Electricity Act 1989 applications - proposed fee changes consultation: Scottish Government response

1. Introduction

The Scottish Ministers are responsible for determining applications for consent under sections 36, 36C and 37 of the Electricity Act 1989 ("the Electricity Act"). These applications are for onshore generating stations with an installed capacity exceeding 50 megawatts ("MW") and overhead power lines in Scotland. Such applications are processed on behalf of Scottish Ministers by the Energy Consents Unit ("ECU"). The Scottish Ministers are also responsible for determining applications for consent for generating stations with an installed capacity exceeding 1 MW in Scottish Territorial waters and over 50 MW in the Scottish Renewable Energy Zone ("REZ"). These applications are processed on behalf of Scottish Ministers by Marine Scotland Licensing Operations Team ("MS-LOT").

The current fee tariff and structure for these applications under the Electricity Act came into force on 30 June 2019 through the introduction of the Electricity (Applications for Consent and Variation of Consent) (Fees) (Scotland) Regulations 2019 ("Fees Regulations 2019").

We are reviewing application fees due to a shortfall between the cost of running the ECU and MS-LOT and the income from application fees. It is also anticipated that a significant number of new applications are to be submitted in the next one to three years and we wish to ensure the service is fully resourced.

This document sets out the Scottish Government's response to the consultation on revising fees for processing applications under the Electricity Act. A total of 25 consultation response were received from the public consultation from a range of stakeholders (Appendix 1: Consultation Respondents). It details the conclusions Ministers have reached and the changes which will be implemented. We have carefully considered all comments received throughout the consultation process. An analysis of these comments has been carried out, which is published in a separate document entitled "Fees Charged for Applications under the Electricity Act – Analysis of Consultation Responses" (subsequently referred to as the "analysis report"). The analysis report should be read alongside this document.

The Scottish Public Finance Manual sets out that the standard approach to setting out charges for public services should be full cost recovery. Our income from fees charged for applications under the Electricity Act has consistently fallen short of the costs of providing the service of determining such applications, which is incompatible with the standard approach to setting charges for public services.

By increasing fees as proposed we are respecting the aims of the Scottish Public Finance Manual on charges for public services, making sure we are adequately resourced to deliver an appropriate level of service that contributes to the delivery of the Energy Strategy.

We have reviewed the fees that we charge and the Scottish Government's conclusions and changes to be implemented are summarised below at Section 3 - Decisions on the fee levels and arrangements.

A balance has been struck between the policy objectives of the Energy Strategy and the aims of public finance management given by the Scottish Public Finance Manual. Fees shall be revised in manner which takes account of the comments received through the consultation.

We will implement new fees and revised thresholds exactly as proposed. The thresholds for the existing upper fee band for applications with installed capacity over 300 MW will be amended to introduce bands where a development has a capacity exceeding 300 MW but not exceeding 500 MW, where a development has a capacity exceeding 500 MW but not exceeding 750 MW, where a development has a capacity exceeding 750 MW but not exceeding 1000 MW, and where a development has a capacity exceeding 1000 MW.

Separately from the statutory arrangements for the charging of fees, the voluntary remuneration to planning authorities in relation to onshore applications shall remain unchanged. The Scottish Government will continue to provide a voluntary contribution to Planning Authorities equivalent to one half of the fee received for every application for onshore electricity generation development under section 36 and 36C of the Electricity Act. The Scottish Government will also continue to provide a voluntary contribution to Planning Authorities equivalent to one half of the application fee received for EIA development applications under section 37 of the Electricity Act.

The service improvements include responding to demands to more proactively project manage application processes to deliver greater certainty around determination timescales. We intend to continue to support discussion with a range of consultees during the assessment of the application, and at pre-application stage to limit the incidence and scope where additional information has to be sought from applicants.

A fixed fee structure for section 37 applications based on installed capacity or length of overhead lines shall be maintained, but with revisions to the bands, thresholds and fee categories, with caps on the fees in recognition of the industry's concerns regarding disproportionate increases for small-scale or very large developments.

The revised fees will be implemented by amendment of the Fees Regulations 2019. This would be subject to a negative procedure in the Scottish Parliament. Ministers aim to implement the revised fees from mid December 2022.

Following the implementation of the revised fee levels the Scottish Government shall monitor the effects of the changes.

Overview of consultation

Fees charged for applications under the Electricity Act are currently set by the Electricity (Applications for Consent) Regulations 1990 and include the following:

Under section 36 of the Electricity Act:

• construction or construction and operation of a generating station
• extension or extension and operation of a generating station
  • resulting in an increase in capacity
  • by retrofitting of emission control equipment to a nuclear generating station
  • any other extension of a generating station
• operation only or change to manner of operation of a generating station

Under section 36C of the Electricity Act:

• a variation of a consent granted under section 36 of the Electricity Act

Under section 37 of the Electricity Act:

• installation of, and/or the keeping installed of, overhead electric lines

A consultation proposing revisions to fees for the above opened on 30 March 2022.

An analysis of all the comments received throughout the consultation has been carried out, which is published in a separate document entitled "Fees Charged for Applications under the Electricity Act – Analysis of Consultation Responses" (subsequently referred to as the "analysis report"). The analysis report should be read alongside this document. The written consultation then closed on 23 June 2022. Details of the consultation respondents are listed in Appendix 1: Consultation Respondents.

On the basis of the consultation responses and feedback during the consultation process, Scottish Ministers have decided on the fee tariffs and arrangements they wish to introduce. Scottish Ministers will implement a fee structure and fee levels as proposed in the consultation document. A comparison of the existing fees with the fees consulted on and to be implemented is set out in tabular form in Section 3 – Decisions on the fee levels and arrangements.

Background

Scottish Ministers are responsible for determining applications for consent for onshore generating stations with installed capacity exceeding 50 MW and overhead power lines in Scotland under sections 36 and 37 of the Electricity Act respectively. The Electricity (Applications for Consent) Regulations 1990 and Electricity Works (Environmental Impact Assessment) (Scotland) Regulations 2017 apply to such applications, which are processed on behalf of Scottish Ministers by the Scottish Government's ECU. The Scottish Ministers are also responsible for determining applications for consent for generating stations with installed capacity exceeding 1 MW in Scottish Territorial waters and over 50 MW in the Scottish REZ. Such applications are processed on behalf of Scottish Ministers by MS-LOT.

The current fee tariff for applications under sections 36, 36C and 37 of the Electricity Act came into force on 30 June 2019 through the introduction of the Fees Regulations 2019.

To inform the fee increase introduced in 2019, a consultation paper was published in February 2018. At that time a review of the fee levels and structure was required due to a significant shortfall in cost recovery for a number of years, and to address the imbalance between income from application fees under the Electricity Act and the costs of running the service provided by Scottish Ministers. There was widespread disagreement with the level of increases proposed from industry and they considered that fees proposed where disproportionately high. Taking into account the comments received during the 2018 consultation, the fee tariffs introduced in 2019 were lower than the proposals consulted upon and did not achieve full cost recovery. The 2018 consultation paper and Scottish Government's response is available from the 2018 consultation website.

At that time, the fee tariff introduced in 2019 sought to strike a balance between supporting high priority investment in low carbon generation while making sure we were adequately resourced to deliver an appropriate level of service that contributes to the delivery of the Energy Strategy.

Fee Monitoring

A commitment was made to monitor the fee tariff introduced in June 2019. A Fee Monitoring Report has been prepared and provides an overview of applications and associated fees received under the Electricity Act, and an estimation of processing costs for the period July 2019 to July 2021. The Fee Monitoring Report has been published.

We are now going to increase the fee tariff to support full cost recovery. Scottish and UK policy mandates a transition to a more decarbonised energy system with increased use of low carbon energy sources. The deployment of new generation and associated grid infrastructure is central to this. At the same time, policies are in place at Scottish and UK level to safeguard the environment. A well-resourced energy consenting regime is vital to achieving a decarbonised energy system.

The Scottish Public Finance Manual sets out that the standard approach to setting out charges for public services should be full cost recovery. Our income from fees charged for applications under the Electricity Act falls short of the costs of providing the service of determining such applications, which is incompatible with the standard approach to setting charges for public services.

Net Zero Commitments

An efficient and effective consenting process is critical to unlocking the potential to deliver renewable energy developments and economic benefits, whilst helping to achieve our net zero targets.

The Climate Change Plan Update sets out the Scottish Government's pathway to our new and ambitious targets set by the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019. It recognises the need to continue to review our energy consenting processes, making further improvements and efficiencies where possible, to reduce determination timescales for complex electricity generation and network infrastructure applications.

A Fairer, Greener Scotland: Programme for Government 2021-22 highlights that development of renewable energy presents an immense opportunity for Scotland to lead by example – showing how a clean energy future is possible at home, and as a net exporter of renewable energy, attracting further investment and ensuring our progress to net zero is environmentally and economically beneficial. The 2022-23 Programme for Government reiterates the commitment to the development of renewable energy. Both onshore and offshore wind energy deployment will play a vital role in delivering our net zero commitments and subject to an ongoing consultation process, the Scottish Government will set an ambition to achieve between 8 GW and 12 GW of installed onshore wind by 2030 and with the ScotWind offshore wind commercial leasing round, Crown Estate Scotland has awarded lease options with the potential of over 25 GW capacity.

Proposed changes to fees

It is within the context of Scottish Government's ambitious renewable energy targets for a just transition to net zero that the fee tariff requires to be increased to ensure full cost recovery of the service to deliver an efficient consenting process. The Scottish Government is proposing to change fee tariffs as set out in Table A below. This includes an increase to all fee categories of approximately 20% as well as proposing new bandings for larger scale applications which include developments that exceed capacities of 500 MW, 750 MW and 1 GW. These additional bandings are to reflect the growing scale of offshore renewable electricity generating stations. The Scottish Government is also proposing to change the variation fee and bandings for applications under section 36C of the Electricity Act. This is to reflect the increased resource needed for variation applications requiring an EIA. The bandings for variation applications which, if granted, would not increase the capacity of the generating station but that do require an EIA, are proposed to increase to reflect the range of resource required for all applications received in that category.

The proposed fee tariff increase is to meet the running costs of the service provided by ECU and MS-LOT in line with the Scottish Public Finance Manual. The increase in fees would also support a well-resourced energy consenting regime, vital to support Scotland's transition to a more decarbonised energy system. The following Table A illustrates the proposed increase to the fee tariff and changes to the structure.