The legal steps that the Gas and Electricity Markets Authority must take to change the level at which the Tariff Cap is set

[Minor edits were made on 13th September 2022 to correct minor typos in the text.]

 The Domestic Gas and Electricity (Tariff Cap) Act 2018 is the legislation which defines the powers and duties of the Gas and Electricity Markets Authority with respect to the Tariff Cap which may be charged for the supply of gas and electricity to homes.

The full text of the Domestic Gas and Electricity (Tariff Cap) Act 2018 (the "2018 Act") can be accessed online here:

Domestic Gas and Electricity (Tariff Cap) Act 2018

The provision of the 2018 Act which directly refers to the Gas and Electricity Markets Authority proposing to change the level at which the Tariff Cap is set out is Section 6 of the 2018 Act.

For convenience I reproduce the text of Section 6 of the 2018 Act here:

6 Review of level at which cap is set

(1) The Authority must, at least once every 6 months while tariff cap conditions have effect, review the level at which the cap is set.

(2) As soon as practicable after carrying out such a review the Authority must publish a statement stating whether, in consequence of the review, the Authority proposes to change the level at which the cap is set.

Step 1 is the Gas and Electricity Markets Authority reviews the level at which the Tariff Cap is set. That duty is imposed on the Gas and Electricity Markets Authority by subsection (1) of Section 6.

Step 2 is that the Gas and Electricity Markets Authority must publish a "Proposed Change Statement" stating whether as a consequence of the Review in Step 1, the Gas and Electricity Markets Authority proposes to change the level at which the Tariff Cap is set.

Implicit in Step 2 is that the Gas and Electricity Markets Authority states in the "Proposed Change Statement" what change they propose to make to the level at which the Tariff Cap is set.

Step 3 is the publication of a Section 4 "Notice of Proposed Modifications".

For convenience I reproduce the text of Section 4 here:

4 Notice of proposed modifications

(1) Before making any modifications under section 1, the Authority must take the following steps.

(2) The Authority must give notice—

(a) stating that it proposes to make the modifications,

(b) setting out the proposed modifications and their effect, and

(c) specifying the period within which representations with respect to the proposed modifications may be made.

(3) That period must be a period of not less than 28 days beginning with the day on which the notice is published.

(4) The notice must be published in such manner as the Authority considers appropriate for the purpose of bringing it to the attention of persons likely to be affected by the proposed modifications, and a copy of the notice must be sent to—

(a) each holder of a supply licence,

(b) the Secretary of State,

(c) Citizens Advice, and

(d) Consumer Scotland.

(5) The Authority must consider any representations which are made before the end of the period specified in the notice.

(6) Steps taken before this Act is passed are as effective for the purposes of this section as steps taken after it is passed.

Subsection (1) of Section 4 makes reference to Section 1 of the 2018 Act.

Section 1 of the Act refers to two types of modifications which are referred to in subsections (1) and (2) of Section 1 which, for convenience, I reproduce here:

1 Cap on standard variable and default rates

(1) As soon as practicable after this Act is passed, the Gas and Electricity Markets Authority (“the Authority”) must modify the standard supply licence conditions so that they include conditions (“tariff cap conditions”) that impose a cap on all standard variable and default rates that may be charged by the holders of supply licences for the supply of gas or electricity under domestic supply contracts.

But this is subject to section 3 (exemptions from the cap).

(2) The Authority—

(a) may modify the tariff cap conditions from time to time, but

(b) must secure that such conditions continue to be included in the standard supply licence conditions until they cease to have effect by virtue of section 8.

The first type of modification in Section 1 consists of modifications made to the "standard supply licence conditions" to include "tariff cap conditions". See subsection (1) of Section 1.

The second type of modification in Section 1 consists of modifications to the "tariff cap conditions" themselves. See subsection (2) of Section 1.

To carry out Step 3 in the way which the 2018 Act requires the "Notice of Proposed Modifications" must include the following elements (as set out in subsection (2) of Section 4. See above.)

• A statement by the Gas and Electricity Markets Authority which states that it proposes to make modifications (in this case to the level at which the Tariff Cap is set) and specifying the changes it proposes to make
• Setting out the effect(s) of the proposed modifications
• Stating that representations may be made about the proposed modifications

The period in which representations can be made must be at least 28 days long. See subsection (3) of Section 4.

The "Notice of Proposed Modifications" must be brought to the attention of those who will be affected if the proposed modifications are to be put into effect.

Step 4 is that the Gas and Electricity Markets Authority must wait at least 28 days to allow representations to be made.

Step 5 is that the Gas and Electricity Markets Authority must consider any representations made during the 28 (or more) day period in Step 4. See subsection (5) of Section 4.

Following completion of the steps required by Section 4 of the 2018 Act, the Gas and Electricity Markets Authority must take the steps set out in Section 5 of the Act.

For convenience I reproduce the text of Section 5 of the 2018 Act here:

 5 Publication and effect of modifications

(1) This section applies if, after taking the steps described in section 4, the Authority decides to make the modifications.

(2) The Authority must—

(a) publish the modifications in such manner as it considers appropriate for the purpose of bringing them to the attention of persons likely to be affected by them,

(b) state the effect of the modifications,

(c) state how it has taken account of any representations made in the period specified in the notice mentioned in section 4, and

(d) state the reason for any differences between the modifications and those set out in the notice.

(3) Each modification has effect from the day specified by the Authority in relation to it.

(4) That day must be after the end of the period of 56 days beginning with the day on which the modification is published.

Subsection (1) of Section 5 makes it clear that Section 5 only applies once the steps taken in compliance with Section 4 have been carried out.

Step 6 The Gas and Electricity Markets Authority may decide to "make the modifications", proposed as a result of the process set out in Section 6 and following compliance with the requirements set out in Section 4.

In practice, it is likely that Step 5 (considering representations made in terms of Section 4) and Step 6 (deciding to make the modifications previously proposed) will take place as part of a single meeting.

Step 7 The Gas and Electricity Markets Authority must publish a "Modification Decision Notice" (my term) in way to inform both consumers and supply licence holders.

The "Modification Decision Notice" is required to have the following content:

• Set out the modifications that the Gas and Electricity Markets Authority has decided to make
• State the effect(s) of the modifications that the Authority has decided to make
• State whether and how it has taken into consideration any representations made during Step 4
• State the date on which the modifications decided upon by the Authority are to take effect

Step 8 The "Modification Delay Period" intervenes between the date of the "Modification Decision Notice" and the "Modification Effect Day". The length of the "Modification Delay Period" must be at least 56 days.

Step 9  The "Modification Effect Day" is the day on which the proposal to change the level at which the Tariff Cap is set (see Section 6 of the 2018 Act and Step 2 set out earlier in this blog post) takes legal effect.