More Charges for your bill ! – Electricity Market Reform

Through EMR, two key mechanisms have been introduced, there is a little further information below as well as the details of the two charges per area that will be levied

• Contracts for Difference (CfD) – these will ensure generators receive a fixed price for low carbon generation, providing greater certainty to those investing in new technologies. CfDs work in tandem with the wholesale energy market, providing an extra payment for generators when the market price falls below the pre-agreed ‘strike’ price, with generators paying back any surplus should the market price rise above it. This mechanism will be managed by the Low Carbon Contracts Company (LCCC) https://lowcarboncontracts.uk/
• A Capacity Market (CM) – a capacity market has been set up to make sure that supply will be available when it’s needed the most. It provides incentives for developers and owners of generating capacity (eg power plants) to make their capacity available. Capacity providers are paid on a kilowatt per year basis for the capacity that they can make available. This mechanism will be managed by the Electricity Settlements Company. https://electricitysettlementscompany.uk/

Charge Name

Charge Description

How It’s Charged

Charge Rate

CfD Operational Levy

Low Carbon Contracts Company operational cost to administer the scheme

Published forecast rate which is set annually and charged based on NBP consumption (Including Distribution and Transmission Losses)

0.004 – 0.012 p/kwh based on contract dates

CfD Supplier Obligation Levy

Costs to cover payments for CfD generators

Published forecast rate, set quarterly and reconciled in arrears based on NBP consumption (Including Distribution and Transmission Losses)

0.0035 p/kwh Q1 2015

Forecast 2015 Average:

Mid – 0.035 p/kwh

High – 0.174 p/kwh

Capacity Market Settlement Levy

Electricity Settlements Company operational cost to administer the scheme

Fixed rate forecast annually and charged on the Grid Supply Point consumption (Including Distribution Losses)

0.001 p/kwh

Capacity Market Obligation Levy

Costs to cover payments to Capacity Market generators

Fixed rate forecast annually and charged on the Grid Supply Point consumption (Including Distribution Losses)

Not charged until Nov 2016

Is There Any Way Of Avoiding These Charges?

Unfortunately not, EMR is legislation passed by Parliament and affects all electricity consumers. However, controlling how much energy you use and when you use it may help to reduce your total costs. The government is seeking to exempt energy intensive industries from some of the Contracts for Difference (CfDs) costs. Details of which industries will be exempt and by how much are still to be determined but initial discussions suggest these customers may receive a considerable discount.

29 May 2015

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