# The Electricity Capacity (Amendment and Transitional Provision) Regulations 2026, Note: Explanatory note


(This note is not part of the Regulations)
This instrument amends the Electricity Capacity Regulations 2014 (S.I. 2014/2043) (“the 2014 Regulations”), the Electricity Capacity (Supplier Payment etc) Regulations 2014 (S.I. 2014/3354) (“the Supplier Payment Regulations”) and the Electricity Capacity (No. 1) Regulations 2019 (S.I. 2019/862) (“the 2019 Regulations”).
The 2014 Regulations make provision for the purpose of meeting consumer demand for electricity in Great Britain by establishing a Capacity Market (“the scheme”) under which those who make capacity available (“capacity providers”) can obtain capacity agreements. Capacity agreements give capacity providers rights to receive capacity payments from the scheme’s settlement body (the Electricity Settlements Company). Capacity agreements also impose obligations on capacity providers, principally to use their “capacity market units” (“CMUs”) to provide capacity during system stress events. Following a prequalification process, during which applications must be made to the scheme’s delivery body (the National Energy System Operator), capacity auctions are held in which capacity agreements are awarded.
The Supplier Payment Regulations impose obligations on persons who supply electricity in Great Britain to pay a supplier charge (to the settlement body) which is used to fund capacity payments. The initial determination of how much each supplier should pay is reviewed at set periods and is recalculated and adjusted, so suppliers are charged an accurate amount reflective of consumer’s metered data. This process is known as reconciliation and is one of the settlement body’s functions.
Further detailed and technical provision for the scheme is made by the Capacity Market Rules 2014 (“the Rules”). An informal consolidated version of the Capacity Market Rules 2014 are at https://www.gov.uk/government/publications/capacity-market-rules. Hard copies are available from the Department for Energy Security and Net Zero, 3 Whitehall Place, London, SW1A 2EG.
Regulation 2 and Schedule 1 amend provisions of the 2014 Regulations relating to: the requirements in respect of prequalification of applicants for capacity agreements; the credit cover required from applicants and capacity providers in certain circumstances; and the termination of capacity agreements once they’ve been awarded.
Paragraphs 1(b), 4, and 6 of Schedule 1 amend the termination fee regime (which includes the level of termination fees payable by a capacity provider if they fail to meet their obligations under a capacity agreement) to introduce higher termination fee rates.
Paragraphs 7 and 8 of Schedule 1 make amendments in respect of when a capacity agreement is terminated for the capacity provider becoming insolvent, and the settlement body must withhold payments.
Paragraphs 2 and 5 of Schedule 1 amend provisions in respect of the interaction between the scheme and Contracts for Difference (“CFDs”). Capacity providers are not able to concurrently benefit from support under the scheme and a CFD and the amendments provide for applicants to apply to prequalify where they have entered a CFD and support under that CFD will commence after the capacity agreement ends.
Paragraph 3 of Schedule 1 amends the reference to publication of auction guidelines by the delivery body to account for any extension made to the prequalification window under the Rules where there is a severe issue impacting the IT portal under which prequalification applications are made.
Paragraphs 9, 10, 11 and 12 of Schedule 1 amend the credit cover regime to increase the amount of credit cover which must be provided by applicants and capacity providers in certain circumstances. Transitional provision is introduced by paragraph 11 so that this increase does not apply to capacity agreements already awarded before this instrument comes into force.
Regulation 3 and Schedule 2 amend the Supplier Payment Regulations to amend references to reconciliation runs allowing the settlement body to account for an alternative timetable of scheduled calculations where required by the authority (Ofgem).
Regulation 2 and Paragraph 1(a) of Schedule 1, and Regulation 4 and Schedule 3 make amendments to the 2014 Regulations and revocations to the 2019 Regulations to address redundant provisions relating to the scheme.
In order to implement the policies in this instrument, amendments to the Rules are also required which will come into force simultaneously with this instrument.
An impact assessment has not been prepared for this instrument. The scheme was subject to a full impact assessment when it was first introduced. This instrument is intended to improve the operation of existing arrangements for the delivery of the scheme. It introduces changes that will only have minor impacts on business, and no impact is foreseen on the voluntary or public sector.

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Source: https://www.legislation.gov.uk/ukdsi/2026/9780348283129/note (the official version)
Page: https://openlegislation.uk/draft-electricity-capacity-amendment-and-transitional-provision-regulations-2026/note
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.