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The Energy Bill in November 2012: strategy and policy statement

This guide was last updated in February 2013.

In November 2012 the Secretary of State for Energy and Climate Change published a revised draft of the Energy Bill, updating proposals made in May 2012.

You can find out more in our partner guides to the draft as a whole and our guide to those changes related to Electricity Market Reform (EMR).

The revised Energy Bill introduces a Strategy and Policy Statement which is intended to provide greater clarity and certainty to the roles of Gas and Electricity Markets Authority (GEMA)/Ofgem and the Government. This remains the same as in the May proposals.

The Strategy and Policy Statement will:

  • set out the Government’s strategic priorities for the energy sector in Great Britain, including offshore areas;
  • describe the roles and responsibilities of various bodies who implement or who have functions that are affected by energy policy in Great Britain; and
  • describe policy outcomes that are to be achieved by GEMA/Ofgem and the Secretary of State when regulating the energy sector.

The Strategy and Policy Statement will replace existing guidance for GEMA/Ofgem on social and environmental matters.

As part of the Coalition Government's programme, a commitment was made to review the current role of GEMA/Ofgem as the independent regulator for gas and electricity markets in Great Britain.

As part of this commitment, the GEMA/Ofgem Review Final Report was published in July 2011. This report concluded that more clarity and coherence was required between the roles of GEMA/Ofgem and the Government. The report also found that the Government should set out its strategic priorities for the energy industry and define the policy outcomes it considers Ofgem should have a role in delivering.

To address the concerns concluded in the Ofgem Review Final Report, the Government proposes to introduce a Strategy and Policy Statement at Part 4 of the Energy Bill to provide the clarity and certainty required, thereby strengthening the current regulatory framework.

Proposals

Chapter 5 Part 4 of the Energy Bill sets out the legislative proposals for the Strategy and Policy Statement. The draft Bill sets out clauses providing for:

  • Designation of the Strategy and Policy Statement: the Secretary of State will be granted the power to designate a Strategy and Policy Statement, which will set out: the Government's strategic priorities in formulating its energy policy; clear policy outcomes to be achieved as a result of implementing that policy, and the roles and responsibilities of the Government, GEMA/Ofgem and others involved in implementing the policy.
  • Consequent Duties: GEMA/Ofgem will have a duty to "have regard to" the strategic priorities in the Strategy and Policy Statement. Both GEMA/Ofgem and the Secretary of State will have the duty to carry out their regulatory functions in a manner which is considered best calculated to further the delivery of the policy outcomes contained in the Strategy and Policy Statement.
  • Five Year Review: the Secretary of State will be required to review the Strategy and Policy Statement every five years. A review may also be required following a general election, following significant unanticipated changes in energy policy, or where GEMA/Ofgem states that it is not realistically achievable to meet a policy outcome provided in the Strategy and Policy Statement.
  • Procedural requirements: the Secretary of State will be required to consult with GEMA/Ofgem, the Scottish Ministers and the Welsh Ministers prior to laying the draft Strategy and Policy Statement before Parliament for debate and final approval.
  • Reporting requirements: there will also be an amendment made to GEMA/Ofgem's current reporting requirements under the Utilities Act 2000 to ensure that it publishes certain specified information in relation to the Strategy and Policy Statement. The provisions give some flexibility to GEMA/Ofgem to publish the information in a way which best fits with its existing reporting cycle.