Consultation: decreasing CAP to £75 from 20 February 2024
This page gives details of a consultation on decreasing the Credit Assessment Price (CAP) to £75 from 20 February 2024. This two-day consultation will close at 17:00 on 2 February 2024.
Status
Outcome
The consultation closed with no responses.
The Credit Committee agreed to notify a CAP value of £75/MWh. Parties may notice a change in their Credit Cover Percentage and should review the amount of Credit Cover lodged.
Given the high level of uncertainty in the market, if significant changes are observed over the next two weeks the Credit Committee can decide to withdraw the notified CAP.
Original consultation
Who will this impact?
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
What is proposed?
This consultation seeks your views on decreasing the CAP to £75 from 20 February 2024.
The current live CAP value of £100/MWh was implemented on 4 January 2024, which will decrease to £85/MWh on 2 February 2024.
The following timeline outlines the current and the upcoming CAPs and the important dates:
|
CAP |
CAP value (£/MWh) |
Notification Date |
Effective From Date |
Effective To Date* |
|
Live CAP |
100 |
18 December |
4 January |
1 February |
|
Notified CAP |
85 |
19 January |
2 February |
19 February |
|
Today’s consultation |
75 |
5 February |
20 February |
– |
*Note: The Notification Date of a CAP is 10 working days before the Effective From Date and indicates the date on which the Credit Committee notifies whether or not it will proceed with the consulted on CAP, or notify at a different CAP value. The Credit Committee might also withdraw a notified CAP if market developments closer to the Effective From Date support such a decision.
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.
Consultation questions
The questions in the consultation are:
- Do you agree with the proposal to revise the Credit Assessment Price (CAP) to £75/MWh from 20 February 2024?
- If your answer to the above Question 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?
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 proposed CAP option
The Credit Committee is proposing a CAP of £75/MWh for implementation on 20 February 2024.
The Credit Committee have been using ICIS Heren peak and baseload, 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 as well as actual System Prices. The latest date with available forward market data is 29 January 2024. For this date, the average forward market price for February was at £71/MWh with the peak price of £76MWh and baseload price of £66/MWh.
It is important to highlight that the Credit Committee has been monitoring the market closely and will continue to do so. As always, the Credit Committee will take necessary actions to protect BSC Parties against potential risks as soon as practicably possible.
The graphs below contain the data that was presented to the Credit Committee to help inform their decision. There are a suite of graphs you can move between 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.
Next Steps
Following the end of the consultation period, the Credit Committee will consider any consultation responses, and decide whether to proceed with the proposed CAP. Consultation responses will also be considered at the next Credit Committee meeting.
Note, the decision as to whether the Credit Committee will proceed with the consulted on CAP of £75/MWh or an alternative CAP value for implementation from 20 February 2024 will be communicated on 5 February 2024.
Any changes will be notified to all BSC Parties, and the new CAP will come into effect at least 10 Working Days later.
Further guidance
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].