Consultation issued on 4 October on increase of the CAP to £259/MWh
We are consulting on an increase of the CAP to £259/MWh from the last notified value of £184/MWh. A change to CAP can impact the amount of Credit Cover required by a BSC Party.
Who will this impact?
This consultation has now closed and the outcome is available.
A trigger event has occurred, meaning that the absolute difference between the CAP and the reference price is greater than the current trigger level of +/- £18/MWh. As a result, a consultation on a new CAP value has commenced.
The CAP that is being consulted on would be the highest CAP since the parameter was introduced in March 2001. There have been six previous instances of the CAP value being greater than £100/MWh.
The previous consultation of the Credit Assessment Price (CAP) from £137/MWh to £184/MWh is due to increase on Thursday 21 October 2021.
How it relates to you
If required, the Credit Committee will meet shortly thereafter to determine if a new CAP value should apply. If the Credit Committee does not meet, the proposed CAP value will be implemented on Tuesday 2 November 2021.
Credit Committee has decided to take discussion around the current market situation resulting in dramatic prices escalations to the BSC Panel. A further circular will be sent out regarding Credit Committee’s decision and the consultation results.
The consultation period will end at 17:00 on Tuesday 12 October 2021.
How to respond
BSC Parties are invited to respond to this consultation using the proforma available on this page.
Please return responses to [email protected] by 17:00 on Tuesday 12 October 2021.
How we calculate the CAP to be consulted on
As described in the CAP Review Guidance, the CAP that is consulted on is calculated based on what the reference price will look like on the day the new CAP is going to be implemented.
When a trigger event happens, Elexon issues a consultation paper on the same day of the event. The consultation closes five working days thereafter and provided that no responses from the industry or Credit Committee disagrees with the proposed CAP, then the new CAP will be notified to the BSC Parties and will be implemented 15 working days afterwards.
The implementation day for this recent trigger event will be in October. Therefore, we need to calculate an estimate for the reference price. A 5-day rolling average of Month +1 and Month +2 forward market prices gives the reference price. We used the 5-day rolling average of November and December forward market prices to calculate the reference price which was £136.99/MWh. We subsequently rounded to the nearest pound to return the new CAP of £137/MWh, which is what we are consulting on.
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].