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Elexon has said it is consulting on raising the Credit Assessment Price (CAP) to a new record high of £137/MWh following continued increases in wholesale electricity prices.
The current price of £113/MWh is already the highest to date and only came into effect on Wednesday (8 September) after being confirmed by the administrator of the Balancing and Settlement Code (BSC) in August. It had previously been set at £96/MWh.
The CAP is used to calculate the monetary value of the energy indebtedness of BSC parties and therefore determine the appropriate level of credit cover to protect against their insolvency.
The latest proposed hike was announced earlier this week as the reference price, derived from forward-looking prices on wholesale electricity markets, reached the trigger level of 10 per cent above or below the latest CAP set at +/-£11/MWh as of August.
Elexon said it would be the eighth such increase in 2021 following a steady rise in forward-looking electricity prices over the year.
The increase will take effect on 5 October if approved following the consultation, which closes on 14 September.
This week has seen a series of new records set for gas and electricity prices. Concerns over supplies for the coming winter due to insufficient injections into storage have driven a surge in gas prices, amplifying price spikes in the power market due a lull in wind output.
Commenting on the previous increase to the CAP, Tom Steward, formerly a senior regulatory manager at Good Energy, warned last month that the hike would worsen the strain on suppliers already struggling to deal with wholesale price rises and could lead to even more failures.
Andrew Stone, managing director at Interpath Advisory, told Utility Week liquidity is now a “primary concern” for many businesses in the sector, saying it is “increasingly evident” that a number of suppliers will make use of Ofgem’s two-month grace period for making Renewables Obligation buyout payments to maintain their cash flows.
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