Consultation: Credit Assessment Price change to £190/MWh from 1 June 2022
This page gives details of a consultation on revising the Credit Assessment Price (CAP) to £190/MWh from 1 June 2022. This two-day consultation will close at 17:00 on 17 May 2022.
On Wednesday 1 June 2022, the CAP value will increase to £190/MWh from the current CAP of £177/MWh. As a result, Parties may notice a change in their Credit Cover Percentage and should review the amount of Credit Cover lodged.
The Credit Assessment Price (CAP) is used in the Energy Indebtedness calculations to convert Credit Cover into an energy value. A change to CAP can impact the amount of Credit Cover required by a BSC Party.
When the CAP changes it may affect the amount of credit cover that suppliers and generators are required to lodge with us. For some Parties this may mean additional collateral needs to be lodged. We recommend monitoring your Indebtedness and Credit Cover Percentage calculations on the Elexon Portal to understand how this change may affect your Party.
If, after consultation, the Credit Committee members are in agreement to proceed with the proposed CAP, today’s proposed CAP of £190/MWh will be implemented on Wednesday 1 June 2022. The current live CAP value of £215/MWh was implemented on 8 April 2022 and will be replaced by the last notified CAP of £177/MWh from 17 May 2022.
Alternative CAP Review Process
Credit Committee members have decided to continue using the alternative Credit Assessment Price (CAP) Review process due to fast market conditions. This alternative process allows the Credit Committee to set a new CAP faster, review the CAP every two weeks and base their assessment on a wider range of data sources. Please note this alternative process is outlined in the CAP Review Process Guidance.
To allow the faster implementation of CAP values during the alternative CAP review process, the Credit Committee will initially consider your consultation response ex committee. However, your response will be considered in more depth at the next Credit Committee meeting. The next Credit Committee will be held on 30 May 2022.
The questions in the consultation are:
- Do you agree with the proposal to change the Credit Assessment Price (CAP) to £190/MWh? This CAP will be due to be implemented on 1 June 2022. Note the last notified CAP of £177 will be effective from 17 to 31 May 2022.
- If your answer to Question 1 is ‘No’, please give the value of CAP that you consider to be more appropriate and your rationale for that value.
- Do you have any further comments relating to the appropriate value of CAP or the other points made in the consultation document?
How to respond
You can respond to this consultation online. All responses must be submitted by 17:00 on Tuesday 17 May 2022.
If you wish to save and return to your response, or share your response with a colleague before submitting then use the save and return button at the bottom of the form. You will then be given a link with your draft response that you can return to or share before submission.
If you would like a follow up from Elexon about your consultation response, please provide your contact details in the form. For any enquiries about responding to this consultation, please contact [email protected]
Background to the CAP
The Credit Assessment Price (CAP) is a parameter defined in Section M1.4 of the BSC as ‘the price it would be appropriate to use to determine the equivalent financial amount of BSC Parties’ Energy Indebtedness.’
Since 1 November 2021 the Credit Committee have been following the alternative CAP review process due to fast market conditions. While the alternative Credit Assessment Price (CAP) Review process is being operated, the Credit Committee will review the Credit Assessment Price at least once every two weeks. However the Credit Committee might also meet in between if they feel it is necessary.
The consultation period is reduced to two working days and the notification period is reduced to 10 working days. This enables the CAP to change faster so that it remains representative of market conditions.
Rationale behind the new proposed CAP value
The Credit Committee met on 26 April 2022 to decide about a new CAP for implementation on 17 May 2022. The committee members also discussed whether the last notified CAP of £177/MWh should be implemented on 17 May.
As a Credit Committee is arranged to be held on 30 May where a new CAP could be proposed, the today’s proposed CAP would be live between 1 June 2022 and 20 June 2022 at a minimum.
The Credit Committee might have to withdraw the proposed CAP before 1 June if market data available closer to the implementation date supports such a decision.
The Credit Committee have been using ICIS Heren peak and base, power price assessments as the primary information to inform their decisions. The data that the committee were provided with is shown in the graphs below.
The Credit Committee considered the latest forward market prices for June 2022. The latest date with available forward market data was 12 May 2022. For this date, average forward market prices were at £186/MWh for June 2022 and at £204/MWh for July 2022.
The Credit Committee also considered the System Prices and Market Index Prices. The seven day rolling average of System Prices is £98/MWh and the seven day rolling average of Market Index Prices is £102/MWh. It was noted that the seven day rolling average of System Prices was between £140/MWh to £150/MWh over the first ten days of May.
The Credit Committee emphasised it appreciates the level of uncertainty in the market is high but it believes in order to support BSC Parties it should react to the market developments as fast and as dynamically as practicably possible. This means the Credit Committee might sometimes have to cancel a notified CAP to revert back to the live CAP if that is the closest to optimal option based on the available data.
Based on the most recent updates in the market data, the Credit Committee members unanimously agreed that the last notified CAP value of £177/MWh should proceed and go live on 17 May. The committee members also proposed a new CAP value of £190/MWh, to go live on 1 June 2022.
The graphs below contain the data that was presented to the Credit Committee to help inform their decision. There are six graphs, you can move between the graphs by using the arrows at the bottom. There are also options to filter the data by using the buttons on the right-hand side of the graphs.
Following the end of the consultation period, if required, the Credit Committee will consider any consultation responses without holding a meeting, and decide whether to proceed with the proposed CAP. Consultation responses will be considered in more detail at the next Credit Committee meeting on 30 May 2022.
Any changes will be notified to all BSC Parties, and the new value will come into effect at least 10 Working Days later.
The next review of the CAP under the alternative CAP review process will be on 30 May 2022 until which the Credit Committee will continuously monitor the market conditions. If the Credit Committee feels it is needed it will meet before the scheduled meeting to make the best decision that is the most reflective of market data.
If any Parties have questions or concerns about the CAP, please reach out to our team at [email protected].
If you have questions or concerns about how the change to CAP may impact your Credit Cover please get in contact with [email protected].