Modifying the standard conditions of the electricity interconnector licence

What this is about

Ofgem is proposing to amend two standard licence conditions that govern what happens when an electricity interconnector project is delayed before it starts operating under the cap-and-floor revenue regime.

The cap-and-floor regime is the mechanism by which GB consumers underwrite interconnector investment. Developers get a guaranteed revenue floor (funded through network charges if market revenues fall short) and accept a revenue cap (returning excess to consumers). The regime starts on a defined date. If the interconnector is not built by that date, the question becomes: does the developer lose its entitlement, or does the clock get extended?

That question is answered by two licence conditions. Standard Licence Condition 26A defines "Pre-Operational Force Majeure" for all cap-and-floor interconnectors, specifying which events beyond a developer's control justify delaying the regime start date. Standard Licence Condition 26B does the same for "Third Window" interconnector projects (the most recent batch to receive cap-and-floor approval) and additionally sets a "Backstop date," a hard deadline by which the interconnector must be operational regardless of delays.

Ofgem is consulting on widening the force majeure definition in 26A and amending the backstop date definition in 26B. The consultation does not explain which specific projects prompted this, but the timing is consistent with construction delays affecting interconnectors in the Third Window pipeline. Several projects awarded cap-and-floor terms in recent years have faced permitting delays, supply chain constraints, and partner-country regulatory holdups.

The cost allocation question is straightforward. Cap-and-floor regimes are funded through transmission network charges, which are paid by GB electricity consumers. If backstop dates are extended or force majeure definitions widened, the window during which consumers are exposed to floor payments lengthens. The developer's construction delay risk is partially transferred to the consumer base. Ofgem's task is to judge whether the events causing delay are genuinely beyond developer control (justifying consumer exposure) or foreseeable commercial risks that developers priced into their investment cases (which should remain with them).

Options on the table

#### Amended force majeure definition (SLC 26A)

Ofgem proposes to change which events qualify as "Pre-Operational Force Majeure" under SLC 26A. Under the current definition, a developer can apply to delay its regime start date if construction is held up by events that are genuinely unforeseeable and outside its control. The proposed amendment would broaden this definition to include additional categories of delay event.

The practical effect is that more types of construction delay would qualify for regime start date deferral. A developer whose project is held up by, say, a permitting delay in a partner country or a force majeure event in its supply chain could apply to push back the date from which its cap-and-floor window runs, without losing years of regulated revenue entitlement at the back end.

Who benefits: Interconnector developers facing pre-operational delays that do not fit neatly within the current force majeure definition. This is particularly relevant for projects with cross-border dependencies, where delays may originate in another country's regulatory or permitting system entirely outside the developer's influence.

Who pays: GB consumers. Every year of regime start date deferral extends the period during which consumers are exposed to floor payments if the interconnector underperforms. It also delays the point at which the cap begins returning excess revenue to consumers. The cost is not a direct payment but a lengthening of risk exposure through network charges.

The judgement call: Force majeure definitions are always a boundary dispute. Too narrow, and developers bear risks they genuinely cannot control, which deters investment. Too wide, and developers are insulated from risks they should have priced into their bids, which means consumers are subsidising poor project management. The consultation document should specify exactly which new event categories Ofgem proposes to add. Respondents should scrutinise whether those events were genuinely unforeseeable at the time cap-and-floor terms were awarded, or whether they were known risks that developers chose to accept.

#### Amended backstop date (SLC 26B)

Ofgem proposes to amend the definition of the "Backstop date" in SLC 26B, which applies specifically to Third Window interconnector projects. The backstop date is the absolute deadline: regardless of force majeure claims, the interconnector must be operational by this date or it loses its cap-and-floor entitlement entirely.

Amending this definition could mean extending the backstop date outright, changing how it is calculated, or altering the conditions under which it can be adjusted. The effect is to give Third Window projects more time to reach commercial operation while retaining their regulated revenue terms.

Who benefits: Third Window interconnector developers who are behind schedule. These projects were awarded cap-and-floor terms more recently and are at earlier stages of construction. An extended backstop gives them breathing room without the binary risk of losing their entire revenue framework.

Who pays: Again, GB consumers. The backstop exists precisely to limit consumer exposure. It says: we will underwrite your revenue for a defined period, but you must deliver by a hard date. Softening that date weakens the discipline mechanism. The original backstop date was set with knowledge of the project timeline; extending it after delays have materialised is, in effect, a retrospective relaxation of terms.

The structural question: Backstop dates are one of the few hard constraints in the cap-and-floor framework. They exist because without them, a developer could hold a cap-and-floor entitlement indefinitely while failing to build anything, a free option on regulated revenue funded by consumers. Extending backstop dates is not automatically wrong, but the bar should be high. The question for respondents is whether the delays are systemic (affecting all projects, justifying a framework-level response) or project-specific (in which case individual relief, not a licence condition change, is the appropriate tool).

Questions being asked

The consultation document published by Ofgem does not list numbered consultation questions in the source text available. The consultation is a statutory consultation on proposed licence modifications, which means Ofgem is presenting draft legal text and inviting views on whether those modifications should be made.

In practice, respondents should address:

- Whether the proposed amendments to the Pre-Operational Force Majeure definition in SLC 26A are appropriately scoped. Are the new qualifying events genuinely beyond developer control? Could any of them have been foreseen and priced at the time of the cap-and-floor award?

- Whether the proposed amendments to the Backstop date definition in SLC 26B are justified by systemic factors or are a response to project-specific delays. If systemic, is a licence condition change proportionate? If project-specific, should relief be handled through individual determinations rather than a blanket amendment?

- Whether the cost transfer from developers to consumers is justified given the circumstances. What is the estimated additional consumer exposure (in duration and potential floor payments) resulting from these amendments?

- Whether adequate safeguards exist to prevent the amended definitions from being used opportunistically by developers whose delays are attributable to commercial decisions rather than genuine force majeure events.

The full consultation documents (the statutory consultation PDF and the proposed licence condition changes PDF) will contain the specific drafting. Respondents should review the exact legal text of the proposed amendments, not just the summary descriptions.

How to respond

Deadline: 20 May 2026

Method: Email to Cap.Floor@ofgem.gov.uk

Documents: The consultation page includes three attachments: the statutory consultation document (PDF, 168KB), the proposed licence condition changes (PDF, 752KB), and amendment notices (ZIP, 1.5MB). The proposed changes PDF contains the draft legal text that would be inserted into the licence conditions.

Who should respond: Ofgem welcomes responses from electricity interconnector licence holders and any other interested stakeholders. Given the consumer cost implications, this is relevant to consumer groups, network companies (who administer the charges), generators (who compete with interconnected imports), and energy-intensive industrial users (who pay transmission charges).