Issue 76

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 UK 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 Government has confirmed that it iscommitted to delivering secure electricity supplies at least cost,and maintains that Capacity Market auctions are the most appropriate way to do this. It has also advised that it is working with the EC to reinstate the CM and will submit a new state aid approval to hold a standalone T-1 top up auction for Delivery Year 2019/20. Furthermore, the Department for Business, Energy and Industrial Strategy (BEIS) has expressed that its preference is to secure agreement from the EC that the suspended CM payments will be paid to capacity providers retrospectively, meaning Suppliers will be asked to fund those repayments in the future. As it is unclear when such repayments will be made, the size of the bill passed onto end consumers, is unknown, but could be substantial. From a CM provider perspective, BEIS has recommended that obligated parties continue to discharge their obligations despite the mechanism being suspended.

The Proposer believes it is prudent that Suppliers continue to collect CM payments from customers. At present, the Electricity Settlements Company (ESC) is under instruction from the Secretary of State not to collect CM payments from Suppliers. It is also unclear whether Suppliers can lawfully continue to collect CM payments from consumers, despite potentially having to do so within the next 7-9 months (depending on outcome/ timing of state aid clearance).

The proposer believes that all CM providers and Suppliers are seeking clarity around these issues and wish to help BEIS to plan for the reinstatement of the CM as soon as possible, including the provision of back payments to CM capacity providers for 2018/19 agreements with the minimal impact for end consumers.

Issue 76 was Raised by VPI Immingham LLP on 6 December 2018.

The first meeting was held on 17 December 2018. Issue 76 resulted in Modification P378 being raised by VPI Immingham LLP on 20 December 2018. The Issue 76 Report was presented to the Panel for information on 14 February 2019. As P378 had superseded Issue 76, the Panel had no comments on Issue 76.