Energy Suppliers and Generators call for changes as the costs from the Covid-19 Pandemic pile up

The consultation will look at the option of deferring the payment of part of the amount of the increase in electricity suppliers obligations that was due to be collected by the Low Carbon Contracts Company for the period of Q2 2020 to Q1 2021. 

According to the LCCC, the increases are a direct result of the lower electricity demand caused by the lockdown.

Recently released data has shown that demand for electricity has fallen by as much as 20% with demand falling to new record-breaking lows as seen on the Easter bank holiday weekend. 

The sharp decline in demand prompted the National Grid ESO to ask Ofgem to make an urgent modification to the grid code so that it could get energy suppliers to stop generation if demand fell to the point where the grid would need to be balanced. 

Read more: Ofgem agrees changes to the Uniform Network Code to tackle Covid-19 issues

Suppliers have argued that a deferral will allow them to better manage their increased obligations as the impacts and ongoing challenges created by the Coronavirus eat into their revenue streams.

“To implement the changes recommended following the consultation would then require Contracts for Difference (Electricity Supplier Obligation) Regulations 2014. This would be subject to parliamentary approval, which would need to be granted before 9 July for the changes to be brought in in time.

If it is not changed, suppliers will have to pay a higher lump sum to LCCC after the reconciliation process in July,” said the BEIS. 

The BEIS has also said that due to the ongoing ‘exceptional circumstances’ it will provide a one-off loan to the LCCC to allow it to pay Contracts for Difference generators without having to raise the Interim Levy Rate. 

The call comes after it was revealed that managing the electricity transmission system will cost an additional £500 million. The fall in electricity demand has created new issues for the National Grid to keep the grid balanced. 

Costs of the BSUoS are forecast to soar as it’s May 15th report shows that costs for 2020/21 could be as high as £2,000 million. In comparison, the February report forecast costs of £1,478 million. 

SSE has argued that if changes are not made and the increased costs continue to be collected under current arrangements the impacts will be ‘profound’ for energy suppliers and energy generators. 

The call for modification additionally asks that this be dealt with as a matter of urgency, as it will have “a significant commercial impact on parties, consumers or other stakeholders” and could give rise to “a significant impact on the safety and security of the electricity and/or gas systems”.

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