CfD Stakeholder Bulletin — 4 June 2020
Summary
Government amends CfD supplier obligation regulations to protect suppliers from 80% of COVID-19-driven cost increases (up to £100m loan) and defer full cost recovery by an additional quarter to Q2 2021. Regulations laid 4 June with Parliamentary approval expected before 9 July reconciliation process.
Why it matters
This socialises COVID-19 costs across the electricity system rather than letting them sit with suppliers who experienced demand reductions. The loan mechanism creates a precedent for government intervention in CfD cost allocation during market stress.
Key facts
- •80% protection from cost increases (up from proposed 67%)
- •£100 million maximum loan amount
- •Cost recovery deferred to Q2 2021 (additional quarter delay)
- •Regulations laid 4 June 2020
- •Parliamentary approval needed before 9 July reconciliation
Timeline
Areas affected
Related programmes
Memo
Contracts for Difference: Stakeholder Bulletin 4 June 2020 Government response to consultation on proposed changes to the Electricity Supplier Obligation Regulations in response to COVID-19 We have today published the Government response to the consultation, which ran from 12-19 May, on proposed changes to the Contracts for Difference (Electricity Supplier Obligation) Regulations 2014 (“the ESO Regulations”) in response to COVID-19. The response confirms that we will: • protect suppliers from 80% of the increase in suppliers’ obligations (up to the maximum loan amount of £100 million) in the second quarter of 2020, higher than the 67% that we had proposed; and • amend the Contracts for Difference (Electricity Supplier Obligations) Regulations 2014 (‘the ESO Regulations’) to: o defer the increase in suppliers’ obligations by an additional quarter, so that the total level of the obligation will be increased in Q2 2021 rather than in Q1 as we had proposed in our consultation; o calculate the reduction in suppliers’ obligations for the current quarter based on their market share over this quarter; o calculate the increase in suppliers’ obligations for the future quarter on the basis of their market share over that quarter; o enable the LCCC to repay the loan that BEIS is providing; and o allow the LCCC to consider anticipated receipt or repayment of a government loan when setting the interim levy rate (ILR) and/or the total reserve amount (TRA) for a quarter or making in-period adjustments The amended Contracts for Difference (Electricity Supplier Obligations) Regulations were laid on 4 June in anticipation that Parliament can approve them before 9 July (the date on which we currently expect LCCC to carry out the reconciliation process for the current quarter). Please direct any queries on this bulletin to the BEIS Contracts for Difference Team at BEISContractsforDifference@beis.gov.uk. General Data Protection Regulation This stakeholder bulletin is being circulated to people who have opted in to the Contract for Difference stakeholder contact list. We issue these stakeholder bulletins as a convenience to interested parties, however it is not in any way essential to be on this list to participate in major consultations or allocation rounds. Purpose & scope of this list: This list is managed by the Department for Business, Energy and Industrial Strategy (BEIS) (and any successor departments) and will be used to inform interested parties of policy developments relevant to the Contract for Difference scheme for renewable energy projects (and any direct successor schemes). It is not used for any other purposes. To be removed from the circulation list: Please send a blank e-mail with the subject ‘opt out’ (if the receiving e-mail you use is different to the one you send the e-mail from, include that e-mail address in the subject of the e-mail) to BEISContractsForDifference@beis.gov.uk. If you have received this indirectly and want to be added to this list: Send a blank e-mail with the subject line ‘opt in’ to BEISContractsForDifference@beis.gov.uk. You can withdraw your consent to opt in at any time. We will normally keep your address on this list until you: a) withdraw your consent to opt in, b) the scheme closes without any successor, c) we receive reports your email address is no longer operational, or d) you do not respond to a periodic request from us to reconfirm your desire to opt in.