Overview
LCCC and ESC have approved for EMRS to make changes to accommodate the following regulatory changes:
- Increasing the level of support delivered through the exemption scheme from 85% to up to 100%
- Include the Energy Intensive Industries Exemption to the Capacity Market.
These changes affect Suppliers who submit information to receive Energy Intensive Industries (EII) Exemptions against the Contracts for Difference (CfD), Nuclear Regulated Asset Based (RAB) and going forward, the Capacity Market (CM) schemes.
To facilitate the administration of the EII exemption as efficiently as possible for EIIs, Suppliers, and ourselves, each EIIs will have one exemption certificate which is utilised across all the applicable schemes.
The regulations are subject to parliamentary approval and if passed the regulations will go-live from the 1 April 2024. You can view the draft regulations here, Electricity Capacity (Supplier Payment etc.) (Amendment and Excluded Electricity) Regulations 2024.
Supporting Information
This section provides more details on how these changes will work operationally, and support Suppliers in any preparatory activities required.
Let’s cover this via the following topics:
- Increasing the level of support from 85% to up to 100%
- How do Suppliers register EIIs to the CM Scheme?
- How will the EII Exemption be applied to Suppliers payments?
- What changes will be made to the existing Backing Data?
Increasing the level of support from 85% to up to 100%
Increasing the level of support from 85% to up to 100% will apply to any single metered entity (effectively exempting all volume). This is intended to be applied to the CfD scheme from 1 April 2024.
For the CfD scheme, those EIIs where the level of support increases for the period from 1 April 2024 to 30 June 2024, EMRS will apply a ‘top up’ percentage (e.g. existing 85% and an additional top-up 15% to reach the 100%) within the Settlement System. From the 1 July 2024 the level of support will be applied within the Settlement System against the new EII certificate.
Please note EII certificates are valid from 1 July to 30 June.
Capacity Market Scheme
This section focuses on the changes to the CM scheme.
How do Suppliers register EIIs to the CM Scheme?
Suppliers and EMRS will continue to use the established process detailed in WP25 – Aggregation Rules. This process provides the information EMRS need to update the Aggregation Rules for the Supplier to exempt a proportion of metered volumes when calculating the charges across the different schemes.
Upon receipt of the information from Suppliers via the processes detailed in WP25 – Aggregation Rules, EMRS will automatically apply the exemption across CfD, CM and Nuclear RAB (when this becomes operational) schemes. This is supported as the EII’s will have one exemption certificate that is utilised across all valid schemes.
No action is required, if a Supplier already has the EII registered within CfD. EMRS will automatically update the Suppliers Aggregation for CM to mirror those EII customers already applied.
Action required, if a Supplier has a new EII customer they should follow the process within WP25 – Aggregation Rules and EMRS will update the Suppliers Aggregation for both CfD and CM schemes.
How will the EII Exemption be applied to Suppliers payments?
This section details how the EII Exemption is applied to the CM Supplier payments.
Worth highlighting a few differences as follows:
- The Supplier Charge and Credit Cover is calculated based on a forecast and then revised upon receipt of actual data. These payments are paid monthly during the Delivery Year which is based from 1 October to 30 September.
- The Settlement Cost Levy is based on the previous year’s actual data and charged monthly on a Financial Year basis from 1 April to 31 March.
Supplier Charge and Credit Cover
To facilitate the EII exemptions being applied to CM from the 2024/25 Delivery Year, the regulations will allow the changes to the Supplier Demand Forecasts process. This will now need to be the chargeable values for the periods of high demand; this will be the gross demand minus any EII exemptions.
It will be essential for Suppliers to work with their EIIs customers to forecast their demand for the periods of high demand (4 p.m. to 7 p.m. on any working day in November, December, January or February) which will be required to be minus from the Suppliers gross demand.
When the Supplier Demand Forecast activity happens in May 2024, EMRS will highlight that the submission needs to illustrate the gross demand minus any EII exemptions and all relevant documents will be updated to reflect this.
This change in the Supplier Demand Forecast supports the calculation required for the Supplier Charge and Credit Cover schedules issued in July. The first six months of the exemption uses the forecast data. Once the actual data for the period of high demand is received, this will use the gross demand minus any EII exemptions, for the revised schedule for the remaining six months of the Delivery Year. Once further settlement data is received for the period of high demand the metered volumes will be adjusted within the monthly and annual reconciliations.
Settlement Cost Levy
The Settlement Cost Levy uses the previous year’s actual data for the period of high demand and charged monthly on a Financial Year from 1 April to 31 March.
The actual chargeable demand, e.g. the gross demand minus any EII exemptions for the period of high demand will use the period from November 2024 to February 2025. This change of data for the Settlement Cost Levy will happen from the 1 April 2025 to 31 March 2026.
Will changes be made to the existing Backing Data?
Yes, the backing data will be changing to include the EII Exemptions volumes so that these volumes can clearly be identified.
These are the T-files impacted:
- T044 – CM Settlements Cost Levy Revision
- T045 – CM Settlements Cost Levy Monthly
- T046 – CM Supplier Charge Invoice
- T049 – CM Supplier Mutualisation Amount
We will be sharing further detail of which items will be changing and / or new items to these T-files, to support Suppliers in preparing for these changes.
EMRS has not been requested to make changes to the data flow ‘D0364 – CM Supplier Invoice Backing Data’ within the Data Transfer Catalogue. Suppliers will need to reference the T-files to ascertain the EII Exemption information.
Background Information
For those that wish to read some background information, the Department of Business and Trade (DBT) issued a consultation in May 2023. This was to seek views on exempting Energy Intensive Industries (EIIs) from all costs associated with the GB Capacity Market. Full details and response from the consultation is available on the ‘British Industry Supercharger: Capacity Market consultation and EIIs government response’ webpage.
Documentation
The Interface Definition Documents (IDD) will be updated to reflect the changes to backing data:
- T-file CSV Format Backing Data
- E Number Item Definitions
These Guidance and Working Practice documents will be updated to reflect the changes:
- G2 – Calculation of Supplier Demand
- G12 – Supplier Demand Forecast
- G14 – Supplier CM Credit Cover
- G15 – CM Supplier Payments
- WP5 – Supplier Capacity Market Demand Forecast
- WP25 – Aggregation Rules
Implementation
On the 20 March 2024, the changes to the Energy Intensive Industries exemptions were successfully approved by parliament and the regulations are effective from the 1 April 2024. You can view the Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2024