Expert Commission on Energy Regulation: main report

Background

In July 2013, the Scottish Government established an expert commission of industry and consumer experts and academics, and asked them to offer independent advice on the operation and regulation of the energy market in Scotland and Great Britain in the event of independence. The Commission was also asked for its advice on policies to encourage renewables, improve energy efficiency and address fuel poverty in Scotland.

The Commission is independent and non-partisan, and has conducted its work and reached its conclusions in an unbiased manner. Commission members were chosen for their experience and depth of industry knowledge, ranging across power systems and market regulation to infrastructure and consumer issues. All Commissioners were unpaid and undertook this work voluntarily.

Members of the Commission

• Robert Armour, Chairman, Smarter Grid Solutions; Senior Counsel, Gowlings; Director, Albion Community Power; Nuclear Liabilities Fund; Former Chair SCDI - Chair of the Expert Commission.
• Simon Bucknall, Retired, Formerly Director of Regulation, Scottish Power.
• Tom Delay, Chief Executive, The Carbon Trust.
• Audrey Gallacher, Director of Energy, Consumer Futures.
• Dr Robert Gross, Director, Centre for Energy Policy and Technology, Imperial College, Co-Director, UK Energy Research Centre.
• Gordon MacDougall, Managing Director, Western Europe, Renewable Energy Systems.
• Dr Fiona Riddoch, Managing Director, Cogen Europe.
• John Scott, Director, Chiltern Power, Formerly Director of Engineering National Grid and Technical Director, Ofgem.
• David Sigsworth, Chairman, SEPA, Chairman of the Scottish Fuel Poverty Forum, Former Board Director, SSE.
• Dr Graeme Sweeney, Special Advisor on Co2 to Royal Dutch Shell, Executive Chair of Chop-cloc; Chairman of the Advisory Council of the European Technology Platform on Zero Emission Fossil Fuel Power Plants ( ETP- ZEP).

The Commission was asked to consider five specific issues:

1. The role of a Scottish Regulator in the optimal operation of the UK energy market to deliver affordability, security of supply and environmental sustainability.

2. The market mechanisms necessary to ensure an independent Scotland can participate efficiently in an integrated GB-market, addressing the unique requirements of energy generation, transmission and distribution in Scotland.

3. How a strategic energy partnership with the UK will operate - its span of competence and the processes for cooperation
with the UK.

4. Options for an optimal policy and regulatory environment to encourage renewable generation, including incentives for innovative technologies and the supply chain.

5. Advice on ways in which an independent Scotland can promote fairer, more affordable energy prices, given the need to address fuel poverty and measures to improve energy efficiency.

The Commission has been asked to work with the following assumptions:

• Scotland becomes an independent country during this decade
• Scotland is required to designate an independent, National Regulatory Authority ( NRA) meeting the requirements of the European Union
• A multi-utility approach to regulation is adopted
• Integrated transmission networks in electricity and gas with rUK continue to operate
• An integrated GB wholesale market for electricity and gas continues to operate
• Both Scotland and rUK remain part of the European Union
• That transitional arrangements will have to apply to changes in the system including grandfathering of the renewables obligation ( RO) and contracts for differences (CfD).

Responding to these issues requires a number of assumptions to be made. The Commission's role is not to consider the merits or demerits of any political aspiration but to work with these assumptions and to think through how the system might be made to work most effectively and beneficially under those given circumstances.

Analysis and Regulatory Impact Assessment

The Commission had limited capacity and resources, meaning that formal analysis and regulatory impact assessment has not formed part of its work. The issues raised within this report will need to be taken forward following detailed analyses in order to fully inform stakeholders on the potential impacts.