P378 ‘Introduction of a CM Supplier Interim Charge’

Formal title: Introduction of a CM Supplier Interim Charge

Current Status

Submission
Initial Written Assessment
Assessment Procedure
Report Phase
With Authority
Rejected

Summary

On 15 November 2018 the General Court of the Court of Justice of the European Union found in favour of Tempus Energy, against the European Commission (EC), annulling the Commission’s State aid approval for the GB Capacity Market (CM). All CM cost recovery by Suppliers and payments to capacity providers have been suspended with all credit cover available to be returned.

The UK Government maintains that the CM is the most cost effective way of ensuring security of supplies and is working with the EC to reinstate the CM.

P378 proposes to use the BSC to introduce a CM Supplier Interim Charge for Suppliers with effect from 1 January 2019. This will act as a contingency fund to protect the industry, and customers, from a price shock in the event that the CM standstill is lifted and backpayments are required to be made. The Modification solution is based on the recommendations of Issue 76 .

Having this fund available will give confidence to industry and investors that they are able to continue normal operations during this standstill period.

Progression

The Authority rejected P378 on 20 February 2019. The decision letter can be found in the documents section below.  Ofgem concluded that it does not have the power to approve P378, as to do so would be unlawful. This was on the basis that  Parliament has established a specific and bespoke statutory regime for regulating the Capacity Market and approving P378 under Ofgem’s general statutory duties as set out in Electricity Act 1989 would contravene this and therefore be unlawful. 

The Authority approved urgency for P378 on 8 January 2019 and approved the timetable as proposed by the Panel.

At its urgent meeting on 4 February 2019, the BSC Panel recommended to the Authority that P378 be approved. The Final Modification Report was submitted to the Authority on 5 February 2019.

The Modification Consultation was issued on 16 January 2019 with responses due by 5pm on Tuesday 29 January 2019.

The Initial Written Assessment (IWA) for P378 was presented to the Panel on 21 December 2018. The Panel recommended that P378 be treated as an Urgent Modification Proposal. An Ofgem response on urgency was requested and granted on 8 January 2019. The approved urgent procedure, detailed in the IWA, contains a minimum 10 Working Day consultation. The Panel additionally recommended that they be allowed to put forward an Alternative solution in response to the consultation, if it is believed to be better than the Proposed. 

P378 was raised by VPI Immingham on 20 December 2018.

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