Ofgem rejects plan to collect Capacity Market payments during hiatus

Ofgem has rejected a modification to the Balancing and Settlement Code (BSC) under which the Capacity Market ‘supplier charge’ would be collected from customers on an interim basis, and held for potential distribution to CM contract holders, saying it does not have the powers to make the decision. The rejection throws the spotlight on BEIS, where a consultation on whether to make collections via a change in regulations closed in mid-January. The modification (378) was seen as a ‘backup’ to the BEIS solution and would have been withdrawn in the event BEIS went ahead.

The CM is in hiatus while it is awaiting new State Aid clearance from the EU, but payments will be backdated if and when the market is reinstated. Some market parties want to continue collecting the payments centrally, so CM contract holders have assurance that the money is ‘ring fenced’ if required, and there is no ‘supplier shock’ in billing customers for backdated payments.

As it is, business customers with disaggregated bills may declined to pay CM levies while the market is out of action. It is not clear at the moment how domestic suppliers are managing the levies if they are still being collected (assuming none has reduced its bills accordingly), and ensuring the funds will be there when required. Meanwhile, the regulator allowed for a continued levy in setting its price cap for standard variable tariff customers this month.  

Taking the decision, Ofgem said it “does not consider that it has the power to approve a modification, that is designed to compel suppliers to pay (a proxy for) the Capacity Market Supplier Charge in light of the fact that Parliament has established a specific and bespoke statutory regime for regulating the Capacity Market.”

See the decision here

Further reading

BSC recommendation gives steer over Capacity Market levies but uncertainties remain

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

Sara Bell: Capacity Market failings are substantive

Tempus Energy chief: Capacity Market auctions will have to be re-run

 

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