BSC recommendation gives steer over Capacity Market levies but uncertainties remain

The BSC (Balancing and Settlement Code) panel has recommended that Ofgem approve a modification that would allow Capacity Market levies to be collected from suppliers, and held I escrow until the future of the CM becomes clear. The regulator has still to decide whether to approve the modification. But the recommendation gives a clearer path to Ofgem in deciding how to treat the levy in calculating domestic consumer price caps to apply over the summer. The regulator has to set the price cap level tomorrow (7 February).

Meanwhile, the European Commission has appealed the European Court ruling that caused the Capacity Market to be paused. There were fears that the appeal could be the cause of further uncertainty, if the hiatus continued while the appeal was heard – a potentially lengthy and uncertain process likely to take at least 18 months. But the Commission has made it clear that the appeal and the reconsideration will proceed in parallel, with the aim of giving the market certainty as soon as possible.

Longer term, Brexit raises more questions about the Capacity Market and specifically how interconnectors will participate. At the moment, it seems that trading across the interconnectors will be on an explicit not implicit basis, which means capacity has to booked, and trading will move from balancing in the Internal Energy Market to trades that are further ahead. That could affect interconnectors’ ability to respond to short-term signals – ie Capacity Market alerts.

Further reading

Act by 29 January: respond to consultation on BSC Capacity Market charging modification

BEIS select committee: what is ‘Plan B’ for Capacity Market?

Capacity Market BSC modification to be treated as ‘urgent’

Sara Bell: Capacity Market failings are substantive

What has the Capacity Market ever done for us?

Capacity Market: two options to resume payments in Q1, BEIS seeks views by 10 January

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