Legalize / United Kingdom / Public General Act

Gas Act 1986

Type Public General Act

Publication 1986-07-25

Last updated 2025-11-13

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(ii) whether the relationship (direct or indirect) between the applicant and the relevant producer or supplier has led or might lead the applicant to discriminate in favour of the relevant producer or supplier; and

(b) may, in particular, take into account any information or undertaking given to the Authority by the applicant, the relevant producer or supplier or the person who controls the applicant and controls or has a majority shareholding in the relevant producer or supplier.

(5) The information and undertakings that may be taken into account under subsection (4)(b) include information and undertakings regarding any measures that have been or will be put in place to ensure the effective separation of the business of the applicant and the business of the relevant producer or supplier.

8J

(1) This section applies in relation to any period for which a person—

(a) holds a licence under section 7 or 7ZA; and

(b) is certified.

(2) If the person is certified on the first, second, ... fifth or sixth certification ground in section 8G, the person is designated as a gas transmission system operator for the purposes of the Gas Regulation.

(3) If the person is certified on the third certification ground in section 8G, the independent system operator nominated in the application for certification is designated as a gas transmission system operator for the purposes of the Gas Regulation.

(4) As soon as is reasonably practicable after a person is designated by virtue of this section, the Authority must notify the designation to—

(a) the person designated; and

(b) the Secretary of State; ...

8K

(1) The Authority must monitor, in respect of each certified person, whether the basis on which the Authority decided to certify the person, including the certification ground on which the person was certified, (the “certification basis”) continues to apply.

(2) If, ... as result of information it has received or obtained, the Authority thinks that a person from a country outside the United Kingdom has taken or may take control of a certified person, the Authority must, as soon as is reasonably practicable—

(a) notify the information to the Secretary of State ...; and

(b) enclose with the notification to the Secretary of State any further information which, at the time of the notification, the Authority has in its possession and thinks is relevant to the question of whether the security of gas supplies in the United Kingdom ... would be put at risk by the continued certification of the person.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) The Authority may ... review whether the certification basis in respect of a certified person continues to apply if—

(a) the certified person notifies it of any event or circumstance which may affect that basis; or

(b) the Authority thinks that the basis may no longer apply.

(6) A review under subsection (5) is to be carried out within the 4 months beginning with—

(a) if paragraph (a) of subsection (5) applies, the day on which the Authority receives the notification under that paragraph;

(b) otherwise, the first day on which the Authority thinks that the certification basis may no longer apply.

(7) Subsection (8) applies where—

(a) by virtue of section 8H(7) or (9), the Authority has treated the fourth or fifth test under section 8H as passed;

(b) a person is certified in reliance on that treatment; and

(8) Where this subsection applies, the Authority must review whether that test is now passed.

(9) A review under subsection (8) is to be carried out within the 4 months beginning with the end of the period mentioned in subsection (7)(c).

(10) If, before any of the deadlines mentioned in subsection ... (6) or (9) (or before such deadline as previously extended under this subsection), the Authority asks the certified person or a relevant producer or supplier for information under section 8L(2) or (3), the relevant deadline is the end of the 4 months beginning with the day on which the last of that information is received.

Review of certification: requirement to provide information etc

8L

(1) As soon as is reasonably practicable after beginning a review under section 8K, the Authority must notify the certified person that the review is being carried out and of the reasons for it.

(2) The Authority may ask that person for any information the Authority thinks is relevant to the review, and the person must supply the information if—

(a) it is in the person’s possession; or

(b) it is information which the person could reasonably be expected to obtain.

(3) The Authority may ask a relevant producer or supplier for any information the Authority thinks is relevant to a review under section 8K, and the relevant producer or supplier must supply that information if—

(a) it is in the relevant producer or supplier’s possession; or

(b) it is information which the relevant producer or supplier could reasonably be expected to obtain.

(4) A person required to supply information under subsection (2) or (3) must do so by any deadline specified by the Authority.

8M

(1) This section applies if the Authority notifies information to the Secretary of State under section 8K(2) in respect of a certified person.

(2) The Secretary of State must prepare a report on whether the security of gas supplies in the United Kingdom ... would be put at risk by the continued certification of the person.

(3) The Secretary of State must prepare the report and send it to the Authority within the 6 weeks beginning with the day on which the notification is received.

(4) If, before the Secretary of State sends the report to the Authority, the Authority receives information under section 8L(2) or (3) and thinks that the information is relevant to the preparation of the report, the Authority must supply that information to the Secretary of State as soon as is reasonably practicable.

(5) In preparing the report, the Secretary of State must take into account—

(a) any relevant international law; and

(b) any relevant agreement between the government of the United Kingdom and the government of the ... country in question.

8N

(1) Where the Authority reviews under section 8K(5) whether the certification basis in respect of a certified person continues to apply, it may, within the 4 months mentioned in section 8K(6) or where relevant the 4 months mentioned in section 8K(10), either—

(a) make a ... decision to continue the certification on the certification ground mentioned in section 8K(1); or

(b) make a ... decision to withdraw the certification.

(2) If the Authority does not make a decision under subsection (1) within those 4 months, it is to be taken as having made a ... decision at the end of the 4 months to continue the certification on the certification ground mentioned in section 8K(1).

(3) Where the Authority reviews under section 8K(8) whether the fourth or fifth test under section 8H is now passed, it may, within the 4 months mentioned in section 8K(9) or where relevant the 4 months mentioned in section 8K(10), either—

(a) make a ... decision to continue the certification on the basis that the test is now passed; or

(b) make a ... decision to withdraw the certification.

(4) If the Authority does not make a decision under subsection (3) within those 4 months, it is to be taken as having made a ... decision at the end of the 4 months to continue the certification on the basis that the test is now passed.

(5) As soon as is reasonably practicable after a ... decision is made (or taken to be made) under this section, the Authority must—

(a) notify the decision to the certified person and the Secretary of State; ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9A) The Authority must publish its decision to continue a certification, or to withdraw a certification, together with the reasons for it, in such manner as it considers appropriate.

(10) Section 8G(9)(b) applies in relation to a decision mentioned in this section as it applies in relation to a decision mentioned in section 8G(1), but as if—

(a) the references in section 8G(9)(b) to the certification of the applicant were references to the continued certification of the person certified; and

(b) the reference in section 8G(9)(b) to a report prepared under section 8E were a reference to a report prepared under section 8M.

8O

(1) A person must not exercise a shareholder right or a right of appointment if—

(a) the right falls within subsection (2), (3), (4) or (5);

(b) the relevant date in respect of the certified person mentioned in that subsection has been reached;

(c) the exercise of the right would or might lead the certified person to discriminate in favour of the relevant producer or supplier mentioned in that subsection; and

(d) the relevant producer or supplier is a person to whom subsection (6) applies.

(2) A right falls within this subsection if—

(a) it is a shareholder right;

(b) it is held by a person who controls a person certified on the certification ground in section 8G(3); and

(3) A right falls within this subsection if—

(a) it is a shareholder right;

(b) it is exercisable in relation to a person certified on the certification ground in section 8G(3); and

(4) A right falls within this subsection if—

(a) it is a shareholder right;

(b) the person who holds it appointed a senior officer of a person certified on the certification ground in section 8G(3);

(d) the right is exercisable in relation to a gas undertaking which is a relevant producer or supplier.

(5) A right falls within this subsection if—

(a) it is a right to appoint a senior officer of a person certified on the certification ground in section 8G(3); and

(b) the person who holds it has, within the immediately preceding period of 3 years, exercised a shareholder right in relation to a gas undertaking which is a relevant producer or supplier.

(6) This subsection applies to a person if, in order to carry out some or all of the activity by virtue of which the person is a relevant producer or supplier, the person—

(a) requires a licence under section 7A of this Act, section 6 of the Electricity Act 1989 (licences authorising supply, etc), or section 3 of the Petroleum Act 1998 (licences to search and bore for and get petroleum); or

(b) would require such a licence if carrying out the activity in Great Britain.

(7) In this section—

(a) “exercise” means exercise directly or indirectly, and “exercisable” is to be interpreted accordingly; and

(b) “relevant date” means the relevant date for the purposes of section 8C(1) or (2).

8P

(1) The following are voidable on an application to the court—

(a) the exercise of a shareholder right in breach of section 8O;

(b) the appointment of a senior officer in breach of that section.

(2) Any person may make an application under subsection (1).

(3) Such an application may not be made after the end of the 5 years beginning with the day on which the shareholder right was exercised or the appointment made.

(4) If, by virtue of this section, the court declares the exercise of a shareholder right or an appointment to be void, it may make an order as to the consequences of its declaration.

(5) In this section, “the court” means—

(a) in relation to England and Wales, the High Court, and

(b) in relation to Scotland, the Court of Session.

8Q

(1) In sections 8C to 8P and this section—

“control”, in relation to one person having control over another, has the meaning given by Article 2(36) of the Gas Directive (but in determining whether one person (“person A”) has control over another (“person B”) no account is to be taken of any unexercised contractual or other right which would, if exercised, give person A control over person B and which was conferred as a condition of the provision of either financial support or a guarantee (or both), by person A in relation to the business of person B); and references to one person controlling another are to be interpreted accordingly;

“certified” means certified by the Authority under section 8F; and “certify” and “certification” are to be interpreted accordingly;

“certification grounds” has the meaning given by section 8G(2);

“person from a country outside the United Kingdom” means a person the Authority thinks is from a country outside the United Kingdom;

“shareholder right” means a right, conferred by the holding of a share in the company’s share capital—to vote at general meetings of the company; orto appoint or remove a member of the company’s board of directors;

(2) In this Part “gas undertaking” means a person who—

(a) gets natural gas from its natural condition in strata otherwise than as an unintended consequence of the storage of gas, and requires a licence under section 3 of the Petroleum Act 1998 (licences to search and bore for and get petroleum) to do so or would require such a licence if getting the gas in Great Britain;

(b) produces any other gas, including in particular biomethane, which is suitable for conveyance through pipes to premises in accordance with a licence under section 7;

(d) arranges with a gas transporter for gas to be introduced into, conveyed by means of or taken out of a pipe-line system operated by that transporter; or

(e) otherwise sells gas.

(3) In this Part “relevant producer or supplier”, in relation to an applicant for certification or a certified person, means a person who falls within each of subsections (4) and (5).

(4) A person falls within this subsection if the person—

(a) is a gas undertaking;

(b) generates electricity for the purpose of giving a supply to any premises or enabling a supply to be so given;

(d) otherwise generates or sells electricity,

and terms used in paragraphs (b) and (c) of this subsection have the same meanings in those paragraphs as in Part 1 of the Electricity Act 1989.

(5) A person falls within this subsection if—

(a) the person requires a licence under section 7A of this Act or section 6 of the Electricity Act 1989 (licences authorising supply, etc) to carry out the activity by virtue of which the person falls within subsection (4);

(b) where the person does not carry out the activity in Great Britain, the person would, in the Authority’s opinion, require such a licence if carrying out the activity in Great Britain; or

(c) the person has a relationship with the applicant or certified person which the Authority thinks might lead the applicant or certified person to discriminate in favour of the person.

Storage facilities: independence

8R

(1) This section applies to a storage facility unless a minor facility exemption is in force in respect of that facility under section 8S.

(2) The owner of a storage facility to which this section applies must, notwithstanding any licence held by the owner, refrain from producing gas in the United Kingdom.

(3) The owner must also, notwithstanding any licence held by the owner, refrain from carrying out any of the following activities in the United Kingdom except to the extent that the activity is necessary for the efficient operation of the storage facility or of another facility used by the owner to store gas—

(a) the supply to any premises of gas which has been conveyed to those premises through pipes;

(b) the making of an arrangement with a gas transporter for gas to be introduced into, conveyed by means of or taken out of a pipe-line system operated by that gas transporter;

(4) If an affiliate of the owner carries out in the United Kingdom an activity which, under subsection (2) or (3), the owner must refrain from carrying out, the owner must operate the storage facility independently of the interests of that affiliate and must, in particular, ensure that—

(a) no senior officer or manager of the owner is a senior officer or manager of the affiliate;

(b) if a senior officer or manager of the owner has an interest in the affiliate that conflicts, or is likely to conflict, with the interests of the storage facility, the owner maintains procedures to ensure that the storage facility is operated independently of that interest in the affiliate;

(c) the owner is entitled to take decisions without the consent of that affiliate in respect of any assets necessary to operate, maintain or develop the storage facility; and

(d) the owner does not take instructions from the affiliate regarding day to day operations or individual decisions concerning the construction or upgrading of the storage facility.

(5) Subsection (4)(c) and (d) does not prevent a parent undertaking of the owner from requiring the owner—

(a) to obtain the parent undertaking’s approval of the owner’s annual financial planning;

(b) to comply with restrictions on the owner’s overall indebtedness.

(6) The owner must establish a programme (the “independence programme”) in relation to the owner’s senior officers, other officers, managers and employees for the purpose of ensuring that they do not cause the owner to—

(a) discriminate against persons who are not affiliates of the owner; or

(b) breach any of the owner’s obligations under section 11C regarding the disclosure or use of information.

(7) The owner must—

(a) ensure that compliance with the independence programme is monitored; and

(b) each year, publish a report setting out the measures taken in accordance with the independence programme and send a copy to the Authority.

(8) For the purposes of this section a person produces gas if the person—

(a) gets natural gas from its natural condition in strata otherwise than as an unintended consequence of the storage of gas, and requires a licence under section 3 of the Petroleum Act 1998 (licences to search and bore for and get petroleum) to do so or would require such a licence if getting the gas in Great Britain; or

(b) produces any other gas, including in particular biomethane, which is suitable for conveyance through pipes to premises in accordance with a licence under section 7.

(9) In this section—

“affiliate”, in relation to a person (“person A”), means—a person who has control of person A; ora person who is under the control of the same person as person A;

“control” has the meaning given by section 8Q(1);

“manager”, in relation to the owner of a storage facility or an affiliate of the owner, means a natural person who is responsible, directly or indirectly, for the day to day management of the owner or the affiliate;

“parent undertaking” has the meaning given by section 1162 of the Companies Act 2006.

(10) The reference in subsection (4)(b) to a conflict of interests includes a conflict of interest and duty and a conflict of duties.

8S

(1) A person who is or expects to be an owner of a storage facility may apply in writing to the Authority for an exemption from the requirements of sections 8R and 19B in respect of that facility (a “minor facility exemption”).

(2) The Authority must give a minor facility exemption in respect of a facility where it is satisfied that use of the facility by other persons is not technically or economically necessary for the operation of an efficient gas market.

(3) A minor facility exemption—

(a) must be in writing;

(b) may be given—

(i) for an indefinite period or for a period determined under the exemption;

(ii) unconditionally or subject to such conditions as the Authority considers appropriate.

(4) The Authority must publish its decision to give or refuse to give a minor facility exemption together with the reasons for the decision.

(5) A minor facility exemption may be revoked—

(a) in accordance with provisions contained in it;

(b) at any other time, if the Authority considers that the condition in subsection (2) is no longer met.

(6) The Authority must from time to time publish a document setting out how it will determine whether the use of a facility by other persons is technically or economically necessary for the operation of an efficient gas market, including the matters it will take into account when determining this.

(7) Publication under subsection (4) or (6) must be in such manner as the Authority considers appropriate.

(8) Before publishing a document under subsection (6) the Authority must consult—

(a) the Secretary of State; and

(b) such other persons as the Authority considers appropriate.

Duties of facility owners and prospective facility owners

11A

(1) This section applies to—

(a) a storage facility;

(b) an LNG import or export facility.

(2) The owner of a facility to which this section applies must—

(a) operate, maintain and develop the facility, so far as it is economical to do so, in a manner calculated to ensure that the facility is secure, reliable and efficient;

(b) take any steps required by the Authority to ensure that the owner maintains sufficient financial resources to enable the owner to comply with the owner’s obligations under this Act and under the Gas Regulation.

11B

A person who is or expects to be the owner of an LNG import or export facility must provide the Authority with such information in such manner and at such times as the Authority may reasonably require to facilitate the performance of its functions under this Act.

11C

(1) The owner of a storage facility or LNG import or export facility must take all reasonable steps to ensure that commercially sensitive information relating to the operation of the facility is not disclosed—

(a) to a person in a way that discriminates against any other person or description of persons;

(b) to an associated undertaking unless the disclosure is necessary in order to enable a transaction with that associated undertaking to take place.

(2) Information which is obtained by the owner of a storage facility or LNG import or export facility from an associated undertaking for the purpose of, or in the course of, a transaction with that undertaking must not be used by the owner for any other purpose.

19AA

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The Authority must revoke an exemption given under section 19A in respect of a facility—

(a) if the construction of the facility, or (as the case may be) the making of the modification to which the exemption relates, has not been started within the 2 years beginning with the relevant date; or

(b) if the facility, or (as the case may be) the modification to which the exemption relates, is not operational within the 5 years beginning with the relevant date.

(4) In subsection (3) “relevant date” means—

(a) if before IP completion day the European Commission notified the Authority that it approved the exemption and terms as copied to it under subsection (1) (as it then had effect), the date of that notification;

(b) if, before IP completion day and in accordance with Article 36(9) of the Gas Directive, the European Commission required the Authority to modify the terms, the date of that requirement;

(i) before IP completion day the Authority sent the European Commission a copy of the exemption and terms under subsection (1) (as it then had effect), and

(ii) the European Commission does not act as described in paragraph (a) or (b) before IP completion day,

the date 4 months after the Authority sent the European Commission a copy of the exemption and terms under subsection (1) or IP completion day, whichever is the sooner;

(d) if the decision to give the exemption was published under section 19A(11) on or after IP completion day, the date on which the decision was published under section 19A(11).

(5) The Authority may at any other time revoke an exemption given under section 19A, or modify the terms on which such an exemption is given, in respect of a facility—

(a) in accordance with the provisions of the exemption; or

(b) by giving the owner of the facility a notice of revocation at least 4 months before the revocation takes effect.

Exceptions from sections 4AA to 4A.

19CA

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The Authority must revoke an exemption given under section 19C in respect of a facility—

(a) if the construction of the facility, or (as the case may be) the making of the modification to which the exemption relates, has not been started within the 2 years beginning with the relevant date; or

(b) if the facility, or (as the case may be) the modification to which the exemption relates, is not operational within the 5 years beginning with the relevant date.

(4) In subsection (4) “relevant date” means—

(a) if before IP completion day the European Commission notified the Authority that it approved the exemption and terms as copied to it under subsection (1) (as it then had effect), the date of that notification;

(b) if, before IP completion day and in accordance with Article 36(9) of the Gas Directive, the European Commission required the Authority to modify the terms, the date of that requirement;

(i) before IP completion day the Authority sent the European Commission a copy of the exemption and terms under subsection (1) (as it then had effect), and

(ii) the European Commission does not act as described in paragraph (a) or (b) before IP completion day,

the date 4 months after the Authority sent the European Commission a copy of the exemption and terms under subsection (1) or IP completion day, whichever is the sooner;

(d) if the decision to give the exemption was published under section 19C(10) on or after IP completion day, the date on which the decision was published under section 19C(10).

(5) The Authority may at any other time revoke an exemption given under section 19C, or modify the terms on which such an exemption is given, in respect of a facility—

(a) in accordance with the provisions of the exemption; or

(b) by giving the owner of the facility a notice of revocation at least 4 months before the revocation takes effect.

Report as to any connection of certified person with a country outside the European Economic Area

19DZA

(1) The owner of an LNG import or export facility may apply to the Authority for an exemption under this section with respect to the facility if the owner—

(a) receives an application under section 19D(4) with respect to the facility; and

(b) considers that allowing the application would cause the owner serious financial difficulties because of take-or-pay commitments of the owner under one or more gas-purchase contracts.

(2) The owner of an LNG import or export facility must apply to the Authority for an exemption under this section with respect to the facility if—

(a) the owner refuses an application under section 19D(4) with respect to the facility; and

(b) the reason, or one of the reasons, given under section 19D(7) for the refusal is the consideration mentioned in subsection (1)(b).

(3) An application made by virtue of subsection (2) must be made before the end of the 7 days beginning with the day of the refusal.

(4) An application for an exemption under this section must enclose all relevant information, including in particular information in respect of—

(a) the nature and extent of the difficulties mentioned in subsection (1)(b) which the owner considers would arise (the “difficulties”);

(b) any steps taken by the owner to prevent the difficulties from arising; and

(5) The Authority may give an exemption under this section if it considers that—

(a) having regard to any steps taken by the owner to prevent the difficulties from arising, the only reasonably available means of prevention is an exemption under this section; and

(b) an exemption ought to be given, having regard to—

(i) the objective of achieving a competitive gas market;

(ii) the need for the owner to comply with any relevant public service obligation which applies to the owner;

(iii) the need to ensure security of the supply of gas;

(iv) the position of the owner of the facility in the gas market and the level of competition in the market;

(v) the level of seriousness of the difficulties;

(vi) the time when the gas-purchase contract was entered into, and the extent to which the owner could reasonably have foreseen at that time that the difficulties were likely to arise;

(vii) the terms of the gas-purchase contract, including the extent to which the contract allows for market changes;

(viii) the significance of the facility to the gas market; and

(ix) the overall effect of the exemption on the operation of an economically efficient gas market.

(5A) In subsection (5)(b)(ii) “public service obligation” has the same meaning as in section 19D.

(6) An exemption under this section must be given for a limited period and in writing and must specify—

(a) the period of the exemption; and

(b) any conditions the Authority considers necessary in order to ensure that the owner takes all reasonably practicable steps to ensure that, by the time the exemption expires, the difficulties would no longer arise.

(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) An exemption under this section may be modified or revoked by the Authority—

(a) in accordance with its provisions;

(b) at any other time, if the Authority considers that an exemption under this section is no longer required.

(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(10) In this section “take-or-pay commitment” and “gas-purchase contract” have the same meanings as in Article 48(1) of the Gas Directive.

19DB

(1) This section applies in relation to an application for an exemption—

(a) under section 19A(2), in respect of all or part of the capacity of a storage facility; or

(b) under section 19C(2), in respect of all or part of the capacity of an LNG import or export facility.

(2) The application must specify the criteria that will be used to determine—

(a) who is to be granted rights to use the facility, or the part of the capacity of the facility, to which the application relates (the “exempt infrastructure”); and

(b) the way in which those rights may be exercised,


(the “capacity allocation mechanism”).

(3) The Authority must not give an exemption under section 19A or 19C in response to the application unless it has—

(a) approved the capacity allocation mechanism specified in the application; or

(b) approved the mechanism on condition that certain modifications are made to it.

(4) The Authority may only approve the capacity allocation mechanism under subsection (3)(a) if it considers that the mechanism meets the following three conditions.

(5) The first condition is that before a right to use the exempt infrastructure is granted to the owner of the facility or to any other person—

(a) the intention to grant a right to use the exempt infrastructure must be published in a way that the Authority considers appropriate for the purpose of bringing it to the attention of persons likely to be interested in using the infrastructure; and

(b) such persons must be able to register an interest in using the exempt infrastructure.

(6) The second condition is that the mechanism must require that any unused capacity in the exempt infrastructure be made available to other users or potential users.

(7) The third condition is that the mechanism must not prevent, and must not be capable of being used to prevent, subsequent trading of rights to use the exempt infrastructure.

(8) The Authority may only approve the capacity allocation mechanism under subsection (3)(b) if it considers that the mechanism will meet those three conditions once the modifications on which the approval is conditional have been made.

23A

(1) Subsections (2) and (3) apply where at any time the Authority modifies the conditions of licences of any type under section 23.

(2) If the conditions modified are standard conditions, the Authority must—

(a) also make (as nearly as may be) the same modifications of those conditions for the purposes of their incorporation in licences of that type granted after that time, and

(b) publish the modifications in such manner as it considers appropriate for the purpose of bringing them to the attention of persons likely to be affected by the making of the modifications.

(3) The Authority may make such incidental or consequential modifications of any conditions of licences of any type as it considers necessary or expedient.

(4) The modification of part of a standard condition of a particular licence under section 23 does not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of this Part.

(5) The modification of a condition of a licence under this section has effect subject to the giving of a direction under paragraph 2 of Schedule 4A in relation to the decision to which the modification relates.

Appeal from decisions of the Authority

23B

(1) An appeal lies to the CMA against a decision by the Authority to proceed with the modification of a condition of a licence under section 23.

(2) An appeal may be brought under this section only by—

(a) a relevant licence holder (within the meaning of section 23);

(b) any other person who holds a licence of any type under section 7, 7ZA, , 7A(1) or (2) , 7AA, 7AB or 7AC whose interests are materially affected by the decision;

(d) Citizens Advice or Consumer Scotland or those bodies acting jointly in the capacity of representing consumers whose interests are materially affected by the decision.

(3) The permission of the CMA is required for the bringing of an appeal under this section.

(4) The CMA may refuse permission to bring an appeal only on one of the following grounds—

(a) in relation to an appeal brought by a person falling within subsection (2)(b), that the interests of the person are not materially affected by the decision;

(b) in relation to an appeal brought by a qualifying body or association, that the interests of the person represented are not materially affected by the decision;

(c) in relation to an appeal brought by Citizens Advice or Consumer Scotland or those bodies acting jointly, that the interests of the consumers represented are not materially affected by the decision;

(d) in relation to any appeal—

(i) that the appeal is brought for reasons that are trivial or vexatious;

(ii) that the appeal has no reasonable prospect of success.

(5) References in this section to a qualifying body or association are to a body or association whose functions are or include representing persons in respect of interests of theirs which are materially affected by the decision in question.

23C

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) ... Schedule 4A to this Act has effect.

(2A) Except where specified otherwise in Schedule 4A, the functions of the CMA with respect to an appeal under section 23B are to be carried out on behalf of the CMA by a group constituted for the purpose by the chair of the CMA under Schedule 4 to the Enterprise and Regulatory Reform Act 2013.

23D

(1) This section applies to every appeal brought under section 23B.

(2) In determining an appeal the CMA must have regard, to the same extent as is required of the Authority, to the matters to which the Authority must have regard—

(a) in the carrying out of its principal objective under section 4AA;

(b) in the performance of its duties under that section; and

(3) In determining the appeal the CMA —

(a) may have regard to any matter to which the Authority was not able to have regard in relation to the decision which is the subject of the appeal; but

(b) must not, in the exercise of that power, have regard to any matter to which the Authority would not have been entitled to have regard in reaching its decision had it had the opportunity of doing so.

(4) The CMA may allow the appeal only to the extent that it is satisfied that the decision appealed against was wrong on one or more of the following grounds—

(a) that the Authority failed properly to have regard to any matter mentioned in subsection (2);

(b) that the Authority failed to give the appropriate weight to any matter mentioned in subsection (2);

(d) that the modifications fail to achieve, in whole or in part, the effect stated by the Authority by virtue of section 23(7)(b);

(e) that the decision was wrong in law.

(5) To the extent that the CMA does not allow the appeal, it must confirm the decision appealed against.

23E

(1) This section applies where the CMA allows an appeal to any extent.

(2) If the appeal is in relation to a price control decision, the CMA must do one or more of the following—

(a) quash the decision (to the extent that the appeal is allowed);

(b) remit the matter back to the Authority for reconsideration and determination in accordance with any directions given by the CMA ;

(c) substitute the CMA's decision for that of the Authority (to the extent that the appeal is allowed) and give any directions to the Authority or any other party to the appeal.

(3) If the appeal is in relation to any other decision, the CMA must do one or both of the following—

(a) quash the decision (to the extent that the appeal is allowed);

(b) remit the matter back to the Authority for reconsideration and determination in accordance with any directions given by the CMA .

(4) A direction under subsection (2) or (3) must not require a person to do anything that the person would not have power to do (apart from the direction).

(5) A person to whom a direction is given under that subsection must comply with it.

(6) A direction given under that subsection to a person other than the Authority is enforceable as if it were an order of the High Court or (in Scotland) an order of the Court of Session.

(7) For the purposes of this section a decision is a price control decision, in relation to the modification of a condition of a licence, if the purpose of the condition is, in the CMA's opinion, to limit or control the charges on, or the revenue of, the holder of the licence.

(8) In determining for the purposes of subsection (7) what the purpose of a condition is the condition may be assessed on its own or in combination with any other conditions of the licence.

(9) In this section and sections 23F and 23G any reference to a party to an appeal is to be read in accordance with Schedule 4A.

23F

(1) The CMA must—

(a) determine an appeal against a price control decision within the period of 6 months beginning with the permission date;

(b) determine an appeal against any other decision within the period of 4 months beginning with the permission date.

(2) Subsection (1)(a) or (b) does not apply if subsection (3) applies.

(3) This subsection applies where—

(a) the CMA has received representations on the timing of the determination from a party to the appeal; and

(b) it is satisfied that there are special reasons why the determination cannot be made within the period specified in subsection (1)(a) or (b).

(4) Where subsection (3) applies, the CMA must—

(a) determine an appeal against a price control decision within the period specified by it, not being longer than the period of 7 months beginning with the permission date;

(b) determine an appeal against any other decision within the period specified by it, not being longer than the period of 5 months beginning with the permission date.

(5) Where subsection (3) applies, the CMA must also—

(a) inform the parties to the appeal of the time limit for determining the appeal, and

(b) publish that time limit in such manner as it considers appropriate for the purpose of bringing it to the attention of any other persons likely to be affected by the determination.

(6) In this section “price control decision” is to be read in accordance with section 23E.

(7) References in this section to the permission date are to the date on which the CMA gave permission to bring the appeal in accordance with section 23B(3).

Exceptions from sections 4AA to 4A.

23G

(1) A determination by the CMA on an appeal—

(a) must be contained in an order made by the CMA ;

(b) must set out the reasons for the determination;

(d) must be notified by the CMA to the parties to the appeal;

(e) must be published by the CMA —

(i) as soon as reasonably practicable after the determination is made;

(ii) in such manner as the CMA considers appropriate for the purpose of bringing the determination to the attention of any person likely to be affected by it (other than a party to the appeal).

(2) The CMA may exclude from publication under subsection (1)(e) any information which it is satisfied is—

(a) commercial information, the disclosure of which would, or might in the CMA's opinion, significantly harm the legitimate business interests of an undertaking to which it relates; or

(b) information relating to the private affairs of an individual, the disclosure of which would, or might in the CMA's opinion, significantly harm the individual’s interests.

(3) The Authority must take such steps as it considers requisite for it to comply with an order of the CMA made by virtue of subsection (1)(a).

(4) The steps must be taken—

(a) if a time is specified in (or is to be determined in accordance with) the order, within that time;

(b) in any other case, within a reasonable time.

(5) Subsections (2) to (4) of section 23A apply where a condition of a licence is modified in accordance with section 23E as they apply where a condition of a licence is modified under section 23.

The ownership unbundling requirement

34A

(1) The Authority may, for the purpose of performing its duty under subsection (1)(a) or (b) of section 34 in relation to activities falling within subsection (2A) of that section, serve a notice under subsection (2) on any regulated person.

(2) A notice under this subsection is a notice signed by the Authority which—

(a) requires the person on whom it is served to produce, at a time and place specified in the notice, to the Authority any documents which are specified or described in the notice and are in that person’s custody or under that person’s control; or

(b) requires that person, if that person is carrying on a business, to furnish, at a time and place and in the form and manner specified in the notice, to the Authority such information as may be specified or described in the notice.

(3) In paragraphs (a) and (b) of subsection (2) the reference to the Authority includes a reference to a person appointed by the Authority for the purpose of exercising the power in question.

(4) Sections 28 to 30 have effect in relation to a person on whom a notice is served under subsection (2) as if references in those sections to a relevant requirement (other than the reference in section 28(8)) included references to a requirement of that notice.

(5) A person who intentionally alters, suppresses or destroys any document or record of information which that person has been required to produce by a notice under subsection (2) is liable—

(a) on summary conviction—

(i) in England and Wales, to a fine not exceeding the statutory maximum;

(ii) in Scotland, to a fine not exceeding £5,000; or

(b) on conviction on indictment, to a fine.

(6) The definition of “regulated person” in section 28(8) applies for the purposes of this section.

Standards of performance in individual cases: gas transporters.

Standards for promoting efficient use of gas.

Promotion of reductions in home-heating costs: gas transporters and gas suppliers

SCHEDULE 2AA

Third party access

1

(1) This paragraph applies where—

(a) a customer owns or occupies premises which are connected to an exempt distribution system;

(b) the customer is taking a supply of gas through that system from—

(i) the distribution exemption holder that operates or has control of the system, or

(ii) a person related to the distribution exemption holder; and

(i) has served on the distribution exemption holder a notice expressing the customer’s interest in taking a supply of gas from a third party supplier through that system; and

(ii) has provided with the notice evidence that at least one third party supplier would be willing to supply the customer with gas through that system, and has identified any such third party supplier in the notice.

(2) In this Schedule “expression of interest” means a notice served under sub-paragraph (1).

(3) Within 5 working days beginning with the day on which it receives the expression of interest, the distribution exemption holder must provide any person related to it that is currently supplying the customer with gas with a copy of the expression of interest.

(4) Within 10 working days beginning with the day on which it receives the expression of interest, the distribution exemption holder must serve on the customer—

(a) a notice informing the customer that it will take the steps in sub-paragraph (6) with a view to giving a third party supplier access to its distribution system; or

(b) a notice informing the customer that the distribution exemption holder considers—

(i) that it would need to increase the capacity of its distribution system in order to give a third party supplier access to that distribution system; and

(ii) that one of the conditions in sub-paragraph (5) is met.

(5) Those conditions are—

(a) that it is not technically feasible to provide the increase in capacity in question;

(b) that providing that increase in capacity would have a significant and adverse economic impact on the distribution exemption holder or any other person.

(6) Where the distribution exemption holder has served on the customer a notice under sub-paragraph (4)(a), the distribution exemption holder must—

(a) serve on any third party supplier identified in the expression of interest a notice specifying—

(i) any metering arrangements that the distribution exemption holder considers would be required to enable access to be given; and

(ii) whether it would be willing to give access through contractual arrangements which would not require a connection to be made or modified; and

(b) provide each such third party supplier with any other documents or information that it may reasonably request.

(7) The distribution exemption holder must serve the notice required by sub-paragraph (6)(a) within 20 working days beginning with the day on which it receives the expression of interest.

(8) The distribution exemption holder must provide any documents or information requested by a third party supplier under sub-paragraph (6)(b)—

(a) within 20 working days beginning with the day of the distribution exemption holder’s receipt of the expression of interest; or

(b) if the request is made at a time when there are fewer than 10 working days remaining in the 20 working day period mentioned in paragraph (a) above, within 10 working days beginning with the day of the distribution exemption holder’s receipt of the request.

2

(1) This paragraph and paragraph 3 apply where a customer who has served an expression of interest relating to an exempt distribution system serves on the distribution exemption holder a notice—

(a) confirming that the customer has entered into a contract with a third party supplier identified in the expression of interest for the supply of gas to premises which are connected to the exempt distribution system; and

(b) identifying that third party supplier.

(2) Within 5 working days beginning with the day on which it receives the notice served under sub-paragraph (1), the distribution exemption holder must provide any person related to it that is currently giving a supply of gas to the customer with a copy of that notice.

(3) If the distribution exemption holder has not, by the end of the 10 working day period mentioned in paragraph 1(4), served on the customer a notice under paragraph 1(4)(b), the distribution exemption holder must give the third party supplier such access to the distribution system to which the expression of interest relates as is necessary to enable the third party supplier to give a supply of gas to the customer.

(4) Access under sub-paragraph (2) must be given either—

(a) as soon as is reasonably practicable after the distribution exemption holder receives the notice served under sub-paragraph (1); or

(b) on a date agreed by the distribution exemption holder, the third party supplier and the customer in writing.

(5) Sub-paragraphs (6) to (11) apply if the distribution exemption holder has served on the customer a notice under paragraph 1(4)(b) (whether before or after the service of the notice under sub-paragraph (1)).

(6) Subject to sub-paragraph (7), the distribution exemption holder must give the third party supplier such access to its distribution system as is necessary to enable the third party supplier to give a supply of gas to the customer, and must give that access—

(a) as soon as is reasonably practicable after the end of the period of 28 working days beginning with the day on which the customer serves the notice under sub-paragraph (1); or

(b) on a date agreed by the distribution exemption holder, the third party supplier and the customer in writing.

(7) If, before the end of the period mentioned in sub-paragraph (6)(a), the distribution exemption holder takes the steps mentioned in sub-paragraph (8)—

(a) the distribution exemption holder is not required to give access in accordance with sub-paragraph (6), and

(b) sub-paragraph (9) applies.

(8) The steps mentioned in sub-paragraph (7) are—

(a) providing the third party supplier with evidence to show—

(i) that the distribution exemption holder would need to increase the capacity of its distribution system in order to give the third party supplier access to that distribution system; and

(ii) that one of the conditions in paragraph 1(5) is met; and

(b) sending a copy of the evidence to the customer.

(9) If, within the period mentioned in sub-paragraph (10), the distribution exemption holder and the third party supplier enter into a contract for the provision to the third party supplier of such access as is necessary to enable it to give a supply of gas to the customer through the distribution system, the distribution exemption holder must give access to the third party supplier in accordance with the terms of the contract.

(10) That period is—

(a) the 14 days immediately following the period mentioned in sub-paragraph (6)(a); or

(b) any longer period that the distribution exemption holder, the third party supplier and the customer may agree in writing.

(11) If, before the end of the 28 day period mentioned in sub-paragraph (6)(a), the distribution exemption holder, the third party supplier and the customer agree in writing to the extension of that period, sub-paragraphs (6) to (10) have effect as if sub-paragraph (6)(a) referred to the extended period instead of to the period of 28 working days there mentioned.

3

(1) The third party supplier mentioned in paragraph 2(1) may make an application to the Authority under this paragraph if—

(a) the distribution exemption holder has served on the customer a notice under paragraph 1(4)(b); and

(b) at the end of the period mentioned in paragraph 2(10), the distribution exemption holder is not under a duty (whether by virtue of sub-paragraph (6) or (9) of paragraph 2) to give access to the third party supplier.

(2) The third party supplier may not make an application under this paragraph unless it has, no later than the 10th working day before the day on which the application is made, served on the distribution exemption holder a notice—

(a) informing the distribution exemption holder that it intends to make an application under this paragraph; and

(b) inviting the distribution exemption holder to provide it with any further evidence it may wish to provide for the purpose mentioned in paragraph 2(8)(a).

(3) The application must include—

(a) any evidence provided by the distribution exemption holder under paragraph 2(8)(a) or sub-paragraph (2)(b) above;

(b) a description of the nature of the access required by the third party supplier (including any alternative forms of access that would be acceptable to it); and

(i) to show that the capacity of the distribution system would not need to be increased in order to give a third party supplier access to it;

(ii) to show that a condition in paragraph 1(5) is not met; or

(iii) as to the benefits that would be brought by any increase in capacity that may be necessary.

(4) The third party supplier must send a copy of the application to the distribution exemption holder and the customer.

(5) Where an application has been made under this paragraph the Authority may, at the request of the customer or the third party supplier (the “requesting party”), ask the distribution exemption holder to provide the Authority and the requesting party with information in respect of the measures that would be required to reinforce the distribution system in order to provide the necessary capacity.

(6) Except to the extent that sub-paragraph (7) applies, the distribution exemption holder must comply with any request made by the Authority under sub-paragraph (5).

(7) If the distribution exemption holder represents to the Authority that particular information should not be disclosed under sub-paragraph (6) because it is commercially sensitive, the Authority may determine that the information in question should be excepted from the duty to disclose information under that sub-paragraph, having regard to the need to preserve the confidentiality of commercially sensitive information.

(8) The distribution exemption holder may recover from the requesting party any costs reasonably incurred in providing any information requested under sub-paragraph (5).

(9) Where an application has been made under this paragraph the Authority—

(a) must, if satisfied that the conditions in sub-paragraph (10) are met, determine that the distribution exemption holder is entitled to refuse the third party supplier access to its distribution system on the ground of lack of capacity;

(b) must, if not satisfied that those conditions are met, determine that the distribution exemption holder is not entitled to refuse the third party supplier access to its distribution system on the ground of lack of capacity.

(10) Those conditions are—

(a) that the distribution exemption holder would need to increase the capacity of its distribution system in order to give the third party supplier access to it; and

(b) that either it is not technically feasible to provide that increase in capacity, or the benefits of the increase in capacity would be outweighed by the economic impact that the provision of the increase in capacity would have on the distribution exemption holder or any other person.

(11) The Authority must, as soon as is reasonably practicable after making its determination—

(a) notify the distribution exemption holder of its determination; and

(b) provide the customer and the third party supplier with a copy of that notice.

(12) If the Authority determines that the distribution exemption holder is not entitled to refuse the third party supplier access to its distribution system on the ground of lack of capacity—

(a) the distribution exemption holder must give the third party supplier such access to its distribution system as is necessary to enable the third party supplier to give a supply of gas to the customer;

(b) paragraph 1(6) to (8) applies as if the distribution exemption holder had served a notice under paragraph 1(4)(a) on the customer, and as if the references in paragraph 1(7) and (8)(a) to the “expression of interest” were to the notification under sub-paragraph (11) above; and

(c) paragraph 5 has effect as if the reference in paragraph 5(3) to the “expression of interest” were to the notification under sub-paragraph (11) above.

(13) Access under sub-paragraph (12)(a) must be given either—

(a) as soon as is reasonably practicable after the distribution exemption holder receives the notification under sub-paragraph (11); or

(b) on a date agreed by the distribution exemption holder, the third party supplier and the customer in writing.

4

(1) This paragraph applies where a distribution exemption holder is required under paragraph 2(3), (6) or (9) or 3(12)(a) to give a third party supplier access to its distribution system.

(2) The duty must be performed for so long as the access is required.

(3) In meeting the duty the distribution exemption holder must not—

(a) treat the third party supplier less favourably than any other supplier in respect of the terms and conditions for access to its distribution system, including those relating to any connection under paragraph 7(3);

(b) refuse to give access on the basis that the Authority has not yet approved its charging methodology; or

(c) act in a manner which unreasonably prevents, restricts or delays access to its distribution system by the third party supplier.

(4) The distribution exemption holder must grant the third party supplier such ancillary or incidental rights over its distribution system as are necessary to enable the third party supplier to meet its licence or statutory obligations, including any obligations of the third party supplier relating to metering functions.

(5) Where access has been given before a methodology for calculating a use of system charge has been given an approval that is required by virtue of paragraph 5(1), the distribution exemption holder may, within a reasonable period after receiving notification of the approval of the methodology, require the third party supplier to pay for that access an amount that is—

(a) equivalent to the charge that would have been payable for that access had the methodology been approved before the access was given; and

(b) payable within such period as the parties agree or, in the absence of such agreement, within such reasonable period after the distribution exemption holder demands the payment as may be specified by the distribution exemption holder.

Charges for use of system

5

(1) Subject to paragraph 13(1), a distribution exemption holder on whom a customer has served an expression of interest must not impose a use of system charge unless the Authority has approved the methodology for calculating that charge under sub-paragraph (5) or paragraph 14(7).

(2) If such a distribution exemption holder proposes to impose a use of system charge in circumstances where, by virtue of sub-paragraph (1), the Authority’s approval of the methodology for that charge is required the distribution exemption holder must—

(a) prepare a record of the assets and liabilities associated with its distribution activities at the time of the receipt of the expression of interest;

(b) prepare a statement (a “charging statement”) containing details of the proposed methodology for calculating the use of system charge;

(i) the charging statement,

(ii) any evidence that the distribution exemption holder may wish to provide in support of the methodology proposed for calculating the use of system charge,

(iii) a copy of the expression of interest, and

(iv) such other information or documents as the Authority may request;

(d) provide the relevant third party supplier with a copy of the charging statement.

(3) Subject to sub-paragraph (4), all of the steps required by sub-paragraph (2) must be carried out within 20 working days beginning with the day of the distribution exemption holder’s receipt of the expression of interest.

(4) Where the Authority has requested further information or documents in accordance with sub-paragraph (2)(c)(iv) at a time when there are fewer than 10 working days remaining in the 20 working day period mentioned in sub-paragraph (3), the further information or documents must be provided within 10 working days beginning with the day of the distribution exemption holder’s receipt of the request.

(5) Where a distribution exemption holder has complied with sub-paragraph (2)(c) the Authority must, as soon as is reasonably practicable—

(a) decide whether to approve the methodology proposed by that distribution exemption holder; and

(b) notify the distribution exemption holder of that decision.

(6) Where a distribution exemption holder receives a notice under sub-paragraph (5)(b), it must, as soon as is reasonably practicable after that receipt, provide the relevant third party supplier with a copy of that notice.

(7) Where the Authority does not approve the methodology proposed by the distribution exemption holder, the Authority must give reasons for that decision.

(8) Where the Authority does not approve the methodology proposed by the distribution exemption holder and the distribution exemption holder still wishes to impose a use of system charge the distribution exemption holder must—

(a) submit to the Authority a charging statement containing details of a revised methodology;

(b) provide the Authority with a copy of such other information as the Authority may request in respect of that revised methodology; and

(9) Where at any time a distribution exemption holder wishes to modify a methodology that has previously been approved under this Schedule and is used by it for calculating a use of system charge levied for the use of a distribution system other than a closed distribution system, the distribution exemption holder must—

(a) submit to the Authority a charging statement containing details of the proposed revised methodology;

(b) provide the Authority with a copy of such other information as the Authority may request; and

(c) provide the relevant third party supplier, and any other third party supplier who would be affected by the modification proposed, with a copy of the charging statement.

(10) If a distribution exemption holder takes the steps required by sub-paragraph (8) or (9), sub-paragraphs (5) to (7) apply as if it had complied with sub-paragraph (2)(c).

(11) For the purposes of sub-paragraphs (2)(d), (6), (8)(c) and (9)(c), a duty to provide anything to “the relevant third party supplier” is a duty to provide it—

(a) if at the time when the duty is discharged the distribution exemption holder has received a notice from the customer under paragraph 2(1), to the third party supplier identified in that notice; or

(b) if at the time when the duty is discharged the distribution exemption holder has not received such a notice from the customer, to any third party supplier identified in the expression of interest.

6

(1) Sub-paragraph (2) applies where a distribution exemption holder is under a duty to give access to its distribution system under paragraph 2(3), (6) or (9) or 3(12)(a).

(2) Where and for so long as the distribution exemption holder is imposing a use of system charge, it must—

(a) prepare and maintain distribution accounts in respect of the distribution system for each regulatory year;

(b) keep copies of those accounts for 6 years from the date of the transactions to which they relate; and

(3) In sub-paragraph (2)—

“distribution accounts” means accounting records in relation to the business (the “distribution business”) constituted by the distribution activities of the distribution exemption holder’s business that—are sufficient to show and explain the transactions of the distribution business, separate from any other transactions of the distribution exemption holder’s business;are sufficient to disclose with reasonable accuracy, at any time, the financial position of the distribution business at that time;contain entries from day to day of all sums of money received and expended in the course of the distribution business and the matters in respect of which the receipt and expenditure takes place; andcontain a record of the assets and liabilities attributable to the distribution business;

“regulatory year”, in relation to a distribution business, means—a period of 12 months beginning on 1 April in any calendar year and ending on 31 March of the next calendar year; orwhere the distribution exemption holder wishes to align the accounting period for the distribution business with the accounting period for any other business it carries on or the business of any a person related to it, the period of 12 months used as the accounting period for that other business or the business of that related person.

Connection

7

(1) This paragraph applies where a distribution exemption holder is under a duty to give access to a third party supplier under paragraph 2(3), (6) or (9) or 3(12)(a).

(2) The third party supplier, or the customer who served the notice under paragraph 2(1), may require a connection to be made between the distribution exemption holder’s distribution system and—

(a) the premises mentioned in paragraph 1(1)(a), or

(b) a pipe-line system operated or controlled by—

(i) a gas transporter, or

(ii) another distribution exemption holder.

(3) The distribution exemption holder must, if required to make a connection pursuant to sub-paragraph (2) either—

(a) connect the premises or pipe-line system to its distribution system and supply and lay any pipe that may be necessary for that purpose; or

(b) where the distribution exemption holder and the person requiring the connection have agreed that a person other than the distribution exemption holder is to supply and lay any pipe that may be necessary for the purpose of connection, connect the premises or pipe-line system to its distribution system once that pipe has been supplied and laid.

(4) The duty under sub-paragraph (3) must be performed in accordance with such terms as are agreed under paragraphs 8 and 9, or paragraph 10, for so long as the connection is required.

(5) In this paragraph and paragraphs 8 to 10—

(a) any reference to a distribution exemption holder connecting any premises or pipe-line system includes a reference to maintaining the connection;

(b) any reference to requiring a connection includes a reference to requiring the connection to be maintained;

(c) any reference to supplying or laying a pipe includes a reference to the supply or laying of a pipe either by the installation of a new one or by the modification of an existing one; and

(d) any reference to a pipe includes a reference to any apparatus ancillary to the pipe.

8

(1) Where a distribution exemption holder is under a duty to connect any premises, or another pipe-line system, to its distribution system in accordance with paragraph 7(3)(a)—

(a) any expenses reasonably incurred in making the connection or in supplying and laying the pipe must, if and to the extent that the distribution exemption holder requires, be met by the person requiring the connection;

(b) the distribution exemption holder may require the person requiring the connection to provide it with reasonable security for the payment to it of all money which may become due to it in respect of the supply and laying of the pipe;

(c) if the person requiring the connection fails to provide any security required under paragraph (b), or any security given by the person requiring the connection becomes invalid or insufficient and that person fails to provide alternative or additional security, the distribution exemption holder may if it thinks fit—

(i) where the connection has not been made, refuse to supply or lay the pipe for so long as the failure continues, or

(ii) where the connection is being maintained, disconnect the premises or pipe-line system in question;

(d) the distribution exemption holder may require the person requiring the connection to accept, in respect of the making of the connection and the supplying and laying of the pipe, any terms restricting any liability of the distribution exemption holder for economic loss resulting from negligence that it is reasonable in all the circumstances for that person to be required to accept.

(2) The reference in sub-paragraph (1)(a) to expenses reasonably incurred in supplying a pipe includes a reference to the capitalised value of any expenses likely to be so incurred in continuing to supply it; and the reference in sub-paragraph (1)(b) to money which may become due in respect of the laying of the pipe is to be construed accordingly.

(3) Where any sum has been deposited with a distribution exemption holder by way of security under sub-paragraph (1)(b), the distribution exemption holder must, on repaying the amount, also pay interest on that amount, calculated on a daily basis at the rate of 1 per cent above LIBOR, for the period beginning with the day following that on which the amount was deposited and ending on the day on which the amount is repaid.

(4) In sub-paragraph (3), “LIBOR”, in relation to any day, means the sterling three-month London inter-bank offered rate in force for that day rounded if necessary to two decimal places.

(5) Where the distribution exemption holder is under a duty to connect any premises, or another pipe-line system to its distribution system in accordance with paragraph 7(3)(b)—

(a) any expenses reasonably incurred in making the connection must, if and to the extent that the distribution exemption holder requires, be met by the person requiring the connection;

(b) the distribution exemption holder may require the person requiring the connection to accept any terms—

(i) indemnifying the distribution exemption holder in respect of any liability connected with the laying of the pipe, and

(ii) which it is reasonable in all the circumstances for the person requiring the connection to be required to accept; and

(c) the following will, from the time of the connection, vest in and become property, rights or liabilities of the distribution exemption holder—

(i) the pipe supplied and laid for the purpose of connection, and

(ii) any rights or liabilities of the owner or occupier of the premises, or of the person who operates or has control of the pipe-line system which relate to the laying, maintenance, repair, alteration or removal of the pipe.

(6) Nothing in paragraph 7 is to be taken as requiring the distribution exemption holder to make a connection if and to the extent that—

(a) the distribution exemption holder is prevented from doing so by circumstances outside its control;

(b) circumstances exist by reason of which the connection would or might involve danger to the public, and the distribution exemption holder has taken all reasonable steps to prevent the circumstances from occurring and to prevent them from having that effect; or

(7) Without prejudice to the generality of sub-paragraph (6), nothing in paragraph 7 is to be taken as requiring the distribution exemption holder to make a connection if any consent that is necessary for the connection to be made or, as the case may be, for the pipe to be supplied and laid, has not been given.

(8) Sub-paragraphs (1)(c)(ii) and (6)(c), do not permit a distribution exemption holder to disconnect any premises or pipe-line system unless the distribution exemption holder has given the owner and the occupier of the premises or (as the case may be) the person who operates or has control of the pipe-line system not less than 7 working days’ notice of its intention to disconnect.

(9) Nothing in paragraph 7 is to be taken as requiring a distribution exemption holder to connect any premises or pipe-line system if the supply of gas to the premises or pipe-line system is likely to exceed 75,000 therms in any period of 12 months.

9

(1) This paragraph applies where a distribution exemption holder is required to connect its distribution system to any premises or pipe-line system under paragraph 7.

(2) Except where an agreement under paragraph 10(1) is in place, the distribution exemption holder must comply with the requirements of sub-paragraph (3) as soon as is reasonably practicable after the person requiring the connection has—

(a) served on the distribution exemption holder a notice requesting that the distribution exemption holder offer terms for making the connection; and

(b) provided the distribution exemption holder with the following information—

(i) details of the premises or pipe-line system from which the connection to the distribution exemption holder’s distribution system is required, including the location of the premises or pipe-line system,

(ii) the date on or by which the person requiring the connection proposes that the work necessary for the connection to be made should be carried out,

(iii) details of the person by whom the person requiring the connection proposes that the pipe should be supplied and laid,

(iv) the maximum pressure at which gas may be required to be conveyed through the connection,

(v) details of any other requirements that the person requiring the connection has, including any metering requirements, and

(vi) any other information in relation to the required connection reasonably requested by the distribution exemption holder.

(3) The distribution exemption holder must serve on the person requiring the connection a notice—

(a) raising any concerns that it has with the information provided in accordance with sub-paragraph (2)(b);

(b) proposing arrangements for any security that the person requiring the connection will be required to pay to it under paragraph 8(1)(b);

(c) proposing arrangements for any payment that the person requiring the connection will be required to make under paragraph 8(1)(a) or (5)(a);

(d) stating any terms that the person requiring a connection will be required to accept under paragraph 8(1)(d), restricting the distribution exemption holder’s liability;

(e) stating any terms for indemnity that the person requiring a connection will be required to accept under paragraph 8(5)(b); and

(f) proposing any other terms on which it will make the connection.

(4) The distribution exemption holder must negotiate in good faith with the person requiring the connection and endeavour to reach an agreement on the terms and conditions for that connection.

10

(1) The distribution exemption holder may enter into an agreement with a person requiring a connection in pursuance of paragraph 7(2) for the making of a connection on such terms as may be agreed by the parties.

(2) So long as the agreement is effective, the rights and liabilities of the parties shall be those arising under the agreement and not those provided for under paragraphs 7 to 9.

11

(1) Section 27A (determination of certain disputes) has effect as if the disputes mentioned in section 27A(1) included a dispute arising under paragraphs 7 to 9 of this Schedule between a distribution exemption holder and a person requiring a connection in pursuance of paragraph 7(2).

(2) In the application of section 27A in relation to such a dispute, that section is to be read as if—

(a) subsection (2) provided that such a dispute, if relating to the connection of any premises to a pipe-line system operated or controlled by a distribution exemption holder, may not be referred to the Authority after the end of the period of 12 months beginning with the time when the connection is made;

(b) in subsection (5) the references to a gas transporter were to a distribution exemption holder, and the reference to a person requiring a connection to a main of the transporter were to a person requiring a connection in pursuance of paragraph 7(2) of this Schedule;

(d) the reference in subsection (7) to a dispute arising under section 11(1) were to a dispute arising under paragraph 8(1)(b) or (c) of this Schedule.

(3) The references in sub-paragraphs (1) and (2)(b) to a person requiring a connection in pursuance of paragraph 7(2)are to be construed in accordance with paragraph 7(5).

Closed distribution systems

12

(1) A distribution exemption holder may apply to the Authority for an exempt distribution system operated or controlled by it to be classified as a closed distribution system.

(2) Where the Authority has received an application from a distribution exemption holder under sub-paragraph (1) (a “closed distribution system application”), it must classify the distribution system as a closed distribution system if the Authority considers that all of the following criteria are met—

(a) the distribution system is not used for the purpose of supplying gas to household customers, or is used to supply fewer than 50 household customers who—

(i) are employees of, or work for or otherwise render services to, the distribution exemption holder or a person related to the distribution exemption holder; and

(ii) take a supply of gas that is wholly or mainly from a gas production site embedded in the distribution system;

(b) the distribution system is wholly or mainly used for distributing gas within a geographically self-contained industrial, commercial or shared services site and is not integrated with any pipe-line system operated by a gas transporter; and

(i) by system users whose businesses, for technical or safety-related reasons, have operational or production processes that are integrated with those of other system users of that distribution system; or

(ii) for the purpose of supplying gas to premises owned or occupied by the distribution exemption holder or by a person related to the distribution exemption holder.

(3) In sub-paragraph (2) “gas production site” means a site on which a person carries on an activity by virtue of which the person is a gas producer within the meaning of section 7.

(4) A closed distribution system application must—

(a) identify the distribution system to which the application relates;

(b) include any evidence available to the applicant to support that application; and

(5) The Authority must decide whether to classify a distribution system as a closed distribution system as soon as is reasonably practicable after the Authority has received—

(a) the closed distribution system application; and

(b) any further information or documents requested by it in under sub-paragraph (4)(c).

(6) The Authority must notify the distribution exemption holder of its decision as soon as is reasonably practicable after that decision has been made.

13

(1) Paragraph 5(1) to (8) does not apply in relation to any use of system charge (or proposed use of system charge) that relates to a closed distribution system.

(2) Where a distribution exemption holder that operates or has control of a closed distribution system receives an expression of interest from a customer who owns or occupies premises that are connected to that system, it must—

(a) include in any notice served under paragraph 1(4) a statement that its distribution system is a closed distribution system; and

(b) within 7 working days beginning with the day on which it receives the expression of interest, by notice inform any third party supplier identified in the expression of interest that its distribution system is a closed distribution system.

14

(1) Sub-paragraphs (2) and (3) apply if a customer has served an expression of interest with respect to a closed distribution system and—

(a) the customer, or a third party supplier identified in the expression of interest, serves a notice on the distribution exemption holder requesting that the methodology for a proposed use of system charge be submitted to the Authority for approval; and

(b) at the time of receiving the request the distribution exemption holder has not received any confirmation under paragraph 2(1) that the customer has entered into a contract with a third party supplier.

(2) From the time when the distribution exemption holder receives that request, paragraph 5(1) to (8) has effect in relation to the closed distribution system as if paragraph 13(1) did not have effect.

(3) For the purposes of the application of paragraph 5(2) in relation to the proposed use of system charge mentioned in sub-paragraph (1)(a), the reference in paragraph 5(3) to the “expression of interest” is to be read as a reference to the request mentioned in sub-paragraph (1)(a).

(4) Sub-paragraphs (5) to (11) apply where a customer who owns or occupies premises that are connected to a closed distribution system has served a notice under paragraph 2(1) confirming that it has entered into a contract with a third party supplier (“the confirmed third party supplier”) and—

(a) the customer or the confirmed third party supplier serves on the distribution exemption holder that operates or has control of the closed distribution system a notice requesting that the methodology for a use of system charge that is being applied by the distribution exemption holder be submitted to the Authority for approval;

(b) the methodology for calculating the charge has not previously been approved under this Schedule; and

(c) at the time of receiving the notice under paragraph (a), the distribution exemption holder has received the notice served under paragraph 2(1).

(5) The distribution exemption holder must, within 20 working days beginning with the day on which it receives the request under sub-paragraph (4)(a)—

(a) provide the Authority with—

(i) a charging statement in respect of the methodology for any use of system charge applied at the time of the request being made; and

(ii) such other information or documents as the Authority may specify; and

(b) provide the customer and the confirmed third party supplier with a copy of that charging statement.

(6) Where the Authority has requested further documents or information in accordance with sub-paragraph (5)(a)(ii) at a time when there are fewer than 10 working days remaining in the 20 working day period mentioned in sub-paragraph (5), those further documents or information must be provided within 10 working days beginning with the day of the distribution exemption holder’s receipt of that request for further documents or information.

(7) Where the distribution exemption holder has complied with sub-paragraph (5)(a), the Authority must, as soon as is reasonably practicable—

(a) decide whether to approve the methodology set out in the charging statement; and

(b) notify the distribution exemption holder and the confirmed third party supplier of its decision.

(8) Where the Authority does not approve the methodology, the Authority must give reasons for that decision.

(9) Where the Authority has notified the distribution exemption holder of a decision that it does not approve the methodology, the distribution exemption holder must not continue to impose a use of system charge, except where the Authority has considered the methodology for such a charge by virtue of sub-paragraph (11) and has approved it.

(10) Where the Authority does not approve the methodology submitted under sub-paragraph (5)(a) the distribution exemption holder may—

(a) submit to the Authority a charging statement containing details of a revised methodology;

(b) provide the Authority with such other information or documents as the Authority may specify; and

(11) If the distribution exemption holder takes the steps mentioned in sub-paragraph (10)(a) to (c), sub-paragraphs (7) and (8) apply as if it had complied with sub-paragraph (5)(a).

(12) Where at any time a distribution exemption holder wishes to modify a methodology that has previously been approved under this Schedule and is used by it for calculating a use of system charge levied for the use of a closed distribution system, the distribution exemption holder must—

(a) submit to the Authority a charging statement containing details of the proposed revised methodology;

(b) provide the Authority with a copy of such other information or documents as the Authority may request; and

(c) send a copy of the charging statement to the customer, the confirmed third party supplier and any other third party supplier who would be affected by the modification proposed.

(13) If the distribution exemption holder takes the steps mentioned in sub-paragraph (12)(a) to (c), sub-paragraphs (7) and (8) apply as if it had complied with sub-paragraph (5)(a).

Change of circumstance in respect of a closed distribution system

15

(1) If, after a system has been classified as a closed distribution system, there is a change of circumstance which affects, or might affect, whether the system continues to meet the criteria set out in paragraph 12(2), the distribution exemption holder that operates or has control of the distribution system must notify the Authority of the change as soon as is reasonably practicable after it occurs.

(2) If the distribution exemption holder that operates or has control of the distribution system wishes the system to continue to be classified as a closed distribution system, it must include in the notice an application to the Authority asking the Authority to confirm the classification.

(3) Any application under sub-paragraph (2) must—

(a) identify the distribution system to which the application relates;

(b) include any evidence available to the applicant to support that application; and

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