Commentary on Sections Part 2: Electricity Market Reform Chapter 2: Contracts for difference Section 6: Regulations to encourage low carbon electricity generation
85.This sets out the Secretary of State’s power to make regulations about contracts for difference.
86.A CFD is a contract between a CFD counterparty and an eligible generator which was offered by the CFD counterparty because the legislation has required the CFD counterparty to offer it. Whether a generator is eligible or not will be set out in regulations. The regulations can only make provisions which, in the opinion of the Secretary of State, will encourage low carbon electricity generation. Therefore only low carbon electricity generation will be eligible. This would include renewable generation, nuclear generation and generation using carbon capture and storage.
87.Subsections (7) to (9) provide that regulations must be made by statutory instrument and that:
	the first time regulations are made relating to:CFD notification: offer to contract on standard terms (section 14);Modification of standard terms (section 15);Information and advice (section 19);Functions of the Authority (section 20).
	Or any regulations relating to:Supplier obligation (section 9);Direction to offer to contract (section 10);CfD notifications (section 12);Allocation of CfDs (section 13);Payments to electricity suppliers (section 17);Application of sums held by a CFD counterparty (section 18);Regulations: further provision (section 21);Enforcement (section 22);Limits on costs to be incurred (section 23).
they must be laid in draft before, and approved by affirmative resolution of, each House of Parliament.
88.Subsection (10) provides that regulations relating to Contracts for Difference should not be treated as a hybrid instrument. The regulations are expected to specify a private company and confer functions on it which could be regarded as adversely affecting its private interests (i.e. they would be unable to stop performing functions without amendment to the regulations), raising the possibility that they could be considered hybrid. It is not considered necessary for the regulations to be treated as hybrid because the existing duty to consult before making regulations should provide adequate protection that private interests will be fully considered.