Rachel Reeves, the chair of the House of Commons’ Business, Energy & Industrial Strategy (BEIS) Committee has called on the UK Government to develop a “Plan B” for the Capacity Market. Her comments are a direct response to a letter from Claire Perry within which the Energy Minister answered questions from the committee over the European Court of Justice’s (ECJ) decision to suspend the Capacity Market at the end of 2018. Within her letter, Clare Perry outlines how the UK Government is managing the suspension of the Capacity Market, including how energy suppliers would continue to collect money from their customers to fund the Capacity Market, and how Capacity Market contract holders would be reimbursed for lost payments. At Optima, we have seen Capacity Market charges coming back into the billing for most suppliers in December.
As we have discussed previously, judges at the ECJ ruled that the European Commission had not followed the correct procedure when it granted state aid approval to the UK Government for the Capacity Market mechanism.
Reeves responded to the letter by saying; “The Government has provided some welcome clarity on their next steps in response to the European Court of Justice ruling on the Capacity Market.”
“However, the Government’s approach rests on European Commission reapproval, doing little to suggest there is any preparation work on a back-up plan in the event of a negative Commission decision.”
“The Government needs a ‘plan B’ so that businesses and investors can ensure the UK’s electricity system is prepared for next winter, whatever the Commission’s ruling.”
As before, we will keep a watching brief at Optima to see how this develops moving forward and will post further updates as we get them.