My Lords, I am extremely grateful to my noble friend Lord Jenkin and the noble Lord, Lord Grantchester, for prompting this debate on the delegated powers within the capacity market and contract for difference provisions.
Clause 26 enables the Secretary of State to make provision to impose requirements, via electricity capacity regulations, in addition to those stipulated in capacity agreements. The requirements can be imposed on persons including licence holders, other persons carrying out functions in relation to capacity agreements and current and former capacity providers.
I understand that my noble friend Lord Jenkin is concerned that the provisions in this clause are too broad. However, the Government consider that the ability to address this provision in secondary legislation is needed as the requirements may change with time. The need to consider certain matters when preparing advice regarding the operation of the capacity market may also change as the market evolves, as has been the experience in international capacity markets, such as those in the United States.
With regard to Clause 26(3)(b) about placing restrictions on the use of generating plant, certain requirements may need to be imposed to ensure a fair and transparent auction and to mitigate or close off gaming opportunities that could otherwise drive up costs for consumers. In particular, it is imperative that we know the range and type of capacity, irrespective of whether the capacity operator intends to bid at auction, and we need to ensure we can address gaming
opportunities, such as a plant operator notifying its intention to close in order to drive up the capacity price. Clause 26(3)(c) allows the Secretary of State to impose requirements relating to participation in a capacity auction. An example of how we envisage using this power is that we may wish to require a plant to participate in a capacity auction if it has notified the delivery body during the pre-qualification process that it is its intention to do so.
It may be necessary to place other requirements on those who have ceased to be capacity providers—that is to say, they have assigned or traded their capacity agreements—in order to determine whether they complied with their obligations while they held the agreement. For example, requirements relating to the inspection of plant or property other than as a condition of entry into a capacity auction, as described in Clause 26(3)(d), may be imposed by the Secretary of State.
The powers in Clause 32 allow the Secretary of State to amend or repeal certain sections of the Electricity Act 1989 and the Energy Act 2004 and to make subsequent amendments to any other enactment as the Secretary of State considers appropriate as a result of provisions made by electricity capacity regulations or capacity market rules. I recognise that my noble friend has particular concerns over the provisions in paragraph (d), which allows the Secretary of State to make consequential amendments to any other enactment that he considers appropriate. I should emphasise that our intention is to limit the use of the power in Clause 32(d) to making amendments that are consequential on, or to avoid duplication and contradiction of, existing primary or secondary legislation on implementing the capacity market. For example, if we modify the standard conditions of licences under the provisions of the Electricity Act, the powers for which are set out in Clause 31, it may be necessary to make a consequential amendment to Section 33 of the Utilities Act 2000. This contains general provision about standard licence conditions and includes in Section 33(1) a list of powers under which licence modifications have been made. Furthermore, any provisions to amend primary legislation through the powers in this clause will be subject to a proper level of parliamentary scrutiny through the affirmative resolution procedure.
I now turn to the amendments proposed by the noble Lord, Lord Grantchester, relating to the level of parliamentary scrutiny of regulations made under Chapters 2 and 3 of this Bill. These amendments would make all regulations subject to the affirmative resolution procedure, aside from those relating to electricity capacity regulations: information and advice and those under Clause 7(10) which set out how long a person who has ceased to be a CFD counterparty is continued to be treated as such. These would be subject to the negative procedure. The amendments are consistent with the recommendations of the Delegated Powers and Regulatory Reform Committee. As I have said in previous debates, the Government welcome the committee’s report and I can reassure the noble Lord that it is being given careful consideration. I commit to consider the amendments further and will respond
in due course. I commend that Clauses 26 and 32 stand part of the Bill, and hope that the noble Lord will feel content to withdraw his objection.
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