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Elexon will set the Credit Assessment Price (CAP) below £100/MWh for the first time since September 2021 following a significant drop in wholesale energy prices.
The CAP is used to calculate the monetary value of the energy indebtedness of Balancing and Settlement (BSC) parties and therefore determine the appropriate level of credit cover to protect against their insolvency.
Soaring wholesale costs saw Elexon raise the CAP multiple times to record levels over the course of the energy crisis, with the highest level of £415/MWh recorded in September 2022.
The BSC code administrator has now said that following the slide in wholesale prices its Credit Committee has agreed to lower the CAP value to £85/MWh from 13 June, down from £100/MWh.
Elexon initially consulted on decreasing the value of the CAP to £90/MWh but following further decreases in forward market prices the committee agreed on a lower figure.
“Given the high level of uncertainty in the market, if significant changes are observed over the next two weeks the Credit Committee can decide to withdraw today’s notified CAP,” Elexon said in a statement.
The last time the CAP was below £100/MWh was 7 September 2021 when the value was £96/MWh.
As market volatility began to bed in during late 2021, Elexon announced that it would begin using an alternative process to set the CAP.
This was to enable the code administrator to adjust the CAP faster in response to rapidly changing market conditions.
Plummeting wholesale costs saw Ofgem reduce the price cap by £1,200 this week, but industry experts have warned that prices remain high and that more targeted support is needed ahead of the coming winter.
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