The Contracts for Difference (Electricity Supplier Obligations) Regulations 2014

Made: 31st July 2014

Coming into force in accordance with regulation 1

The Secretary of State has before making these Regulations—consulted the persons listed in section 24(1)(a) to (g) of the Energy Act 2013 and such other persons as the Secretary of State considered it appropriate to consult; andhad regard to the matters in section 5(2) of that Act

The Secretary of State has before making these Regulations—

consulted the persons listed in section 24(1)(a) to (g) of the Energy Act 2013 and such other persons as the Secretary of State considered it appropriate to consult; and

had regard to the matters in section 5(2) of that Act

In accordance with section 6(8) of that Act, a draft of this instrument was laid before Parliament and approved by a resolution of each House of Parliament.

Accordingly, the Secretary of State, in exercise of the powers conferred by sections 6(1), (5) and (6), 9(1), (2), (4) to (8), and (10), 17, 18(1), (2) and (4), 19, 21(1) and (3) and 22(1) of, and paragraph 16(2) of Schedule 2 to, the Energy Act 2013, makes the following Regulations:

PART 1 — Introduction

Citation and commencement

1

These Regulations may be cited as the Contracts for Difference (Electricity Supplier Obligations) Regulations 2014 and come into force on the day after the day on which they are made.

Interpretation

2

• (1) In these Regulations—

• “absolute value”, in relation to an amount, means the magnitude of that amount without regard to whether that amount is positive or negative;

• “the Act” means the Energy Act 2013;

• “the Balancing and Settlement Code” means the code for the governance of electricity balancing and settlement in Great Britain , as amended from time to time, which is maintained in accordance with the conditions of an electricity system operator licence granted under section 6(1)(da) of the Electricity Act 1989;

• “BM Unit” has the meaning given in the Balancing and Settlement Code (see section X of that code) and “registered” in relation to a BM Unit means registered in accordance with the requirements of section K of the Balancing and Settlement Code;

• “BSC volume allocation run” means any one of the following—an Initial Volume Allocation Run,an Interim Information Volume Allocation Run,a Reconciliation Volume Allocation Run (including a Final Reconciliation Volume Allocation Run or a Post-Final Volume Allocation Run);

• “the BSCCo” means ELEXON Limited (or any successor to that company acting in the capacity of the BSCCo within the meaning given in the Balancing and Settlement Code);

• “CFD counterparty payment” means any payment which the CFD counterparty must make—under a CFD;under a connected agreement; to a CFD party for the purpose of compensating that person in respect of any breach of any duty (however that duty arises) owed to that person by the CFD counterparty which is connected to a CFD or a connected agreement, and includes any payment made to a person to whom a benefit under a CFD or connected agreement has been assigned in accordance with the terms of that agreement;

• “CFD party” means a person, other than the CFD counterparty, who is a party to a CFD or connected agreement and is entitled to payments under such an agreement;

• “CFD party payment” means any payment which a CFD party must make to the CFD counterparty—under a CFD;under a connected agreement,and includes a payment made to a person to whom a benefit under a CFD or connected agreement has been assigned in accordance with the terms of that agreement;

• “CFD period contribution” is to be construed in accordance with regulation 3;

• “connected agreement” means any agreement entered into by the CFD counterparty or a CFD party, pursuant to a CFD;

• “EII excluded electricity” has the meaning given in regulation 2(1) of the Excluded Electricity Regulations;

• “electricity supplier” means a person who is the holder of a licence to supply electricity under section 6(1)(d) of the Electricity Act 1989;

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “estimated quarterly obligation period electricity supply”, “estimated quarterly obligation period income”, and “estimated quarterly obligation period payment cost” are to be construed in accordance with regulation 7;

• ...

• “Excluded Electricity Regulations” means the Electricity Supplier Obligations (Amendment & Excluded Electricity) Regulations 2015;

• “final reconciliation determination” is to be construed in accordance with regulation 15(2);

• “Final Reconciliation Volume Allocation Run” has the meaning given in the Balancing and Settlement Code (see section U of that code);

• “first operational cost period” means the period beginning on 1st January 2015 and ending on 31st March 2015;

• “Initial Volume Allocation Run” has the meaning given in the Balancing and Settlement Code (see section U of that code);

• “Interim Information Volume Allocation Run” has the meaning given in the Balancing and Settlement Code (see section U of that code);

• “interim rate payment” is to be construed in accordance with regulation 8;

• “investment contract” has the meaning given in Schedule 2 to the Act;

• “letter of credit” means a letter from a person which contains an irrevocable and unconditional authorisation in favour of the CFD counterparty to be paid by that person on demand up to an amount stated in the letter;

• “mutualisation amount” and “mutualisation notice” are to be construed in accordance with regulation 17;

• “operational cost period” means—the first operational cost period, orany subsequent period beginning on 1st April in a year and ending on 31st March in the following year;

• “Post-Final Volume Allocation Run” has the meaning given in the Balancing and Settlement Code (see section U of that code);

• “quarterly obligation period” means a period of 3 months commencing after 31st March 2015 on 1st April, 1st July, 1st October or 1st January ...;

• “reconciliation determination” and “reconciliation period” are to be construed in accordance with regulation 15(1);

• “Reconciliation Volume Allocation Run” has the meaning given in the Balancing and Settlement Code (see section U of that code);

• “reserve payment” means a payment an electricity supplier is required to make under regulation 11(1);

• “reserve period” means a period beginning with the 13th working day of a quarterly obligation period and ending with the 13th working day of the subsequent quarterly obligation period;

• “SoS funds” means any financial assistance provided by the Secretary of State to the CFD counterparty (under section 154(2)(b) of the Act) for the purposes of making CFD counterparty payments and adjusting payments due from electricity suppliers in accordance with these Regulations;

• “sustainable industry reward” has the meaning given in regulation 2(1) of the Contracts for Difference (Allocation) Regulations 2014 as amended from time to time;

• “total reserve amount” is to be construed in accordance with regulation 10;

• “transport and storage provider” means a person who holds a licence under section 7 of the Energy Act 2023.

• “working day” means a day that is not a Saturday or Sunday, Christmas Day, Good Friday or any day that is a bank holiday in England and Wales under the Banking and Financial Dealings Act 1971 .

• (2) Any reference in these Regulations to an amount of electricity is a reference to that amount expressed in megawatt hours.

• (2A) Any reference in these Regulations to a supply of electricity is a reference to its supply in Great Britain, and “supply” is to be construed in accordance with section 4(4) of the Electricity Act 1989.

• (3) Any reference in these Regulations to an amount to be paid or provided is a reference to that amount expressed in pounds sterling and rounded to the nearest whole penny with any half of a penny being rounded upwards.

• (4) Any reference in these Regulations to a CFD includes a reference to an investment contract which was transferred to the CFD counterparty by virtue of paragraph 16(1) of Schedule 2 to the Act.

• (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (6) Where more than one person is designated under section 7 of the Act as a CFD counterparty, the Schedule has effect and these Regulations have effect as set out in that Schedule.

PART 2 — Supplier obligation

CHAPTER 1 — The supplier obligation

The supplier obligation

3

• (1) Every electricity supplier who supplies electricity during a quarterly obligation period must, subject to paragraph (3), pay a CFD period contribution to the CFD counterparty in respect of that period.

• (2) The CFD period contribution in relation to a supplier in respect of a quarterly obligation period is the sum of—

• (a) CFD daily contributions for each day on which that supplier supplies electricity in that period calculated in accordance with regulation 4; and

• (b) a CFD quarterly contribution for that period calculated in accordance with regulation 5.

• (3) Where the amount of a supplier's CFD period contribution in respect of a quarterly obligation period is a negative number—

• (a) the amount the supplier must pay under paragraph (1) in respect of that period is zero; and

• (b) the CFD counterparty must pay the absolute value of that amount to that supplier.

• (4) For the purpose of ensuring that the CFD period contribution is paid—

• (a) an electricity supplier must—

• (i) make interim payments in accordance with regulations 8(1) and 11(1) and, where so required, regulation 14(3),

• (ii) make supplier data reconciliation payments in accordance with regulation 9(2), and

• (iii) make any required reconciliation payments in accordance with regulation 16(3)(a); and

• (b) the CFD counterparty must—

• (i) make counterparty data reconciliation payments in accordance with regulation 9(3), and

• (ii) make any required reconciliation payments in accordance with regulation 16(3)(b).

CFD daily contributions

4

• (1) The CFD daily contribution for a supplier for a day on which that supplier supplies electricity in a quarterly obligation period is the amount given by—

$$(GP−CP)×[SDS−(XE+GE)TDS−(TE+GT)]$ where— GP is the total amount of generation counterparty payments which the CFD counterparty is required to make in respect of—electricity generation which occurred on that day,electricity generation capacity which was made available on that day,transport and storage capital costs or operational costs which arose on that day,carbon dioxide capture which occurred on that day,carbon dioxide capture capability which was made available on that day,transport and storage revenue shortfalls which arose on that day, the sustainable industry reward which arose on that day; except for any payments which, at the time of the final reconciliation determination in respect of that quarterly obligation period, had not been determined by the CFD counterparty; CP is the total amount of generation party payments which the CFD counterparty has received from CFD parties in respect of—electricity generation which occurred on that day,electricity generation capacity which was made available on that day,transport and storage capital costs or operational costs which arose on that day,carbon dioxide capture which occurred on that day,carbon dioxide capture capability which was made available on that day,transport and storage revenue shortfalls which arose on that day, the sustainable industry reward which arose on that day; except for any payments which, at the time of the final reconciliation determination in respect of that quarterly obligation period, had not been determined by the CFD counterparty; SDS is the amount of electricity supplied by that supplier on that day;XE is the amount of EII excluded electricity supplied by that supplier on that day; ... TDS is the total amount of electricity supplied by all suppliers on that day.TE is the total amount of EII excluded electricity supplied by all suppliers on that day; ...$

• (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (1B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (2) In this regulation and regulations 5 and 28—

• “generation counterparty payment” means any CFD counterparty payment made under, or in respect of a breach of, a CFD or connected agreement which is calculated directly by reference to—an amount of electricity generated by a generating station which is the subject of that CFD or connected agreement,an amount of electricity generation capacity made available by a generating station which is the subject of that CFD or connected agreement,the capital costs or the operational costs incurred by a transport and storage provider and is payable under the CFD or connected agreement to the generating station which is the subject of that CFD or connected agreement,an amount of carbon dioxide captured by a generating station which is the subject of that CFD or connected agreement,an amount of carbon dioxide capture capability made available by a generating station which is the subject of that CFD or connected agreement,the revenue shortfalls of a transport and storage provider and is payable under the CFD or connected agreement to the generating station which is the subject of that CFD or connected agreement; the sustainable industry reward;

• “generation party payment” means any CFD party payment made under a CFD or connected agreement which is calculated directly by reference to—an amount of electricity generated by a generating station which is the subject of that CFD or connected agreement,an amount of electricity generation capacity made available by a generating station which is the subject of that CFD or connected agreement,the capital costs or the operational costs incurred by a transport and storage provider and is payable under the CFD or connected agreement to a generating station which is the subject of that CFD or connected agreement,an amount of carbon dioxide captured by a generating station which is the subject of that CFD or connected agreement,an amount of carbon dioxide capture capability made available by a generating station which is the subject of that CFD or connected agreement,the revenue shortfalls of a transport and storage provider and is payable under the CFD or connected agreement to the generating station which is the subject of that CFD or connected agreement; the sustainable industry reward.

• (3) For the purposes of this regulation and regulation 5, the amount of electricity supplied by a supplier is the amount of electricity which the BSCCo determines was supplied by that supplier on the basis of—

• (a) a Final Reconciliation Volume Allocation Run; or

• (b) where a Post-Final Volume Allocation Run has occurred in relation to the day on which the electricity was supplied, a Post-Final Volume Allocation Run.

CFD quarterly contribution

5

The CFD quarterly contribution for a supplier for a quarterly period is the amount given by—

CHAPTER 2 — Interim daily levy

Setting the interim levy rate

6

• (1) The CFD counterparty must, in respect of every quarterly obligation period determine an interim levy rate which is to apply for that period.

• (2) The CFD counterparty must determine an interim levy rate for a quarterly obligation period (“the rate period”) before the commencement of the quarterly obligation period which immediately precedes the rate period.

• (3) Where the CFD counterparty has determined an interim levy rate for a quarterly obligation period it must—

• (a) as soon as reasonably practicable, publish a notice setting out that rate and issue that notice to every electricity supplier who has a BM Unit registered as at the day before the date of publication of the notice; and

• (b) issue that notice to every electricity supplier who has a BM Unit that becomes registered on or after the date of publication of the notice and by the last day of the quarterly obligation period to which that rate applies, as soon as reasonably practicable after the BM Unit is registered.

• (4) Subject to paragraph (5), the interim levy rate for a quarterly obligation period is to be determined as the amount given by—

$$E O C − E O I E O S$where—EOC is the estimated quarterly obligation period payment cost, estimated in accordance with regulation 7(1);EOI is the estimated quarterly obligation period income, estimated in accordance with regulation 7(3); andEOS is the estimated quarterly obligation period electricity supply, estimated in accordance with regulation 7(4).$

• (5) Where the amount given by the calculation in paragraph (4) in relation to a quarterly obligation period is less than zero, the interim levy rate shall be determined as zero for that period.

Estimated cost, income & electricity supply

7

• (1) The estimated quarterly obligation period payment cost in respect of a quarterly obligation period (“the rate period”) is the sum of any SoS repayment and the CFD counterparty’s estimates of TGPR and NDSR in respect of that period, estimated by the CFD counterparty having regard to the matters set out in paragraph (2).

• (2) The matters referred to in paragraph (1) are—

• (a) the strike prices which, in the opinion of the CFD counterparty, will apply to CFDs during the rate period;

• (b) the availability payments related to the amount of low carbon electricity generation capacity availability which, in the opinion of the CFD counterparty, will apply to CFDs during the rate period;

• (c) the CFD counterparty’s estimate of—

• (i) where payments under a CFD may become due in relation to the generation of electricity in a settlement hour or a settlement period by a CFD generating station, the amount of electricity generated by each such CFD generating station in each settlement hour or settlement period during the rate period;