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The Electricity Act 1989 provides for the licensing of electricity suppliers. The Gas Act 1986 provides for the licensing of gas shippers and suppliers. The licensing of suppliers under the Acts is now applicable on a Great Britain-wide basis, and the licences themselves contain standard conditions for all suppliers. There is also now no distinction between suppliers selling in to or outside their traditional regions. Obligations under these licence conditions relevant to suppliers in the industrial and commercial markets are summarised in the paragraphs below.

Figure 6:1: Overview of Ofgem Objectives and Guidance

Source: Ofgem

6.2.2.1. Exclusion of Cross Subsidy

As a condition of their licences, suppliers are bound not to give any cross- subsidy to, or receive a cross-subsidy from, any related business. In practice, for example, if a supplier makes losses repeatedly over a period of time which might appear to be the result of a cross-subsidy from another part of its business, this would tend to suggest a breach of this condition. However, such a circumstance would very likely be extremely difficult to prove in practice.

Ofgem's principal objective is to:

Protect the interests of present and future consumers wherever appropriate by promoting effective competition

In meeting the principal objective Ofgem must have regard to:

• Ensuring all reasonable demands for electricity and gas (where

economically viable) are met; • Securing that licence holders are able

to finance their obligations; • The interests of special customers

including the sick and disabled, the elderly, those on low income and those in rural areas; and • The interests of other utility

consumers.

Subject to the principal objective Ofgem is required to:

- Promote efficiency & economy - Protect the public from dangers - Secure long term energy supply Ofgem must have regard to: the effect on the environment of activities connected with power generation, transmission and distribution and the conveyance of gas through pipes

Ofgem must also have regard to:

6.2.2.2. Meter Reading and Theft of Energy

Gas licensees must provide information, as reasonably requested by a gas transporter, to enable it to meet its licence requirements to develop and operate a safe pipeline system and detect and prevent the theft of gas. Electricity licensees and their agents must take all reasonable steps to detect and prevent theft of electricity, damage to and interference with electrical plant, meters and lines.

Gas and electricity suppliers also have an obligation to ensure that meters are read, and inspect them for damage, interference or deterioration at least once in every two-year period during which they service a customer.

6.2.2.3. Information Provision to Customers

The supply number (electricity) and meter point reference number (gas) must be provided by licensees to customers either annually or with or on each bill.

Suppliers must provide their customers with a telephone number for safety purposes to report gas escapes or electrical dangers. This must be provided when the customer first signs a supply contract and then annually or with, or on, each bill.

6.2.2.4. Information Provision to Ofgem and GEMA

Licensed suppliers are obliged to provide GEMA at any time, and in whatever form it requests it, with any information it may reasonably require, or as may be necessary for the purpose of performing its statutory duties. From time to time, Ofgem monitors aspects of the suppliers’ businesses, including customer

numbers, market share and prices.

6.2.2.5. Gas Transportation Charges

Gas licensees, which supply gas to customers on a gas transporter’s pipeline network, must give the transporter a binding undertaking to pay its charges in the event that its shipper is terminated from the Network Code of the

6.2.2.6. Guaranteed Standards and Payments

Licensees must pass on guaranteed standards payments received from either gas shippers or transporters, or electricity distributors, to the relevant customer.

6.2.2.7. Codes of Practice

Licensees must prepare Codes of Practice covering:

• procedures with respect to site access, i.e. the principles and procedures that they will follow in respect of any representative requiring access to a customer’s premises – including compliance with statutory Rights of Entry powers; and

• efficient use of gas / electricity, i.e. guidance for customers on energy efficiency, including the provision of a telephone enquiry and advice service. This is primarily targeted at domestic users.

6.2.2.8. Deemed Contracts

Licensees must prepare deemed contracts. Where there is no contract

explicitly agreed between a customer and the registered supplier of a premises, the deemed contract terms apply.

There is no duty to supply non-domestic customers.

6.2.2.9. Supplier of Last Resort

In the event that one supplier (‘A’) loses its licence to supply (by becoming insolvent or having its licence revoked for some reason), the Authority can direct any other licensee (‘B’) to become a Supplier of Last Resort for some or all of the customers of ‘A’. This mechanism is allowable provided that it will not

significantly prejudice the ability of ‘B’ to continue to supply its customers, and fulfil its contractual obligations for the supply of electricity. Use of it has not yet happened to date. Ofgem, from time to time, asks licensees if they wish to be considered as a potential Supplier of Last Resort in the event that this was to happen. Once the process begins, other licence requirements come into play regarding information to be given to customers and prices that will apply.