Commentary on Sections Part 2: Electricity Market Reform Chapter 3: Capacity Market Section 37: Licence modifications for the purpose of the capacity market
166.This section enables the Secretary of State to make licence modifications and to amend electricity industry codes (which are documents maintained under licences), for the purposes of a Capacity Market. Industry codes (such as the Balancing and Settlement Code, made under the standard conditions of the electricity transmission licence) generally contain provisions relating to the functioning of the electricity industry and electricity markets. They also ordinarily contain provision about the procedure for their modification, usually involving the participation of the parties to the code and the Authority.
167.Subsection (1) allows the Secretary of State to amend the conditions of generation, transmission, distribution, supply and interconnection licences, electricity industry codes and agreements that give effect to industry codes.
168.Subsection (2) allows the Secretary of State to provide for a new document to be required to be prepared and maintained in accordance with the conditions of a licence. This would enable the Secretary of State to create a new industry code rather than modifying an existing one, for example to set out the arrangements governing the settlement of payments relating to capacity agreements. This subsection also enables a licence or code modification to confer functions on the national system operator.
169.Subsection (3) enables provisions included in a licence or industry code by a modification made under this section to include any provision of a kind that can be made in electricity capacity regulations, to make different provision for different cases, and confirms that provision need not relate to the activities that the licence authorises. For example modifications to a code may make different provision for different types of capacity (such as electricity generation in contrast to demand side response technologies) or provide for different capacity agreements to apply for different lengths of time.
170.Subsections (4) and (5) require the Secretary of State to consult licence holders, the Authority and any other person he or she considers appropriate before making modifications and confirms that consultation that occurs before the passing of the Act will satisfy this requirement.
171.Section 64 makes further provision about licence modifications.