My Lords, I will also speak to the other four statutory instruments listed on the Order Paper.
As we approach EU exit, the department is working to ensure that our energy legislation continues to function effectively after exit day, ensuring that consumers continue to benefit from reliable, affordable and clean electricity and gas. A significant part of the legislation that governs our energy markets takes the form of direct EU legislation. This will be incorporated into domestic law as retained EU law upon our departure from the EU by the European Union (Withdrawal) Act. These instruments amend EU regulations that will become retained EU law and address a range of highly technical issues, from cross-border trade to the energy market objectives of regulators.
The instruments simply remove inoperabilities in retained EU law in the event that we leave the EU without a deal. In the main, they remove references to the EU and EU institutions that would make no sense following EU exit. This ensures that, in the event of a no-deal exit, we would retain the regulatory functions and frameworks needed to keep Great Britain and Northern Ireland’s electricity and gas markets working effectively, facilitating continuity for UK industry and consumers. This is a sensible contingency to minimise uncertainty and disruption to our energy markets.
The instruments make similar amendments to legislation applying to Northern Ireland and Great Britain, although they are not always identical. This will ensure a consistent approach to retained EU legislation that previously applied across the UK while still recognising the unique nature of the single electricity market on the island of Ireland. On the single electricity market, let me be clear that the Government will take all necessary steps to seek to ensure that it can continue in a no-deal scenario. These instruments help to facilitate that. In preparing this legislation, the department has worked closely with Ofgem in Great Britain, and the Department for the Economy and the Utility Regulator in Northern Ireland.
In sifting this and related instruments, the Secondary Legislation Scrutiny Committee Sub-Committee A reported that the draft regulations,
“are necessary to enable UK energy markets to operate effectively if there is no agreement with the EU”,
and that,
“the proposed changes … do not appear to present significant policy or regulatory changes”.
The Electricity and Gas etc. (Amendment etc.) (EU Exit) Regulations amend and make “workable” the retained EU electricity and gas legislation that was created to harmonise energy markets and regulation across the EU. They also revoke guidelines for trans-European energy infrastructure which set out processes for development of EU infrastructure, as these will be redundant in a domestic setting.
The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations amend retained EU gas legislation. They ensure that the regulatory framework relating to gas is maintained, including the technical EU network codes that cover the cross-border gas trade. This will maintain maximum business continuity and efficiency for UK gas operators and UK gas
consumers. It also maintains the framework for dealing with security of supply, such as responding to gas supply emergencies by updating the security of supply regulation to remove references to EU institutions.
The Electricity Network Codes and Guidelines (Markets and Trading) (Amendment) (EU Exit) Regulations address EU electricity legislation relating to markets and trading, ensuring that they operate as part of domestic law. In particular, this instrument amends a wider package of rules, known as EU network codes for electricity. It revokes the guideline on forward capacity allocation and the guideline on capacity allocation and congestion management. These codes govern how cross-border trade operates within the EU’s internal energy market. The EU has been clear that, were the UK to leave the EU without an agreement, we would no longer be part of the internal energy market. These codes would therefore have little to no practical application in UK law and are being revoked. Alternative arrangements for cross-border trade are being put in place by GB interconnectors similar to those that were in place prior to European market coupling. Fallback arrangements will be in place for the interconnectors between the single electricity market and GB to ensure that trading can continue to take place in a no-deal scenario.
This instrument also amends the inter-transmission system operator compensation mechanism regulation, which established a mechanism to compensate national transmission system operators for hosting cross-border flows of electricity. The cross-border elements are removed as they cannot be provided for by domestic UK legislation. Provisions relating to the setting of domestic network charges are retained.
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The guideline on electricity balancing will be largely retained in Great Britain, with amendments made to remove provisions relating to a European platform for the exchange of balancing energy. In Northern Ireland, the guideline on electricity balancing will be revoked as it does not apply to islands not interconnected with the rest of the EU.
The Electricity Network Codes and Guidelines (System Operation and Connection) (Amendment etc.) (EU Exit) Regulations deal with EU legislation relating to the operation of the electricity system. Two of the EU regulations amended by this instrument—system operation guideline and emergency and restoration network code—concern the activities of electricity system operators, which balance supply and demand on the system in real time and ensure that electricity flows securely to customers across the UK.
The instrument amends the obligation on National Grid to co-operate with other system operators. It requires National Grid to assist SONI, the Northern Ireland system operator, with a similar reciprocal requirement on SONI. It removes the obligation to co-operate with other system operators. This does not preclude such co-operation happening, which we would encourage. However, we do not think it would be right that the GB system operator would be under a legal duty to co-operate that would not be legally required by our EU neighbours.
The unique shared arrangements underpinning the single electricity market on the island of Ireland mean that a different approach is required. In a no-deal scenario, the EU regulations oblige EirGrid, Ireland’s system operator, to endeavour to conclude a co-operation agreement with SONI because of the shared nature of the single electricity market. Therefore for Northern Ireland we are retaining a similar requirement for SONI to endeavour to conclude an agreement with EirGrid.
In addition, the instrument revokes the “connection codes”—a set of three EU instruments for electricity. These codes apply only under EU law and from a date after exit, so will not be incorporated via the withdrawal Act. A similar issue arises for some provisions of the gas transmission tariffs.
Finally, the Electricity and Gas (Market Integrity and Transparency) (Amendment) (EU Exit) Regulations deal with measures to ensure market integrity and transparency. They amend retained EU law to ensure that UK regulators can maintain effective market surveillance and enforcement, and that market participants will continue to publish relevant inside information.
In conclusion, while leaving the EU without a withdrawal agreement is not what the Government want or are aiming for, these regulations make the necessary changes to ensure that the electricity and gas markets continue to function as normal, including the continuation of the single electricity market on the island of Ireland. This will maximise business continuity for UK market operators, facilitate the continued efficient international trade in energy and ensure that consumers continue to benefit from reliable, affordable and clean electricity and gas. I beg to move.