In its consultation2, BEIS has advised that existing CMAs are still capable of being enforced during the standstill period, although no payments may be made. However, during the standstill period, the requirement to provide credit support has been waived and capacity providers are permitted to request the return of their credit cover.
National Grid (as EMR delivery body) and the Electricity Settlements Company are continuing to operate the CM, but without making payments, to ensure that capacity providers are eligible for deferred payments after the standstill period, subject to state aid clearance and continued compliance with the obligations under those CMAs. It is envisaged that 2019/2020 CMAs would also be eligible for deferred payments should state aid approval slip beyond 1 October 2019.
Potential capacity providers with a new build units with CMA for future delivery years are under certain obligations and must meet certain milestones to ensure timely delivery. BEIS is consulting on delaying certain milestones which involve significant financial commitments, recognising that these will be difficult to justify during the standstill period (the majority of proposals relate to CMAs with the 2020/2021 delivery year).
BEIS are also consulting on proposals that any termination fees or penalties accruing during the standstill period will be set-off against deferred payments and settled only once the Secretary of State determines that the standstill period has ended (the ‘domestic law trigger’).
Following discussions with the Commission, and because of the potential spike in consumer bills, the Government is minded to restart collection of the CM supplier charge so that it is in a position to make any deferred payments due, once state aid approval is granted. BEIS is now consulting on measures to ensure continuity in supplier charging arrangements so that funds will be in place to make any payments once the CM is reapproved. Options being considered include continuing to collect the supplier charge, and modification of the Balancing and Settlement Code to require suppliers to pay an amount equivalent to the supplier charge into a trust or into escrow.
It should be noted that if the CM is altered in order to secure state aid approval, there could be an impact on CMAs awarded at past auctions (otherwise the grant of the aid would not be in conformance with the terms of the approval). Much will depend on the conditions associated with the approval.