Schedule 2

Energy Bill – in a Public Bill Committee at 2:30 pm on 28 February 2008.

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Decommissioning of energy installations

Question proposed, That this schedule be the Second schedule to the Bill.

Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

Once the new offshore transmission regime goes live—currently expected at the end of 2009—all projects that connect to shore via lines of 132 kV or above will be covered by the new licensing regime. This means that some projects that have already been built or are currently under construction will need to be subject to the new tendering process for offshore transmission licences.

To date, the sub-sea cables and associated equipment that will convey electricity from offshore generating stations to the shore have been developed by generator-developers. Careful consideration has therefore been given to the specific arrangements that will need to be put in place for offshore projects that are already completed, will be completed or will be well developed by the time the new regime goes live. Ofgem will be running a competitive tender process to select the holders of offshore transmission licences in respect of these transmission assets.

For these projects, once an offshore transmission licensee has been selected under the tender exercise, any transmission-related property, rights and liabilities held by the generator-developer or other relevant asset owner must be transferred or made available to the offshore transmission licensee within a reasonable time. This will enable the licensee to perform its licensed and statutory obligations and convey the electricity generated to the onshore network. Schedule 2 enables the authority, in certain circumstances, to make a scheme transferring property, rights and liabilities from the existing owner to the successful bidder for the offshore transmission licence.

We expect that it will be in the relevant parties’ interest to reach a commercial agreement as to the terms of the transfer. In most cases, therefore, we would not expect the authority to be asked to use the powers set out in the schedule to make a property scheme. However, the power to make a property scheme will help to ensure the efficient and timely transfer of property, rights and liabilities from the owner of the assets, usually a generator-developer, to the successful bidder for the offshore transmission licence if they cannot reach an agreement through commercial negotiations. This will provide certainty  and reassurance to tender participants for certain transitional projects. It will also help ensure that the parties involved are not placed under undue pressure by a third party seeking unreasonable commercial advantage.

I shall highlight a few key features of the property scheme. The authority may make a scheme only upon application and the scheme provisions must be necessary or expedient for the offshore transmission licence holder to perform its functions. There are also provisions in the schedule covering compensation, protecting third-party interest and an appeals mechanism.

We believe that the compulsory property scheme will be used only in a small number of circumstances, and consider that the existence of the powers will now encourage parties to seek fair commercial negotiations where otherwise they might not do so.

Question put and agreed to.

Schedule 2 agreed to.