Part 3: Regulation of Gas and Electricity Markets Exploitation of electricity trading and transmission arrangements Commentary on Sections Section 18: Power to make modifications
101.Subsection (1) provides the Secretary of State with the power to introduce a modification to electricity generation licences (including standard conditions incorporated in licences and documents maintained in accordance with the conditions of licences (such as industry codes) or agreements that give effect to those documents). When exercising powers under this section, the Secretary of State (and Ofgem) must carry out functions in accordance with the principal objective and general duties set out in sections 3A to 3D of the Electricity Act 1989 (section 30).
102.Subsection (2) limits the power in subsection (1) so that it may only be exercised for the purpose of limiting or eliminating the circumstances in which a generation licence holder may obtain excessive benefits from electricity generation in a particular period. Subsection (3) provides that a licence holder will be taken to obtain an excessive benefit if they have entered into arrangements regarding the generation of electricity with the transmission system operator and one or more of the conditions set out in subsections (4)-(7) is met. These conditions are:
	the licence holder does not notify electricity generation that would have been economic to carry out and may receive excessive payments in connection with an increase in electricity generation in the relevant period;
	the licence holder may pay an excessively low amount, or may receive an excessively high amount, in connection with a reduction in electricity generation in the relevant period;
	the licence holder is paid an excessively high amount for an inter-trip arrangement; or
	there is an increase or reduction in the licence holder’s electricity generation in a specific period, compared to their notified generation, as a result of which the licence holder may obtain an excessive benefit.
103.Subsection (8) provides that modifications may include provisions relating to operation of power stations, amounts payable to generation licence holders or offers by the licence holder to pay amounts.
104.Subsection (9) requires the Secretary of State to consult on the detail of any modification made under subsection (1) before it is implemented. Those consulted must include any generation licence holders, Ofgem and such other persons as the Secretary of State considers appropriate. Subsection (10) specifies that this requirement may be satisfied by consultation either before or after the passing of the Act.
105.Subsections (11) to (14) contain definitions and interpretation provisions for the purposes of this section. In particular, subsection (11) specifies the meaning of “notified electricity generation” for a period, and subsection (12) defines references to an increase or reduction in electricity generation in a period.