PART 2 Amendments

2 Amendments to the Electricity Capacity Regulations 2014
1 The Electricity Capacity Regulations 2014 are amended as follows.
S.I. 2014/2043, amended by S.I. 2014/3354, 2015/875. 2015/1974. 2016/742, 2017/1053 and 2019/862.
2 In regulation 2(1) (interpretation)—
(a) after the definition of “T-1 auction” insert—

““T-3 auction” means a capacity auction held during the auction window commencing on 1st September 2019 for the delivery year commencing on 1st October 2022;”

; and
(b) in the definition of “T-4 auction”, after “87(1)” insert “and 87C(2)(a)”.
3 In regulation 7 (annual electricity capacity report), after paragraph (7) insert—

“8 The Delivery Body must, as soon as reasonably practicable after the date on which the Electricity Capacity (No. 2) Regulations 2019 come into force—
(a) prepare an annex to the last electricity capacity report prepared before 1st June 2019; and
(b) send that annex to the Secretary of State.
9 The annex prepared under paragraph (8) must include a recommendation as to the target capacity that should be included in the T-3 auction (if this auction is held).”

.
4 In regulation 10(1) (determining whether capacity auction is to be held)—
(a) in sub-paragraph (ba), omit “and”; and
(b) after sub-paragraph (ba), insert—

“(bb) as soon as reasonably practicable after the date on which the Electricity Capacity (No. 2) Regulations 2019 come into force, whether the T-3 auction is to be held; and”

.
5 In regulation 12(5)(a) (determination of auction parameters), after “7(6)” insert “or (8)”.
6 In regulation 43B(3) (repayment of capacity payments: termination)—
(a) in sub-paragraph (c), for “.” substitute “;”; and
(b) after sub-paragraph (c), insert—

“(d) the period TP4, the capacity payments that must be repaid are those made in respect of the period beginning on 1st October, and ending on 1st May, of the relevant delivery year.”

.
7 In regulation 45(1) (general)—
(a) in the definition of “invoiced amount”, for “or 44” substitute “, 44 or 49A”; and
(b) in the definition of “payer”, for “or 44” substitute “, 44 or 49A”.
8 In regulation 49A (reducing capacity payments: offsetting relevant expenditure)—
(a) for paragraph (1) substitute—

“1 This paragraph applies if, before the time when a credit note is issued to a capacity provider (“C”) for a capacity payment, the Delivery Body has acknowledged receipt of a declaration under the Rules that—
(a) relevant expenditure has been incurred, or is expected to be incurred; or
(b) relevant benefit has been received, or is expected to be received,
in respect of the capacity committed CMU for which C is responsible (“CMU i”).”

;
(b) in paragraph (2)—
(i) for “this regulation” substitute “paragraph (1)”;
(ii) in sub-paragraph (a)—
(aa) after “the” insert “aggregate”; and
(bb) after “expenditure” insert “and outstanding relevant benefit”;
(iii) in sub-paragraph (b)—
(aa) after “the”, in the first place it occurs, insert “aggregate”; and
(bb) after “expenditure” insert “and outstanding relevant benefit”; and
(c) after paragraph (3) insert—

“3A This paragraph applies where—
(a) the aggregate amount of any outstanding relevant expenditure and outstanding relevant benefit (“aggregate outstanding amount”) in respect of CMU i is greater than nil; and
(b) there are no further capacity payments in respect of CMU i which the Settlement Body would be required to reduce under paragraph (2) to offset this aggregate outstanding amount.
3B Where paragraph (3A) applies—
(a) C is liable to pay to the Settlement Body an amount equal to the lesser of—
(i) the aggregate outstanding amount; or
(ii) the total amount of all the capacity payments paid to C in respect of CMU i, less the amount of any repayment of these capacity payments by C to the Settlement Body under regulation 43B, 43C or 50; and
(b) the Settlement Body must, as soon as reasonably practicable after paragraph (3A) becomes applicable, issue to C an invoice for the amount C is liable to pay under sub-paragraph (a).”

;
(d) for paragraph (4) substitute—

“4 This regulation applies to a credit note or invoice issued in respect of a transferred part as it applies to a credit note or invoice issued in respect of a capacity agreement, and where a capacity agreement has been transferred pursuant to regulation 30A(1)(b) or (2)(b)—
(a) the reduction in the amount payable to C pursuant to paragraph (2) is to be calculated so that it is proportionate to the period and part of the capacity obligation held by C during the month to which the credit note relates; and
(b) the aggregate outstanding amount attributable to C under paragraph (3B)(a) is to be determined by adjusting this amount so that it is proportionate to the period and part of the capacity obligation held by C throughout the duration of the capacity agreement.”

; and
(e) in paragraph (5), in the appropriate places, insert—
(i) “outstanding relevant benefit” means relevant benefit that has not been deducted from capacity payments pursuant to this regulation; and
(ii) “relevant benefit” has the meaning given in the Rules.
A consolidated version of the Capacity Market Rules 2014 is at https://www.ofgem.gov.uk/publications-and-updates/publication-consolidated-capacity-market-rules-2018. Copies are available from the Department for Business, Energy and Industrial Strategy, 1 Victoria Street, London, SW1H 0ET.
9 After regulation 87B insert—

“87C Transitory provisions: the T-3 auction
1 This regulation applies if the Secretary of State determines under regulation 10(1)(bb) that the T-3 auction is to be held.
2 Where this regulation applies—
(a) references to a T-4 auction in regulations 10(4), 12(2), 31(2)(e), 34(1), 59(2)(a), 60(2)(a) and Schedule 1 are treated as including the T-3 auction;
(b) regulation 13 (adjustment of auction parameters following prequalification) applies in relation to the T-3 auction and the subsequent T-4 auction as if after paragraph (2) there were inserted—

“3 After the Secretary of State receives a notification from the Delivery Body under regulation 25(1) in respect of the T-3 auction, the Secretary of State may decide to adjust the demand curve and target capacity for the subsequent T-4 auction (if the Secretary of State has determined this T-4 auction is to be held).
4 The Secretary of State must make any decision under paragraph (3), and give notice of any adjustments to the Delivery Body, no later than the last working day before the date on which the Delivery Body is required to publish the final version of the auction guidelines for the subsequent T-4 auction under regulation 21(3).”

;
(c) regulation 59 (requirement to provide applicant credit cover) applies—
(i) in relation to credit cover provided in respect of the T-3 auction as if—
(aa) in paragraph (4), for “twelve months” there were substituted “nine months”; and
(bb) in paragraph (5), for “twelve-month” there were substituted “nine-month”; and
(ii) in relation to credit cover provided in respect of the T-3 auction and the subsequent T-4 auction as if for paragraphs (2A) and (2B) there were substituted—

“2A Paragraph (2B) applies where an applicant for the T-3 auction and the subsequent T-4 auction is required to provide applicant credit cover in respect of the same CMU (“CMU i”) for both auctions in accordance with this regulation.
2B Where this paragraph applies—
(a) the applicant may satisfy their obligation to provide credit cover in respect of CMU i for both auctions by providing credit cover of an amount equal to the greater of the amounts determined under paragraph (2)(a) in respect of—
(i) the T-3 auction; and
(ii) the subsequent T-4 auction;
(b) credit cover provided in accordance with sub-paragraph (a) may be drawn down under regulation 61(1) in relation to a capacity agreement awarded in either of the auctions referred to in sub-paragraph (a); and
(c) notwithstanding paragraph (1)(h) or (3) of regulation 60, any credit cover drawn down in relation to a capacity agreement awarded in either of the auctions referred to in sub-paragraph (a) must be replaced in accordance with the obligation under regulation 60(1) to maintain credit cover in respect of the other auction.”

;
(d) regulation 60 (credit obligation period) applies in respect of the T-3 auction and the subsequent T-4 auction as if—
(i) before paragraph (1)(a) there were inserted—

“(aa) where credit cover provided by A in respect of CMU i for an auction (“auction X”) also satisfies A’s obligation to provide credit cover in respect of CMU i for another auction because regulation 59(2B) applies and an event in sub-paragraph (b) to (h) has occurred in respect of the other auction;”

;
(ii) after paragraph (1) there were inserted—

“1A Where paragraph (1)(aa) applies, A must thereafter maintain credit cover in respect of auction X in an amount equal to—
(a) the amount calculated under regulation 59(2)(a) in respect of A’s application to prequalify for auction X in respect of CMU i; or
(b) where paragraph (1)(a) applies, the amount calculated under paragraph (2) in respect of CMU i and auction X,
until the earliest of the events in sub-paragraphs (b) to (h) of paragraph (1) has occurred in respect of auction X.”

; and
(iii) after paragraph (4) there were inserted—

“4C Paragraphs (1) to (4) are subject to paragraph (4D).
4D Where regulation 59(2B) applies, A is required to maintain credit cover in the amount equal to the greater of the amounts A is required to maintain in respect of CMU i under this regulation in relation to—
(a) the T-3 auction; and
(b) the subsequent T-4 auction,
until the applicant is no longer required to maintain credit cover in respect of CMU i in relation to either auction.”

; and
Inserted regulation 87C(2)(d)(iii) reads paragraphs (4C) and (4D) into regulation 60 of the Electricity Capacity Regulations 2014 because regulation 21 of the Electricity Capacity (No. 1) Regulations 2019 (which is extended to the T-3 auction and subsequent T-4 auction by the amendments made by regulation 3(5) of these Regulations) already reads paragraphs (4A) and (4B) into regulation 60.
(e) regulation 69(3) applies to requests for review of prequalification decisions for—
(i) the T-1 auction for the delivery year commencing on 1st October 2020;
(ii) the T-3 auction; and
(iii) the subsequent T-4 auction,
as if for “15” there were substituted “20”.
3 In this regulation “subsequent T-4 auction” means the T-4 auction for the delivery year commencing on 1st October 2023.”

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