Individual offshore supply license exemptions
Published 2 August 2023
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This publication is available at https://www.gov.uk/government/publications/individual-offshore-supply-license-exemptions/individual-offshore-supply-license-exemptions
Disclaimer: This guidance is intended to provide information in respect of individual offshore Supply Licence Exemptions. This guidance does not create any rights enforceable at law in any legal proceedings, is not a substitute for legal advice, and does not limit the ability of the Secretary of State to exercise their own discretion in accordance with the Electricity Act 1989. The Secretary of State is not bound to follow this guidance and may depart from it in appropriate circumstances. Supply Licence Exemptions applications are subject to consultation and Parliamentary time, and therefore can never be guaranteed. Parties should take their own legal advice.
Scope
1. This guidance concerns direct ‘supply’ to an offshore end user (“offshore supply”), as part of novel and innovative coordinated projects. Such projects might include first movers using new technology, or innovative uses of supply to existing offshore infrastructure.
Background
2. If you intend to supply electricity in Great Britain you will need to determine whether a licence or an exemption is required.
3. Section 4(1)(c) of the Electricity Act 1989 (“the Act”) makes it an offence for a person to “supply electricity to any premises”, unless authorised to do so by a licence.
4. ‘Supply’ is defined in the Act as:
“supply”, in relation to electricity, means its supply to premises in cases where—
a. it is conveyed to the premises wholly or partly by means of a distribution system, or
b. (without being so conveyed) it is supplied to the premises from a substation to which it has been conveyed by means of a transmission system,
but does not include its supply to premises occupied by a licence holder for the purpose of carrying on activities which he is authorised by his licence to carry on;
5. Under section 5 of the Act, the Secretary of State may exempt individual persons or persons falling under a class from the requirement to hold a licence and impose conditions on the exemption. Class exemptions will apply automatically to those persons falling within the terms of a relevant class exemption under the Electricity (Class Exemptions from the Requirement for a Licence) Order 2001 (“the Class Exemptions Order”. The Class Exemptions Order created a number of class exemptions applicable to discrete categories of generation, distribution and supply activities and Schedule 4 sets out the exemptions applicable to supply activities.
6. The granting of individual offshore supply licence exemptions follows a statutory process set out in the Act involving secondary legislation laid in Parliament and includes a requirement for a minimum 28 day notice period. However, the notice period may be longer for complex applications.
7. When determining whether it is appropriate to grant an individual offshore supply licence exemption, as with exercising any function in Part 2 of the Act the Secretary of State must consider the principal objective and general duties under Section 3A of the Act.
Exemptions
8. Applications for offshore individual supply licence exemptions will therefore be evaluated based on the criteria included in the principal objective and general duties described in the Act.
9. For example, the criteria include protecting the interests of existing and future consumers in relation to electricity conveyed by distribution systems or transmission systems. These interests include the reduction of greenhouse gas emissions, for example, where supply contributes to meeting the UK’s carbon budgets, or where there is any wider emissions benefit from current or future supply to the UK market from renewable energy deployment through decarbonisation of the grid. The contribution to sustainable development will also be reviewed, for example, by reference to UN sustainable development goals in terms of meeting the needs of the present without compromising future generations.
10. In respect of the principal objective, when considering security of supply, this may include the potential for wind capacity installation to support the UK’s electricity markets and compliance with regulatory standards. This may also include evidence of the benefits to government policies advancing security of supply, in particular impacts on the total electricity system.
11. When considering the promotion of effective competition between persons engaged in commercial activities where this is connected with the supply of electricity offshore, this may include considering the deployment of offshore renewables and other offshore infrastructure and whether certain entities may be favoured.
12. The Secretary of State has a broad discretion under section 5 of the Act in determining whether to grant an individual offshore supply licence exemption so in addition to the principal objective and general duties in the Act, other factors appropriate in the evaluation for granting an exemption may be considered. For example, the impact on consumer bills and taxpayers.
13. In all instances individual offshore supply licence exemption applications will be considered on a case-by-case basis on its merits where these criteria and any other factors the Secretary of State deems appropriate may be used to determine the necessity and proportionality of a specific exemption.
Making an application for an individual Offshore Supply License Exemption
14. If you wish to make an application to the Secretary of State for an exemption, please submit your application to the Department in writing (detailing why the Secretary of State should grant an exemption from licencing requirements).
15. Applications should be sent to OSLExemptionApplications@energysecurity.gov.uk.
16. Applications should include the following information:
a. Name of supplier, and parent company (if any)
b. Company numbers of the supplier and parent company
c. Name of end users, and parent company (if any)
d. Company numbers of end user(s) and parent company
e. Capacity of generation which will provide the supply
f. Capacity of supply to end user and demand profile over the lifetime of the supply
g. Detailed location of supplier (for example, ED 50 or ETRF 89 coordinates)
h. Detailed location of end user(s) (for example, coordinates)
i. Timing – when the supply is due to begin and end, and when the applicant would like the exemption to be in place
j. Contact details including email address and phone number
k. Any other information that may be considered relevant
17. In granting an exemption, the Secretary of State is required to consult on draft exemption orders for a minimum of 28 days (section 5(2)(c) of the Act). This will normally entail publication of the draft order on the Department’s website and inviting comments from interested parties. The Order will also be sent to Ofgem and Citizens Advice. Applications in respect of exemptions which relate to Scotland must also be brought to the attention of Scottish Ministers. This will be conducted alongside (that is, simultaneous with) the 28 days consultation process.
18. In reaching a final decision, the Secretary of State will take into account relevant views of those who respond during the notice period, and all other factors they determine are relevant to the decision.
19. The Department aims to consider and reach a decision on applications for individual exemption within a 9-month timescale although we strongly advise that applicants allow for a longer period as this can be subject to delays. However, if all necessary information is provided with the application and we are not required to request more, we can aim for an accelerated timeframe. Therefore, applicants should highlight the reason for urgency in their application.
20. There is no guarantee that exemption will be given. We strongly recommend that applicants seek legal advice before making an application and prepare an alternative position in the event that their application is unsuccessful.
21. Although it is possible to apply for an exemption whilst holding a supply licence, the same person may not hold both a licence and an exemption for the same activity simultaneously. You should therefore liaise with both the Department and Ofgem with regard to the possibility of synchronising timing for surrendering a licence and gaining an exemption if granted.
22. The Secretary of State may revoke an order by which an exemption was granted:
a. at the person’s request.
b. in accordance with any provision of the order by which the exemption was granted; or
c. if it appears to the Secretary of State inappropriate that the exemption should continue to have effect.
(Section 5(8), Electricity Act 1989)
Similar powers exist under section 5(9) and (10) of the Electricity Act 1989 in respect of revoking a class exemption order or withdrawing an exemption from a person within a class (respectively).
Broadly speaking, if revoking an exemption otherwise than at the beneficiary’s request, the Secretary of State is required to consult Ofgem and the beneficiary accordingly (section 5(11) and (12), Electricity Act 1989).