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The Energy Act 2011

by Michael Smith
NBS Information Specialist

On Tuesday, 18 October 2011, the Energy Bill received Royal Assent and became the Energy Act 2011. Ministers pledged to revolutionise the energy efficiency of Britain's homes and businesses, in the wake of the enforcement of the Act. This article investigates the provisions of the new Act, which also sets out plans for the government's Green Deal.

Background

The Energy Bill was first introduced into the House of Lords in December 2010 and completed its Commons stages on 14 September 2011. The Lords were content with Commons amendments, which allowed the Bill to receive Royal Assent.

The Energy Act provides for some of the key elements of the Coalition's Programme for Government, and its first Annual Energy Statement.

The Act provides for a step change in the provision of energy efficiency measures to homes and businesses, and makes improvements to the energy framework to enable and secure low-carbon energy supplies and fair competition in the energy markets. The Act includes provisions on the Green Deal, including the private rented sector.

As well as tackling the Green Deal, the Act also includes measures to:

Improve energy efficiency and energy security
Enable low-carbon technologies
Extend the role of the Coal Authority
Repeal the Home Energy Conservation Act 1995 (HECA) in Scotland and Wales.

However, CIBSE has criticised the government for failing to use the legislation to also make an end to mandatory Display Energy Certificates (DECs) for commercial buildings.

Provisions of the Act

The Energy Act has three principal objectives: tackling barriers to investment in energy efficiency; enhancing energy security; and enabling investment in low carbon energy supplies.

The Green Deal
The Act will create a new financing framework to enable the provision of improvements to the energy efficiency of households and non-domestic properties, funded by a charge on energy bills that avoids the need for consumers to pay upfront costs. This framework includes:

Powers to set parameters around the use of this facility to ensure consumer protection for both the originator of the work and subsequent occupiers
Powers to limit access to the financial mechanism in the framework to the installation of measures that are expected to deliver savings in excess of the original charge
An obligation on energy companies to administer the charges and pass monies to the appropriate party.

The framework will exempt energy suppliers from the Consumer Credit Act requirement to gain a credit licence when they collect Green Deal payments and from the requirement to hold a consumer credit licence in respect of Green Deal Finance offered to smaller businesses.

The framework will also oblige the Secretary of State to take reasonable steps to improve the energy efficiency of the English residential sector by 2020, in line with UK carbon budgets.

The Act also requires the Secretary of State to report to Parliament on the contribution of the Green and the Energy Company Obligation to reducing UK carbon emissions.

Private Rented Sector
The Act includes provisions to ensure that, from April 2016, private residential landlords cannot refuse a tenant's reasonable request for consent to energy efficiency improvements, where a government backed finance package is available. Provisions in the Act also provide for powers to ensure that from April 2018, it will be unlawful to rent out a residential or business premise that does not reach a minimum energy efficiency standard (this is intended to be set at EPC rating 'E').

These requirements will be subject to there being no upfront financial cost to landlords.

Energy Company Obligation
The Act amends existing powers in the Gas Act 1986, Electricity Act 1989 and the Utilities Act 2000 to enable the creation of a new Energy Company Obligation that will take over from existing obligations to reduce carbon emissions when the Carbon Emissions Reduction Target (CERT) and Community Energy Saving Programme (CESP) expire at the end of 2012, and work alongside the Green Deal Finance, targeting appropriate measures at those households likely to need additional support, such as those on low incomes and/or in hard-to-treat housing.

Additional measures to improve energy efficiency
The Energy Act also amends the smart meters powers in the Energy Act 2008 to allow Government to direct the roll-out of smart meters until 2018 and to enable the Secretary of State to make changes to transmission licences to ensure the effective introduction of the new central data and communications arrangements to support smart metering. The Act also enables the removal of unnecessary restrictions on access to data by amending the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007.

However, one of the most important powers in the Act for consumers is that it establishes powers for both the Secretary of State and Ofgen to require energy companies to provide information on the cheapest tariff on energy bills.

Measures to improve energy security
The Act confers on the Gas and Electricity Markets Authority (GEMA) a duty to report to the Secretary of State with an estimate of future need for electricity capacity and amends the Energy Act 2004 to give the Secretary of State a duty to publish his assessment of future capacity need.

The Act also establishes powers for Ofgem to require changes to be made to the Uniform Network Code, to strengthen market incentive mechanisms for ensuring supply during gas emergencies.

It also consolidates existing provisions for third party access to upstream oil and gas infrastructure, and streamlines current procedures to facilitate determinations by the Secretary of State where required.

The Act establishes powers to re-designate areas of the UK continental shelf to facilitate signing of a comprehensive agreement with Ireland about maritime boundaries, which will enable the alignment of Exclusive Economic Zones and provide flexibility in managing UK continental shelf resources.

Finally, the Act enables the Secretary of State to make regulations for the purposes of ensuring the security of civil nuclear facilities being built in the vicinity of an existing nuclear site from the point when construction work begins.

Measures to enable low carbon technologies
The Energy Act 2011 extends existing Secretary of State powers, made in the Energy Act 2004 (that have now expired) and also extends existing Ofgem powers in the Electricity Act 1989, with regards to the implementation of an offshore electricity transmission regime beyond 2010. It will also extend the end date for any scheme to adjust transmission charges from October 2024 to 2034.

The Act amends existing powers for the Secretary of State to modify a nuclear operator's Funded Decommissioning Programme, to ensure that there is an appropriate balance between the Secretary of State's powers to protect the taxpayer and the operator's need for clarity over how those powers will be exercised.

The Act will remove barriers to the reuse of existing capital assets for carbon dioxide storage and transport, where they are suitable. It will allow National Park Authorities and the Broads Authority to generate and sell renewable electricity within specific constraints.

Finally, it will also extend the Renewable Heat Incentive primary powers to Northern Ireland, enabling them to make their own regulations to incentivise renewable heat.

Measures to extend the role of the Coal Authority
The Act amends the Coal Industry Act 1994 to provide powers to the Coal Authority to enable it to offer and charge for services relating to the longer-term safety and remediation of non-coal mining subsidence and water pollution.

Repeals and amendments

The Energy Act 2011 repeals the Home Energy Conservation Act 1995 (HECA) in Scotland and Wales.

The Act amends the Coal Industry Act 1994, the Energy Act 2004 and the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007.

The Act also amends or increases existing powers laid out in the Gas Act 1986, Electricity Act 1989 and the Utilities Act 2000 and Energy Act 2008.