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The Electricity and Gas (Internal Markets) Regulations 2011

Type Statutory-Instrument

Publication 2011-01-01

Last updated 2020-12-31

State In force

Department King's Printer of Acts of Parliament

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Made: 9th November 2011

Coming into force in accordance with regulation 1(1)

The Secretary of State is designated for the purposes of section 2(2) of the European Communities Act 1972 in relation to energy and energy sources.

The Secretary of State makes these Regulations in exercise of the powers conferred by section 2(2) of, and paragraph 1A of Schedule 2 to, that Act.

These Regulations make provision for a purpose mentioned in section 2(2) of that Act and it appears to the Secretary of State that it is expedient for any reference in these Regulations to an Annex to the following instruments to be construed as a reference to that Annex as amended from time to time—Regulation 2009/714/EC of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation 2003/1228/EC ,Regulation 2009/715/EC of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation 2005/1775/EC , as amended by Commission Decision 2010/685/EU of 10 November 2010 amending Chapter 3 of Annex I to Regulation 2009/715/EC , andCommission Regulation 2010/838/EU of 23 September 2010 on laying down guidelines relating to the inter-transmission system operator compensation mechanism and a common regulatory approach to transmission charging .These Regulations make provision for a purpose mentioned in section 2(2) of that Act and it appears to the Secretary of State that it is expedient for any reference in these Regulations to an Annex to the following instruments to be construed as a reference to that Annex as amended from time to time—Regulation 2009/714/EC of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation 2003/1228/EC ,Regulation 2009/715/EC of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation 2005/1775/EC , as amended by Commission Decision 2010/685/EU of 10 November 2010 amending Chapter 3 of Annex I to Regulation 2009/715/EC , andCommission Regulation 2010/838/EU of 23 September 2010 on laying down guidelines relating to the inter-transmission system operator compensation mechanism and a common regulatory approach to transmission charging .

Regulation 2009/714/EC of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation 2003/1228/EC ,

Regulation 2009/715/EC of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation 2005/1775/EC , as amended by Commission Decision 2010/685/EU of 10 November 2010 amending Chapter 3 of Annex I to Regulation 2009/715/EC , and

Commission Regulation 2010/838/EU of 23 September 2010 on laying down guidelines relating to the inter-transmission system operator compensation mechanism and a common regulatory approach to transmission charging .

PART 1 — Introductory provisions

Citation, commencement and extent

1

(1) These Regulations may be cited as the Electricity and Gas (Internal Markets) Regulations 2011 and come into force on the day after the day on which they are made.

(2) These Regulations, except regulation 3, do not extend to Northern Ireland.

Interpretation

2

In these Regulations, “standard condition” in relation to—

(a) a licence granted under section 7, 7ZA or 7A(1) of the Gas Act 1986 , means a condition which by virtue of section 81(2) of the Utilities Act 2000 or section 137(3) or 150(5) of the Energy Act 2004 is a standard condition for the purposes of that licence;

(b) a licence granted under section 6(1)(b) to (e) of the Electricity Act 1989 , means a condition which by virtue of section 33(1) of the Utilities Act 2000 or section 146(5) of the Energy Act 2004 is a standard condition for the purposes of that licence.

PART 2 — Consumer protection

National Consumer Council to provide guidance to energy consumers

3

(1) The Consumers, Estate Agents and Redress Act 2007 is amended as follows.

(2) After section 19 insert—

(19A) (1) The Council must prepare, and keep under review— (a) guidance for energy consumers (the “energy consumer guidance”), and (b) a summary prepared in accordance with subsection (4) (the “concise guidance”). (2) The energy consumer guidance must address the matters included in any document published by the European Commission pursuant to Article 3(16) of the Electricity Directive or Article 3(12) of the Gas Directive. (3) The energy consumer guidance may include any other information relating to the rights of energy consumers which the Council thinks appropriate. (4) The concise guidance must— (a) summarise any information in the energy consumer guidance which in the Council's view is particularly relevant to the interests of energy consumers, and (b) state where a copy of the energy consumer guidance can be obtained. (5) In preparing and reviewing the energy consumer guidance and the concise guidance the Council must consult— (a) the Secretary of State, (b) the Gas and Electricity Markets Authority, and (c) any other person the Council considers appropriate. (6) The Council must publish the first version of the energy consumer guidance and the concise guidance on its website by 1 December 2011. (7) If, following a review, the Council considers it necessary to amend the energy consumer guidance or the concise guidance, the Council must, as soon as is reasonably practicable— (a) publish the amended version on its website, and (b) inform any person it consulted in accordance with subsection (5) that it has done so. (8) The Council may also make the first and any amended version of the energy consumer guidance and the concise guidance available in any other manner the Council thinks appropriate for the purpose of bringing that guidance to the attention of those likely to be interested. (9) In this section— - “the Electricity Directive” means Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC ; - “energy consumer” means an individual who is— 1. a consumer in relation to gas supplied by an authorised supplier for consumption by the consumer's own household; 2. a consumer in relation to electricity supplied by an authorised supplier for consumption by the consumer's own household; - “the Gas Directive” means Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC .

(3) In section 29(4) (exceptions to restriction on disclosure of information)—

(a) in paragraph (c) omit “or 24(8)”;

(b) after paragraph (c) insert—

(ca) published or made available by the Council under any of subsections (6) to (8) of section 19A, (cb) published by the Council under section 24(8),

(4) In section 65(2) (provisions extending to England and Wales and Scotland only), after paragraph (b) insert—

(ba) section 19A (guidance for energy consumers);

PART 3 — Transmission and the operation of interconnectors

Gas transmission and the operation of gas interconnectors: independence

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After section 8B of the Gas Act 1986 insert—

(8C) (1) A person who, for any period on or after the relevant date, holds a licence under section 7 and carries out transmission of gas must ensure that the person is certified by the Authority under section 8F throughout that period. (2) A person who, for any period on or after the relevant date, holds a licence under section 7ZA and participates in the operation of a gas interconnector must ensure that the person is certified by the Authority under section 8F throughout that period. (3) In subsections (1) and (2) the “relevant date” in respect of a person is 3 March 2012 or any later date before 4 March 2013 which the Authority specifies under subsection (4) or (5) in respect of the person. (4) The Authority may specify a later date in respect of a person if— (a) the person has asked the Authority to specify a later date; (b) the person is not, and is not part of, a vertically integrated undertaking; and (c) no senior officer of the person is also a senior officer of a relevant producer or supplier. (5) The Authority may also specify a later date in respect of a person if the Authority thinks that, for reasons beyond its and the person's control, the Authority will not reasonably be able to make a final decision before 3 March 2012 as to whether to certify the person. (6) In this section— (a) “transmission” has the meaning given by Article 2(3) of the Gas Directive; and (b) “vertically integrated undertaking” has the meaning given by Article 2(20) of that Directive. (8D) (1) Any person may apply for certification. (2) An application for certification— (a) must be made in writing to the Authority; and (b) must be made in such form and contain such information as the Authority may specify. (3) If the application is made on or after 3 March 2013 and the applicant is a person from a third country or a person controlled by a person from a third country, the Authority must, as soon as is reasonably practicable after receiving the application— (a) notify the Secretary of State and the European Commission that an application has been made by such a person; and (b) enclose with the notification to the Secretary of State any 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 or any other EEA state would be put at risk by the certification of the applicant. (4) The Authority may ask an applicant for certification for any further information the Authority thinks is relevant to the application, and the applicant must supply that information if— (a) it is in the applicant's possession; or (b) it is information which the applicant could reasonably be expected to obtain. (5) The Authority may ask a relevant producer or supplier for any information the Authority thinks is relevant to an application for certification, 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. (6) A person required to supply information under subsection (4) or (5) must do so by any deadline specified by the Authority. (8E) (1) This section applies if the Secretary of State is notified by the Authority under section 8D(3) that an application has been made by a person from a third country or a person controlled by a person from a third country. (2) The Secretary of State must prepare a report on whether the security of gas supplies in the United Kingdom or any other EEA state would be put at risk by the certification of the applicant. (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 under section 8D(3) is received. (4) If, before the Secretary of State sends the report to the Authority, the Authority receives information under section 8D(4) or (5) 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 third country in question. (8F) (1) Where the Authority receives an application for certification, it must make a preliminary decision by the relevant deadline as to whether it should certify the applicant. (2) The relevant deadline is the end of the 4 months beginning with the day on which the Authority receives the application; but this is subject to any extension under subsection (3). (3) If, before the deadline mentioned in subsection (2) (or before that deadline as previously extended under this subsection), the Authority asks the applicant or a relevant producer or supplier for information under section 8D(4) or (5), the relevant deadline is the end of the 4 months beginning with the day on which the last of that information is received. (4) As soon as is reasonably practicable after making the preliminary decision the Authority must notify the decision and the reasons for it to— (a) the applicant; (b) the Secretary of State; and (c) the European Commission. (5) The Authority must enclose with the notification under subsection (4)(c) a copy of any report— (a) which the Secretary of State has prepared under section 8E in respect of the applicant; and (b) which the Authority receives before giving the notification. (6) Subsections (7) and (8) apply in relation to the Authority's final decision under Article 3 of the Gas Regulation as to whether to certify the applicant. (7) As soon as is reasonably practicable after making the final decision the Authority must notify the decision and the reasons for it to— (a) the applicant; (b) the Secretary of State; and (c) the European Commission. (8) If the final decision is to certify the applicant the applicant is to be taken as certified by the Authority under this section. (8G) (1) This section applies to— (a) a preliminary decision under section 8F as to whether an applicant should be certified; (b) a final decision under Article 3 of the Gas Regulation as to whether to certify an applicant. (2) The Authority may only decide that the applicant should be certified, or decide to certify the applicant, if one of the following six grounds (“the certification grounds”) applies. (3) The first certification ground is that the applicant meets the ownership unbundling requirement in section 8H. (4) The second certification ground is that the applicant has asked the Authority to exempt it from the ownership unbundling requirement on the grounds in paragraph (9) of Article 9 of the Gas Directive (alternative arrangements for independence), and the Authority thinks the requirements of that paragraph are met. (5) The third certification ground is that— (a) the applicant has asked the Authority to exempt it from the ownership unbundling requirement on the grounds in paragraphs (1) and (2) of Article 14 of the Gas Directive (independent system operator); (b) the applicant has nominated an independent system operator for designation in accordance with those paragraphs; and (c) the Authority— (i) thinks that the requirements of those paragraphs are met, and (ii) is minded to designate the nominated independent system operator. (6) The fourth certification ground is that— (a) the applicant holds a licence under section 7ZA; (b) the applicant has asked the Authority to exempt it from the ownership unbundling requirement on the ground that it meets the requirements of Chapter 4 of the Gas Directive (independent transmission operator), in accordance with Articles 9(8)(b) and 18(10) of that Directive; and (c) the Authority thinks that the applicant meets the requirements of that Chapter, in accordance with those Articles. (7) The fifth certification ground is that— (a) the applicant holds a licence under section 7ZA; and (b) in accordance with the conditions of that licence, the applicant has been granted an exemption from the ownership unbundling requirement in accordance with Article 36 of the Gas Directive (new infrastructure) and remains entitled to the benefit of it. (8) The sixth certification ground is that— (a) the applicant holds a licence under section 7ZA; and (b) either— (i) the applicant has, in accordance with the conditions of that licence, been granted an exemption in accordance with Article 22 of Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 on common rules for the internal market in natural gas (new infrastructure) and remains entitled to the benefit of it; or (ii) another person benefits from such an exemption, and the applicant is in a position which is substantially similar to the position of that person. (9) But, regardless of whether a certification ground applies, the Authority— (a) may, in particular, decide that the applicant should not be certified, or decide not to certify the applicant, if, on the basis of an opinion expressed by the European Commission under Article 11 of the Gas Directive (certification in relation to persons from countries outside the European Economic Area), the Authority thinks that the certification of the applicant would put at risk the security of gas supplies in any EEA state; (b) must not decide that the applicant should be certified, and must not decide to certify the applicant, if a report prepared by the Secretary of State under section 8E states that the certification of the applicant would put at risk the security of gas supplies in the United Kingdom or any other EEA state; (c) must not decide to certify the applicant on the second certification ground if the European Commission has not verified, in accordance with paragraph (10) of Article 9 of the Gas Directive (verification of independence under alternative arrangements), that the requirement in that paragraph as to arrangements for effective independence is met. (8H) (1) In section 8G(3) the ownership unbundling requirement is met by an applicant for certification if the Authority thinks that each of the following five tests is passed. (2) The first test is that the applicant— (a) does not control a relevant producer or supplier; (b) does not have a majority shareholding in a relevant producer or supplier; and (c) will not, on or after the relevant date, exercise shareholder rights in relation to a relevant producer or supplier. (3) For the purposes of subsection (2)(c), the Authority is entitled to think that the applicant will not exercise shareholder rights if the applicant has given an undertaking not to exercise those shareholder rights. (4) The second test is that, where the applicant is a company, partnership or other business, none of its senior officers has been, or may be, appointed by a person who— (a) controls a gas undertaking which is a relevant producer or supplier; or (b) has a majority shareholding in a gas undertaking which is a relevant producer or supplier. (5) The third test is that, where the applicant is a company, partnership or other business, none of its senior officers is also a senior officer of a gas undertaking which is a relevant producer or supplier. (6) The fourth test is that the applicant is not controlled by a person who controls a relevant producer or supplier. (7) But even where the fourth test is not passed, the Authority may treat it as passed if— (a) the control over the applicant was gained through the exercise of a right conferred as a condition of the provision of either financial support or a guarantee (or both), in relation to the applicant's business; or (b) the control over the relevant producer or supplier was gained through the exercise of such a right conferred in relation to the business of the relevant producer or supplier. (8) The fifth test is that the applicant is not controlled by a person who has a majority shareholding in a relevant producer or supplier. (9) But even where the fifth test is not passed, the Authority may treat it as passed if— (a) the control over the applicant was gained through the exercise of a right conferred as a condition of the provision of either financial support or a guarantee (or both), in relation to the applicant's business; or (b) the majority shareholding in the relevant producer or supplier was gained through the exercise of such a right conferred in relation to the business of the relevant producer or supplier. (10) In subsection (2)(c) “relevant date” means the relevant date for the purposes of section 8C(1) or (2). (8I) (1) Subsections (2) and (3) apply where— (a) by virtue of subsection (7) or (9) of section 8H, the Authority treats the fourth or fifth test under section 8H as passed in relation to a person; and (b) the person is certified in reliance on that treatment. (2) The Authority must by notice to the certified person specify a period of time at the end of which the Authority will cease to treat that test as passed by virtue of that subsection. (3) The Authority may by notice to the certified person extend that period if the Authority thinks it necessary or expedient to do so. (4) In deciding whether to treat a test as passed by virtue of section 8H(7) or (9), and in determining any period or extension under subsection (2) or (3), the Authority— (a) must take into account— (i) the period of time for which the test is likely to continue not to be passed, and (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, fourth, fifth or sixth certification ground in section 8G, the person is designated as a gas transmission system operator for the purposes of Article 10(2) of the Gas Directive (designation of transmission system operators). (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 that Article. (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; (b) the Secretary of State; and (c) the European Commission. (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, on or after 3 March 2013, as result of information it has received or obtained, the Authority thinks that a person from a third country 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 the European Commission; 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 or any other EEA state would be put at risk by the continued certification of the person. (3) The Authority must review whether the certification basis in respect of a certified person continues to apply if the European Commission asks it to do so. (4) A review under subsection (3) is to be carried out within the 4 months beginning with the day on which the Authority receives the request from the European Commission. (5) The Authority may also 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 (c) the period specified under section 8I as the period at the end of which that treatment will cease comes to an end. (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). (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 or any other EEA state 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 third country in question. (8N) (1) Where the Authority reviews under section 8K(3) or (5) whether the certification basis in respect of a certified person continues to apply, it may, within the 4 months mentioned in section 8K(4) or (6) either— (a) make a preliminary decision that the certification should be continued on the certification ground mentioned in section 8K(1); or (b) make a preliminary decision that the certification should be withdrawn. (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 preliminary decision at the end of the 4 months that the certification should be continued 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), either— (a) make a preliminary decision that the certification should be continued on the basis that the test is now passed; or (b) make a preliminary decision that the certification should be withdrawn. (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 preliminary decision at the end of the 4 months that the certification should be continued on the basis that the test is now passed. (5) As soon as is reasonably practicable after a preliminary 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; and (b) notify the decision to the European Commission, enclosing the information it considers relevant to the decision. (6) Subsections (7) to (9) apply in relation to the Authority's final decision under Article 3 of the Gas Regulation whether to confirm the certification. (7) As soon as is reasonably practicable after making the final decision the Authority must notify the decision and the reasons for it to— (a) the person in relation to whom the review was carried out; (b) the Secretary of State; and (c) the European Commission. (8) If the final decision is to continue the certification the person is to be taken as continuing to be certified by the Authority under section 8F. (9) Otherwise, the person is to be taken as no longer certified. (10) Section 8G(9)(a) and (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)(a) and (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 (c) it is exercisable in relation to a relevant producer or supplier. (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 (c) it is held by a person who controls a relevant producer or supplier. (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); (c) the person appointed continues to hold that office; and (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 taken in accordance with section 8F(8) or 8N(8) to be certified (or as continuing to be 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 third country” means a person the Authority thinks is from a third country; - “shareholder right” means a right, conferred by the holding of a share in the company's share capital— 1. to vote at general meetings of the company; or 2. to appoint or remove a member of the company's board of directors; - “third country” means a country that is not, and is not part of, an EEA state. (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; (c) supplies to any premises gas which has been conveyed to those premises through pipes; (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; (c) supplies electricity to any premises; or (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 the person carries out in an EEA state some or all of the activity by virtue of which the person falls within subsection (4) and— (a) requires a licence under section 7A of this Act or section 6 of the Electricity Act 1989 (licences authorising supply, etc) to do so; (b) would, in the Authority's opinion, require such a licence if carrying out the activity in Great Britain; or (c) 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.

Electricity transmission and the operation of electricity interconnectors: independence

5

After section 10 of the Electricity Act 1989 insert—

(10A) (1) A person who, for any period on or after the relevant date, holds a transmission licence and participates in the transmission of electricity for the purpose mentioned in subsection (2) must ensure that the person is certified by the Authority under section 10D throughout that period. (2) That purpose is the purpose of— (a) giving a supply to any premises; or (b) enabling a supply to be so given. (3) A person who, for any period on or after the relevant date, holds an interconnector licence and participates in the operation of an electricity interconnector must ensure that the person is certified by the Authority under section 10D throughout that period. (4) In subsections (1) and (3) the “relevant date” in respect of a person is 3 March 2012 or any later date before 4 March 2013 which the Authority specifies under subsection (5) or (6) in respect of the person. (5) The Authority may specify a later date in respect of a person if— (a) the person has asked the Authority to specify a later date; (b) the person is not, and is not part of, a vertically integrated undertaking; and (c) no senior officer of the person is also a senior officer of a relevant producer or supplier. (6) The Authority may also specify a later date in respect of a person if the Authority thinks that, for reasons beyond its and the person's control, the Authority will not reasonably be able to make a final decision before 3 March 2012 as to whether to certify the person. (7) In subsection (5)(b) “vertically integrated undertaking” has the meaning given by Article 2(21) of the Electricity Directive. (10B) (1) Any person may apply for certification. (2) An application for certification— (a) must be made in writing to the Authority; and (b) must be made in such form and contain such information as the Authority may specify. (3) If the application is made on or after 3 March 2013 and the applicant is a person from a third country or a person controlled by a person from a third country, the Authority must, as soon as is reasonably practicable after receiving the application— (a) notify the Secretary of State and the European Commission that an application has been made by such a person; and (b) enclose with the notification to the Secretary of State any 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 electricity supplies in the United Kingdom or any other EEA state would be put at risk by the certification of the applicant. (4) The Authority may ask an applicant for certification for any further information the Authority thinks is relevant to the application, and the applicant must supply that information if— (a) it is in the applicant's possession; or (b) it is information which the applicant could reasonably be expected to obtain. (5) The Authority may ask a relevant producer or supplier for any information the Authority thinks is relevant to an application for certification, 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. (6) A person required to supply information under subsection (4) or (5) must do so by any deadline specified by the Authority. (10C) (1) This section applies if the Secretary of State is notified by the Authority under section 10B(3) that an application has been made by a person from a third country or a person controlled by a person from a third country. (2) The Secretary of State must prepare a report on whether the security of electricity supplies in the United Kingdom or any other EEA state would be put at risk by the certification of the applicant. (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 10B(4) or (5) 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 third country in question. (10D) (1) Where the Authority receives an application for certification, it must make a preliminary decision by the relevant deadline as to whether it should certify the applicant. (2) The relevant deadline is the end of the 4 months beginning with the day on which the Authority receives the application; but this is subject to any extension under subsection (3). (3) If, before the deadline mentioned in subsection (2) (or before that deadline as previously extended under this subsection), the Authority asks the applicant or a relevant producer or supplier for information under section 10B(4) or (5), the relevant deadline is the end of the 4 months beginning with the day on which the last of that information is received. (4) As soon as is reasonably practicable after making the preliminary decision the Authority must notify the decision and the reasons for it to— (a) the applicant; (b) the Secretary of State; and (c) the European Commission. (5) The Authority must enclose with the notification under subsection (4)(c) a copy of any report— (a) which the Secretary of State has prepared under section 10C in respect of the applicant; and (b) which the Authority receives before giving the notification. (6) Subsections (7) and (8) apply in relation to the Authority's final decision under Article 3 of the Electricity Regulation as to whether to certify the applicant. (7) As soon as is reasonably practicable after making the final decision the Authority must notify the decision and the reasons for it to— (a) the applicant; (b) the Secretary of State; and (c) the European Commission. (8) If the final decision is to certify the applicant the applicant is to be taken as certified by the Authority under this section. (10E) (1) This section applies to— (a) a preliminary decision under section 10D as to whether an applicant should be certified; (b) a final decision under Article 3 of the Electricity Regulation as to whether to certify an applicant. (2) The Authority may only decide that the applicant should be certified, or decide to certify the applicant, if one of the following five grounds (“the certification grounds”) applies. (3) The first certification ground is that the applicant meets the ownership unbundling requirement in section 10F. (4) The second certification ground is that the applicant has asked the Authority to exempt it from the ownership unbundling requirement on the grounds in paragraph (9) of Article 9 of the Electricity Directive (alternative arrangements for independence), and the Authority thinks the requirements of that paragraph are met. (5) The third certification ground is that— (a) the applicant has asked the Authority to exempt it from the ownership unbundling requirement on the grounds in paragraphs (1) and (2) of Article 13 of the Electricity Directive (independent system operator); (b) the applicant has nominated an independent system operator for designation in accordance with those paragraphs; and (c) the Authority— (i) thinks that the requirements of those paragraphs are met, and (ii) is minded to designate the nominated independent system operator. (6) The fourth certification ground is that— (a) the applicant holds a licence under section 6(1)(e); and (b) in accordance with the conditions of that licence, the applicant has been granted an exemption under Article 17 of the Electricity Regulation (new interconnectors) and remains entitled to the benefit of it. (7) The fifth certification ground is that— (a) the applicant holds a licence under section 6(1)(e); and (b) in accordance with the conditions of that licence, the applicant has been granted an exemption under Article 7 of Regulation (EC) No. 1228/2003 of the European Parliament and of the Council of 26 June 2003 on conditions for access to the network for cross-border exchanges in electricity (new interconnectors) and remains entitled to the benefit of it. (8) But, regardless of whether a certification ground applies, the Authority— (a) may, in particular, decide that the applicant should not be certified, or decide not to certify the applicant, if, on the basis of an opinion expressed by the European Commission under Article 11 of the Electricity Directive (certification in relation to persons from countries outside the European Economic Area), the Authority thinks that the certification of the applicant would put at risk the security of electricity supplies in any EEA state; (b) must not decide that the applicant should be certified, and must not decide to certify the applicant, if a report prepared by the Secretary of State under section 10C states that the certification of the applicant would put at risk the security of electricity supplies in the United Kingdom or any other EEA state; (c) must not decide to certify the applicant on the second certification ground if the European Commission has not verified, in accordance with paragraph (10) of Article 9 of the Electricity Directive (verification of independence under alternative arrangements), that the requirement in that paragraph as to arrangements for effective independence is met. (10F) (1) In section 10E(3) the ownership unbundling requirement is met by an applicant for certification if the Authority thinks that each of the following five tests is passed. (2) The first test is that the applicant— (a) does not control a relevant producer or supplier; (b) does not have a majority shareholding in a relevant producer or supplier; and (c) will not, on or after the relevant date, exercise shareholder rights in relation to a relevant producer or supplier. (3) For the purposes of subsection (2)(c), the Authority is entitled to think that the applicant will not exercise shareholder rights if the applicant has given an undertaking not to exercise those shareholder rights. (4) The second test is that, where the applicant is a company, partnership or other business, none of its senior officers has been, or may be, appointed by a person who— (a) controls an electricity undertaking which is a relevant producer or supplier; or (b) has a majority shareholding in an electricity undertaking which is a relevant producer or supplier. (5) The third test is that, where the applicant is a company, partnership or other business, none of its senior officers is also a senior officer of an electricity undertaking which is a relevant producer or supplier. (6) The fourth test is that the applicant is not controlled by a person who controls a relevant producer or supplier. (7) But even where the fourth test is not passed, the Authority may treat it as passed if— (a) the control over the applicant was gained through the exercise of a right conferred as a condition of the provision of either financial support or a guarantee (or both), in relation to the applicant's business; or (b) the control over the relevant producer or supplier was gained through the exercise of such a right conferred in relation to the business of the relevant producer or supplier. (8) The fifth test is that the applicant is not controlled by a person who has a majority shareholding in a relevant producer or supplier. (9) But even where the fifth test is not passed, the Authority may treat it as passed if— (a) the control over the applicant was gained through the exercise of a right conferred as a condition of the provision of either financial support or a guarantee (or both), in relation to the applicant's business; or (b) the majority shareholding in the relevant producer or supplier was gained through the exercise of such a right conferred in relation to the business of the relevant producer or supplier. (10) In subsection (2)(c) “relevant date” means the relevant date for the purposes of section 10A(1) or (3). (10G) (1) Subsections (2) and (3) apply where— (a) by virtue of subsection (7) or (9) of section 10F, the Authority treats the fourth or fifth test under section 10F as passed in relation to a person; and (b) the person is certified in reliance on that treatment. (2) The Authority must by notice to the certified person specify a period of time at the end of which the Authority will cease to treat that test as passed by virtue of that subsection. (3) The Authority may by notice to the certified person extend that period if the Authority thinks it necessary or expedient to do so. (4) In deciding whether to treat a test as passed by virtue of section 10F(7) or (9), and in determining any period or extension under subsection (2) or (3), the Authority— (a) must take into account— (i) the period of time for which the test is likely to continue not to be passed, and (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. (10H) (1) This section applies in relation to any period for which a person— (a) holds a transmission licence or an interconnector licence; and (b) is certified. (2) If the person is certified on the first, second, fourth or fifth certification ground in section 10E, the person is designated as an electricity transmission system operator for the purposes of Article 10(2) of the Electricity Directive (designation of transmission system operators). (3) If the person is certified on the third certification ground in section 10E, the independent system operator nominated in the application for certification is designated as an electricity transmission system operator for the purposes of that Article. (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; (b) the Secretary of State; and (c) the European Commission. (10I) (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, on or after 3 March 2013, as result of information it has received or obtained, the Authority thinks that a person from a third country 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 the European Commission; 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 electricity supplies in the United Kingdom or any other EEA state would be put at risk by the continued certification of the person. (3) The Authority must review whether the certification basis in respect of a certified person continues to apply if the European Commission asks it to do so. (4) A review under subsection (3) is to be carried out within the 4 months beginning with the day on which the Authority receives the request from the European Commission. (5) The Authority may also 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 10F(7) or (9), the Authority has treated the fourth or fifth test under section 10F as passed in relation to a person; (b) the person is certified in reliance on that treatment; and (c) the period specified under section 10G as the period at the end of which that treatment will cease comes to an end. (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). (10J) (1) As soon as is reasonably practicable after beginning a review under section 10I, 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 10I, 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. (10K) (1) This section applies if the Authority notifies information to the Secretary of State under section 10I(2) in respect of a certified person. (2) The Secretary of State must prepare a report on whether the security of electricity supplies in the United Kingdom or any other EEA state 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 10J(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 third country in question. (10L) (1) Where the Authority reviews under section 10I(3) or (5) whether the certification basis in respect of a certified person continues to apply, it may, within the 4 months mentioned in section 10I(4) or (6), either— (a) make a preliminary decision that the certification should be continued on the certification ground mentioned in section 10I(1); or (b) make a preliminary decision that the certification should be withdrawn. (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 preliminary decision at the end of the 4 months that the certification should be continued on the certification ground mentioned in section 10I(1). (3) Where the Authority reviews under section 10I(8) whether the fourth or fifth test under section 10F is now passed, it may, within the 4 months mentioned in section 10I(9), either— (a) make a preliminary decision that the certification should be continued on the basis that the test is now passed; or (b) make a preliminary decision that the certification should be withdrawn. (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 preliminary decision at the end of the 4 months that the certification should be continued on the basis that the test is now passed. (5) As soon as is reasonably practicable after a preliminary 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; and (b) notify the decision to the European Commission, enclosing the information it considers relevant to the decision. (6) Subsections (7) to (9) apply in relation to the Authority's final decision under Article 3 of the Electricity Regulation whether to confirm the certification. (7) As soon as is reasonably practicable after making the final decision the Authority must notify the decision and the reasons for it to— (a) the person in relation to whom the review was carried out; (b) the Secretary of State; and (c) the European Commission. (8) If the final decision is to continue the certification the person is to be taken as continuing to be certified by the Authority under section 10D. (9) Otherwise, the person is to be taken as no longer certified. (10) Section 10E(8)(a) and (b) applies in relation to a decision mentioned in this section as it applies in relation to a decision mentioned in section 10E(1), but as if— (a) the references in section 10E(8)(a) and (b) to the certification of the applicant were references to the continued certification of the person certified; and (b) the reference in section 10E(8)(b) to a report prepared under section 10C were a reference to a report prepared under section 10K. (10M) (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 10E(3); and (c) it is exercisable in relation to a relevant producer or supplier. (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 10E(3); and (c) it is held by a person who controls a relevant producer or supplier. (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 10E(3); (c) the person appointed continues to hold that office; and (d) the right is exercisable in relation to an electricity 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 10E(3); and (b) the person who holds it has, within the immediately preceding period of 3 years, exercised a shareholder right in relation to an electricity undertaking which is a relevant producer or supplier. (6) This subsection applies to a person if, in order to carry out of 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 6 of this Act, section 7A of the Gas Act 1986 (licensing of gas suppliers and gas shippers) 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 10A(1) or (3). (10N) (1) The following are voidable on an application to the court— (a) the exercise of a shareholder right in breach of section 10M; (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. (10O) (1) In sections 10A to 10N and this section— - “control”, in relation to one person having control over another, has the meaning given by Article 2(34) of the Electricity 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 taken in accordance with section 10D(8) or 10L(8) to be certified (or as continuing to be certified) by the Authority under section 10D; and “certify” and “certification” are to be interpreted accordingly; - “certification grounds” has the meaning given by section 10E(2); - “majority shareholding” means a simple majority of shares; - “person from a third country” means a person the Authority thinks is from a third country; - “shareholder right” means a right, conferred by the holding of a share in a company's share capital— 1. to vote at general meetings of the company; or 2. to appoint or remove a member of the company's board of directors; - “third country” means a country that is not, and is not part of, an EEA state. (2) In this Part “electricity undertaking” means a person who— (a) generates electricity for the purpose of giving a supply to any premises or enabling a supply to be so given; (b) supplies electricity to any premises; or (c) otherwise generates or sells electricity. (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 section if the person— (a) is an electricity undertaking; (b) 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; (c) 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 of the Gas Act 1986; (d) supplies to any premises gas which has been conveyed to those premises through pipes; (e) 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 (f) otherwise sells gas, and terms used in paragraphs (b) to (f) of this subsection have the same meanings in those paragraphs as in Part 1 of the Gas Act 1986. (5) A person falls within this subsection if the person carries out in an EEA state some or all of the activity by virtue of which the person falls within subsection (4) and— (a) requires a licence under section 7A of the Gas Act 1986 (licensing of gas suppliers and gas shippers) or section 6 of this Act to do so; (b) would, in the Authority's opinion, require such a licence if carrying out the activity in Great Britain; or (c) 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.

PART 4 — Gas facilities

Independence of storage facilities

6

After section 8Q of the Gas Act 1986 insert—

(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 an EEA state. (3) The owner must also, notwithstanding any licence held by the owner, refrain from carrying out any of the following activities in an EEA state 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; (c) any other sale of gas. (4) If an affiliate of the owner carries out in an EEA state 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— 1. a person who has control of person A; or 2. a 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.

General duties of storage facility owners, LNG import or export facility owners etc

7

(1) The Gas Act 1986 is amended as follows.

(2) After section 11 insert—

(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.

(3) Omit section 19DA (provision of information) .

(4) In section 19E (sections 19A to 19D: supplemental) , in subsection (1) for “19DA” substitute “ 19D ”.

Duty to allow others to use storage facilities: exemptions for new and modified facilities

8

(1) For the italic heading preceding section 19 of the Gas Act 1986 substitute—


“Pipe-line systems, storage facilities and LNG import or export facilities: rights of use etc”.

(2) Section 19A of the Gas Act 1986 (exemptions from duty to allow others to use storage facilities) is amended as follows.

(3) For subsection (1) substitute—

(1) Section 19B applies to a storage facility, except as provided in subsections (1A) and (1B). (1A) Section 19B does not apply to a storage facility if it is subject to a minor facility exemption under section 8S . (1B) Section 19B does not apply to a storage facility if, or to the extent that, it is exempt under this section. (1C) The Authority must maintain on its website a list of the facilities to which section 19B applies. (1D) If only part of the capacity of a storage facility is exempt under this section, the list under subsection (1C) must specify the extent to which section 19B applies to the facility.

(4) In subsection (2), after “an exemption” insert “ under this section ”.

(5) After subsection (2) insert—

(2A) An application under subsection (2) must relate to— (a) a storage facility (or proposed storage facility) which is not yet operational; or (b) a modification (or proposed modification) which falls within subsection (2B) and is not yet operational. (2B) A modification (or proposed modification) falls within this subsection if it is— (a) a modification of a storage facility to provide for a significant increase in the capacity of the facility; or (b) a modification of a storage facility to enable the development of new sources of gas supply. (2C) The Authority must send to the European Commission a copy of an application under subsection (2) as soon as is reasonably practicable following its receipt.

(6) For subsection (3) substitute—

(3) An exemption under this section must be given in writing and on the following terms— (a) a term specifying the period of the exemption, or specifying how that period is to be determined; (b) a term as to whether the exemption applies to all of the capacity of the facility or part of that capacity only; (c) a term that the owner must comply with the capacity allocation mechanism approved in accordance with section 19DB ; and (d) such other terms regarding non-discriminatory access to the facility or any other matter as the Authority considers appropriate. (3A) When determining a term under subsection (3) the Authority must take into account— (a) the capacity of the facility or (as the case may be) the increase in capacity of the facility; (b) the length of time required to recover the investment in the facility or (as the case may be) the investment in the modification; (c) the implications of the exemption for the operation of the gas market in Great Britain.

(7) Omit subsections (4) and (5).

(8) In subsection (6)—

(a) for the words from the beginning to “either” substitute “ Where the Authority receives an application under subsection (2) in relation to a facility or modification, it must give an exemption if it is satisfied that ”;

(b) omit paragraph (a).

(9) After subsection (6) insert—

(6A) An exemption given in accordance with subsection (6) may apply to all of the capacity of the facility concerned or to part of that capacity only, regardless of the extent of the exemption applied for; but this is subject to subsection (7).

(10) In subsection (7), at the end insert “ or part of that increase in its capacity ”.

(11) After subsection (7) insert—

(7A) When deciding whether the requirements of subsection (8)(a), (d) and (e) are met, the Authority must take into account the way in which capacity is to be allocated under the capacity allocation mechanism approved in accordance with section 19DB.

(12) In subsection (8)—

(a) in paragraph (a) for “significant increase in its capacity” substitute “ modification ”;

(b) in paragraph (b) omit “to provide for a significant increase in its capacity”;

(d) omit paragraph (f) (and the “and” preceding it).

(13) In subsection (9), for “subsection (10)” substitute “ subsections (9A) and (10) ”.

(14) After subsection (9) insert—

(9A) Subsection (9) does not prevent a further exemption being given by virtue of subsection (6)(b) in respect of a facility if the previous exemption given by virtue of that provision in respect of the facility has been revoked under section 19AA(5) .

(15) In subsection (10)—

(a) after “a significant increase in its capacity” insert “ or to enable the development of new sources of gas supply ”;

(b) for “that increase in its capacity” (in each place) substitute “ that modification ”.

(16) In subsection (11), for “together with the reasons for its decision” substitute “ under this section, together with the reasons for its decision, ”.

Duty to allow others to use storage facilities: review and revocation of exemptions

9

After section 19A of the Gas Act 1986 insert—

(19AA) (1) If the Authority gives, or refuses to give, an exemption under section 19A it must send the following to the European Commission as soon as is reasonably practicable— (a) if the exemption was given, a copy of the exemption and of the terms on which it has been given; (b) the Authority's reasons for giving the exemption or not giving it, which must address each of the matters listed in Article 36(1) of the Gas Directive; (c) any supporting information held by the Authority which is relevant to the application for an exemption, including in particular any— (i) relevant financial information; (ii) analysis of the likely effect of the exemption on competition and on the effective functioning of the EU market for natural gas; (d) if the exemption was given, the basis on which the Authority determined— (i) the period of the exemption or how that period is to be determined; and (ii) the capacity to which the exemption applies; (e) any contribution by the storage facility to the diversification of the supply of gas; and (f) any other information requested by the European Commission. (2) If, in accordance with Article 36(9) of the Gas Directive, the European Commission requires the Authority to revoke an exemption given under section 19A, or to modify the terms on which it is given, the Authority must— (a) comply with that request within the period of 1 month beginning with the day on which it receives the request; and (b) inform the European Commission when it has done so. (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 the European Commission notified the Authority that it approved the exemption and terms as copied to it under subsection (1), the date of that notification; (b) if, 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; (c) otherwise, the date 4 months after the Authority sent the Commission a copy of the exemption and terms under subsection (1). (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.

Duty to allow others to use storage facilities

10

In section 19B of the Gas Act 1986 (acquisition of rights to use storage facilities) , after subsection (3) insert—

(3A) At least 2 months before publishing the main commercial conditions, or any changes to the published conditions, under subsection (1), the owner of a relevant facility must— (a) publish a draft of the proposed conditions or changes; and (b) inform any person who has a right to have gas stored in the facility that the draft has been published. (3B) When finalising conditions or changes under subsection (1), the owner of a relevant facility must take into account any representations it has received about the proposed conditions or changes.

Duty to allow others to use LNG import or export facilities: exemptions for new and modified facilities

11

(1) Section 19C of the Gas Act 1986 (application of section 19D to LNG facilities) is amended as follows.

(2) For subsection (1) substitute—

(1) Section 19D applies to an LNG import or export facility, except as provided in subsections (1A) and (1B). (1A) Section 19D does not apply to an LNG import or export facility if, or to the extent that, it is exempt under this section. (1B) Section 19D does not apply to an LNG import or export facility if it is exempt under section 19DZA.

(3) In subsection (2)—

(a) for “LNG import facility” substitute “ LNG import or export facility ”;

(b) after “an exemption” insert “ under this section ”.

(4) After subsection (2) insert—

(2A) An application under subsection (2) must relate to— (a) a facility (or proposed facility) which is not yet operational; or (b) a modification (or proposed modification) which falls within subsection (2B) and is not yet operational. (2B) A modification (or proposed modification) falls within this subsection if it is— (a) a modification of an LNG import or export facility to provide for a significant increase in the capacity of the facility; or (b) a modification of an LNG import or export facility to enable the development of new sources of gas supply. (2C) The Authority must send to the European Commission a copy of an application under subsection (2) as soon as is reasonably practicable following its receipt.

(5) For subsection (3) substitute—

(3) An exemption under this section must be given in writing and on the following terms— (a) a term specifying the period of the exemption, or specifying how that period is to be determined; (b) a term as to whether the exemption applies to all of the capacity of the facility or part of that capacity only; (c) a term that the owner must comply with the capacity allocation mechanism approved in accordance with section 19DB; and (d) such other terms regarding non-discriminatory access to the facility or any other matter as the Authority considers appropriate. (3A) When determining a term under subsection (3) the Authority must take into account— (a) the capacity of the facility or (as the case may be) the increase in capacity of the facility; (b) the length of time required to recover the investment in the facility or (as the case may be) the investment in the modification; and (c) the implications of the exemption for the operation of the gas market in Great Britain.

(6) Omit subsection (4).

(7) After subsection (5) insert—

(5A) An exemption given in accordance with subsection (5) may apply to all of the capacity of the facility concerned or to part of that capacity only, regardless of the extent of the exemption applied for; but this is subject to subsection (6).

(8) In subsection (6), at the end insert “ or part of that increase in its capacity ”.

(9) After subsection (6) insert—

(6A) When deciding whether the requirements of subsection (7)(a), (d) and (e) are met, the Authority must take into account the way in which capacity is to be allocated under the capacity allocation mechanism approved in accordance with section 19DB.

(10) In subsection (7)—

(a) in paragraph (a) for “significant increase in its capacity” substitute “ modification ”;

(b) in paragraph (b) omit “to provide for a significant increase in its capacity”;

(d) omit paragraph (f) (and the “and” preceding it).

(11) In subsection (8), for “subsection (9)” substitute “ subsections (8A) and (9) ”.

(12) After subsection (8) insert—

(8A) Subsection (8) does not prevent a further exemption being given by virtue of subsection (5) in respect of a facility if the previous exemption given by virtue of that subsection in respect of the facility has been revoked under section 19CA(3).

(13) In subsection (9)—

(a) after “a significant increase in its capacity” insert “ or to enable the development of new sources of gas supply ”;

(b) for “that increase in its capacity” (in each place) substitute “ modification ”.

(14) In subsection (10), for “together with the reasons for its decision” substitute “ under this section, together with the reasons for its decision, ”.

Duty to allow others to use LNG import or export facilities: review and revocation of exemptions

12

After section 19C of the Gas Act 1986 insert—

(19CA) (1) If the Authority gives, or refuses to give, an exemption under section 19C it must send the following to the European Commission as soon as is reasonably practicable— (a) if an exemption was given, a copy of the exemption and of the terms on which it has been given; (b) the Authority's reasons for giving the exemption or not giving it, which must address each of the matters listed in Article 36(1) of the Gas Directive; (c) any supporting information held by the Authority which is relevant to the application for an exemption, including in particular any— (i) relevant financial information; (ii) analysis of the likely effect of the exemption on competition and on the effective functioning of the EU market for natural gas; (d) if an exemption was given, the basis on which the Authority determined— (i) the period of the exemption or how that period is to be determined; and (ii) the capacity to which the exemption applies; (e) any contribution by the storage facility to the diversification of gas supply; and (f) any other information requested by the European Commission. (2) If, in accordance with Article 36(9) of the Gas Directive, the European Commission requires the Authority to revoke an exemption given under section 19C, or to modify the terms on which such an exemption is given, the Authority must— (a) comply with that request within the period of 1 month beginning with the day on which it receives the request; and (b) inform the European Commission when it has done so. (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 the European Commission notified the Authority that it approved the exemption and terms as copied to it under subsection (1), the date of that notification; (b) if, 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; (c) otherwise, the date 4 months after the Authority sent the Commission a copy of the exemption and terms under subsection (1). (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.

Duty to allow others to use LNG import or export facilities

13

(1) Section 19D of the Gas Act 1986 (acquisition of rights to use LNG import or export facilities) is amended as follows.

(2) In subsection (1), for “LNG import facility” substitute “ LNG import or export facility ”.

(3) Before “liquid gas” (in each place) insert “ gas or ”.

(4) In subsection (11), at the end insert “ ; but this is subject to subsections (11A) and (11B) ”.

(5) After subsection (11) insert—

(11A) When considering whether the giving of directions under subsection (11) in respect of an LNG import or export facility would be prejudicial as mentioned in that subsection, the Authority must disregard any difficulties by virtue of which the owner of the facility may or must apply for an exemption under section 19DZA with respect to the facility. (11B) The Authority must not give directions under subsection (11) in respect of an LNG import or export facility if— (a) such directions would prevent the owner from carrying out any public service obligation, within the meaning of paragraph (2) of Article 3 of the Gas Directive, which is imposed on the owner pursuant to that paragraph; or (b) an exemption is in force with respect to the facility under section 19DZA (regardless of whether that exemption was given before or after the application to the Authority under subsection (8) was made).

Duty to allow others to use LNG import or export facilities: exemptions in relation to take-or-pay commitments

14

After section 19D of the Gas Act 1986 insert—

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