Gas Act 1986

Page type: primary-anchored (mirrors Gas Act 1986 (c. 44))

The Gas Act 1986 is the statutory foundation of the GB gas market. Originally passed to privatise the British Gas Corporation, it has been extensively amended and now establishes the licensing framework, regulatory duties, enforcement powers, and consumer protections for piped gas in Great Britain. It is the gas counterpart to the Electricity Act 1989; both Acts share the same regulator (GEMA/Ofgem) and the same principal objective structure.

Source file: 1986-gas-act.md

Part I: Gas Supply

Principal objective and general duties (ss.4AA–4E)

The principal objective of the Secretary of State and GEMA is to protect the interests of existing and future consumers in relation to gas conveyed through pipes (s.4AA(1)). Since the Energy Act 2023, consumer interests explicitly include compliance with the Climate Change Act 2008 net zero target and carbon budgets (s.4AA(1A)(a)), as well as security of gas supply (s.4AA(1A)(b)).

The primary mechanism for furthering the principal objective is promoting effective competition in gas shipping, transportation and supply (s.4AA(1B)–(1C)), though the regulator must consider whether other approaches might better protect consumers.

Additional duties include: meeting all reasonable gas demands (s.4AA(2)(a)); ensuring licensees can finance their obligations (s.4AA(2)(b)); contributing to sustainable development (s.4AA(2)(c)); and particular regard to vulnerable consumers, specifically disabled, chronically sick, pensionable age, low-income, and rural (s.4AA(3)).

The Authority must also apply better regulation principles: "transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed" (s.4A).

Prohibition and licensing (ss.5–8AA)

The prohibition. It is a criminal offence to carry on any of six categories of gas activity without a licence or exemption (s.5(1)). 1. Conveying gas through pipes to premises (s.5(1)(a)), requiring a gas transporter licence 2. Participating in gas interconnector operation (s.5(1)(aa)), requiring an interconnector licence 3. Supplying gas to premises (s.5(1)(b)), requiring a gas supply licence 4. Arranging with transporters for gas introduction/conveyance/extraction (s.5(1)(c)), requiring a gas shipper licence 5. Providing smart meter communication services (s.5(1)(d)), requiring a smart meter licence 6. Performing code manager functions (s.5(1)(e)), requiring a code manager licence

Penalty: fine up to statutory maximum on summary conviction; unlimited fine on indictment (s.5(3)).

Seven licence types are available under Part I:

Standard conditions are incorporated by reference into all licences of each type (s.8(1)). The Authority may modify standard conditions when granting a particular licence, but must not create undue competitive disadvantage for supply or shipper licensees (s.8(7)).

Exemptions from the prohibition may be granted by the Secretary of State (s.6A), and Schedule 2A provides automatic exceptions for landlord supply, associated company supply, propane/butane, and large/very large consumers (thresholds at 75,000 and 2,000,000 therms/year).

The gas code (s.8B, Schedule 2B)

The gas code (Schedule 2B) sets out rights and obligations of licence holders and consumers for day-to-day gas supply operations. Key provisions:

• Metering: Consumers must take supply through a meter (para. 2). Meter registers are prima facie evidence of quantity for supplies under 75,000 therms (para. 4). No charge for meter adjustment for disabled persons (para. 6).
• Pre-payment and debt recovery: Pre-payment meters may only recover debts for gas, meter provision, or green deal plans (para. 6A). After 28 days' non-payment, suppliers may install pre-payment meters or disconnect (para. 7).
• Deemed contracts: When gas flows without express contract, a contract is deemed to exist on the supplier's published scheme terms (para. 8).
• Criminal offences: Meter tampering (para. 10) and illegal reconnection (para. 11) are summary offences (level 3 fine).
• Service pipes: Transporters maintain service pipes at their expense; consumers liable only for their own negligence (para. 15).
• Entry powers: Authorised officers may enter premises during supply at reasonable times (para. 23); 24 hours' notice for entry on discontinuance (para. 24); 7 days' notice for pipe replacement (para. 27, with emergency exception). Obstruction is a criminal offence (para. 28).
• Meter protection: Gas meters and marked fittings owned by transporters/suppliers cannot be seized as security for debts (para. 29).

Transmission independence (ss.8C–8Q)

Gas transmission licence holders and gas interconnector operators must be certified as independent by the Authority under s.8F (s.8C(1)–(2)). This implements the EU Third Energy Package ownership unbundling requirements, retained after Brexit. The relevant date for certification was 3 March 2012 (s.8C(3)).

Powers and duties of public gas transporters (ss.9–11)

General duty: Develop and maintain an efficient and economical pipe-line system and comply with reasonable connection requests (s.9(1)). Duty to support competition in gas supply (s.9(1A)). No undue preference or discrimination (s.9(2)).

Duty to connect: Premises within 23 metres of a relevant main must be connected on request (s.10(1)–(2)). This is a fixed statutory distance, not set by secondary legislation. Exemptions apply for: premises exceeding 75,000 therms/year; where circumstances prevent connection; public danger; or unfit owner-supplied pipes (s.10(8)–(9)). Owner-supplied pipes vest in the transporter on connection (s.10(6)).

Security: Transporters may require reasonable security for gas charges (s.11(1)).

Duties of facility owners (ss.11A–11C)

Storage and LNG facility owners must operate, maintain, and develop their facilities "in a manner calculated to ensure that the facility is secure, reliable and efficient" (s.11A(2)(a)) and maintain sufficient financial resources as required by the Authority (s.11A(2)(b)). Inserted by the Internal Markets Regulations 2011.

Pipe-line access (ss.19–22A)

Any person may apply to the Authority for directions requiring a gas transporter to grant access to its pipe-line system (s.19(1)). The Authority may direct terms including charges, provided access would not prejudice efficient operation of the system (s.19(3)–(4)). Charges must cover the transporter's costs and provide an appropriate return on capital (s.19(5)–(6)).

Licence modification (ss.23–23A)

The Authority may modify conditions of a particular licence or standard conditions of any licence type (s.23(1)). Procedural requirements: 28 days' notice with reasons (s.23(2)–(3)); notification to licence holders, Secretary of State, HSE, Citizens Advice, and Consumer Scotland (s.23(4)). The Secretary of State has a veto: if the Secretary of State directs the Authority not to proceed, it must comply (s.23(5)). Modifications to standard conditions must also be made for future licences of that type (s.23A(2)).

Appeals to CMA (ss.23B–27)

Licence modification decisions may be appealed to the CMA (s.23B(1)). Eligible appellants include affected licence holders, other materially affected persons, Citizens Advice, and Consumer Scotland (s.23B(2)). CMA permission is required; it may be refused only if interests are not materially affected or the appeal is trivial/vexatious/without reasonable prospects (s.23B(3)–(4)). The appeal procedure is set out in Schedule 4A.

Dispute determination (ss.27A–27D)

Disputes between gas transporters or suppliers and consumers about connections (s.9, s.10), security (s.11), or gas code provisions (Sch. 2B) may be referred to the Authority by either party, or by Citizens Advice/Consumer Scotland with consent (s.27A(1)). Connection disputes must be referred within 12 months (s.27A(2)). Orders are final and enforceable as county court judgments (E&W) or extract registered decrees arbitral (Scotland) (s.27A(9)).

Enforcement (ss.28–30O)

Enforcement orders: The Authority may make final orders to secure compliance with relevant conditions or requirements (s.28(1)), or provisional orders where urgency justifies (s.28(2)). Must consider whether Competition Act 1998 proceedings would be more appropriate (s.28(4A)–(4B)).

Financial penalties: Up to 10% of turnover for contravention of relevant conditions/requirements or failure to meet performance standards (s.30A(1), s.30O). 21 days' notice required (s.30A(3)); penalty payment not before 42 days after notice (s.30A(5)(d)). Penalties paid to the Consolidated Fund (s.30A(10)).

Consumer redress orders: The Authority may require regulated persons to compensate affected consumers, with 21 days' notice (s.30I). Combined penalty and compensation capped at 10% of turnover (s.30O).

Schedule 4B maps which provisions are enforceable against each category of regulated person.

Standards of performance (ss.33A–33DB)

Individual standards may be prescribed by the Authority for gas suppliers' activities affecting individual customers (s.33A(1)), with Secretary of State consent (s.33A(2)). Compensation is payable for failures (s.33A(4)). Overall standards set expected business conduct levels for gas suppliers (s.33B(1), (4)) and gas transporters (s.33BA).

The Act also provides for carbon emissions reduction obligations (s.33BC) and home-heating cost reduction obligations (s.33BD).

Other functions and powers (ss.34–38A)

The Authority must regularly review gas activities and collect information (s.34(1)–(2)). It must provide information to the Secretary of State and CMA (s.34(4)).

UNC emergency modification power: The Authority may direct the NTS operator to modify the Uniform Network Code in relation to Gas Supply Emergency arrangements, provided the modification is "market-based" (creates financial incentives for shippers or transporters) and would reduce the likelihood or severity of a Gas Supply Emergency (s.36C). This is one of the few statutory powers the Authority has over the UNC directly; normally, UNC modifications follow the licence condition process.

Information powers: The Authority may require any person to produce documents or furnish information by written notice (s.38(1)). Failure is a criminal offence (level 5 fine, s.38(2)); document destruction is indictable (s.38(3)). Legal professional privilege is protected (s.38(1B)).

Charge adjustment (ss.41A–41B)

Provisions for adjustment of gas charges to help disadvantaged groups of customers (s.41A). Section 41B has been omitted since the Energy Act 2010.

Part II: Transfer of Undertaking (ss.49-61)

These provisions transferred the British Gas Corporation's property, rights, and liabilities to a Crown-nominated successor company (British Gas plc) on 24 August 1986 (s.49). They dealt with: initial government shareholding (s.51), investment (s.52), target investment limits (s.54), financial structure (s.55), and borrowing restrictions (s.56). Section 57 (dissolution of BGC) was repealed in 2004.

Part II is largely spent. It achieved its purpose on privatisation and has no ongoing operational effect, though most sections remain technically in force.

Part III: Miscellaneous and General (ss.62-68)

Contains the general interpretation section (s.66), financial provisions (s.65), extraterritorial operation provision (s.64A), and standard machinery (amendments, repeals, short title, commencement, extent).

Key numeric thresholds

Defined terms

See the full defined terms register in the source file.

Cross-references

The Gas Act 1986 has extensive cross-references to: - Electricity Act 1989: dual fuel licensing (ISOP, DCC, code manager must hold both gas and electricity licences) - Climate Change Act 2008: net zero target embedded in principal objective - Utilities Act 2000: created GEMA; established standard conditions mechanism - Competition Act 1998: alternative enforcement route; must be considered before gas enforcement - EU Gas Directive (retained): ownership unbundling definitions - Uniform Network Code: exists under licence conditions, not statute; limited statutory override in Gas Supply Emergency - Energy Act 2023: ISOP, code manager, central systems, net zero duty

Full cross-reference table in the source file.

Price controls implemented under this Act: - RIIO-GD3 -- Gas Distribution price control 2026-2031 (s.23 price control conditions) - RIIO-GT3 -- Gas Transmission price control 2026-2031 (s.23 price control conditions)

Amendment history

The Act has been substantially rewritten since 1986. Key milestones: - 1995 (Gas Act 1995): Competition framework, separating transport, supply, and shipping licences - 2000 (Utilities Act 2000): GEMA replaced Director General; principal objective; enforcement overhaul - 2004 (Energy Act 2004): Interconnector licensing; CMA appeals - 2011 (Internal Markets Regulations): Ownership unbundling and certification - 2013 (Energy Act 2013): Consumer redress orders - 2023 (Energy Act 2023): ISOP licensing; code manager licensing; net zero in principal objective

Full timeline in the source file.

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