UK Parliament / Open data

Electricity Capacity (Supplier Payment etc.) Regulations 2014

I start by thanking the noble Lord, Lord Grantchester, for what was, I think, his general support for the draft regulations. Of course, he reminded

me of the hard work that the Committee undertook during debate on what became the Energy Act 2013. I was extremely grateful for the noble Lord’s participation in ensuring that the level of scrutiny that took place really did enhance the Bill as it moved through to become an Act.

As always, the noble Lord, Lord Grantchester, asked a large range of questions and before I continue, if I fail to answer any of the questions that he posed, I will of course read Hansard carefully, and I undertake to write to him and place a copy in the Library.

The noble Lord asked about the period of reviews. Reviews will be undertaken yearly by Ofgem and every five years by the Government. It is important that we ultimately deliver the right formula to ensure a value-for-money cost to the consumer. I know that ultimately the noble Lord and I share the primary object of ensuring that not only do we have enough supply but that it provides value to the consumer.

4.30 pm

The noble Lord also asked what suppliers thought of mutualisation of the costs in the event that one supplier fails to pay. We have consulted with suppliers on charging arrangements and they accept that mutualisation is necessary in order to provide the necessary certainty that capacity payments will be made to providers. This reflects cost recovery mechanisms in similar organisations elsewhere. It is not unique to the proposal we are putting forward here.

The noble Lord asked what dispute mechanisms were in place in relation to the data used or the calculations carried out. The majority of data used for settling the capacity market comes from existing industry processes established by the balancing and settlement code. So, again, we have evidence available from resources already in place.

The noble Lord also asked about electricity suppliers’ charges being based initially on their own estimates. The payment methodology ensures that, in all instances, 100% of the necessary costs can be collected. This is an important objective. We opted not to create a penalty on suppliers for inaccurate estimates because of the additional complexity that that would create. The challenge, of course, as the noble Lord is aware, is to achieve this in a fair manner. We do not want to have unintended consequences on suppliers just because a new mechanism is being put into place.

4.32 pm

Type
Proceeding contribution
Reference
757 cc476-7GC 
Session
2014-15
Chamber / Committee
House of Lords Grand Committee
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