Contracts for Difference: proposed changes to the Electricity Supplier Obligation Regulations in response to COVID-19
Read the full outcome
Detail of outcome
Following the consultation, we will:
- protect suppliers from 80% of the increase in suppliers’ obligations (up to the maximum loan amount of £100 million) in the second quarter of 2020, higher than the 67% that we had proposed
- amend the Contracts for Difference (Electricity Supplier Obligations) Regulations 2014 (‘the ESO Regulations’) to:
- defer the increase in suppliers’ obligations by an additional quarter, so that the total level of the obligation will be increased in Q2 2021 rather than in Q1
- calculate the reduction in suppliers’ obligations for the current quarter based on their market share over this quarter
- calculate the increase in suppliers’ obligations for the future quarter on the basis of their market share over that quarter
- enable the LCCC to repay the loan that BEIS is providing
- allow the LCCC to consider anticipated receipt or repayment of a government loan when setting the interim levy rate (ILR) and/or the total reserve amount (TRA) for a quarter or making in-period adjustments
The amended Contracts for Difference (Electricity Supplier Obligations) Regulations were laid on 4 June in anticipation that Parliament can approve them before 9 July (the date on which we currently expect LCCC to carry out the reconciliation process for the current quarter).
Detail of feedback received
We received 22 responses from a range of parties including:
- electricity suppliers and generators
- business customers
- consumer representatives
- individuals
Respondents were in general supportive of the proposal. The key themes in the responses were:
- that the increase in suppliers’ obligations should be deferred to Q2 2021, not Q1 as we had proposed
- that suppliers should be protected from a greater proportion of the increase in CfD costs relating to COVID-19 in the current quarter (Q2 2020)
Original consultation
Consultation description
In response to the exceptional circumstances of COVID-19, BEIS will provide a one-off loan to the Low Carbon Contracts Company (LCCC) so that it can continue to pay Contracts for Difference (CfD) generators without needing to increase the Interim Levy Rate at short notice.
This consultation seeks views on the proposal to defer to 2021 quarter 1 part of the amount of the increase in electricity suppliers’ obligations that would otherwise be collected by LCCC in July for the current (second) quarter of 2020.
Implementation of this proposal would require changes to the Contracts for Difference (Electricity Supplier Obligation) Regulations 2014.
If we don’t proceed with this proposal, we will still provide the loan facility to LCCC. Suppliers’ obligations for CfD payments in 2020 quarter 2 would remain unchanged, so they would have to pay a higher lump sum to LCCC following the reconciliation process in July.
Online stakeholder event, Friday 15 May
We will host an online consultation event at 10am on Friday 15 May to explain the proposals and answer any questions.
If you would like to register, please email [email protected].
Please do not send responses by post to the department during the coronavirus lockdown period as we will not be able to access them.
Documents
Updates to this page
Published 12 May 2020Last updated 4 June 2020 + show all updates
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Government response published.
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First published.