S.I. No. 760/2005 - European Communities (Internal Market in Natural Gas) (BGE) Regulations 2005

S.I. No.760 of 2005

European Communities (Internal Market in Natural Gas) (BGÉ) Regulations 2005

I, Noel Dempsey, Minister for Communications, Marine and Natural Resources, in exercise of the powers conferred on me by section 3 of the European Communities Act 1972 (No. 27 of 1972), as amended by the European Communities (Amendment) Act 1993 (No. 25 of 1993), and for the purpose of giving further effect to Directive 2003/55/EC¹ of the European Parliament and of the Council of 26 June 2003, hereby make the following Regulations:

PART 1 PRELIMINARY AND GENERAL

Citation and commencement

1.

• (2) Except as provided by paragraph (3), these Regulations come into operation on the day on which notice of their making is published in the Iris Oifigiúil.

• (3) Part 5 comes into operation on the transfer date.

Object and scope of these regulations

2.

Interpretation

3.

“assets” means any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description (including money) and includes securities, choses in action and documents;

“BGÉ” means the body corporate called Bord Gáis Éireann as constituted under the Gas Act 1976 (No.30 of 1976);

“BGÉ transportation system” means such parts of the transmission system and the distribution system owned by BGÉ as may be designated in the transfer plan prepared in accordance with Regulation 9(3)(b);

“CER” means the Commission for Energy Regulation established by the Electricity Regulation Act 1999 (No. 23 of 1999);

“Companies Acts” means the Companies Act 1963 and any act that amends, or is required to be read as one with, that Act;

“distribution system”, in relation to natural gas, means a system for the transport of natural gas through local or regional pipelines with a view to its delivery to customers;

“financial plan” includes any document in the nature of a financial plan, whether called a financial plan or not;

“liabilities” means liabilities, debts or obligations (whether present or future and whether vested or contingent);

“the Minister” means the Minister for Communications, Marine and Natural Resources;

“the Natural Gas Market Directive” means Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas, and repealing Directive 98/30/EC;

“operate” includes maintain and develop;

“ownership”, in relation to an asset, includes proprietary rights arising under a lease, licence or bailment of the asset;

“publish” includes publish on the Internet;

“rights” means any rights, powers, privileges or immunities (whether present or future and whether vested or contingent);

“the subsidiary company”, in relation to BGÉ, means the company established or required to be established by BGÉ in accordance with Regulation 5;

“trade union” means a trade union that holds a negotiation licence under Part II of the Trade Union Act 1941 ;

“transfer date” means the date fixed by the Minister under Regulation 10;

“transmission system”, in relation to natural gas, means a system for the transport of natural gas through a high pressure pipeline, other than an upstream pipeline, with a view to delivering the gas to customers;

“upstream pipeline” means any pipeline operated or constructed as part of a gas production project, or used to convey natural gas from one or more such projects to a processing plant or terminal or final coastal landing terminal.

• (2) In these Regulations—

• (a) a reference to a Part, Regulation or Schedule is a reference to a Part or Regulation of, or a Schedule to, these Regulations, and

• (b) a reference to a paragraph or a subparagraph is a reference to the paragraph or subparagraph of the provision in which the reference occurs,

unless in either case it is indicated that reference to some other provision is intended.

• (3) If a word or expression that is not defined in this Regulation is used in these Regulations and is also used in the Natural Gas Market Directive, the word or expression has unless the context otherwise requires, the same meaning in these Regulations as it has in that Directive.

• (4) If an enactment or statutory instrument referred to in these Regulations has been amended, or is amended after these Regulations come into operation, the reference is taken to be a reference to the enactment or statutory instrument as amended.

• (5) An approval by the Minister under these Regulations does not take effect until the Minister for Finance has concurred with the approval.

PART 2 SEPARATION OF FUNCTIONS OF BGÉ

BGÉ to form and register subsidiary company

• (2) The company formed under paragraph (1) must be a private company limited by shares. At least one of the members of the company must be BGÉ.

• (3) The members of the company are to have such shares in the company as are specified in the company's memorandum of association, but BGÉ is required to hold more than half in nominal value of its equity share capital.

• (4) BGÉ shall ensure—

• (a) that the memorandum of association of the company specifies that the objects of the company are or include responsibility for operating the BGÉ transportation systems in a manner consistent with the provisions of the Natural Gas Market Directive, and

• (b) that either the memorandum of association or the articles of association of the company prescribes the basis of the relationship between the company and BGÉ and between the company and the Minister in a manner consistent with those provisions, and

• (c) that the articles of association of the company provide for the appointment of no fewer than 4 directors of the company.

• (5) As soon as practicable after the company is formed, BGÉ shall arrange for it to be registered under the Companies Acts. However, the memorandum and articles of association of the company may not be lodged for registration under those Acts unless they have been approved by the Minister.

• (6) In this Regulation, “equity share capital” has the same meaning as in section 155(5) of the Companies Act 1963 .

• (7) Nothing in section 8A of the Gas Act 1976 applies to action taken under this Regulation.

Alteration of memorandum or articles not to have effect until approved by Ministers

Appointment and termination of appointment of directors of subsidiary company to be subject to the approval of the Minister

BGÉ and subsidiary company may enter into infrastructure agreements

• (a) each of them will fulfil its functions with respect to the BGÉ transportation system, and

• (b) BGÉ will provide the subsidiary company with the resources (including financial resources) and services necessary to enable that company to fulfil its responsibility with respect to the operation of the BGÉ transportation systems.

• (2) An agreement under paragraph (1) may provide that the agreement or any particular provisions of the agreement will take effect from a specified date (which may be the transfer date).

• (3) BGÉ and the subsidiary company may from time to time vary an agreement entered into under paragraph (1).

• (4) A variation of an agreement entered into under paragraph (1), may provide that the variation, or any particular provisions of the variation, will take effect from a specified date (which may be the transfer date).

• (5) If either BGÉ or the subsidiary company wishes to enter into an agreement under paragraph (1), or to vary an agreement already entered into under that paragraph, the other of them shall enter into negotiations in good faith with a view to concluding such an agreement or variation.

• (6) An agreement entered into under paragraph (1) (or the agreement as varied or substituted under paragraph (3)) is valid only in so far as it is consistent with the provisions of the Natural Gas Market Directive.

• (7) In this Regulation, “vary”, in relation to an agreement, includes replacing the agreement with another agreement that deals with the same matters.

BGÉ to prepare plan for transfer of assets and staff to subsidiary company

• (a) such assets, rights and liabilities of BGÉ specified in the plan, and

• (b) such employees of BGÉ designated in the plan,

as are necessary to enable the subsidiary company to fulfil its responsibility for the operation of the BGÉ transportation system as provided in the agreements (if any) entered into under Regulation 8.

• (2) Only those assets, rights and liabilities relevant to the operation of the BGÉ transportation system may be specified in the transfer plan.

• (3) The transfer plan must clearly designate—

• (a) those assets of BGÉ the ownership of which is to be transferred to the subsidiary company, and

• (b) those part or parts of the transmission system and distribution system owned by BGÉ the operation of which will be the responsibility of the subsidiary company.

• (4) Nothing in these Regulations or in any document made under these Regulations requires BGÉ to transfer to the subsidiary company any part of any transmission system or distribution system owned by BGÉ.

• (5) BGÉ may designate employees for transfer to the subsidiary company only after consultation with relevant trade unions and with the concurrence of the employees concerned.

Minister to make order implementing transfer plan

• (2) An order under paragraph (1) is subject to such terms and conditions (if any) as are specified in the order. However, terms and conditions so specified are valid only in so far as they are consistent with the provisions of the Natural Gas Market Directive.

Transfer to subsidiary company of operation of BGÉ's natural gas transmission and distribution systems

• (2) On the transfer date—

• (a) Schedule 1 has effect with respect to the transfer of assets, rights and liabilities of BGÉ, and

• (b) Schedule 2 has effect with respect to the transfer of BGÉ employees to the subsidiary company.

• (3) If, after the transfer date, the subsidiary company decides that work is necessary to enable the BGÉ transportation system to function effectively and efficiently, the subsidiary company may require BGÉ to undertake the work, in which case BGÉ shall undertake, or arrange for a contractor to undertake, the work in accordance with the directions of the subsidiary company.

Subsidiary company to be independent of BGÉ in certain respects

• (2) The subsidiary company is entitled to make decisions, independently of BGÉ with respect to the operation of the BGÉ transportation system.

• (3) BGÉ shall not—

• (a) engage in any conduct that interferes with or is likely to prejudice the subsidiary company as regards its responsibility for the day-to-day operation of the BGÉ transportation system, or

• (b) make any decision about the construction or improvement of the BGÉ transportation systems that is within the ambit of the annual plan prepared or approved by BGÉ.

• (4) The subsidiary company shall take appropriate measures to ensure that the persons who are concerned in its management are capable of acting in a manner consistent with maintaining the independence of that company.

• (5) A person who is concerned in the management of the subsidiary company may not participate, directly or indirectly, in the day-to-day operation of the BGÉ supply business.

• (6) Nothing in this Regulation affects the right of BGÉ to do any of the following in relation to the subsidiary company:

• (a) to take appropriate steps to ensure protection of the economic and management supervision rights of BGÉ with respect to securing a return on assets, whether owned by BGÉ or that company;

• (b) to require that company to comply with an annual financial plan prepared or approved by BGÉ;

• (c) to impose global limits on the amount of debt that that company may incur at any specified time or during any specified period;

• (d) to appoint persons as directors of that company so long as they are not involved, directly or indirectly, in the day-to-day operation of the BGÉ supply business.

Obligation of subsidiary company to establish and comply with compliance program

• (2) A draft compliance program must—

• (a) specify measures designed to ensure that the subsidiary company does not engage in discriminatory behaviour, and

• (b) specify the obligations of those persons concerned in the management of, or employed by, the subsidiary company that will ensure that that company does not engage in discriminatory behaviour, and

• (c) include provisions designed to ensure that the professional interests of persons who are concerned in the management of the subsidiary company are taken into account in a way that is consistent with maintaining the independence of that company.

• (3) As soon as practicable after a draft compliance program is submitted to it in accordance with paragraph (1), CER shall consider the program and shall then either—

• (a) approve the program, or

• (b) approve the program with such modifications as it considers appropriate.

• (4) On being notified by CER that it has approved the draft compliance program, the program becomes the subsidiary company's compliance program.

• (5) While a compliance program remains in force, the subsidiary company shall comply with the requirements of the program and as far as reasonably practicable ensure that those persons who are concerned in the management, or are employees, of that company observe those requirements.

• (6) CER may, from time to time, by notice given to the subsidiary company, require it—

• (a) to modify its compliance program to such extent as it considers appropriate,

or

• (b) to substitute for its compliance program a new compliance program.

• (7) If CER gives a notice to the subsidiary company in accordance with paragraph (6) that company shall comply with the requirement within such period as is specified in the notice, or within such extended period as CER may allow.

Subsidiary company to report annually to CER

• (2) On receiving the subsidiary company's compliance report, CER shall consider the report and either approve the report or remit the report to the company with such comments and suggestions as CER considers appropriate, in which case the company shall revise the report, taking account of the comments and suggestions of CER, and resubmit the revised report to CER for its approval.

• (3) Paragraph (2) applies to a revised report in the same way as it applies to the original report.

• (4) As soon as practicable after being notified that CER has approved its annual report, the subsidiary company shall publish the report by such means as CER specifies to that company.

Variation of transfers by agreement

• (2) The agreement—

• (a) must be in writing, and

• (b) takes effect on the date on which it is approved by the Minister or on such later date as is specified in, or determined in accordance with, the agreement.

• (3) The agreement does not affect the rights and liabilities arising under a contract of employment unless the employee concerned is a party to the agreement.

• (4) Assets or liabilities specified in the agreement are, on the date on which the agreement takes effect, transferred and vested in accordance with the agreement.

• (5) This Regulation has effect as if a reference to a transfer or vesting under the transfer plan included a reference to a transfer or vesting under an agreement entered into under this Regulation.

Proof of title by certificate

• (a) any asset specified in the certificate, or any interest in, or right over, any such asset, or

• (b) any liability so specified,

is by virtue of these Regulations vested in the issuer of the certificate is, in the absence of evidence to the contrary, proof of that fact.

PART 3 FUNCTIONS OF CER WITH RESPECT TO BGÉ

Specific responsibilities of CER with respect to BGÉ

CER to carry out periodic reviews of operations of subsidiary company

• (2) The first periodic review must be carried out within 2 years after the transfer date. Each subsequent periodic review must be carried out within such period not more than 5 years after the last periodic review as CER notifies in writing to the subsidiary company.

• (3) In carrying out a periodic review, CER shall ascertain—

• (a) the extent to which the subsidiary company is conducting its operations in a manner consistent with Regulation 12, and

• (b) whether or not that company engages in discriminatory behaviour, in particular as regards other entities that are part of, or are related to, BGÉ.

• (4) As soon as practicable after carrying out a periodic review, CER shall publish by such means as it thinks fit its conclusions on the review. If the conclusions are based on judgements formed by it, CER shall include in its conclusions a statement setting out how those judgements were arrived at.

• (5) If, in consequence of carrying out a periodic review, CER forms the opinion that the subsidiary company—

• (a) is not conducting its operations in a manner consistent with Regulation 12,

or

• (b) is engaging in discriminatory behaviour,

CER shall, by notice in writing given to the subsidiary company, require it to take such measures to rectify the situation as CER specifies in the notice.

• (6) A notice under paragraph (5) may include a requirement directing the subsidiary company to modify its compliance program to such extent, and in such respects, as are specified in the relevant notice.

• (7) The subsidiary company shall comply with a requirement imposed on it in accordance with paragraph (5).

• (8) If CER imposes a requirement in accordance with paragraph (5), it may also, by notice in writing given to BGÉ, require BGÉ to adopt such measures to rectify the situation as CER specifies in the notice.

• (9) BGÉ shall comply with a requirement imposed on it in accordance with paragraph (8).

CER to resolve disputes between BGÉ and the subsidiary

• (a) the operation of Part 2 (including in particular the effect or implementation of an agreement entered into under Regulation 8), or

• (b) the transfer to the subsidiary company of any assets, rights or liabilities,

either BGÉ or the subsidiary company may request CER to determine the dispute. Such a request must be in writing.

• (2) On receiving a request under paragraph (1), CER shall in the first instance attempt to resolve the dispute by conciliation. However, if the attempt is unsuccessful, CER shall after giving each party an opportunity to state its case, make a determination in respect of the dispute and notify the parties in writing of its determination. CER may include in such a determination such directions as it considers appropriate for resolving the dispute.

• (3) A determination made under paragraph (2) is binding on BGÉ and the subsidiary company and BGÉ and the subsidiary company shall comply with the directions (if any contained in the determination.

PART 4 ENFORCEMENT OF THESE REGULATIONS

Persons to whom this Part applies

• (a) BGÉ;

• (b) the subsidiary company;

• (c) a person concerned in the direction or management of BGÉ or the subsidiary company.

CER may apply to High Court for compliance order

• (a) a provision of these Regulations, or

• (b) a requirement or direction imposed or given under such a provision it may apply to the High Court for a compliance order against the person.

• (2) An application under this Regulation must be in writing and must specify—

• (a) the provision, requirement or direction that has been, is being or is about to be contravened or has not been, is not being or is about not to be complied with, and

• (b) the acts or omissions that, in CER's opinion, constitute or would constitute the contravention or failure to comply.

• (3) An application under this Regulation may not be heard unless the High Court is satisfied that the person concerned has been served with a copy of the application. On being served with a copy of the application, that person becomes the respondent to the application and is entitled to appear and be heard at the hearing of the application.

Powers of High Court on hearing of application

• (a) to prevent a repetition of the contravention or failure to comply, or

• (b) to cease the contravention or failure comply, or

• (c) to prevent the contravention or failure to comply from occurring.

However, if on the hearing of such an application, the High Court is not satisfied that the application is substantiated, it shall refuse to make such an order.

• (2) If the High Court decides to make an order under paragraph (1), it may make such ancillary or consequential orders as considers appropriate.

• (3) The High Court may vary or revoke an order made under this Regulation if it considers it appropriate to do so.

Part 5 CONSEQUENTIAL AMENDMENTS TO GAS LEGISLATION

Amendment of Gas Act 1976

• (a) in subsection (3)(a), by inserting “subject to subsection (3A),” before “transmit and distribute”, and

• (b) by inserting the following subsections after subsection (3A):

• “(3A) From the transfer date fixed under the European Communities (Internal Market in Natural Gas)(BGÉ) Regulations 2005—

  • (a) the subsidiary company established in accordance with those Regulations has such of the functions of the Board under this or any other Act as are necessary to enable it to carry out its responsibilities under those Regulations with respect to operating the BGÉ transportation system, and

  • (b) the Board continues to have such functions under this or any other Act as are necessary to enable it to carry out its responsibilities under those Regulations as owner of the BGÉ transportation system and under agreements entered into under Regulation 8 of those Regulations.

• (3B) In subsection (3A)—

‘BGÉ transportation system’ means such parts of the transmission system and the distribution system owned by BGÉ as have been designated in the transfer plan prepared in accordance with Regulation 9(3)(b) of the European Communities (Internal Market in Gas)(BGÉ) Regulations 2005;

‘distribution system’, in relation to natural gas, means a system for the transport of natural gas through local or regional pipelines with a view to delivering the gas to customers;

‘transmission system’, in relation to natural gas, means a system for the transport of natural gas through a high pressure pipeline, other than an upstream pipeline, with a view to delivering the gas to customers;”.

Amendment of Gas (Interim)(Regulation) Act 2002

• (a) by substituting the following subsections for subsection (1):

• “(1) The Commission may grant or refuse to grant to a person a licence to undertake in the State all or any of the following activities:

  • (a) the supply of natural gas;

  • (b) the shipping of natural gas;

  • (c) the operation of a transmission system;

  • (d) the operation of a distribution system;

  • (e) the ownership of a transmission system;

  • (f) the ownership of a distribution system;

  • (g) the operation of a natural gas storage facility;

  • (h) the operation of a LNG facility;

• (1A) A licence granted under subsection (1) is subject to such conditions as are specified in the licence.

• (1B) For the purposes of Article 7 of the Directive—

  • (a) the holder of a licence for the operation-of a transmission system is designated as a transmission system operator, and

  • (b) the holder of a licence for the operation of a natural gas storage facility is designated as a storage facility operator and

  • (c) the holder of a licence for operation of a LNG facility is designated as a LNG facility operator.

• (1C) The holder of a licence for the operation of a distribution system is designated for the purposes of Article 11 of the Directive.”.

• (b) by inserting in subsection (2) “the regulations (if any) in force under” after “Subject to”;

• (c) in subsection (4)(b), by deleting “or subsection (10) or both”;

• (d) by repealing subsections (10) and (11);

• (e) by substituting the following paragraphs for paragraphs (e), (f), (g) and (h of subsection (1):

• “(e) in the case of the holder of a licence for the operation of a transmission system or a distribution system, take steps to prevent the disclosure in a discriminatory manner of commercially advantageous information about its own activities,

• (f) in the case of a holder of a licence for the operation of a transmission system, a distribution system, a natural gas storage facility or LNG facility, provide users of the system or facility with sufficient information to enable them to access the system or facility,

• (g) in the case of the holder of a licence for the operation of a transmission system, obtain the energy that is uses for carrying out its functions according to transparent, non-discriminating and market-based procedures,

• (h) if, in the case of the holder of a licence for the operation of a transmission system or a distribution system, the holder is responsible for balancing that system—

• (i) adopt rules for operating the system that are objective transparent and non-discriminatory (including rules for charging users of the system for energy imbalance subject to approval by the Commission), and

  • (ii) ensure that terms and conditions (including rules and tariffs for providing balancing services) are established in a non-discriminatory and cost reflective way according to a methodology compatible with Article 25(2) of the Directive, and

  • (iii) publish those rules, terms and conditions in a publication that is generally available to those users and”;

• (f) by inserting the following subsection after subsection (18):

• “(19) In this section, ‘contravene’ includes failure to comply.”.

• (2) Subject to the regulations (if any) in force under section 16 of the Gas (Interim)(Regulation) Act 2002—

• (a) a person who, on the transfer date, owns a transmission system or a distribution system is, on that date, taken to have applied to CER under that section for a licence for ownership of that system, and

• (b) within 6 months after that date, CER shall issue to the person such a licence.

• (3) A licence in force under section 16 of the Gas (Interim)(Regulation) Act 2002 immediately before the commencement of this Regulation continues in operation as if it has been granted under that section as in force after that commencement.

• (4) Section 16(2) of the Gas (Interim)(Regulation) Act 2002 does not apply in respect of the ownership of a transmission system or distribution system until the end of 6 months after the transfer date.

SCHEDULE 1 TRANSFER OF ASSETS, RIGHTS AND LIABILITIES OF BGÉ

Transfer of certain BGÉ licences to subsidiary company

Transfer of ownership of certain assets of BGÉ to subsidiary company

• (2) All legal proceedings relating to those assets begun before the transfer date by or against BGÉ and pending immediately before that date are taken to be legal proceedings pending by or against the subsidiary company.

• (3) Any act, matter or thing done or omitted to be done in relation to those assets before the transfer date by, to or in respect of BGÉ is (to the extent that that act, matter or thing has any effect) taken to have been done or omitted by, to or in respect of the subsidiary company.

Transfer of responsibility for the operation of certain assets of BGÉ to subsidiary company

Transfer of certain rights and liabilities of BGÉ to subsidiary company

• (2) All legal proceedings relating to those rights or liabilities begun before the transfer date by or against BGÉ and pending immediately before that date are taken to be legal proceedings pending by or against the subsidiary company.

• (3) Any act, matter or thing done or omitted to be done in relation to those rights or liabilities before the transfer date by, to or in respect of BGÉ is (to the extent that that act matter or thing has any effect) taken to have been done or omitted by, to or in respect of the subsidiary company.

Certain references to BGÉ to be treated as references to subsidiary company

Change of ownership of asset not to be regarded as giving rise to remedy

No attornment required in respect of certain leased land

Stamp duty not chargeable

SCHEDULE 2 TRANSFER OF CERTAIN BGÉ EMPLOYEES TO SUBSIDIARY COMPANY

Certain BGÉ employees transferred to subsidiary company on transfer date

This Schedule not to affect certain matters relating to staff members

• (2) Nothing in this Schedule has the effect of breaking a person's contract of employment or continuity of employment for the purpose of applying to the person any other law relating to employment that would, apart from this Schedule, apply to the person. In particular, this Schedule does not affect a person's accrued rights that the person had immediately before the transfer date in respect of any kind of leave.

Variation of terms and conditions of transferred employees

• (2) Nothing in this Schedule prevents the terms and conditions of a transferred employee's employment after the transfer date from being varied—

• (a) in accordance with those terms and conditions, or

• (b) by or under an applicable law or agreement.

• (3) In this section—

“terms and conditions” includes a term existing because of paragraph (1);

“vary”, in relation to terms and conditions, includes vary by—

• (a) omitting any of those terms and conditions, or

• (b) adding to those terms and conditions, or

• (c) substituting new terms or conditions for any of the first-mentioned terms and conditions.

	GIVEN under my Official Seal, 2^nd December, 2005.
	Noel Dempsey T.D., Minister for Communications, Marine and Natural Resources.

EXPLANATORY NOTE

(This note is not a part of the Instrument and does not purport to be a legal interpretation)

These Regulations give further legal effect to Directive 2003/55/EC of the European Parliament and of the Council of the 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC, by providing for the legal unbundling of the Transmission Systems and Distribution Systems operations of Bord Gáis Éireann.

Footnotes