Contracts for Difference: proposed changes to the Electricity Supplier Obligation Regulations in response to COVID-19

Overview

This consultation seeks views on the proposal to defer part of the amount of the increase in electricty suppliers' obligations that would otherwise be collected by LCCC for the current (the second) quarter of 2020 to the first quarter of 2021. Implementation of the proposal would require a change to the Contracts for Difference (Electricity Supplier Obligation) Regulations 2014, which would be subject to Parliamentary approval. 

Why your views matter

As a result of lower electricity demand, resulting from measures introduced to reduce the spread of COVID-19, and higher payments to Contracts for Difference (CfD) generators because of lower wholesale electricity prices, electricity suppliers would have faced an unexpected increase in their obligations for the second quarter of 2020. Therefore, in line with government efforts to support the economy in the light of the COVID-19  emergency, the government announced on 24 April that it will provide a one-off loan to the Low Carbon Contracts Company (LCCC) so that it can continue to pay CfD generators without needing to increase the Interim Levy Rate at short notice. This is in response to the truly exceptional circumstances of COVID-19. 

The government also announced that it intended to consult on deferring part of the amount of the increase in suppliers' obligations that would otherwise be collected by LCCC for the current (the second) quarter of 2020 to the first quarter of 2021. This consultation seeks views from stakeholders and interested parties on that proposal.

Online stakeholder event, Friday 15 May

We will host an online consultation event at 10am on Friday 15 May to explain the proposals and answer any questions.

If you would like to register, please email BEISContractsforDifference@beis.gov.uk.

What happens next

Following this consultation, we plan to publish the Government Response and lay the regulations in Parliament in early June to enable them to come into force in early July. 

If the government decides (following consultation) not to proceed with the proposal, it would still provide the loan facility to the LCCC, but suppliers’ obligations for CfD payments in the current quarter would be unchanged. Suppliers would have to pay a higher lump sum to LCCC following the reconciliation process in July. We would still amend the ESO Regulations to enable LCCC to repay the loan to BEIS.