Energy (Windfall Gains in the Energy Sector) (Cap on Market Revenues) Act 2023

PART 1 Preliminary and General

1. Short title and commencement

1. (1) This Act may be cited as the Energy (Windfall Gains in the Energy Sector) (Cap on Market Revenues) Act 2023.

(2) This Act shall come into operation on such day or days as the Minister may appoint by order or orders either generally or with reference to any particular purpose or provision and different days may be so appointed for different purposes or provisions.

2. Interpretation

2. (1) In this Act—

“Act of 1999” means the Electricity Regulation Act 1999;

“adjusted surplus revenue” shall be construed in accordance with section 12;

“affiliated person” means—

(a) in relation to a company formed and registered under the Companies Act 2014 or an existing company within the meaning of that Act—

(i) any parent company or any wholly owned subsidiary company of the company, or any company that is part of a group of companies with that company within the meaning of section 8 of the Companies Act 2014, or

(ii) the spouse or any relative, or the spouse of any relative, of a director, manager, secretary or other officer of the company,

and

(b) in relation to an individual—

(i) a relative of the individual,

(ii) a person acting on behalf of the individual or of a relative of the individual,

(iii) a company or other body of which the individual or relative of the individual, or a nominee of them, is a member,

(iv) a partnership in which the individual or a relative of the individual is a partner, or

(v) an employer of the individual, or of a relative of the individual;

“balancing market” has the meaning given to it by section 6;

“billing period” in relation to a settlement rerun, shall be construed in accordance with section G.2.2.2 of Part B of the Trading and Settlement Code;

“collection agent” means EirGrid, the person licensed as the Single Electricity Market operator under section 14(1)(j) of the Act of 1999;

“competent authority” means the Commission for Regulation of Utilities, being the competent authority designated under the European Union (Risk Preparations) Regulations 2020 (S.I. No. 342 of 2020);

“Council Regulation” means Council Regulation (EU) 2022/1854 of 6 October 2022[^2] on an emergency intervention to address high energy prices;

“current account” shall be construed in accordance with section 25;

“day ahead market” has the meaning given to it by section 6;

“distribution system” shall be construed in accordance with the meaning given to it in the definition of “distribution” in the Act of 1999;

“distribution system operator” means the Electricity Supply Board being the holder of the licence referred to in section 14(1)(g) of the Act of 1999;

“electricity market” means the Single Electricity Market;

“export only supplier” means a market participant—

(a) who does not sell electricity to wholesale customers (within the meaning of the Act of 1999) or final customers,

(b) is licensed to supply electricity under section 14(1)(b) of the Act of 1999, and

(c) who supplies electricity on behalf of more than one producer, each of which producer has a generating unit with installed capacity of less than 10 megawatts;

“ex-ante market” has the meaning given to it by section 6;

“final customer” has the meaning given to it by the Act of 1999;

“Fund” means the Market Cap Fund established under section 25;

“generating unit” means an apparatus that produces electricity, measured in megawatts, for which the maximum electrical output capable of being delivered on a sustained basis without accelerated loss of equipment life at the point where the apparatus is joined to the transmission system or the distribution system, is one or more than one whole megawatt;

“hedging arrangement” shall be construed in accordance with section 14;

“imbalance settlement period” means, in relation to each consecutive hour during the relevant period, a 30 minute period beginning at each hour and at 30 minutes past each hour;

“inspector” means an inspector appointed under section 56 of the Act of 1999;

“installed capacity” means the maximum instantaneous power that a generating unit can produce under specific conditions designated by the manufacturer and expressed in megawatts;

“intermediary” shall be construed in accordance with section 6;

“intraday market” has the meaning given to it by section 6;

“investment account” shall be construed in accordance with section 25;

“loss-adjusted metered quantity” shall be construed in accordance with Sections F.2.5 and F.4 of Part B of the Trading and Settlement Code;

“market cap” shall be construed in accordance with section 8;

“market index price” has the meaning given to it by section 9;

“market participant” has the meaning given to it by the Act of 1999;

“Minister” means the Minister for the Environment, Climate and Communications;

“monthly capped revenue” shall be construed in accordance with section 10;

“monthly market revenue” shall be construed in accordance with section 10;

“power purchase agreement” has the meaning given to it by section 10;

“preliminary surplus revenue” shall be construed in accordance with section 11;

“prescribed” means prescribed by regulations or schemes made by the Minister or by regulations made by the competent authority having consulted with the Minister;

“producer” shall be construed in accordance with section 6;

“REFIT power purchase agreement” means a REFIT power purchase agreement referred to in the Electricity Regulation Act 1999 (Public Service Obligations) Order 2002 (S.I. No. 217 of 2002);

“relative” means, in relation to an individual, a child, step-child, parent, brother, sister, spouse, civil partner within the meaning of section 3 of the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010, cohabitant, within the meaning of section 172(1) of that Act of 2010, grandparent, or grandchild of the individual or a child of the individual’s civil partner or cohabitant;

“relevant period” has the meaning given to it by section 8;

“relevant quantity” has the meaning given to it by section 10;

“return” means a return made by a producer, intermediary or trader under section 15;

“scheme” means a scheme prescribed by the Minister under section 28;

“SEMO” means—

(a) in relation to the State, the Single Electricity Market operator, and

(b) in relation to Northern Ireland, the person appointed to perform like functions in Northern Ireland to those performed by the Single Electricity Market operator in the State;

“settlement rerun” means a settlement rerun carried out by the Single Electricity Market operator in the 4th month and 13th month after the end of a billing period, in accordance with Section G.2.9 of Part B of the Trading and Settlement Code, the objective of which is to adjust the financial position of market participants by taking account of matters including updated data relating to metered generation of electricity;

“Single Electricity Market” has the meaning given to it by the Act of 1999;

“Single Electricity Market operator” means EirGrid, being the person licensed as the Single Electricity Market operator under section 14(1)(j) of the Act of 1999;

“trader” shall be construed in accordance with section 6;

“Trading and Settlement Code” means the Single Electricity Market Trading and Settlement Code, established under section 9BA(1) of the Act of 1999, concerning rules and procedures for the purchase and sale of wholesale electricity in the Single Electricity Market and in operation during the relevant period including as respects a settlement rerun relating to a billing period occurring during the relevant period;

“transmission system” shall be construed in accordance with the meaning given to it in the definition of “transmission” in the Act of 1999;

“transmission system operator” means a holder of a licence referred to in section 14(1)(e) of the Act of 1999.

(2) In this Act a word or expression which is used in this Act and which is also used in the Council Regulation has, unless the context otherwise requires, the same meaning in this Act as it has in the Council Regulation.

3. Regulations and schemes

3. (1) The Minister may by regulations provide for any matter referred to in section 33 as prescribed or to be so prescribed.

(2) The Minister may make a scheme to provide for any matter referred to in section 28 as prescribed or to be so prescribed.

(3) The competent authority, having consulted with the Minister, may by regulations provide for any matter referred to in section 15 or 20 as prescribed or to be so prescribed.

(4) Without prejudice to any provision of this Act, regulations or schemes under this Act may contain such incidental, supplementary and consequential provisions as appear to the Minister or the competent authority having consulted with the Minister, as the case may be, to be necessary or expedient for the purposes of the regulations.

(5) Every regulation or scheme under this Act shall be laid before each House of the Oireachtas as soon as may be after it is made and, if a resolution annulling the regulation or scheme is passed by either such House within the next 21 days on which that House has sat after the regulation or scheme is laid before it, the regulation or scheme shall be annulled accordingly, but without prejudice to the validity of anything previously done thereunder.

4. Expenses

4. The expenses incurred by the Minister in the administration of this Act shall, to such extent as may be approved by the Minister for Public Expenditure, National Development Plan Delivery and Reform, be paid out of moneys provided by the Oireachtas.

5. Service of notices

5. (1) A notice or other document that is required to be served on or given to a person under this Act shall be in writing addressed to the person concerned by name, and may be so served on or given to the person in one of the following ways:

(a) by delivering it to the person;

(b) by leaving it at the address at which the person ordinarily resides or, in a case in which an address for service has been furnished, at that address;

(c) by sending it by post in a prepaid registered letter to the address at which the person ordinarily resides or, in a case in which an address for service has been furnished, to that address;

(d) by electronic means in a case in which the person has given notice in writing to the person giving the notice concerned of his or her consent to the notice (or notices of a class to which the notice belongs) being given to him or her in that manner.

(2) For the purpose of this section, a company formed and registered under the Companies Act 2014 or an existing company within the meaning of that Act is deemed to be ordinarily resident at its registered office, and every other body corporate and every unincorporated body of persons shall be deemed to be ordinarily resident at its principal office or place of business.

PART 2 Calculation, Return, Payment and Recovery

Chapter 1 Calculation

6. Application of Act to certain persons

6. (1) Each of the following persons shall be liable, subject to this Act, to make a payment referred to in section 8:

(a) a person (in this Act referred to as a “producer”) who holds a licence under section 14(1)(a) of the Act of 1999, in respect of a generating unit with installed capacity of one or more than one megawatt which produces electricity from a source specified in section 7;

(b) a person (in this Act referred to as an “intermediary”) appointed and authorised, under and in accordance with Section B.11 of Part B of the Trading and Settlement Code, by a producer to be an intermediary on behalf of the producer;

(c) a person (in this Act referred to as a “trader”) appointed and authorised under and in accordance with Section B.7 of Part B of the Trading and Settlement Code, by a producer or an intermediary to sell electricity in accordance with the SEMOpx rules on behalf of the producer or intermediary, in the ex-ante market or the balancing market.

(2) In this section—

“balancing market” means the market operated by SEMO to continuously balance generation of and demand for electricity in order to maintain stable and secure operation of the transmission system;

“day ahead market” means a part of the electricity market operated by SEMOpx where market participants submit their offers and bids for electricity supply and demand, respectively, for the immediately following day which facilitates the efficient scheduling and dispatch of electricity generation resources based on anticipated supply and demand conditions wherein the market-clearing price is determined based on the intersection of the offers and bids, and which establishes the price of electricity for the day ahead;

“ex-ante market” means a day-ahead market or an intraday market;

“intraday market” means a part of the electricity market operated by SEMOpx where market participants may trade electricity closer to real-time, after the day ahead market has concluded, and adjust and optimise their positions or meet unforeseen changes in electricity supply or demand, and manage imbalances between scheduled and actual electricity flows, in a timely manner;

“SEMOpx” is the nominated electricity market operator (NEMO) designated by the SEMO under and in accordance with Commission Regulation (EU 2015/1222) of 24 July 2015[^3] and Title VIII of the Trade and Cooperation Agreement between the European Union and the European Atomic Energy Community of the one part and the United Kingdom of Great Britain and Northern Ireland of the other part, done at Brussels and London on 30 December 2020[^4] to operate the ex-ante market under and in accordance with that Regulation and Agreement.

7. Application of Act to certain fuel sources

7. This Act applies to market revenue obtained in the State each month during the relevant period by a producer, intermediary or trader from the sale of electricity produced from any or all of the following fuel sources:

(a) wind energy;

(b) solar energy (solar thermal and solar photovoltaic);

(c) geothermal energy;

(d) hydropower (with or without reservoir);

(e) biomass fuel (solid or gaseous biomass fuels), excluding biomethane;

(f) waste;

(g) nuclear energy;

(h) lignite;

(i) crude petroleum products;

(j) peat;

(k) hard coal.

8. Market cap

8. (1) A producer, intermediary or trader shall each be liable to make a payment, calculated in accordance with this Act, in respect of the market revenue, obtained in the State by the producer, intermediary or trader each month during the relevant period from the sale of electricity produced from a class of fuel source referred to in section 7, that exceeds the amount specified in subsection (2) in relation to that class of source (in this section referred to as the “market cap”).

(2) Subject to subsection (3), the market cap shall be—

(a) €120 per megawatt hour for electricity produced from the source referred to in paragraph (a), (b) or (d) of section 7,

(b) €180 per megawatt hour for electricity produced from the source referred to in paragraph (c), (f), (g) or (h) of section 7, and

(c) for electricity produced from the source referred to in paragraph (e), (i), (j) or (k) of section 7, a cap per megawatt hour of the greater of—

(i) €180 per megawatt hour, or

(ii) the allowable cost of production for that calendar month plus an allowable margin of—

(I) €15 per megawatt hour for electricity produced from the source referred to in paragraph (e) or (j) of section 7,

(II) €120 per megawatt hour for electricity produced from the source referred to in paragraph (i) of section 7, and

(III) €35 per megawatt hour for electricity produced from the source referred to in paragraph (k) of section 7.

(3) Where electricity is produced in a generating unit from more than one class of fuel source referred to in section 7, the producer, intermediary or trader concerned shall be liable to make a payment in relation to the market cap applying to the greatest percentage of the fuel source used in the production of electricity in the unit in a month which shall, in that month, be the market cap applying to the sale of all the electricity produced in that unit.

(4) In this section—

“allowable cost of production” shall be calculated by the producer by applying the unit complex bids to the relevant quantity for the generating unit for the month concerned in megawatt hours, then dividing the resulting amount, stated in euros, by the relevant quantity for the generating unit for the month concerned in megawatt hours, to give an amount stated in euros per megawatt hour;

“incremental and decremental priced quality pairs” shall be construed in accordance with Section D.4.4 of Part B of the Trading and Settlement Code;

“no load costs” shall be construed in accordance with Section D.4.3 of Part B of the Trading and Settlement Code;

“relevant period” means the period beginning on 1 December 2022 and ending on 30 June 2023;

“start up costs” shall be construed in accordance with Section D.4.3 of Part B of the Trading and Settlement Code;

“unit complex bids” means complex bid offer data submitted, by or on behalf of a producer, under Section D.4 of Part B of the Trading and Settlement Code, to the SEMO in respect of a generating unit.

9. Market index price

9. (1) The collection agent shall establish and maintain a website whereby it shall, on or after the commencement of this section, continue to publish the market index price which was calculated and published by the collection agent before the said commencement.

(2) In this section, “market index price” in relation to each month of the relevant period, means the weighted average price of the prices associated with each quantity of electricity traded in the day-ahead market and each quantity of electricity traded in the intraday market by all generating units in each imbalance settlement period in that month.

10. Monthly market revenue and monthly capped revenue