Views sought on suppliers’ obligations under Contract for Difference

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THE GOVERNMENT is seeking views on a proposal to defer increases on electricity suppliers’ obligations under Contract for Difference rules due to impact of COVID-19.

BEIS said the consultation is looking for comment on plans to defer the “2021 quarter 1 part” of the increase that “would otherwise be collected by Low Carbon Contracts Company in July for the current second quarter of 2020”.

Implementation of the proposal requires changes to the CfD Electricity Supplier Obligation Regulations 2014, BEIS said.

The government said it had been been advised by Low Carbon Contracts Company that as a “result of lower electricity demand, resulting from measures introduced to reduce the spread of Covid-19, and higher payments to CfD generators because of lower wholesale electricity prices, electricity suppliers would have faced an unexpected increase in their obligations for the second quarter of 2020”.

BEIS is also providing a one-off loan to Low Carbon Contracts Company so that it can continue to pay generators without needing to increase the interim levy rate at short notice.

The government said that this is in response to the “truly exceptional circumstances” of COVID-19.

“It must be emphasised that we are committed to upholding the self-financing nature of levies in the energy system, and the government cannot be relied upon to provide capital for consumer-funded energy levies in future,” it added.

The consultation is open until 11.45pm on 19 May, a shorter than usual period, said BEIS, because “implementation is being taken forward as a matter of urgency”.

The government added that if it is unable to or decides following consultation not to proceed with the proposal, it would still provide the loan facility to Low Carbon Contracts Company.

However, suppliers’ obligations for CfD payments in this quarter would be unchanged, but they would have to pay a higher lump sum to Low Carbon Contracts Company following the reconciliation process in July.

The consultation closes at 11.45am on 19 May.