UK consults on CfD proposals for energy suppliers

UK consults on CfD proposals for energy suppliers

by Big Mac

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A consultation on proposed changes to the supplier obligation under the Contracts for Difference (CfD) scheme has been launched.
Under the CfD scheme, green developers receive guaranteed payments for the energy they generate.
A contract is signed between a low carbon electricity generator and the Low Carbon Contracts Company (LCCC), which collects money from suppliers to make the payments to developers.
Suppliers will make pre-payments, which will consist of:
• an interim rate payment, charged at a fixed £/MWh rate on a daily basis across each levy quarter and
• a lump sum ‘reserve’ payment at the start of each levy period.
The government’s proposed changes aim to lower the costs of CfDs that are passed onto consumers by energy companies.
They include modifying the way the interim levy rate is calculated “in order to align it with suppliers’ expected liabilities for a quarter” and making reconciliation payments more quickly once a quarter ends.
Currently these payments are made 90 days after the relevant notice is issued, “which may result in LCCC holding more reserves than necessary for a significant period of time”.
The government is proposing reducing the payment period to five to 10 working days.
“We are consulting on a series of technical amendments aimed at reducing CfD costs to consumers through incremental changes to the efficiency and transparency of the SO design”, it states.
The consultation is open until 23rd October.