Explanatory note

These Regulations make amendments to the Electricity Capacity Regulations 2014 (S.I. 2014/2043) (“the Principal Regulations”), and revoke provisions of the Principal Regulations, the Electricity Capacity (No. 1) Regulations 2019 (S.I. 2019/862) and the Electricity Capacity (Amendment etc.) (Coronavirus) Regulations 2020 (S.I. 2020/697).

The Principal Regulations make provision for the purpose of meeting consumer demand for electricity in Great Britain by establishing a Capacity Market (“the scheme”). Under the scheme, those who make capacity available (“capacity providers”) can be awarded capacity agreements, which give them rights including the right to receive capacity payments, and impose obligations on them to use their capacity market units to provide capacity during one or more specified years (“delivery year”). Capacity agreements ordinarily last until the end of their only or final delivery year or when terminated before that by the Delivery Body (currently, the National Energy System Operator) due to a capacity provider’s failure to meet a specified obligation. Further detailed and technical provision in respect of the scheme is made by the Capacity Market Rules 2014 (“the Rules”)^f1.

Part 2 of these Regulations makes amendments to the Principal Regulations to introduce a mechanism which capacity providers may use to seek termination of their capacity agreement without penalty (a “managed termination”) in order to move onto a Contract for Difference (“CFD”) where that CFD relates to carbon capture and storage (a “CCS CFD”). A managed termination mechanism is necessary because capacity providers are not able to concurrently benefit from support under the scheme and a CFD. Under a managed termination, the termination takes effect on a date specified by the Delivery Body which may be several years after the capacity provider seeks termination in order to ensure that security of electricity supply is not compromised.

Regulation 3 amends regulation 2 of the Principal Regulations to introduce new defined terms which are used in the provisions which relate to a managed termination.

Regulation 4 amends regulation 16 of the Principal Regulations, which prevents a person from pre-qualifying for the scheme if they have entered into a CFD, to clarify its operation in respect of a CCS CFD.

Regulation 5 amends regulation 34 of the Principal Regulations, which provides a separate route for voluntary immediate termination, to clarify that that route will not be available in respect of CCS CFDs.

Regulation 6 introduces a new regulation 34A to the Principal Regulations, which contains the mechanism by which the Delivery Body will terminate a capacity agreement under a managed termination, including what details a capacity provider needs to include in a notice requesting such a termination (a “CCS CFD transfer notice”).

Regulation 7 amends regulation 60 of the Principal Regulations to enable the release of credit cover which is held in respect of a capacity agreement that is terminated following a managed termination.

Regulations 8, 9 and 10 amend regulations 68, 69 and 70 of the Principal Regulations respectively in order to enable a capacity provider to dispute the Delivery Body’s refusal to accept a CCS CFD transfer notice.

Part 3 of these Regulations makes revocations to address redundant provisions in secondary legislation relating to the scheme.

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.