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Government reinstate the Capacity Market following a 12 month suspension

The Secretary of State, Andrea Leadsom has confirmed that following the European Commission’s decision that determined that the Capacity Market (CM) is compliant with state aid rules, the CM will be reinstated following its suspension 12 months ago. It will also allow for capacity payments of almost £1bn to be made to generators with capacity agreements which will be recovered through suppliers.

Andrea Leadsom has written to the Electricity Settlements Company (ESC) and National Grid ESO, notifying them that the European Commission’s (EC’s) decision to re-approve the CM under State Aid rules constitutes a Trigger Event under the previously published guidance. This requires the ESC to:

  • Calculate and collect standstill payments from suppliers and make these to capacity agreement holders in accordance with the regulations
  • Undertake all CM functions required of it as the settlement body in view of the Trigger Event
  • Resume any other functions, such as invoicing and collecting monthly supplier charges and making monthly capacity payments

Suppliers will receive an invoice for standstill payments on 14 November, covering 1 October 2018 to 30 November 2019 which must be paid in 5 working days. Total Gas & Power has continued to collect Capacity Market costs throughout the suspension period, so impact on bills is expected to be minimal and customers will receive more information once the levy values to be collected have been confirmed.