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The Renewables Obligation Late Payment Fund (2008-2009)
This provides an update to our press release of 5 October 2009 on the RO buy-out fund for 2008-2009. Late payments can be made from 1 September to 31 October. A total of 18,948,878 ROCs were correctly submitted by suppliers to Ofgem for the 2008-2009 RO year. The three main buy-out funds were redistributed on 30 September 2009 and the three late payment funds were redistributed on 12 November 2009. The amounts (including interest) redistributed from the late payment funds totalled £1,173,496. These were redistributed to all suppliers that had fully complied with their renewables obligations, in the proportions previously published. The total amount of the buy-out fund redistributed for 2008-09, the seventh year of the obligation, was £352,651,576 (including interest). This equates to £18.61 for each ROC presented. Bizz Energy Ltd and Electricity4Business Ltd failed to comply with their Renewables Obligations. The shortfall in the buy-out funds arising from this was £5,750,734.04 for the Renewables Obligation and £329,020.66 for the Renewables Obligation Scotland. Based on this, mutualisation will not be triggered for the 2008-09 compliance period. We are in contact with Bizz Energy Ltd’s administrators and Electricity4Business Ltd’s liquidators regarding their outstanding amounts and will update suppliers if, and when they make any payments against their 2008-09 obligations. All other electricity suppliers in England and Wales, Scotland and Northern Ireland have complied with their 2008-09 renewables obligations. Ofgem administers the Government’s Renewables Obligation, which started in April 2002 (April 2005 in Northern Ireland). The obligation requires electricity suppliers to source at least part of their electricity from renewable generators. To meet their obligations, suppliers can present Ofgem with ROCs or make a buy-out payment, or use a combination of ROCs and buy-out. The buy-out price per megawatt hour of electricity (or from 2009-10 buy-out price per ROC) is calculated by Ofgem each year by adjustment to reflect changes in the Retail Prices Index. The buy-out price for the 2008-09 obligation period was £35.76. All renewable generators apply to Ofgem for accreditation that their electricity is generated from eligible renewable sources. The renewable generator can sell ROCs either with or separately from the electricity generated. In England & Wales and Scotland, the obligation started at 3 per cent of electricity supplied in 2002-2003. From 1 April 2009, the obligation changed from a percentage of a supplier's sales to an obligation to present a number of ROCs per MWh of a supplier's sales. The introduction of a banded RO breaks the existing direct link between the level of the obligation and the actual amount of renewable energy required to meet it. One ROC will not necessarily be equivalent to 1 MWh of renewable electricity. This means that the RO changes from an obligation to produce evidence that a percentage of electricity supplied to customers comes from renewable sources, to one where suppliers are obliged to present a specified number of ROCs. The obligation for 2008-2009 was 9.1 per cent and for 2009-2010 it is 9.7 ROCs per 100 MWh. The obligation reaches 15.4 ROCs per 100 MWh in 2015-2016 and remains at this level until 2026-2027. In Northern Ireland, the obligation started at 2.5 per cent in 2005-2006, was 3.0 per cent in 2008-09, and reaches 6.3 ROCs per 100 MWh in 2012-2013. It remains at this level until 2026-2027. The buy-out and late payment funds are redistributed using the single recycling mechanism across England and Wales, Scotland and Northern Ireland. The buy-out and late payment funds have been redistributed to suppliers in proportion to the total number of ROCs that each has presented across the three obligations. Should a shortfall in the England and Wales or the Scotland buy-out fund exceed a certain amount, all suppliers that met their obligation are required to make a second payment to make good the shortfall. This is known as mutualisation. The trigger level for mutualisation in England and Wales is set by the Department of Energy and Climate Change. The level for Scotland is set by the Scottish Executive. In 2008-09 the level was £9.1m in England and Wales and £910,000 in Scotland. It is £9.7m in England and Wales and £970,000 in Scotland in 2009-10. Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority's functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem. To view tables, please click here. Source: Ofgem |
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