The Energy Regulation and Markets Review - Stikeman Elliott

United Kingdom
Participants in the gas and electricity markets deal with Ofgem on a day-to-day basis and
Ofgem is referred to as the ‘Regulator’.
GEMA’s powers and duties largely derive from statute, principally the Gas Act
1986 and the Electricity Act 1989, which have been substantially amended over time. 4
Detailed provisions are set out in statutory instruments. Ofgem also publishes guidance
documents, 5 which provide practical information. This guidance is not legally binding.
There have been subtle shifts in the definition of the regulator’s powers and duties
over time. Emphasis has moved from an initial focus solely on competition, through
taking into account the interests of consumers to recognising the need for sustainability. 6
At present GEMA’s principle objective is to protect the interests of existing and future
consumers in relation to gas conveyed through pipes and electricity conveyed by
distribution or transmission systems. The interests of such consumers are their interests
taken as a whole, including their interests in the reduction of greenhouse gases and in
the security of the supply of gas and electricity to them. GEMA is generally required
to carry out its functions in the manner it considers is best calculated to further the
principal objective, wherever appropriate by promoting effective competition between
persons engaged in regulated activities. GEMA has powers under the Competition Act
to investigate anti-competitive activity, and has concurrent powers with the Office of Fair
Trading in respect of market investigation references to the Competition Commission.
In performing its duties, GEMA must also have regard to security of supply,
a licensee’s ability to finalise its licensed activities, the achievement of sustainable
development and to the interests of individuals who are disabled, chronically sick, of
pensionable age, with low incomes or residing in rural areas. 7 Subject to the former,
GEMA must carry out its functions in a manner which it considers is best calculated
to promote efficiency and economy on the part of licenced entities, protect the public
from dangers arising from the transportation and use of gas and electricity and secure
a diverse and viable long-term energy supply, with regard to the effect the carrying out
of its functions has on the environment. GEMA must also have regard to upholding
the best regulatory practice (in particular with regard to transparency, accountability,
proportionability and consistency) and to statutory guidance on social and environmental
matters issued by the government.
ii Regulated activities
Both the Electricity Act and the Gas Act are structured along the same lines, namely that
it is an offence under either act to carry out a licensable activity without authorisation.
Authorisation under both acts takes the form of either a licence or an exemption.
4 Consolidated and ‘as enacted’ versions of these Acts are available at www.legislation.gov.uk.
5 www.ofgem.gov.uk.
6 These changes can be seen in the successive changes to Sections 4AA of the Gas Act and 3A of
the Electricity Act.
7 There is a specific set of licence conditions relating to these special classes of individuals in the
licence of suppliers who supply domestic customers.
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