The Electricity Supplier Payments (Amendment) Regulations 2016

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations make a number of amendments to the Contracts for Difference (Electricity Supplier Obligations) Regulations 2014 (S.I. 2014/2014) (the “ESO Regulations”). These Regulations also set the rate for the operational costs levy in the ESO Regulations. These Regulations also amend the Contracts for Difference (Standard Terms) Regulations 2014 (S.I. 2014/2012) (the “Standard Terms Regulations”). These Regulations also provide a revised figure for the settlement costs levy under regulation 9 of the Electricity Capacity (Supplier Payment etc.) Regulations 2014 (S.I. 2014/3354) (the “Supplier Payment Regulations”).

Part 1

Regulation 2 contains definitions used in these Regulations. These relate to the three statutory instruments which are being amended by these Regulations.

Part 2

Regulation 3 inserts a definition of the term “BM Unit” and of the term “registered” in relation to a BM Unit in the ESO Regulations, for the purpose of amendments made by regulations 4(2), 9(3) and 14(2) and (3). The amended provisions (together with others described below) ensure that the CFD counterparty is only required to send notices to and request payments from relevant suppliers, rather than being required to do so for suppliers who are not active at the relevant time. For these amendments to regulations 6, 13 and 20 of the ESO Regulations, this is achieved by identifying relevant suppliers by reference to those who have a BM Unit registered in accordance with the Balancing and Settlement Code (which is defined in the ESO Regulations) at the relevant time.

The amendments made by regulations 4 and 9 impose deadlines for the CFD counterparty to publish and issue notices.

Regulation 4 also omits redundant wording.

Regulation 5 changes the reference period according to which the interim rate is determined. Previously that rate was determined by reference to payments made during quarterly periods. This has been changed so that the rate is determined according to payments made in respect of those quarterly periods, given that some of those payments may be made outside the actual quarterly period.

Regulation 6 amends regulation 10 of the ESO Regulations in order to provide a period between the time at which the CFD counterparty must determine the total reserve amount in respect of a quarter and the time at which it must determine the individual payments that it will collect from each supplier.

Regulations 7, 8 and 9 contain changes which are consequential to the amendments in regulation 5.

The amendments made by regulations 6(5), 10, 11 and 12(2) ensure that the CFD counterparty is not required to notify inactive suppliers of their obligations where those obligations are not relevant to them. As a result of these changes, regulations 10, 14, 15 and 17 of the ESO Regulations only apply to suppliers who either supplied electricity during specified periods or who are due to make specified payments.

Paragraphs (3) and (4) of regulation 12 remove a requirement to include additional non-essential information in the notices that the CFD counterparty is required to issue under regulation 17. Paragraph (5) simplifies the definition of the reference period according to which mutualised payments are calculated.

Regulation 13 increases the amount of time the CFD counterparty has between recovering a mutualised payment from a defaulting supplier and paying that amount back to other suppliers, from 5 to 15 working days.

Regulation 15 increases the amount of time the CFD counterparty has between receiving an interest payment for collateral it holds on behalf of a supplier and the date on which it is required to pay that interest to that supplier.

Regulation 16 sets the rate for the operational costs levy in the ESO Regulations from the date these Regulations come into force and until amended. (It is expected that the rate will be amended from 1st April 2017.)

Regulation 17 removes the requirement for the CFD counterparty to notify suppliers of interest that has accrued on payments at the date of the notice, which may differ in any event from the interest that supplier is required to pay.

Regulation 18 imposes an obligation on the CFD counterparty to publish forecasts of the liabilities that suppliers are likely to face as a result of the ESO Regulations, up to three quarters in advance of those liabilities arising.

Regulation 19 clarifies the circumstances in which the CFD counterparty is able to set off payments due to suppliers against payments due to and from suppliers under regulation 30.

Regulation 20 inserts a new regulation 30A which enables the CFD counterparty to net payments due to suppliers against payments due from suppliers. Such payments can be netted against one another automatically where they are due at the same time. This differs from the set-off provision in the amended regulation 30, which relates to future payments on which suppliers are highly likely to default.

Regulation 21 amends regulation 31 of the ESO Regulations consequential on the amendment of regulation 25 of the ESO Regulations by regulation 30(3) of the Electricity Supplier Obligations (Amendment & Excluded Electricity) Regulations 2015 (S.I. 2015/721).

Regulation 22 amends the Schedule to the ESO Regulations in order to ensure that the amended provisions can function where multiple CFD counterparties are appointed.

Part 3

Regulation 23 amends the Standard Terms Regulations to require the CFD counterparty to include CFD start dates (a defined term in the CFD contracts) in the CFD register. Paragraph (4) restricts the categories of information that the CFD counterparty may withhold if in its opinion that information would be exempt from disclosure under the transparency legislation.

Part 4

Regulation 24 amends the Supplier Payment Regulations in order to provide a revised figure for the settlement costs levy under regulation 9 of those Regulations. The revised figure does not apply in respect of any financial year commencing before 2016. A financial year for this purpose means a period of one year commencing with 1st April.