Embedded benefits cut faces legal challenge

Ofgem says it will defend decision to slash triad avoidance payments

Flexible generation firm Peak Gen, along with seven over companies, has requested a judicial review of Ofgem’s decision earlier this year to massively reduce triad avoidance payments.

Ofgem said it plans to defend the decision, which will remain standing unless struck down in court.

“Peak Gen Top Co, along with seven other companies which own or have interests in power generation, has requested a judicial review in respect of Ofgem’s decision on embedded benefits,” the company said in a statement to Utility Week.

“This is now a matter of public record on the register maintained at the Royal Courts of Justice.

“In light of the on-going legal action it would not be appropriate to provide further details at this time.”

In June, Ofgem confirmed plans to almost entirely remove the residual element of triad avoidance payments, cropping it from the current level of around £47/kW to between £3/kW and £7/kW.

The regulator argued the payments were giving unfair advantage to distributed generators and were set to rise even further without action.

Triad avoidance payments are one of a number of financial advantages – known as embedded benefits – which are available to small-scale generators embedded within distribution networks.

They can receive the payments for reducing suppliers’ Transmission Network Use of System (TNUoS) charges and are able to do this because they are treated as net negative demand during the triad periods used to set the charges for half-hourly metered non-domestic customers.

TNOuS charges contain a locational element that reflects users’ impact on costs due investments in additional capacity, and a residual element that covers the sunk costs of the existing network.

“Ofgem has been served with a claim for judicial review,” the regulator said in a statement. “We are defending the claim. Our decision stands unless quashed by the court.”