Elexon seeks third Credit Assessment Price rise in a month

Elexon has once again proposed to raise the Credit Assessment Price (CAP) to a new all-time high of £184/MWh.

If approved following consultation the increase will be the ninth so far this year and the third in just over a month.

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.

Earlier this month the code administrator said it was consulting on raising the CAP to £137/MWh following continued increases in wholesale electricity prices.

This was an increase from a previous record high of £113/MWh which came into effect just days earlier.

This week Elexon is again consulting on increasing the CAP, this time to £184/MWh.

The increase follows a ‘trigger event’, where the difference between the last notified CAP value (£137/MWh) and the reference price, which is derived from forward-looking prices on wholesale electricity markets, was greater than the trigger level of +/-£14/MWh.

A consultation on the increase will be open until 28 September and, if confirmed, the new CAP will come into force from 19 October.

Elexon added that due to the new value being a significant increase from the last, Elexon’s Credit Committee has agreed to meet to discuss the new CAP following the closure of the consultation.

Last month Tom Steward, formerly a senior regulatory manager at Good Energy, warned that increases to the CAP would worsen the strain on suppliers already struggling to deal with wholesale price rises and could lead to even more failures.

Additionally Andrew Stone, managing director at Interpath Advisory, recently told Utility Week liquidity is now a “primary concern” for many businesses in the sector.

Utility Week has launched its Energy Reset campaign, in a bid to ensure the current crisis results in real reform of the energy retail market.