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Ofgem has confirmed that the mutualisation of missed Renewables Obligation (RO) payments has been triggered for the fifth consecutive year after a number of suppliers failed to pay by the late deadline.
Under the RO scheme retailers are obliged to present their obligations by 1 September, with those who miss the deadline having to make late payments by 31 October. Any payments still owed after this point and above the relevant thresholds, currently set at £63.7 million for England and Wales and £1.54 million for Scotland, will be mutualised.
Last week the regulator revealed that as of 1 September, 36 retailers, most of which are no longer active in the market or are insolvent, left a £163 million shortfall in the RO buyout funds.
Ofgem is yet to say how much of the shortfall was still owed at the late payment deadline, but confirmed on Wednesday (9 November) that a “relevant shortfall” has been reached and that the amount will be mutualised in respect of both the RO schemes for England and Wales and for Scotland.
The regulator is unable to take enforcement action against failed suppliers if they have left behind unpaid RO liabilities. Where there are monies owed by failed retailers in respect of the scheme, Ofgem will seek to claim for this through the appropriate insolvency processes.
Ofgem added that further details, including the total shortfall, will be published on its website around the beginning of next month.
Despite 36 retailers missing the September deadline, the regulator has so far only formally pursued one over its failure to pay and has ordered Delta Gas and Power to make payments of £530,000 by 31 October.
This is in stark contrast to last year when it ordered seven retailers to make almost £20 million in payments. Following this, mutualisation was triggered for the fourth consecutive year after 28 suppliers, the vast majority of which had already exited the market, left more than £218 million in RO payments to be picked up by the rest of the industry.
The figure constituted the largest ever amount to be mutualised under the scheme. It was more than six times larger than the 2019/20 period and more than double the previous record amount of £97.5 million set in 2018/19.
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