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"Highly contentious" ruling should not be made in aftermath of election
Ofgem has been pushed to delay its final decision on embedded benefits due to the political uncertainty created by the upcoming general election.
The Flexible Generation Group, which represents peaking plant developers, said it would be inappropriate for the regulator to make the “highly contentious” decision when “public attention is elsewhere” and the future direction of the energy industry is in doubt.
“A decision of this magnitude, which has such far-reaching consequences for how energy charges are levied and how competition in the market is developed, should not be made in the immediate aftermath of a general election,” wrote the group’s chairman Mark Draper, in a letter to Ofgem chief executive Dermot Nolan.
“It is our belief that no decision should be taken before Ofgem has time to discuss with the new administration the impacts of the policy on wider energy objectives.”
In March, Ofgem revealed plans to slash the value of the residual element of triad avoidance payments from the current level of around £45/kW to less than £2/kW. They are one of a range of so-called embedded benefits available to small-scale generators (less than 100MW) connected to distribution networks.
The minded-to decision followed a year-long review of the payments by the regulator. The changes have been subjected to sharp criticism by peaking plant developers. UK Power Reserve accused the “mafia-like” Connection and Use of System Code (CUSC) panel, which recommended the reforms to Ofgem, of skewing decisions in favour of incumbents.
The regulator is scheduled to make a final decision on the reforms on 15 June, but Draper said proceeding as planned could be viewed as “a deliberate attempt by Ofgem to present the new administration with a decision before assessing it against the broader policy background.
“The timing of the decision risks reinforcing in the minds of many that the large power generators wield excessive and undue influence within Ofgem’s regulatory processes.”
He continued: “Ofgem needs additional time to robustly asses the proposals in front of them against the background of a new energy market framework, or it risks having to unpick its position while creating an investment hiatus.”
Draper, who is also the chief executive of Peak Gen, told Utility Week recently that his firm may be forced to renege on some of the capacity market contracts it secured during the first two auctions if the changes to triad avoidance payments are enacted in their current form.
Click here to read the full analysis, titled: ‘What does the future hold for peaking plants?’
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