The Nuclear Regulated Asset Base Model (Revenue Collection) Regulations 2023

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations impose a number of obligations on persons who supply electricity in Great Britain pursuant to an electricity supply licence (granted by the Gas and Electricity Markets Authority under section 6 of the Electricity Act 1989). Those obligations principally consist of requirements to make payments to the revenue collection counterparty, a person who is designated as such under section 15 of the Nuclear Energy (Financing) Act 2022 (“the 2022 Act”). The payments are made to enable the revenue collection counterparty to meet its costs, which include the costs it incurs in meeting obligations it has under revenue collection contracts. The counterparty is also, in some circumstances, required to make payments to electricity suppliers.

Revenue collection contracts are contracts which the revenue collection counterparty must offer to enter into with a designated nuclear company by virtue of section 18 of the 2022 Act. A designated nuclear company is a company that holds an electricity generation licence in respect of a nuclear energy generation project and has been designated in relation to that project under section 2 of the 2022 Act.

Part 1

Regulation 2 contains definitions used in these Regulations. There are terms used in these Regulations which are defined in the Balancing and Settlement Code. That code is available at available at the following website: www.elexon.co.uk. A hard copy of that code may be requested from Elexon Limited (4th Floor, 350 Euston Road, London NW1 3AW). The Balancing and Settlement Code Company (the BSCCo) makes determinations under that code about the amount of electricity supplied in Great Britain, and these determinations are relied upon for various purposes in these Regulations. Every licensed electricity supplier is a party to that code.

Part 2

Regulation 3 sets out the obligation of electricity suppliers to contribute towards the costs of revenue collection contracts in respect of a quarterly obligation period. There are four such periods a year, each lasting three months. The regulation also provides the obligation of the revenue collection counterparty to make payments to suppliers where a supplier’s contribution in respect of a period is calculated as being a negative number. Whilst this regulation sets out the principal obligation to make such payments, the obligation will be met by the making of interim payments, reserve payments and reconciliation payments.

Regulation 4 sets out the calculation for an electricity supplier’s contribution in respect of a quarterly obligation period. This is calculated in the following way. First the sum of the following amounts is calculated: (a) the amount required to be paid by the revenue collection counterparty under, or pursuant to, revenue collection contracts (or to a party of those contracts for a related breach of duty) during the period; and (b) the amount of financial assistance funds the Secretary of State has provided to the revenue collection counterparty that the Secretary of State has specified is to be used when calculating the contribution for the period (the “SoS Payment”). Second, from the resulting sum, the sum of the following amount is subtracted: (i) the amount of payments the revenue collection counterparty received under, or pursuant to, revenue collection contracts during the period; (ii) the amount of the SoS Payment for the quarterly obligation period that ended three quarterly obligation periods before the period for which the calculation is made; and (iii) the amount of interest payable to the revenue collection counterparty under the Regulations. Finally, once the subtraction has been performed, the resulting amount is then multiplied by the fraction of supplier’s share of the electricity market, excluding any EII excluded electricity (within the meaning of regulation 6(1) of S.I. 2015/721).

Regulation 4(3) provides that determinations by the revenue collection counterparty about amounts of EII excluded electricity supplied must be based on information derived from the most recent BSC volume allocation run.

Regulation 5 requires the revenue collection counterparty to determine a rate which applies to a quarterly obligation period. That rate will be the basis on which electricity suppliers make interim daily payments to that revenue collection counterparty during that period. The rate is set on the basis of the amount of money which the revenue collection counterparty believes it will need to make payments under, or pursuant to, revenue collection contracts (or to a party to those contracts for a related breach of duty) during that period, less the amount of money which it believes it will be paid under, or pursuant to, revenue collection contracts during that period. The rate is then arrived at by dividing that amount by the amount of electricity (excluding EII excluded electricity) which the revenue collection counterparty estimates will be supplied during that period.

Regulation 6 sets out the basis on which the revenue collection counterparty must estimate the matters referred to in regulation 5.

Regulation 7 requires an electricity supplier who supplies electricity on a day in a quarterly obligation period to make a payment in respect of that day (an interim rate payment). The payment is calculated by multiplying the rate determined by the revenue collection counterparty by the amount of electricity supplied by that supplier (excluding EII excluded electricity) on that day. The revenue collection counterparty must issue a notice to that supplier once the first information about electricity supply on that day is available (this will be available once the BSCCo has carried out the Interim Information Volume Allocation Run in relation to that day). The supplier must then pay the amount within 5 working days after the day that notice was issued. As a consequence, the payments are likely to be daily payments (subject to how working days fall). The regulation also provides that interest must be paid on amounts which are not paid on time.

Regulation 8 provides for payments to be made by a supplier to the revenue collection counterparty, or by the revenue collection counterparty to that supplier, where the BSCCo revises its determination of an amount of electricity supplied following the carrying out of an Initial Volume Allocation Run or Reconciliation Volume Allocation Run. The payments are made for the purpose of ensuring that the amount paid by a supplier as an interim rate payment reflects, as much as possible, the amount of electricity actually supplied. These payments will not be made after the conclusion of a quarterly obligation period as amounts will be subsequently reconciled once every quarter.

Regulation 9 requires the revenue collection counterparty to calculate a “total reserve amount” to be paid to it in respect of a quarterly obligation period and the share of that amount which each supplier must pay (that supplier’s reserve payment). The revenue collection counterparty must make a determination about total reserve payments at least 30 days before that period and determinations about supplier reserve payments before the end of the period of 8 working days starting with the day which is 30 days before the period.

The revenue collection counterparty determines the total reserve amount by modelling how much money it would need to have during a period to meet all payments it might have to make to the parties to a revenue collection contract (RCC parties). This determination is based upon a probabilistic assessment of the amount the revenue collection counterparty would need in 95% of possible cases.

Regulation 10 provides that an electricity supplier must make reserve payments by the 5th working day after the revenue collection counterparty has issued a notice to them. Each supplier’s reserve payment is calculated by multiplying the total reserve amount for a period by the supplier’s share of the electricity market (excluding EII excluded electricity) for the most recent period of 30 consecutive days for which an Initial Volume Allocation Run has been carried out.

Regulation 11 allows the revenue collection counterparty to vary an interim levy rate, and/or require a further reserve payment from suppliers where, after setting the rate and determining the total reserve amount, it later appears that it will not receive enough money to make all the payments to RCC parties it must make during that period. The regulation also allows the revenue collection counterparty to reduce the interim levy rate if it appears that it will receive significantly more than enough money to make payments to the RCC parties during that period.

Regulation 12 sets out the means for determining an adjusted interim rate. The rate is arrived at in the same manner as the rate determined under regulation 5, but taking into account such payments as have already been made and may be made before the coming into effect of the adjusted rate. An adjusted rate will not have effect before at least 30 days after that rate has been determined.

Regulation 13 sets out the means for determining an additional total reserve amount for a quarterly obligation period, and the share of that amount which each supplier must pay. An additional total reserve amount is arrived at in a similar manner to the total reserve amount. The same probabilistic assessment is made in respect of the payments which must be made by the revenue collection counterparty for as much of the period as remains after the making of the determination. A supplier will have to pay its share of the amount no earlier than 30 days after it has been notified of the amount it has to pay.

Regulation 14 allows the revenue collection counterparty to reduce the total reserve amount without notice by recalculating it where it considers that it would collect significantly more from suppliers than needed in order to make all payments during the reserve period. This needs to be done in advance of the issue of the reconciliation notice which triggers payment of a suppliers’ reserve payment.

Regulation 15 makes provision for the revenue collection counterparty to calculate reconciliation payments which must be made by it to a supplier, or by that supplier to it. Reconciliation payments must be determined in respect of a quarterly obligation period once in every subsequent quarterly obligation. This will happen 10 times.

Regulation 16 sets out the means for calculating a reconciliation payment. To calculate such a payment the revenue collection counterparty must calculate the RCC period contribution of a supplier using the latest data available. This is then compared against the total amount of payments under Chapter 2 and 3 which that supplier was required to pay to the revenue collection counterparty, and which were required to be paid by the revenue collection counterparty to that supplier. The difference between the two determines the amount and direction of a reconciliation payment.

Regulation 17 makes provision for the circumstances in which an electricity supplier defaults on a payment it was required to make. In those circumstances other electricity suppliers can be required to pay further amounts to cover the amount of that default (a mutualisation of that default).

Regulation 18 makes provision for the circumstances where, following a mutualisation of a default, the revenue collection counterparty is able to recover amounts from the supplier who defaulted. In those circumstances, suppliers who were subject to the obligation to pay in respect of that default must be paid a share of the amount recovered, and a share of any default interest which was paid in respect of that default.

Regulation 19 imposes a requirement on electricity suppliers to provide collateral in respect of their obligations under this Part. The amount of collateral which must be provided by a supplier is calculated by reference to the amount of electricity supplied for a recent period of 21 days. A supplier may choose to provide collateral as cash or as letters of credit. As that requirement is calculated daily the requirement may fluctuate and electricity suppliers may have to provide additional collateral. Suppliers will also have to provide additional collateral where their collateral is used (“called”) by the revenue collection counterparty.

Regulation 20 makes provision about the terms of letters of credit which may be provided by electricity suppliers to meet their collateral requirement. The revenue collection counterparty may determine whether the terms of a letter of credit are appropriate. The regulation also makes provision about the required credit rating of a person issuing such a letter.

Regulation 21 contains provision about how collateral is called by the revenue collection counterparty. It may be called by the revenue collection counterparty when an electricity supplier fails to make a payment it is required to make under this Part. The revenue collection counterparty may then issue a notice to that supplier informing it that an amount of that supplier’s collateral is called. This may trigger the requirement to provide further collateral. Where collateral was provided as cash, this cash is treated as having been paid to the revenue collection counterparty and will discharge that supplier’s obligations as a payment would have done. Where collateral was provided as a letter of credit, the obligations of a supplier will only be discharged where the person issuing the letter of credit has paid the revenue collection counterparty under it.

Regulation 22 allows an electricity supplier to request the return of collateral where the amount provided exceeds the amount of that supplier’s collateral requirement at that time. The regulation also provides that any interest which has been earned on the holding of cash collateral by the revenue collection counterparty must be paid to the supplier who provided that collateral.

Part 3

Regulation 23 requires electricity suppliers to make operational cost payments to the revenue collection counterparty. The payments are calculated by reference to the amount of electricity supplied on a day, and a rate specified in this regulation. Payments must be made daily, except in relation to the first operational costs period where the sum of the payments for that period must be made after the revenue collection counterparty has given notice of the amounts of all the payments which are due in respect of that period, so they are, in effect, required to be paid by the same date, which will be after the conclusion of that period.

Regulation 24 makes provision about the circumstances where the revenue collection counterparty has received more in operational cost payments than the amount of its costs. In those circumstances the revenue collection counterparty must pay electricity suppliers any excess based on the amount of electricity supplied over the operational cost period.

Part 4

Regulation 25 makes provision about enforcement of the requirements of electricity suppliers under these Regulations. It enables the Gas and Electricity Markets Authority (the Authority) to deal with any breach of such requirements as if those requirements were, in effect, requirements under an electricity supply licence. It also provides for notices to be issued by the revenue collection counterparty where a supplier has breached a requirement to make a payment, or a requirement to provide collateral. In the case of a breach of a collateral requirement, a supplier will then have to provide that collateral as cash.

Regulation 26 enables an electricity supplier to dispute any determination made by the revenue collection counterparty. Determinations about an amount of electricity supplied which is determined by the BSCCo are excluded from this provision.

Regulation 27 sets out the duties of the revenue collection counterparty in relation to the determination of disputes including the steps it must take if it accepts a dispute. It also makes provision dealing with the effect of determinations made following the determination of a dispute.

Regulation 28 imposes general duties on the revenue collection counterparty including a duty in relation to the collection of sums to be paid under these Regulations, and duties to keep electricity suppliers informed of their liabilities under these Regulations.

Regulation 29 makes provision about the issuing of notices by the revenue collection counterparty under these Regulations and the giving of notices by electricity suppliers, including provision about the giving and issuing of notices electronically.

Regulation 30 enables the revenue collection counterparty to set off amounts it has to pay to a supplier against amounts that supplier must pay.

Regulation 31 enables the revenue collection 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.

Regulation 32 deals with the circumstances where an electricity supplier makes a partial payment such that not all of its liabilities at that time will be discharged by the making of that payment. In those circumstances that payment will be allocated to the outstanding debts of that supplier in an order determined partially by this regulation and partially by the revenue collection counterparty in its discretion.

Regulation 33 prohibits the revenue collection counterparty from using payments received from a supplier under regulation 23 for any purpose other than meeting its costs. Payments received from suppliers under other regulations may only be used the purposes of making payments under, or pursuant to, the revenue collection contracts (or payments to a party to those contracts for a related breach of duty) and making repayments due to the Secretary of State in relation to funds provided to the revenue collection counterparty by the Secretary of State.

Regulation 34 deals with the circumstances where the revenue collection counterparty does not hold enough money to make all payments it is required to make under revenue collection contracts. In those circumstances the amount that the revenue collection counterparty holds will be divided between the revenue collection contracts such that a proportional share of the total available may be paid under each revenue collection contract.

Regulation 35 contains provision designed to have effect in relation to the terms of revenue collection contracts. The terms of revenue collection contracts may include limited recourse provisions which prevent a party to those agreements from taking steps to recover more from the revenue collection contract than it has raised under these Regulations (or is available from other sources). Regulation 35 applies the apportionment provision in regulation 34 to such revenue collection contracts in accordance with those terms.

Regulation 36 sets out the rate of interest which applies to a requirement of a supplier to pay interest under these Regulations.

Part 5

Regulation 37 sets out the requirements for directions given by the Secretary of State directing the revenue collection counterparty to offer to contract with a designated nuclear company on specified terms.

Regulation 38 sets out requirements for the form and content of the specified terms.

Regulation 39 specifies the procedure that the Secretary of State must following when revoking a direction made under regulation 37 and the effect such a revocation has.

Regulation 40 requires the revenue collection counterparty to publish a revenue collection contract, excluding confidential information, when a designated nuclear company accepts an offer to enter into such a contract.

Regulation 41 contains a definition used in Part 5 of these Regulations.

Part 6

Regulation 42 gives the revenue collection counterparty, the Authority and the Secretary of State power to request information from certain persons in connection with their relevant functions. Persons who receive such requests must comply with them within such period as the person making the request reasonably requires.

Regulation 43 provides that certain persons may provide information (whether or not a request for information has been made) to the revenue collection counterparty, Authority and Secretary of State where the person reasonably considers the recipients requires the information in connection with their relevant functions.

Regulation 44 enables the Secretary of State to request advice relating to revenue collection contracts that is reasonably required in connection with the Secretary of State’s relevant functions, from the revenue collection counterparty, the Authority, or the person operating the national transmission system for Great Britain.

Regulation 45 provides that information or advice provided under Part 6 of these Regulations may not be disclosed to another person subject to certain exemptions.

Regulation 46 sets out various supplementary matters relating to Part 6 of these Regulations. These include provision that requirements imposed on certain persons under Part 6 are to be treated as having effect on that person as if the requirement were a relevant requirement placed on a regulated person for the purposes of section 25 of the Electricity Act 1989 (c. 29).

Regulation 47 contains definitions used in Part 6 of these Regulations.

Schedule

The Schedule sets out the way the provisions of these Regulations will operate when there is more than one revenue collection counterparty designated. In those circumstances electricity suppliers would be required to contribute separately to the costs of revenue collection contracts in relation to each revenue collection counterparty.

A full impact assessment of the effect that this instrument will have on the costs of business and the voluntary sector is available from the Department for Business, Energy and Industrial Strategy at 1 Victoria Street, London, SW1H 0ET and is published with the Explanatory Memorandum alongside this instrument on www.legislation.gov.uk.