The UK government has proposed changes to electricity suppliers’ obligations under the Contract for Difference (CfD) regime because of the impact of the Covid-19 pandemic.
The proposals relate to increases in suppliers’ obligations that would otherwise be collected by the Low Carbon Contracts Company (LCCC) for the current (second) quarter of 2020 to the first quarter of 2021.
BEIS plans to protect suppliers from 80% of the increase in suppliers’ obligations, up to a maximum of £100m which is to be loaned LCCC, in the second quarter of 2020.
This is higher than the 67% that the government had proposed, ahead of a consultation with industry that ran from 12 to 19 May.
The government also plans to amend the CfD regulations to defer an increase in suppliers’ obligations by an additional quarter, so that the total level of the obligation will be increased in the second quarter of 2021 rather than in Q1.
Amendments will also be made to calculate the reduction in suppliers’ obligations for the current quarter based on their market share over this quarter and calculate the increase in suppliers’ obligations for the future quarter on the basis of their market share over that quarter, BEIS said.
An amendment will also allow LCCC to repay the loan.
BEIS said the proposals will now go to parliament for approval, which is anticipated before 9 July – the date on which it currently expects LCCC to carry out the reconciliation process for the current quarter.
It added that if parliament does not approve them before the date on which LCCC carries out the reconciliation exercise, BEIS would still provide the loan facility to LCCC.
However, suppliers’ obligations for CfD payments in this quarter would be unchanged.
“Suppliers may therefore have to pay a higher lump sum to LCCC following the reconciliation process in July,” the government said.
But, it added, “should it become clear that there is a short delay to the regulations coming into force, LCCC can delay the Q2 reconciliation process for a short time to accommodate this”.