Commentary on Sections Part 2: Electricity Market Reform Chapter 5: Conflict of interest and contingency arrangements Section 48: Energy administration orders
253.This section amends the Energy Act 2004 to extend the special administration regime for the national system operator to include its EMR functions.
254.Special administration regimes act as an alternative to general insolvency law and procedures. They are designed to ensure uninterrupted and safe operation of essential services in the event of a company becoming insolvent. Special administration regimes exist for electricity transmission (including system operation) and distribution, gas transportation licensees, water and rail companies and parts of the banking sector.
255.Under the special administration regime introduced by the Energy Act 2004, the Secretary of State (or the Authority with the Secretary of State’s consent) can apply to the court for an energy administration order, which may be granted where the company meets the statutory tests for insolvency. In these circumstances, the court would appoint an energy administrator, whose statutory objective would be to ensure “that the company’s system is and continues to be maintained and developed as an efficient and economic system”. The energy administrator is required to do this by (if possible) managing the company as a going concern.
256.This section amends the special administration regime to provide that where EMR delivery functions have been conferred on the system operator then the administrator has an additional objective of ensuring that the EMR functions are performed in an efficient and effective manner. In a situation where the old and new objectives could not be secured in a consistent way, the new objective would be subordinate to the primary objective of maintaining and developing an efficient and economic system.