Energy Act 2004 - new duties, new powers and many changes

United Kingdom

The Energy Bill, announced in the Queen's Speech in November 2003, received Royal Assent on 22 July 2004. For an overview of the main provisions in the Energy Act please click here. The Energy Act 2004 affects the energy sectors in Northern Ireland as well as Great Britain and covers three main areas:

  • nuclear decommissioning, security and liability
  • renewable energy, micro-generation and sustainable development
  • energy markets and regulation.

The Act comes into force on days appointed by order of the Secretary of State and different parts will come into force at different times. One order has already been made, but the full timetable for commencement of the Act has not yet been fixed.

For businesses active in UK electricity and gas markets, the Act makes a number of changes to the regulatory framework. It gives the Secretary of State powers to amend licences, including for implementation of BETTA and recovery of costs. Existing categories of activities requiring a licence are amended and new categories of licence created for gas and electricity interconnectors. The definition of electricity supply is expanded to include supply to premises connected to the transmission network. The statutory duties of the Gas and Electricity Markets Authority (GEMA) and the Secretary of State have both been changed, including new duties to apply best regulatory practice and contribute to sustainable development. The Competition Commission is given power to hear appeals against GEMA's decisions about amendments to industry codes and the Secretary of State has a new duty to report each year about security of supply. Special administration orders for energy network licence holders have been introduced.

For the offshore oil and gas sectors, offshore electricity generation, transmission, distribution and supply activities to be taken into account by the Secretary of State when exercising powers under the Petroleum Act 1998. The Secretary of State is also given power to amend the Petroleum Act to give effect to international agreements relating to pipelines and offshore installations.

Renewable energy is given support through changes to the renewables obligation and a new legal framework for the development of offshore electricity generation from wind or water. The Secretary of State is given powers to establish a scheme to adjust transmission charges in order to decrease them in areas of high potential for the development of renewable energy.

The Act will also affect non-energy sectors. The Renewable Transport Fuel Obligation, if introduced, may increase energy costs for vehicles, vessels, aircraft, trains and other modes of transport. For the ports and shipping sectors and others using the UK's coastal waters, the creation of safety zones around offshore renewable installations may have an impact on shipping routes and restrict access by leisure craft and other vessels to waters near offshore renewable installations.

If you would like more information or require advice about the Act, please contact Robert Lane at [email protected] or Amanda Seaton at [email protected]