection counterparty pursuant to a direction from the Secretary of State in accordance with section 18 of this Part.
120. Subsection (3) defines further key terms of this part. Subsection (4) makes clear that the provision made by this Part is without prejudice to the generality of the regulation-making power in subsection (1).
121. Subsection (5) clarifies certain points relating to the scope of the Secretary of State’s powers to make revenue regulations, such as that regulations can include incidental, supplementary or consequential provision, and can make different provision for different purposes.
122. Subsections (6) to (8) provide that revenue regulations must be made by statutory instrument and that:
     1. the first regulations that are made relating to:
        1. Information and advice (section 23)
        2. Functions of the Authority (section 24)
     2. And any regulations relating to:
        1. Designation of a revenue collection counterparty (section 16)
        2. Duties of a revenue collection counterparty (section 17)
        3. Direction to offer to contract (section 18)
        4. Supplier Obligation (section 19)
        5. Payments to electricity suppliers (section 20)
        6. Application of sums held by a revenue collection counterparty (section 21)
        7. Enforcement (section 22)
     must follow the affirmative resolution procedure. Any other regulations must follow the negative resolution procedure.
123. Subsection (9) provides that revenue regulations should not be treated as a hybrid instrument. The regulations are expected to confer functions and obligations on a revenue collection counterparty and on electricity suppliers, in a way which could be regarded as adversely affecting their private interests, raising a possibility that revenue regulations may be a hybrid instrument. However, this subsection clarifies that it is not considered necessary for the regulations to be treated as hybrid because the duty to consult before making regulations in section 25 will provide adequate protection that private interests will be fully considered.

Section 16: Designation of a revenue collection counterparty

124. This section allows the Secretary of State to designate a company registered in England and Wales or Scotland or a public authority, with the consent of that person, to act as the counterparty to revenue collection contracts. The revenue collection counterparty will enter into and manage revenue collection contracts with relevant licensee nuclear companies and will act as the interface between those companies and suppliers.
125. Subsection (1) allows the Secretary of State by notice to designate an eligible person to be the counterparty for revenue collection contracts. Subsection (2) clarifies that a person designated under subsection (1) is referred to in this Part as the revenue collection counterparty.
126. Subsection (3) allows the counterparty to be a company registered in England and Wales or Scotland or a public authority. Whilst it is expected that the counterparty will be owned by Government, any designated counterparty would be bound by the same duties under the legislation, regardless of whether it was a company owned by Government, a public authority, or a private company. Subsection (4) states that a person can only be designated with their consent. Subsection (5) gives the Secretary of State the power to designate more than one revenue collection counterparty. This can only take place if the Secretary of State considers that it is necessary for one of the reasons set out in subparagraphs (a) to (c), for example to ensure that liabilities under revenue collection contracts can continue to be met.
127. Under subsection (6) the designation of a company as the revenue collection counterparty can be revoked by the Secretary of State. Designation will also cease if the revenue collection counterparty elects to withdraw its consent and gives 3 months notice to the Secretary of State of that withdrawal.
128. Subsection (8) makes clear that the Secretary of State must publish the notice of the designation that took place under subsection (1) (or a revocation under subsection (6)(a)).
129. Subsections (7), (9) and (10) deal with the continuity of revenue collection counterparties. If the designation of a revenue collection counterparty was to come to an end, the Secretary of State must designate another counterparty and, as soon as reasonably practicable, make a transfer scheme under section 26 of this Part, transferring all rights and liabilities under revenue collection contracts to that new counterparty. This is designed to ensure that there is always at least one revenue collection counterparty in operation, and that where a revenue collection counterparty ceases to be designated, the contracts are transferred to a new revenue collection counterparty. Subsection (10) also provides that revenue regulations may make provision about the length of time for which, and circumstances in which, a revenue collection counterparty can be treated as such, after its designation has ceased.

Section 17: Duties of a revenue collection counterparty

130. This section sets out the duties of a revenue collection counterparty.
131. Subsection (1) makes it clear that it is a duty of a person who has been designated as a revenue collection counterparty to comply with the revenue regulations and any direction from the Secretary of State made under this Part.
132. Subsections (2) to (3) lay out examples of the duties the revenue regulations may place on the revenue collection counterparty and the powers that the Secretary of State may exercise over the counterparty, including the situations that may require consultation with, or the consent of, the Secretary of State.
133. Subsection (4) also places a duty on the revenue collection counterparty to exercise its functions to ensure that it can meet its liabilities under revenue collection contracts. This includes its functions relating to the recovery of sums from licensed electricity suppliers (see section 19).
134. Subsection (5) says that revenue regulations must make provision for what the Secretary of State thinks is necessary to ensure that the revenue collection counterparty can meet its liabilities under revenue collection contracts.

Section 18: Direction to offer to contract

135. This section allows for the Secretary of State to direct a revenue collection counterparty to offer to enter into a revenue collection contract with a designated nuclear company.
136. Subsection (1) confers a power on the Secretary of State to issue a direction to the revenue collection counterparty to offer to enter into a revenue collection contract with a designated nuclear company, in accordance with terms specified in the direction.
137. Subsections (2) and (3) provide that revenue regulations can set out the circumstances in which such a direction can or must be made, as well as the terms that may or must be specified in a direction. This may include certain terms that are required to be part of the revenue collection contract, such as terms relating to the determinations to be made by the Authority under the nuclear company’s licence. The provisions made within revenue regulations will include calculations for where payments may be due and how these are to be determined.
138. Subsection (4) clarifies that references to a designated nuclear company in this section refer to a nuclear company in relation to which a designation under section 2(1) has effect.

Section 19: Supplier obligation

139. This section deals with the obligations of suppliers in relation to the functioning of the revenue stream.
140. Subsection (1) places an obligation on the Secretary of State, when making revenue regulations under section 15, to include provision requiring electricity suppliers in GB to make payments to the revenue collection counterparty to enable it to make payments under revenue collection contracts. Subsection (2) describes other areas where revenue regulations may place obligations on suppliers to pay the revenue collection counterparty. Suppliers may also be obliged to make payments to cover administration costs of the revenue collection counterparty for managing the revenue collection contracts. Payments may also be required in order to enable the revenue collection counterparty to hold sums in reserve (subsection 2(b)) and to mutualise costs across suppliers to cover those not made by an insolvent or defaulting supplier (subsection 2(c)) . Subsection (3) defines ‘costs’ for the use in subsection 2(a).
141. Subsection (4) enables revenue regulations to require suppliers to provide financial collateral to a revenue collection counterparty.
142. Subsection (5) specifies that the regulations must place the revenue collection counterparty under a duty in relation to the collection of sums that are owed by suppliers.
143. Subsections (6) to (8) provides further details of the types of provision that revenue regulations may include by virtue of this section. This includes, for example, provision enabling the supplier obligation to be varied according to the supplier or factors in relation to a supplier (such as the amount of electricity it supplies to particular groups of consumers). It also allows provision for the revenue collection counterparty to provide notices to suppliers and to enforce such notices, and for dispute resolution arrangements.
144. Subsection (9) clarifies that any sum which a supplier is required to pay the revenue collection counterparty by virtue of the revenue regulations, and which is not paid when it is due under the regulations, is recoverable as a civil debt.

Section 20: Payments to electricity suppliers

145. This section deals with the process related to payments from the revenue collection counterparty to electricity suppliers.
146. Subsection (1) enables regulations to require the revenue collection counterparty to make payments to suppliers. This is designed to enable payments to suppliers where the revenue collection counterparty has overcharged suppliers or overpaid a relevant license nuclear company. This could occur, for example, where the forecast market revenue is higher than the forecast allowed revenue over a given period. Subsection (2) highlights what the regulations enabled by subsection (1) may cover. This includes the calculations undertaken by the revenue collection counterparty where they owe funds to suppliers.

Section 21: Application of sums held by a revenue collection counterparty

147. This section deals with situations where the funds held by the revenue collection counterparty are insufficient to meet its liabilities in relation to revenue collection contracts.
148. Subsections (1) to (2) enable the regulations to make provision about the allocation of sums between revenue collection contracts by the revenue collection counterparty in circumstances where the supplier obligation is not large enough to meet all of its obligations in full. It also enables revenue regulations to include provision to define what is meant by "unable to fully meet its liabilities under a revenue collection contract". Subsection (3) states that, in making these regulations, the Secretary of State must have regard to the principle that sums should be apportioned in proportion to the amounts which are owed, such that they are pro-rated between relevant licensee nuclear companies.
149. Subsections (4) and (5) enable the regulations to make provision about the use of sums a revenue collection counterparty holds and for the circumstances where monies received should or should not go to the Consolidated Fund.

Section 22: Enforcement

150. This section deals with the enforcement of requirements under revenue regulations.
151. Subsections (1) to (2) mean that revenue regulations may provide that the obligations of suppliers in regulations made under this Part are to be enforceable by the Authority in Great Britain as if they are relevant requirements under section 25 of the Electricity Act 1989. This means that a breach can be treated, in effect, as if it were a breach of a licence condition, thus allowing the Authority to make an order to secure compliance, and impose financial penalties where appropriate. It also enables requirements on the national system operator to be enforced by the Authority in this manner.

Section 23: Information and advice

152. This section lays out how the regulations will deal with the information and advice sharing necessary for the functioning of revenue collection contracts.
153. Subsections (1) to (2) enable regulations to make provision to ensure that information and advice required to make the scheme work is provided from the bodies specified in regulations to the bodies requiring it at appropriate points. The bodies that may covered by these regulations include relevant licensee nuclear companies, electricity suppliers, the Authority, the national system operator, the revenue collection counterparty, the Secretary of State and, where relevant, a nuclear administrator.
154. An important information interface within the scheme will be between the Authority and the revenue collection counterparty, since it would be the Authority which would determine the amount of the payments which the revenue collection counterparty would need to pay to relevant licensee nuclear companies under the terms of their contract and any associated documents. This section also enables regulations to make provision governing the use and protection of information so received to ensure it is handled in an appropriate manner.

Section 24: Functions of the Authority

155. This section deals with advice or determinations by the Authority in relation to revenue collection contracts.
156. This section enables the regulations to confer functions upon the Authority to provide advice to and make determinations for the parties to revenue collection contracts. This could include, for example, advising the revenue collection counterparty on which suppliers may be fully or partially exempt from the supplier obligation under provision made in regulations, and determining whether obligations have been met.

Section 25: Consultation

157. This section sets out the process the Secretary of State must take before revenue regulations may be made.
158. Subsection (1) requires that the Secretary of State must consult licensed suppliers in Great Britain, the national system operator, every nuclear company in relation to which as designation has effect under section 2(1), every nuclear company that is a relevant licensee nuclear company and the Authority before making or amending secondary legislation under this Part. Scottish and Welsh Ministers are also required to be consulted as well as any other persons the Secretary of State considers as appropriate. Subsection (2) provides that this consultation can occur before or after the passage of this Act.

Section 26: Revenue collection counterparties: transfer schemes

159. This section sets out the process by which the property, rights and liabilities of the revenue collection counterparty may be transferred from one counterparty to another, should this prove necessary either because a counterparty no longer wishes to be designated, or because it has become inappropriate for a counterparty to be designated in this role. Under subsection (7), a scheme may provide for compensation to be paid by the Secretary of State to persons whose interests are adversely affected by a scheme.
160. Subsections (1) to (4) allow the Secretary of State to make transfer schemes for the transfer of a revenue collection counterparty’s designated property, rights or liabilities to a new body who will take on the role. This will take place on a designated transfer date.
161. Subsections (5) to (6) describe the types of provision that may be included in a transfer scheme, clarifying their scope and application.
162. Subsection (8) makes provision relating to the scope of the Secretary of State’s powers to make a transfer scheme, such as that a scheme can include incidental, supplementary or consequential provision, and can make different provision for different purposes. Subsection (9) defines the terms for this section.

Section 27: Modification of transfer schemes

163. This section gives the Secretary of State the ability to modify transfer schemes made under section 26.
164. Subsection (1) enables the Secretary of State to modify transfer schemes. Subsection (2) states that any modification following the transfer taking effect can only be made with the agreement of the transferor and/or transferee affected by the modification. This narrows the scope of the power after the completion of the transfer scheme.
165. Subsection (3) clarifies that modifications can take effect on a date decided by the Secretary of State. This can include the date on which the original transfer scheme took effect.

Section 28: Shadow directors, etc

166. This makes it clear that, in exercising their controls over the revenue collection counterparty, the Secretary of State could not be deemed to be in any way managing or controlling the revenue collection counterparty in such a way that would class them, for example, as a "shadow director" or a principal of a revenue collection counterparty.

Section 29: Licence modifications

167. This sets out the Secretary of State’s power to make licence modifications in connection with the RAB revenue stream.
168. Subsection (1) provides the Secretary of State with the power to modify particular transmission and distribution licences, the standard conditions of such licences and documents maintained in accordance with conditions of such licences, and associated agreements (such as industry codes).
169. Subsection (2) sets out that these modification powers may only be used for the purpose of allowing or requiring services to be provided to the revenue collection counterparty or enforcing the obligations of a revenue collection contract. Subsection (3) clarifies that licence modifications under this section can include any provision that can be covered in revenue regulations.
170. Subsection (4) requires that the Secretary of State must consult licensed suppliers in Great Britain, the holder of any licence being modified, and the Authority before such licence modifications. Scottish and Welsh Ministers are also required to be consulted as well as any other persons the Secretary of State considers appropriate. Subsection (5) states that this consultation can occur before or after the passage of this legislation.
171. Subsection (6) allows the Secretary of State to use the licence modification powers to make modifications which are general (e.g. applicable to all licence holders) or specific (for example, to make different provision for different licensees). It also allows the Secretary of State to make modifications for different purposes and to make incidental, supplementary, consequential or transitional modifications.
172. Subsection (7) enables provisions included in a licence or associated document or agreement (such as an industry code) by a modification under these powers to make different provision for different purposes. It also makes clear that any provision included in a licence by such a modification need not relate to the activities that the licence authorises. Subsection (7)(c) provides that a provision included in a licence by virtue of a relevant power may do anything which is authorised for licences of that type by section 7(2A), (3), (4), (5) or (6A) of the Electricity Act 1989.
173. Subsection (8) requires the Secretary of State to publish the details of any modifications as soon as reasonably practicable after they are made.
174. Subsection (9) requires the Authority to incorporate modifications made by the Secretary of State to standard conditions into future licences, and to publish these modifications.
175. Subsection (10) 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 the purposes of the Electricity Act 1989.
176. Subsection (11) clarifies that the power to modify licences includes the power to amend, add or remove.

Section 30: Interpretation of Part 2

177. This section defines terms used throughout this Part.