Utilities bill update

United Kingdom

The Utilities Bill is on its way through Parliament and is due to receive Royal Assent before the end of July. The Government intends to pass the Utilities Act to implement a new regulatory regime in the electricity and gas industries for England, Scotland and Wales.

The Bill:
(a) aligns, so far as possible, the gas and electricity regimes;
(b) addresses the retail activities of gas and electricity utilities;
(c) re-organises the regulatory authorities dealing with those industries and introduces new regulatory procedures;
(d) imposes new duties on regulators for those industries to have regard to social and environmental objectives; and
(e) enables changes to be made to the Electricity Act 1989 to implement the New Electricity Trading Arrangements ("NETA").
Each of these points is addressed in more detail below.

Consumer provisions
The new principal objective for the new electricity and gas regulator (the Gas and Electricity Markets Authority or "GEMA") is to protect the interests of consumers by promoting effective competition. A consumer is defined to include a disadvantaged consumer (eg. a low income earner, a chronically sick person) but also includes the interests of other descriptions of consumer (including a future consumer).

A single, independent Gas and Electricity Consumer Council is to be established to resolve complaints, provide information and advocate the interests of all consumers to regulators, Government and appropriate others.

GEMA has the power to impose financial penalties on companies for breaches of licence conditions, conditions of appointment, standards of performance and specified statutory requirements. It will also have more extensive powers than the current regulator to impose or modify conditions of electricity licensees.

The Secretary of State has the power to raise a cross-subsidy in favour of identifiable groups of disadvantaged customers.

Price-regulated utilities are required to disclose any links between directors' pay and customer service standards.

Regulatory institutions and procedures
The Bill replaces the Director General of Electricity Supply and the Director General of Gas Supply with GEMA.

Licence modifications proposed by GEMA after a modification reference to the Competition Committee may be refused by the Competition Commission (and enforce its own licence conditions) if, in its opinion, they do or may be expected to operate against the public interest.

The Competition Commission's sector-specific utility panels are replaced with a single cross-utility panel.

Utility regulation and wider social and environmental objectives
GEMA is required to have regard to guidance issued by the Secretary of State on social and environmental objectives.

The Secretary of State gains power to make regulations to promote energy efficiency and the generation of electricity from renewable sources.

Gas and electricity regulation
The Bill amends the Electricity Act 1989 to implement NETA. In short, NETA will replace the Electricity Pool with bilateral trading between generators, suppliers and customers.

Existing electricity supply licences are amended to separate the licensing of electricity supply and electricity distribution. There is a prohibition on the same person holding both electricity supply and electricity distribution licences.

Conclusion
The Utilities Bill reorganises the regulatory offices for the electricity and gas industries and as a stated aim intends to increase the protection offered to consumers in a privatised and deregulated market.

For further information on this article please speak to Rafique Khan in the Energy Projects and Construction Group at [email protected] or on +44 (0)20 7367 2469.