The Electricity Capacity (Amendment) Regulations 2017

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations amend in various respects the Electricity Capacity Regulations 2014 (S.I. 2014/2043) (“the Principal Regulations”).

The Principal Regulations make provision for the purpose of enabling consumers’ demands for electricity in Great Britain to be met, by establishing a system (“the Capacity Market”) whereby those who offer to make electricity capacity available can (as the result of an auction) be awarded capacity agreements, which confer rights and impose obligations on those awarded the agreement (“capacity providers”). Those rights and obligations consist principally of the right to receive “capacity payments” from a settlement body established for that purpose, these being payments for generating (or reducing demand for) electricity at times of system stress; and the liability to make a penalty payment where the capacity agreement is breached.

There are three kinds of capacity market units (“CMUs”) that can be used to participate in the Capacity Market: generating CMUs, demand side response (“DSR”) CMUs, and interconnector CMUs. The Principal Regulations and the Electricity Capacity (Supplier Payment etc.) Regulations 2014 (“the Supplier Payment Regulations”) also impose obligations on persons who supply electricity in Great Britain pursuant to an electricity supply licence under section 6 of the Electricity Act 1989 (c. 29). Those obligations consist principally of requirements to make payments to the settlement body. Further detailed and technical provision is made by the Capacity Market Rules 2014 (“the Rules”)(1).

The amendments are set out in the Schedules to these Regulations.

Schedule 1 amends the Principal Regulations.

Paragraphs 1(c), 2 to 4, 6(1) and (2), 6(4)-(6), 7(a) and 8 make amendments connected to the de-rating of DSR CMUs. The arrangements for de-rating the capacity of CMUs are set out in the Rules and these amendments reflect changes being made to the arrangements for DSR CMUs.

Paragraph 5 makes provision for the settlement body to make deductions from the amount of credit payable to a capacity provider where a capacity provider has made a declaration under the Rules that relevant expenditure funded by certain risk finance schemes has been incurred, or is expected to be incurred, in respect of the capacity committed CMU for which the capacity provider is responsible.

Paragraphs 6(3), 7(b) -(d), 9 and 10 clarify the drafting in the Principal Regulations to put beyond doubt the requirement to maintain applicant credit cover until a CMU has achieved all of the requirements against which applicant credit cover has been lodged and for which a failure to meet would otherwise result in its capacity agreement being terminated under the Rules. The changes also correct an unintended double liability on capacity providers as regards to their applicant credit cover and termination fee exposure.

Schedule 2 amends the Supplier Payment Regulations so that the capacity market supplier charge and settlements costs levy will be collected based on “gross demand”, instead of “net demand”, in relation to delivery years and financial years (respectively) from 2018 onwards. “Gross demand” means the amount of electricity (expressed in MWh) supplied by an electricity supplier (“S”) to premises in Great Britain, whereas “net demand” means the difference (expressed in MWh) between that amount and the amount of generated electricity for which S is responsible, except that where that difference is a negative amount the net demand is zero.

(1)

The Capacity Market Rules 2014, and subsequent amending Rules are available here: