Another landmark

Since the April meeting no additional information from DECC has been made available on the Electricity Market Reform (EMR), including the likely workings of the proposed Contracts for Difference Feed-in Tariff (CfD FiT). It is still unclear on how suppliers will be required to enable CfD FiTs to work in practice.

Member were asked to note that a DECC and National Grid industry meeting was held on 18 April. The timetable for implementation of EMR has not changed from the Technical Update issued in December 2011. Work is on-going on the Operational Framework and is expected shortly. DECC has established the formation of an executive steering group, a delivery board and three expert groups: one on contracts for difference; one on the capacity mechanism; and one on the institutional arrangements. Both the capacity mechanism and the institutional frameworks groups have met, but the contracts for difference group is yet to meet. Some suppliers were concerned that the current framework for the industry groups may not enable information to flow to all participants.

Under the Ofgem Retail Market Review a consultation is currently seeking views to an informal consultation on the platform delivery for its proposal for the mandatory auction (closes 11 May). The group discussed the main issues raised at an Ofgem meeting on 23 April. Attendees did not agree that the mandatory auction proposal under the regulator’s RMR package is the sole solution to the problem of wholesale market liquidity and access to product.

Independent suppliers suggested the mandatory market maker proposal or the self-supply restriction should be taken forward. Suppliers were concerned that the MA proposal will create additional calls for credit to be able to trade on the platform. Unless this issue is tackled by the regulator members of the forum do not believe the solutions proposed would work to significantly increase liquidity. All of the proposed solutions are thought to be collateral heavy for independent players.

Other areas of discussion included:

• the recent Ofgem industry event that discussed the scope of the proposed significant code review (SCR) of electricity cash-out; and
• the current DECC consultations on the framework for the smart metering implementation programme; and
• Ofgem’s consultation on proposals to reduce network charging volatility.

The next meeting of the forum will be held on 9 May. For queries and comments, please contact us.