The Electricity Capacity (Amendment) Regulations 2015

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations are made under Part 2, Chapter 3 of the Energy Act 2013 (c. 32) (“the Act”). They amend in various respects the Electricity Capacity Regulations 2014 (S.I. 2014/2043) (“the Principal Regulations”), which have previously been amended by Schedule 2 to the Electricity Capacity (Supplier Payment etc.) Regulations 2014 (S.I. 2014/3354) (“the Supplier Payment Regulations”). They also contain amendments to the Supplier Payment Regulations.

The Principal Regulations make provision for the purpose of enabling consumers’ demands for electricity in Great Britain to be met, by establishing a system (“the Capacity Market”) whereby those who offer to make electricity capacity available can (as the result of an auction) be awarded capacity agreements, which confer rights and impose obligations on those awarded the agreement. Those rights and obligations consist principally of the right to receive “capacity payments” from a settlement body established for that purpose, these being payments for generating (or reducing demand for) electricity at times of system stress; and the liability to make a penalty payment where the capacity agreement is breached. The Principal Regulations and the Supplier Payment Regulations also impose obligations on persons who supply electricity in Great Britain pursuant to an electricity supply licence under section 6 of the Electricity Act 1989 (c. 29). Those obligations consist principally of requirements to make payments to the settlement body. Further detailed and technical provision is made by the Capacity Market Rules 2014 (“the Rules”).

The amendments are set out in the Schedules to these Regulations.

Part 1 of Schedule 1 makes provision enabling electricity interconnectors to participate in the Capacity Market from 1st September 2015 onwards. For that purpose, the Supplier Payment Regulations have already amended the definition of “providing electricity” given in regulation 3 of the Principal Regulations, so that it includes the provision of electricity through an electricity interconnector—that is to say, an electric line or other electrical plant which subsists to convey electricity between Great Britain and another country or territory (see section 4(3E) of the Electricity Act 1989).

Paragraphs 1 and 2of Part1 make provision for other appropriate definitions, adding in particular a definition of an “interconnector CMU” as a third category of Capacity Market Unit which can participate in the system (alongside “generating CMUs” and “demand side response CMUs”). Paragraphs 3 to 7, 10 and 11 contain corresponding consequential amendments.

Paragraph 8of Part 1 introduces a new financial penalty, corresponding to the termination penalties already provided for under the Principal Regulations and the Rules, but which can apply where the question of the termination of a capacity agreement does not arise, because the default can be ascertained only after the relevant capacity agreement has already expired. This is relevant to capacity agreements for interconnector CMUs, which will be for a single delivery year.

Paragraph 9of Part 1 amends regulation 59 of the Principal Regulations to clarify when credit cover that has already been provided by an applicant in order to participate in a capacity auction need not be re-provided. In this case provision is made both for new build interconnector CMUs (new paragraph (1A)) and demand side response CMUs (new paragraph (1B)).

Part 2 of Schedule 1 amends the Principal Regulations to make provision—

(a) for a new definition of “half hourly meter” (amendment to regulation 2);

(b) to disapply the requirement for all generating units comprised in a generating CMU to be owned by the same person where the total connection capacity of those generating units is less than 50 megawatts (amendments to regulation 4);

(c) to clarify that, in the case of a demand side response CMU, the DSR capacity of the CMU must be equal to or greater than 2 megawatts (amendment to regulation 15);

(d) to disapply regulation 69(5) (which prevents the use of certain information in the reconsideration of a prequalification decision) in the case of the first and second DSR transitional auctions, to be held by the Delivery Body in accordance with Regulation 29(2); and to exclude participation in both the Electricity Demand Reduction pilot scheme established under section 43 of the Act and the first DSR transitional auction, where there is any overlap with the relevant delivery period (amendments to regulations 29 and 69);

(e) to require a capacity provider to repay capacity payments to the Settlement Body if a capacity agreement is terminated on a ground specified for this purpose in capacity market rules (new regulation 43B);

(f) to require a capacity provider to repay capacity payments to the Settlement Body if a metering test certificate or DSR test certificate is held to be invalid on a ground specified for this purpose in capacity market rules (new regulation 43C);

(g) for a capacity provider to forego at least one month’s capacity payment where the capacity provider has failed to demonstrate satisfactory performance (amendments to regulation 50);

(h) to ensure that a successful appellant against a “prequalification” decision can nominate a lower amount of capacity in the case of a demand side reduction CMU (amendments to regulation 73); and

(i) for transitory provisions for the “second T-4 auction” (new regulation 87A).

Schedule 2 amends the Supplier Payment Regulations in order to provide a revised figure for the annual settlement costs levy under regulation 9, and to remove an unnecessary duplication between regulation 34 and regulations 2(7) and 5(4).

A full impact assessment of the effect that this instrument and the Principal Regulations will have on the costs of business and the voluntary sector is available from the Department of Energy and Climate Change at 3 Whitehall Place, London SW1A 2AW and is published with the Explanatory Memorandum alongside this instrument on www.legislation.gov.uk.