The Warm Home Discount (Reconciliation) Regulations 2022

Made: at 11.24 a.m. on 9th November 2022

Laid before Parliament: at 4.00 p.m. on 9th November 2022

Coming into force: 30th November 2022

In accordance with section 14(1) of the Energy Act 2010, the Secretary of State has consulted the Gas and Electricity Markets Authority, licensed electricity suppliers, licensed gas suppliers and such other persons as the Secretary of State thinks appropriate⁴⁹.

PART 1 — Introductory

Citation, commencement and extent

1

• (1) These Regulations may be cited as the Warm Home Discount (Reconciliation) Regulations 2022.

• (2) These Regulations come into force on 30th November 2022.

• (3) These Regulations extend to England and Wales and Scotland.

Interpretation: general

2

In these Regulations—

• “England & Wales Scheme Regulations” means the Warm Home Discount (England & Wales) Regulations 2026;

• “Scotland Scheme Regulations” means the Warm Home Discount (Scotland) Regulations 2026.

PART 2 — Reconciliation Mechanism: England & Wales Scheme Regulations

CHAPTER 1 — Introductory

Part 2: Interpretation

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• (1) In this Part—

• “Bank of England base rate” means—the percentage rate announced from time to time by the Monetary Policy Committee of the Bank of England as the official dealing rate, being the rate at which the Bank is willing to enter into transactions for providing short term liquidity in the money markets; orwhere an order under section 19 of the Bank of England Act 1998⁵⁰ is in force, any equivalent percentage rate determined by the Treasury under that section;

• ...

• “final reconciliation” means the calculation by the Authority⁵¹ of the amounts to be paid by, or received by, scheme electricity suppliers as final reconciliation payments for a scheme year;

• “final reconciliation payment” has the meaning given in regulation 10(1);

• “interim reconciliation” has the meaning given in regulation 6(2);

• “interim reconciliation direction” has the meaning given in regulation 6(3);

• “interim reconciliation payment” has the meaning given in regulation 7(1);

• “interim reconciliation period” has the meaning given in regulation 6(5);

• “original non-core spending obligation” in relation to a compulsory scheme electricity supplier and a scheme year, means a supplier’s non core spending obligation for the scheme year calculated in accordance with regulation 20 of the England & Wales Scheme Regulations before any adjustments under regulation 21 or 22 of those Regulations;

• “reconciliation payment” means—an interim reconciliation payment; ora final reconciliation payment;

• “relevant supplier” means—a scheme electricity supplier; ora scheme gas supplier;

• “reporting date” has the meaning given in regulation 4(6);

• “standard rebate notice” has the meaning given in regulation 9(1)(a) of the England & Wales Scheme Regulations.

• “working day” means any day other than a Saturday or Sunday or a day which is a bank holiday or public holiday in England and Wales or in Scotland.

• (2) In this Part the following expressions have the same meanings as in the England & Wales Scheme Regulations⁵²—

• “compulsory scheme electricity supplier”;

• “core group customer”;

• “GB domestic customer”;

• “scheme electricity supplier”;

• “scheme gas supplier”;

• “scheme year” and “scheme year” followed by a number.

Notification of GB domestic gas and electricity unit volumes: scheme years 16 to 20

4

• (1) For each of scheme years 16 to 20, the Secretary of State may give one or more notices to the Authority specifying—

• (a) one or more reporting periods for the scheme year; and

• (b) one or more reporting dates for the scheme year,

stating that the reporting period or date relates to either interim or final reconciliation, or both, as appropriate.

• (2) If the Authority is given a notice under paragraph (1), the Authority must give a notice to all relevant suppliers specifying—

• (a) the reporting period; and

• (b) the reporting date,

stating that the reporting period or date relates to either interim or final reconciliation, or both, as appropriate.

• (3) A relevant supplier to whom a notice under paragraph (2) is given must notify the Authority on or before the reporting date, and in such form as may be specified in the notice, of such information as the Authority may require for the purpose of determining the total volume of electricity and gas units delivered by that supplier to all their GB domestic customers in the relevant reporting period specified in paragraph (2).

• (4) If a relevant supplier does not comply with the requirements in paragraph (3), the Authority must, to the best of its ability with the information available to it, determine the supplier’s total volume of electricity and gas units delivered to all their GB domestic customers in the relevant reporting period specified in paragraph (2).

• (5) The Authority may use volumetric data which it has already previously collected as part of—

• (a) voluntary requests for information; or

• (b) final reconciliation;

for the purposes of interim reconciliation.

• (6) In this regulation—

• “reporting date”, in relation to a scheme year, means a date specified as a reporting date in a notice given by the Secretary of State under paragraph (1), by which date the supplier’s total volume of electricity and gas units delivered to all their GB domestic customers must be reported to the Authority for the purposes of interim reconciliation, or final reconciliation, as the case may be;

• “reporting period”, in relation to a scheme year, means a period specified as a reporting period, being the period for which the supplier’s total volume of electricity and gas units delivered to all their GB domestic customers is calculated, in accordance with a notice given by the Secretary of State under paragraph (1).

• (7) For the final reconciliation, the reporting period must conclude on 31st March in any scheme year.

• (8) For the final reconciliation, the reporting date must fall within two months from the date of the end of the reporting period.

Determination of market share for scheme electricity supplier

5

• (1) The Authority must use the total volume of electricity and gas units obtained from scheme electricity suppliers as described in regulation 4 or 5A, as the case may be, in respect of each scheme year to determine the market share of each scheme electricity supplier, in accordance with paragraph (3), to be used for—

• (a) the interim reconciliation in that scheme year; and

• (b) the final reconciliation in that scheme year.

• (2) The Authority must make a determination—

• (a) under paragraph (1)(a) as soon as is reasonably practicable after the start of the scheme year;

• (b) under paragraph (1)(b) as soon as is reasonably practicable after the reporting date for the final reconciliation.

• (3) The market share of a scheme electricity supplier is to be calculated as follows—

$$VMS= SRg+SReTSRg+TSRe$where—“VMS” is the volumetric market share; “SRg” is the Supplier Recovery (gas), the amount recovered by that supplier through Warm Home Discount gas unit rates (see paragraph (5)); “SRe” is the Supplier Recovery (electric), the amount recovered by that supplier through Warm Home Discount electric unit rates (see paragraph (5));“TSRg” is the Total Supplier Recovery (gas), the sum of the amount recovered by all suppliers through Warm Home Discount gas unit rates (see paragraph (5));“TSRe” is the Total Supplier Recovery (electric), the sum of the amount recovered by all suppliers through Warm Home Discount electric unit rates (see paragraph (5)).$

• (4) For the purposes of paragraph (3)—

• (a) a reference to a supplier’s market share is a reference to the supplier’s market share calculated—

• (i) in respect of the interim reconciliation, in accordance with paragraph (1)(a); or

• (ii) in respect of the final reconciliation, in accordance with paragraph (1)(b);

• (b) if a scheme electricity supplier is connected to one or more scheme gas suppliers but is not connected to any other scheme electricity suppliers, they must be treated as one supplier when determining supplier recovery;

• (c) if a scheme electricity supplier is connected to one or more scheme gas suppliers and one or more scheme electricity suppliers, the estimated amount recovered through Warm Home Discount gas unit rates must be split between those connected scheme electricity suppliers according to each supplier’s proportion of the group’s electricity volumes;

• (d) a relevant supplier is to be treated as connected to another relevant supplier only if they both belonged to the same group of companies on 31st December preceding the start of the scheme year;

• (e) all references to “supplier” in this regulation include any supplier connected to that supplier by virtue of paragraph (d).

• (5) In this regulation—

• “WHD gas unit rates” are gas unit rates set out in the Policy Cost Allowance Methodology, Annex 4, maintained in accordance with the conditions of licences granted under section 6(1) of the Electricity Act 1989 and section 8 of the Gas Act 1986, and under section 2 of the Domestic Gas and Electricity (Tariff Cap) Act 2018.

• “WHD electricity unit rates” are electricity unit rates set out in the Policy Cost Allowance Methodology, Annex 4, maintained in accordance with the conditions of licences granted under section 6(1) of the Electricity Act 1989and section 8 of the Gas Act 1986, and under section 2 of the Domestic Gas and Electricity (Tariff Cap) Act 2018.

• “Wholesale Cost Allowance Methodology” is the Annex 2 Wholesale Cost Allowance Methodology maintained in accordance with the conditions of licences granted under section 6(1) of the Electricity Act 1989 and section 8 of the Gas Act, and under section 2 of the Domestic Gas and Electricity (Tariff Cap) Act 2018.

• (6) In paragraph (3), for the purposes of calculating the Supplier Recovery (electric)—

• (a) the supplier’s reported electricity units supplied to GB domestic customers as notified, or treated as notified, to the Authority by the supplier under regulation 4(3), or 5A(3), of these Regulations or, as the case may be, determined by the Authority under regulation 4(4), or 5A(4), must be apportioned across each quarter using the electricity profile class 1 seasonal weighting percentages used in the Authority’s published Wholesale Cost Allowance Methodology;

• (b) the apportioned electricity units for each quarter must be multiplied by the applicable Warm Home Discount electricity unit rate for that quarter, used in the Authority’s published Policy Cost Allowance Methodology; and

• (c) the resulting quarterly amounts must be aggregated.

• (7) In paragraph (3), for the purposes of calculating the Supplier Recovery (gas)—

• (a) the supplier's reported gas units supplied to GB domestic customers, as notified, or treated as notified, to the Authority by the supplier under regulation 4(3), or 5A(3), of these Regulations or, as the case may be, determined by the Authority under regulation 4(4), or 5A(4), must be apportioned across each quarter using the gas non-prepayment meter seasonal weighting percentages used in the Authority's published Wholesale Cost Allowance Methodology;

• (b) the apportioned gas units for each quarter must be multiplied by the applicable Warm Home Discount gas unit rate for that quarter, used in the Authority’s published Policy Cost Allowance Methodology; and

• (c) the resulting quarterly amounts must be aggregated.

• (8) For the purposes of paragraph 4(d) “group of companies” has the meaning given in regulation 3(1) of the England & Wales Scheme Regulations.

Provision of relevant information

5A

• (1) The Authority may request that a relevant supplier provide it with such information or evidence as the Authority requires for the purposes of carrying out its functions in relation to the reconciliation mechanism as provided for in these regulations.

• (2) A request under paragraph (1)—

• (a) must specify the date on or before which the information or evidence is to be provided; and

• (b) may specify the form in which any information is to be provided.

• (3) A relevant supplier must comply with a request under paragraph (1).

• (4) If a relevant supplier does not comply with any request made under paragraph (1), the Authority must make any determination required for the purposes of carrying out its functions in relation to the reconciliation mechanism, to the best of its ability using the information available to it.

CHAPTER 2 — Interim reconciliation

Direction to carry out interim reconciliation

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• (1) The Secretary of State may direct the Authority to carry out an interim reconciliation for a scheme year or any part of a scheme year.

• (2) An interim reconciliation is a calculation of the amounts to be paid by, or received by, scheme electricity suppliers on account of final reconciliation payments for the scheme year.

• (3) A direction under paragraph (1) (an “interim reconciliation direction”) may be given at any time—

• (a) after the Secretary of State has given a standard rebate notice in the scheme year under regulation 9(1) of the England & Wales Scheme Regulations; but

• (b) before the Authority has notified scheme electricity suppliers in relation to that scheme year under regulation 8 of these Regulations.

• (4) The Secretary of State may give more than one interim reconciliation direction to the Authority in relation to different parts of the scheme year.

• (5) An interim reconciliation direction must specify the period to which it relates (the “interim reconciliation period”).

• (6) The interim reconciliation period specified must end on or before the date on which the interim reconciliation direction is given.

• (7) If the Secretary of State gives an interim reconciliation direction to the Authority, the Secretary of State must notify the Authority of the number of persons specified in the Warm Home Discount standard rebate notices issued to each scheme electricity supplier on or before the date specified for interim reconciliation period, which number is then to be used for the purpose of calculating interim reconciliation payments in accordance with regulation 7.

• (7A) If, in accordance with paragraph (7), the Secretary of State gives an interim reconciliation direction to the Authority, the Authority must notify each scheme electricity supplier of—

• (a) the interim reconciliation direction;

• (b) the interim reconciliation period;

• (c) the number of persons specified in the standard rebate notices notified to the Authority under paragraph (7).

• (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Calculation of interim reconciliation payments

7

• (1) If the Authority is given an interim reconciliation direction in accordance with regulation 6, it must calculate the amount (the “interim reconciliation payment”) to be paid or received by each scheme electricity supplier in accordance with this regulation.

• (2) For the purposes of paragraph (1), the interim reconciliation payment is to be calculated as follows—

$$Interim Reconciliation Payment = Supplier Commitment – (VMS × Aggregate Supplier Commitment)$where—“Supplier Commitment” is, in this regulation, the projected Warm Home Discount liability, calculated by multiplying £150 with the number of persons specified in the standard rebate notices for that scheme electricity supplier issued to that supplier in relation to that scheme year added together with the total of the original non-core spending obligation for that supplier;“VMS” is the latest volumetric market share, calculated in accordance with the formula set out in Regulation 5(3);“Aggregate Supplier Commitment” is the total of the Supplier Commitments across all scheme electricity suppliers.$

• (3) Where the interim reconciliation payment calculation set out in paragraph (2) results in a positive amount, the scheme electricity supplier is entitled to receive an interim reconciliation payment equal to that amount.

• (4) Where the interim reconciliation payment calculation set out in paragraph (2) results in a negative amount, the scheme electricity supplier must make a payment equal to that amount to the Authority.

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

CHAPTER 3 — Final reconciliation

Notification of amounts of rebates provided

8

As soon as is reasonably practicable after the end of a scheme year, the Authority must notify each scheme electricity supplier of—

• (a) the total amount of rebates provided, or treated as being provided, to core group customers in the scheme year by the scheme electricity supplier (as determined in accordance with regulation 29(1)(a) of the England & Wales Scheme Regulations); and

• (b) the sum of the amounts so determined for all scheme electricity suppliers.

Estimate of the number of undelivered rebates

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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Calculation of final reconciliation payments

10

• (1) The Authority must calculate, in relation to each scheme year, the amount (“the final reconciliation payment”) to be received or paid by each scheme electricity supplier in accordance with this regulation.

• (2) The calculation referred to in paragraph (1) must be made as soon as reasonably practicable after the Authority has given a notification to each scheme electricity supplier in accordance with regulation 8.

• (3) For the purposes of calculating a scheme electricity supplier’s final reconciliation payment, the final reconciliation payment is to be calculated as follows—

$$Reconciliation payment = Supplier Commitment -(VMS × Aggregate Supplier Commitment) + Pm - Pr$where—“Supplier Commitment” is, in this regulation, the actual Warm Home Discount liability, the total cost of rebates provided by that supplier during the scheme year added together with the total cost of the original non-core spending obligation for that supplier;“VMS” is the latest volumetric market share, calculated in accordance with the formula set out in regulation 5(3); “Aggregate Supplier Commitment” is the total of the Supplier Commitments across all scheme electricity suppliers;“Pm” is the total of any interim reconciliation payments already made by the scheme electricity supplier;“Pr” is the total of any interim reconciliation payments already received by the scheme electricity supplier.$

• (4) Where the final reconciliation payment calculation set out in paragraph (3) results in a positive amount, the scheme electricity supplier is entitled to receive a final reconciliation payment equal to that amount.

• (5) Where the final reconciliation payment calculation set out in paragraph (3) results in a negative amount, the scheme electricity supplier must make a payment equal to that amount to the Authority.

CHAPTER 4 — Payments and related matters

Making reconciliation payments

11

• (1) After the Authority has calculated interim reconciliation payments under Chapter 2, or final reconciliation payments under Chapter 3, it must give a notice (a “payment notice”) to each scheme electricity supplier who is liable to make or entitled to receive a reconciliation payment.

• (2) A payment notice must specify—

• (a) the amount of the reconciliation payment;

• (b) the scheme electricity supplier’s latest market share, as used to calculate the reconciliation payment;

• (c) where the supplier is liable to make a reconciliation payment, the date on or before which the payment is to be made;

• (d) where the supplier is entitled to receive a reconciliation payment, the date on or before which the payment is to be made.

• (3) The date specified for the purposes of paragraph (2)(c) must be at least three working days after the date on which the payment notice is given.

• (4) The date specified for the purposes of paragraph (2)(d) must not be more than 10 working days—

• (a) after the date specified for the purposes of paragraph (2)(c); or

• (b) if different dates are specified for the purposes of that sub-paragraph for different scheme electricity suppliers, after the latest of those dates.

• (5) A scheme electricity supplier who is given a payment notice and is liable to make a reconciliation payment must pay the specified amount to the Authority on or before the specified date.

• (6) Where a scheme electricity supplier is given a payment notice and is entitled to receive a reconciliation payment, the Authority must pay the specified amount to the scheme electricity supplier on or before the specified date (but see regulation 12(6) and (7)).

• (7) The Authority must maintain a fund into which reconciliation payments by scheme electricity suppliers and from which reconciliation payments by the Authority under these Regulations are to be made.

• (8) In this regulation “specified” means specified in a payment notice.

Mutualisation

12

• (1) This regulation applies if, after the Authority has given a notice under regulation 11(1) to each scheme electricity supplier who is liable to make a reconciliation payment, one or more of those scheme electricity suppliers (each a “defaulting supplier”) fails to make the whole or part of the reconciliation payment to the Authority on or before the date on which it is due (the “due date”).

• (2) The Authority must—

• (a) apportion the total of the overdue amounts that remain unpaid between all the scheme electricity suppliers other than the defaulting suppliers, in proportion to their latest market shares for the relevant scheme year; and

• (b) give a notice (a “mutualisation notice”) to each of the scheme electricity suppliers other than the defaulting suppliers.

• (3) A mutualisation notice must specify—

• (a) the amount apportioned to the scheme electricity supplier under paragraph (2)(a) (the “mutualisation payment”);

• (b) the date on or before which the mutualisation payment must be made; and

• (c) the supplier’s latest market share, as used to calculate the mutualisation payment.

• (4) The date specified for the purposes of paragraph (3)(b) must be at least three working days after the date on which the mutualisation notice is given.

• (5) A scheme electricity supplier who is given a mutualisation notice must pay the specified amount to the Authority on or before the specified date.

• (6) The Authority may defer the whole, or part, of any reconciliation payments due to scheme electricity suppliers until up to 10 working days after the date it has received—

• (a) the overdue amounts from the defaulting suppliers; or

• (b) mutualisation payments from the other scheme electricity suppliers.

• (7) The amount of the payments deferred under paragraph (6) may not exceed the total of the overdue amounts.

• (8) Paragraph (9) applies if—

• (a) after giving a mutualisation notice to scheme electricity suppliers; but

• (b) before any of those suppliers has made a mutualisation payment,

the Authority receives an overdue amount from a defaulting supplier (a “paying supplier”).

• (9) Where this paragraph applies, the Authority must—

• (a) cancel the mutualisation notice; and

• (b) if any overdue amounts still remain unpaid, give a new mutualisation notice under paragraph (2) in relation to those amounts (but see paragraph (10)).

• (10) A mutualisation notice given in accordance with paragraph (9)(b) must not be given to—

• (a) the paying supplier; or

• (b) any other supplier who—

• (i) was a defaulting supplier; but

• (ii) has paid the whole of the overdue amount to the Authority.

• (11) Paragraph (12) applies if, after receiving mutualisation payments from scheme electricity suppliers, the Authority receives an overdue amount from a defaulting supplier.

• (12) Where this paragraph applies, the Authority must, within 10 working days after the date on which it receives the amount from the defaulting supplier, distribute that amount among the suppliers who have made mutualisation payments in proportion to their latest market shares (as used to calculate their mutualisation payment).

• (13) In this regulation—

• “latest market share”, in relation to a scheme electricity supplier and a relevant scheme year, means the most recent of any of the following determinations or recalculations of the supplier’s market share made by the Authority before the relevant date— a determination under regulation 5(1)(a) of the supplier’s market share for the purposes of interim reconciliation; a determination under regulation 5(1)(b) of the supplier’s market share for the purposes of final reconciliation; a recalculation under regulation 13(4) of the supplier’s market share for the relevant scheme year;

• “overdue amount”, in relation to a reconciliation payment that a scheme electricity supplier is liable to make, means the amount of the reconciliation payment which the scheme electricity supplier has failed to pay to the Authority by the due date;

• “relevant date” means the date on which the Authority makes the apportionment referred to in paragraph (2)(a);

• “relevant scheme year”, in relation to the calculation of a mutualisation payment by apportionment of an overdue amount, means the scheme year for which, or for part of which, the interim or final reconciliation to which the overdue amount relates was carried out;

• “specified” means specified in a mutualisation notice.

Termination of supply licence

13

• (1) This regulation applies if the electricity supply licence of a scheme electricity supplier (“E”) is terminated—

• (a) after the date on which the Authority makes a determination under regulation 5(1)(a) in relation to a scheme year (the “relevant scheme year”); but

• (b) before the date on which the Authority gives a notification under regulation 8 in respect of the relevant scheme year.

• (2) If, before the termination of E’s licence, the Authority has calculated under Chapter 2 that E is liable to make or entitled to receive an interim reconciliation payment for the relevant scheme year—

• (a) to the extent that the payment remains unpaid, E remains so liable or entitled (as the case may be) despite the termination of E’s licence;

• (b) in relation to E, the interim reconciliation for the relevant scheme year is to be treated as final.

• (3) E is not to be treated as a scheme electricity supplier for the purposes of any of the following events taking place after the termination of its licence—

• (a) an interim or final reconciliation;

• (b) a mutualisation notice given under regulation 12(2);

• (c) a distribution of interest (see regulation 14(4) or 15).

• (4) After the termination of E’s licence, the Authority must recalculate the market share of each remaining scheme electricity supplier for the relevant scheme year in accordance with the following formula—

$$M2=M1×100100-E1$where—“M2” is the remaining scheme electricity supplier’s recalculated market share for the relevant scheme year;“M1” is the remaining scheme electricity supplier’s original market share for the relevant scheme year;“E1” is E’s original market share for the relevant scheme year.$

• (5) For the purposes of paragraph (4), a scheme electricity supplier’s original market share for the relevant scheme year is the most recent of any of the following determinations or recalculations of the supplier’s market share made by the Authority before the date on which E’s licence is terminated—

• (a) a determination under regulation 5(1)(a) of the supplier’s market share for the purposes of interim reconciliation;

• (b) a determination under regulation 5(1)(b) of the supplier’s market share for the purposes of final reconciliation;

• (c) a recalculation under regulation 13(4) of the supplier’s market share for the relevant scheme year.

• (6) If, before the termination of E’s licence, E received an interim reconciliation payment (“IRP”) for the relevant scheme year—

• (a) any final reconciliation payment that a supplier is entitled to receive under regulation 10(4) on a final reconciliation for the relevant scheme year is to be adjusted by subtracting M2% of IRP;

• (b) any final reconciliation payment that a supplier is liable to pay under regulation 10(5) on a final reconciliation for the relevant scheme year is to be adjusted by adding M2% of IRP.

• (7) If, before the termination of E’s licence, E paid an interim reconciliation payment (“IRP”) for the relevant scheme year—

• (a) any final reconciliation payment that a supplier is entitled to receive under regulation 10(4) on a final reconciliation for the relevant scheme year is to be adjusted by adding M2% of IRP;

• (b) any final reconciliation payment that a supplier is liable to pay under regulation 10(5) on a final reconciliation for the relevant scheme year is to be adjusted by subtracting M2% of IRP.

• (8) For the purposes of this regulation, an electricity supply licence is terminated if—

• (a) it is revoked by the Authority in accordance with the terms of the licence;

• (b) it is surrendered by the licensee; or

• (c) it expires by the passage of time.

• (9) In this regulation “electricity supply licence” means a licence under section 6(1)(d) of the Electricity Act 1989⁵³.

Interest on late payments

14

• (1) A scheme electricity supplier who fails to make the whole or part of any payment under these Regulations by the date on which it is due (a “defaulting supplier”) must pay interest (“late payment interest”) on the unpaid amount for the period—

• (a) beginning with the day after the date on which the amount is due; and

• (b) ending with the date on which the amount is paid.

• (2) Late payment interest is to be calculated at a rate of two percentage points above the Bank of England base rate.

• (3) Any payment under these Regulations that is made by a defaulting supplier after the date on which it is due must be applied first to any late payment interest payable under paragraph (1).

• (4) Where a defaulting supplier pays late payment interest to the Authority, the Authority must distribute the amount of late payment interest among all the other scheme electricity suppliers, in proportion to their latest market shares for the relevant scheme year.

• (5) In this regulation—

• “latest market share”, in relation to a scheme electricity supplier and a relevant scheme year, means the most recent of any of the following determinations or recalculations of the supplier’s market share made by the Authority before the relevant date— a determination under regulation 5(1)(a) of the supplier’s market share for the purposes of interim reconciliation; a determination under regulation 5(1)(b) of the supplier’s market share for the purposes of final reconciliation; a recalculation under regulation 13(4) of the supplier’s market share for the relevant scheme year;

• “relevant date” means the date on which the Authority makes the distribution referred to in paragraph (4);

• “relevant scheme year”, in relation to the distribution of late payment interest on an unpaid amount, means the scheme year for which, or for part of which, the interim or final reconciliation to which the unpaid amount relates was carried out.

Interest earned by the Authority

15

• (1) The Authority must distribute to all the scheme electricity suppliers in proportion to their latest market shares the amount of any interest earned by the Authority on any payments made to it by scheme electricity suppliers under these Regulations.

• (2) The Authority—

• (a) must, if it has earned any interest, make a distribution under paragraph (1) at the same time as it makes final reconciliation payments for any scheme year commencing after scheme year 12; and

• (b) may make additional distributions at such other times as it considers appropriate.

• (3) In this regulation—

• “latest market share”, in relation to a scheme electricity supplier, means—where the interest is to be distributed at the same time as any final reconciliation payment, the supplier’s latest market share as used to calculate the final reconciliation payment ...;where the interest is to be distributed at any other time, the most recent of the following determinations or recalculations of the supplier’s market share made by the Authority before the relevant date—a determination under regulation 5(1);a recalculation under regulation 13(4);

• “relevant date” means the date on which the Authority makes the distribution under paragraph (1).

Make-right amounts

16

• (1) This regulation applies if the Authority identifies that an error has been made on an interim or final reconciliation or on the calculation of a mutualisation payment.

• (2) The Authority must calculate the amount that each scheme electricity supplier is liable to pay, or is entitled to receive, to correct the error (the “make-right payment”).

• (3) The make-right payment for a scheme electricity supplier is the sum of—

• (a) the difference between the amount already paid or received by the scheme electricity supplier (“amount A”), and the amount which the supplier would have been liable to pay or entitled to receive if the error had not been made (“amount B”); and

• (b) interest on the difference between amount A and amount B from the date of payment or receipt of amount A, calculated at a rate of two percentage points above the Bank of England base rate.

• (4) But where there is an imbalance, the Authority must adjust each scheme electricity supplier’s make-right payment by a percentage of the amount of the imbalance equal to the supplier’s latest market share for the relevant scheme year, so that the total of the make-right payments which suppliers are liable to pay is equal to the total amount of make-right payments that suppliers are entitled to receive.

• (5) For the purposes of paragraph (4), there is an imbalance if, on calculating each scheme electricity supplier’s make-right payment in accordance with paragraph (3), there is a difference between—

• (a) the total amount of make-right payments which suppliers are liable to pay; and

• (b) the total amount of make-right payments which suppliers are entitled to receive.

• (6) The Authority must give a notice (a “make-right notice”) to each scheme electricity supplier who is liable to make or entitled to receive a make-right payment.

• (7) A make-right notice must specify—

• (a) the amount of the make-right payment;

• (b) if an adjustment is made under paragraph (4)—

• (i) the amount by which the make-right payment is adjusted; and

• (ii) the supplier’s latest market share, as used to calculate the make-right payment;

• (c) where the scheme electricity supplier is liable to make a make-right payment, the date on or before which the payment is to be made;

• (d) where the scheme electricity supplier is entitled to receive a make-right payment, the date on or before which the payment is to be made.

• (8) The date specified for the purposes of paragraph (7)(c) must be at least three working days after the date on which the make-right notice is given.

• (9) The date specified for the purposes of paragraph (7)(d) must not be more than 10 working days—

• (a) after the date specified for the purposes of paragraph (7)(c); or

• (b) if different dates are specified for the purposes of that sub-paragraph for different suppliers, after the latest of those dates (the “latest due date”).

• (10) A scheme electricity supplier who is given a make-right notice and is liable to make a make-right payment must pay the specified amount to the Authority on or before the specified date.

• (11) Where a scheme electricity supplier is given a make-right notice and is entitled to receive a make-right payment, the Authority must pay the specified amount to the scheme electricity supplier on or before the specified date (but see paragraphs (12) and (13)).

• (12) The Authority may defer the whole, or part, of the make-right payments due to scheme electricity suppliers until up to 10 working days after the date it has received the make-right payments due from scheme electricity suppliers.

• (13) The amount of the payments deferred under paragraph (12) may not exceed the total of the make-right payments which the scheme electricity suppliers have failed to pay to the Authority on or before the latest due date.

• (14) The Authority must maintain a fund into which make-right payments by scheme electricity suppliers and from which make-right payments by the Authority under these Regulations are to be made.

• (15) In this regulation—

• “latest market share”, in relation to a scheme electricity supplier and a relevant scheme year, means the most recent of any of the following determinations or recalculations of the supplier’s market share made by the Authority before the relevant date— a determination under regulation 5(1)(a) of the supplier’s market share for the purposes of interim reconciliation; a determination under regulation 5(1)(b) of the supplier’s market share for the purposes of final reconciliation;a recalculation under regulation 13(4) of the supplier’s market share for the relevant scheme year;

• “mutualisation payment” has the meaning given in regulation 12(3)(a);

• “relevant date” means the date on which the Authority makes the adjustment under paragraph (4);

• “relevant scheme year” means—in relation to an error made on an interim or final reconciliation, the scheme year for which, or for part of which, the interim or final reconciliation was carried out;in relation to an error made on the calculation of a mutualisation payment, the scheme year for which, or for part of which, the interim or final reconciliation to which the mutualisation payment relates was carried out;

• “specified” means specified in a make-right notice.

PART 3 — Reconciliation Mechanism: Scotland Scheme Regulations

Reconciliation mechanism in relation to the support scheme made by the Scotland Scheme Regulations

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For the purposes of a reconciliation mechanism, in relation to the support scheme made by the Scotland Scheme Regulations, Part 2 of these Regulations applies in the same way as it applies for the purposes of a reconciliation mechanism in relation to the support scheme made by the England & Wales Scheme Regulations, with the following modifications—

• (a) for “England & Wales Scheme Regulations” in each place substitute “Scotland Scheme Regulations”;

• (b) in regulation 8(a), for “regulation 29(1)(a)” substitute “regulation 34(1)(a).

PART 4 — Set-off

Set-off

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• (1) This regulation applies where a relevant supplier is entitled to receive a payment from the Authority under these Regulations and is at the same time liable to make a payment to the Authority under these Regulations (whether or not the due date for the payment has passed).

• (2) The Authority may reduce the payment that it makes to the relevant supplier by up to the amount of the payment the supplier is liable to make under these Regulations.

• (3) Where the Authority reduces a payment that it makes to a relevant supplier by virtue of paragraph (2)—

• (a) for the purposes of these Regulations—

• (i) the Authority is to be treated as having paid to the relevant supplier, and the relevant supplier as having received from the Authority, the relevant amount; and

• (ii) the relevant supplier is to be treated as having paid to the Authority, and the Authority as having received from the relevant supplier, the relevant amount; and

• (b) the Authority must give a notice to the relevant supplier specifying—

• (i) the relevant amount;

• (ii) the balance of the payment the relevant supplier is entitled to receive (if any); and

• (iii) the balance of the payment the relevant supplier is liable to make (if any).

• (4) In this regulation—

• “relevant amount” means the amount by which the Authority reduces the payment that it makes to a relevant supplier by virtue of paragraph (2);

• “relevant supplier” means— a scheme electricity supplier as defined in regulation 3(1) of the England & Wales Scheme Regulations; or a scheme electricity supplier as defined in regulation 3(1) of the Scotland Scheme Regulations.

Signed

Callanan — Parliamentary Under Secretary of State — Department for Business, Energy and Industrial Strategy — At 11.24 a.m. on 9th November 2022

Editorial notes

Explanatory note

(This note is not part of the Regulations)

EXPLANATORY NOTE

These Regulations make provision for the establishment and operation of reconciliation mechanisms for the purposes of the Warm Home Discount (England and Wales) Scheme and the Warm Home Discount (Scotland) Scheme (each a “Scheme”). The Schemes are made by the Warm Home Discount (Scotland) Regulations 2022 and the Warm Home Discount (England and Wales) Regulations 2022 (the “Scheme Regulations”). The Scheme Regulations place obligations on electricity suppliers to incur spending in each scheme year (as defined in regulation 3(1) of each of the Scheme Regulations) on the provision of benefits, including rebates, to customers in or at risk of fuel poverty.

The reconciliation mechanisms provide for payments to be made to, or by, each electricity supplier that provides rebates to customers (“core group customers”) as specified in rebate notices given by the Secretary of State under Part 3 of each of the Scheme Regulations, so that the cost to each electricity supplier of providing rebates to core group customers is proportionate to its market share.

Part 1 contains general interpretation provisions.

Part 2 makes provision for the reconciliation mechanism in relation to the Warm Home Discount (England and Wales) Scheme—

• (a) Chapter 1 provides for the determination of the market share of each scheme electricity supplier. A “scheme electricity supplier” is a licensed electricity supplier that is required to participate in the Scheme or has been approved by the Gas and Electricity Markets Authority (the “Authority”) as a voluntary participant (and the expression is defined in regulation 3(1) of each of the Scheme Regulations).

• (b) Chapter 2 provides for interim reconciliations to be carried out during the scheme year, under which each scheme electricity supplier will make or receive a payment on account of its liability or entitlement for that year.

• (c) Chapter 3 provides for the final reconciliation to be carried out after the end of each scheme year.

• (d) Chapter 4 makes provision about payments. These set out how and when payments are to be made by scheme electricity suppliers or the Authority. Provision is also made for the adjustment of liability or entitlement to payments where a scheme electricity supplier defaults on making a payment or the supplier’s electricity supply licence is terminated. Provision is also made for interest payments and for the correction of errors.

Part 3 makes provision for the reconciliation mechanism in relation to the Warm Home Discount (Scotland) Scheme.

Part 4 enables the Authority to set-off payments to be made to scheme electricity suppliers against payments to be made by the scheme electricity supplier.

A full impact assessment has not been produced for this instrument. An analysis of the effect of each of the Schemes on the costs of business and the public sector has been produced and is available alongside the Scheme Regulations on www.legislation.gov.uk. Paper copies can be obtained from the Warm Home Discount Team, Department for Business, Energy and Industrial Strategy, 1 Victoria Street, London SW1H 0ET.

Footnotes