The Energy Regulation and Markets Review - Stikeman Elliott

United Kingdom
Licences are issued by the Secretary of State pursuant to the relevant act and
are administered on a day to day basis by Ofgem. Exemptions are made by statutory
instrument and may take the form of a class exemption or a specific exemption which
is personal to a particular company. Licences are granted to persons (companies), not
assets. They do not, therefore, attach to an asset, or the land on which an asset is situated,
and they do not transfer on a sale of the asset or land.
Section 6 of the Electricity Act provides that the Secretary of State may issue a
licence in respect of the following licensable activities:
a the generation of electricity for the purpose of supplying premises;
b the transmission of electricity;
c the distribution of electricity;
d the supply of electricity to premises; and
e the operation of an electricity interconnector.
Supply, distribution and transmission licences may be limited in geographical area if the
licensee agrees. Supply licences may also differentiate between supply to domestic and
non-domestic (industrial and commercial, or I&C) premises.
The same legal person may not hold a transmission, distribution or interconnector
licence together with any other licence.
There are fewer licences for supply to domestic premises (even though, by numbers,
these customers form the largest single group of the supply market) because licences
for supply to domestic premises include conditions relating to provision of particular
services to customers, including those who are vulnerable or have special needs.
The Electricity (Class Exemptions from Requirement for a Licence) Order 2001
sets out class exemptions from the requirement to hold a licence. Any person that falls
within a specific class need not obtain a licence if it wishes to conduct a licensable activity.
Two of the more commonly used class exemptions are the exemption for generating
stations with a capacity of less than 50MW, and the exemption for on-site supply to
premises, which is available to embedded generators supplying direct to the site where
the generating station is situated. Specific exemptions may be granted by application to
the Secretary of State.
Section 7 of the Gas Act provides that the Secretary of State may issue a licence in
respect of the following licensable activities:
a transportation – the conveyance of gas through pipes to premises or to a pipeline
system operated by another gas transporter;
b shipping – the making of arrangements with a gas transporter for gas to be put
into, conveyed through or taken out of that gas transporter’s pipeline system;
c supply – the supply to premises of any gas conveyed to premises through those
pipes; and
d interconnector – the operation of a gas interconnector.
As with electricity licences, gas licences may be limited in geographical area and supply
licences are divided into those in respect of domestic and non-domestic customers.
Exemptions from the requirement for a licence in the gas sector are set out in the Gas
(Exemptions) Order 2011. The Secretary of State may also issue specific exemption by
statutory instrument.
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