Draft Electricity Trading (Development of Technical Procedures) (Day-Ahead Market Timeframe) Regulations 2021

Anne-Marie Trevelyan Excerpts

Tuesday 18th May 2021 General Committees

[The Chair]

I remind Members to observe social distancing and to sit only in places that are clearly marked. I also remind Members that Mr Speaker has stated that masks should be worn in Committee. Hansard would be most grateful if Members send their speaking notes to [e-mail].

[The Minister for Business, Energy and Clean Growth (Anne-Marie Trevelyan)]

I beg to move,

That the Committee has considered the draft Electricity Trading (Development of Technical Procedures) (Day-Ahead Market Timeframe) Regulations 2021.

The draft regulations were laid before the House on 22 March this year. This statutory instrument was brought forward using powers under the European Union (Future Relationship) Act 2020.

The trade and co-operation agreement that we secured with the EU requires that new and efficient cross-border electricity trading arrangements be developed between the connected UK and EU markets. The new arrangements were a key objective of the UK during the negotiations for the agreement. Efficient cross-border trade can lower bills for UK consumers and support our decarbonisation and security-of-supply objectives.

The agreement sets out the principles for the design of the new trading arrangements, but the detailed technical procedures still need to be developed by the transmission system operators. Those, collectively, are the companies that own and operate electricity interconnectors that connect the UK to neighbouring markets, and the electricity system operator that runs our onshore electricity network. The development of the new arrangements will need to take place in co-operation with the relevant electricity market operators, which are organisations that operate marketplaces for the buying and selling of electricity.

The agreement details the timeframes for transmission system operators to develop technical procedures for the new arrangements, noting that new arrangements should be made operational by April 2022. It is therefore important that the development of the new arrangements takes place quickly and efficiently. To support that development, this draft statutory instrument imposes duties on electricity transmission system operators in Great Britain, with the co-operation of relevant electricity market operators, to develop the new cross-border electricity trading arrangements for the day-ahead market period.

The instrument will also grant the Office of Gas and Electricity Markets the ability to regulate transmission system operators and relevant electricity market operators in their development of the new trading arrangements, to ensure that they meet their obligations under the regulations. The instrument will further enable Ofgem to make decisions on the allocation and recovery of costs incurred in the development of the new arrangements.

The new arrangements will also be used for trade between Great Britain and the single electricity market on the island of Ireland. Energy is largely a devolved matter in Northern Ireland, but my Department has developed the draft instrument in close collaboration with officials in the Northern Ireland Department for the Economy and the Northern Ireland Authority for Utility Regulation. Input from our colleagues in Northern Ireland ensures that the instrument will support a UK-wide approach to the development of the new arrangements.

It is estimated that the new, efficient trading arrangements could bring significant benefit to consumers. Any delay will of course come at a cost to consumers. Therefore, it is important that the draft regulations are approved to ensure that the transmission system operators develop the new arrangements within the timeframe set by the agreement, so that the benefits can be realised as early as possible. The instrument is one part of a programme of works to deliver the new arrangements.

On 3 February 2021, the Secretary of State provided guidance to those organisations to encourage early action to support implementation of the agreement, while the draft regulations were still being prepared. This instrument follows that guidance to provide a regulatory underpinning for the initial development of the new cross-border electricity trading arrangements.

Since this statutory instrument was laid in both Houses, the numbering of the provisions in the trade and co-operation agreement has been updated following the final legal revision process. A correction slip has been laid in respect of the draft instrument to update the cross-references of the agreement.

If required, the Government will prepare further legislation for the operation of the new trading arrangements, once they are developed. I assure the Committee that such legislation will be laid before Parliament to ensure that it, too, may be scrutinised appropriately. Therefore, I commend the draft regulations to the Committee.

--- Later in debate ---

[Anne-Marie Trevelyan]

I thank the hon. Gentleman, as ever, for his valuable and insightful contribution. To confirm, Norway is not included in the regulations—separate discussions are ongoing with them at the moment, which, unsurprisingly, look very similar. I am happy to keep him updated in due course on how those are progressing.

On the question of the exemptions regime, the best answer that I can give is probably, “May I come back to the hon. Gentleman on that ongoing area?” I am happy to write to him with more details in the near future. He challenged me last time on a particularly tricky question, which I think we managed to fulfil, and although this is less tricky, I would not want to give him insufficient information today—I would rather write and provide him with the full picture so that he is reassured in due course.

The regulations will oblige our transmission systems operators to develop now and at pace new efficient cross-border electricity trading arrangements. As I said, those are really important to supporting our decarbonisation, our security-of-supply objectives and, crucially, to providing economic benefits to all our customers. The new regime should be operational by April 2020. That is quite a challenging deadline, but adherence to it will enable us to realise as early as possible those benefits to consumers of the arrangements. We are very minded that we have a clear set of deadlines to meet to help everyone to get to that point. On that basis, I recommend the draft regulations to the Committee.

Question put and agreed to.