Energy weekly highlights—21 June 2019

Electricity and gas market regulation and licensing

Decision on licensing applications regulations and guidance document

Ofgem has published its final decision regarding it approach to licensing suppliers and have now made the Electricity (Applications for Licences, Modifications of an Area and Extensions and Restrictions of Licences) Regulations 2019, SI 2019/1023 and Gas (Applications for Licences and Extensions and Restrictions of Licences) Regulations 2019, SI 2019/1024 and published a final application guidance document, which sets out, among other information, the application processing time periods. The decision forms part of Ofgem's new approach to licensing suppliers, to raise standards for supplier financial resilience and customer service. SI 2019/1023 and SI 2019/1024 both come into effect on 5 July 2019. See: LNB News 19/06/2019 76.

Electricity sector Regulation and Directive published in the Official Journal

Regulation (EU) 2019/941 of the European Parliament and of the Council of 5 June 2019 on risk-preparedness in the electricity sector and repealing Directive 2005/89/EC, Regulation (EU) 2019/942 of the European Parliament and of the Council of 5 June 2019 establishing a European Union Agency for the Cooperation of Energy Regulators, Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity, and Directive (EU) 2019/944 of the European Parliament and of the Council of 5 June 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU have been published in the Official Journal. See: LNB News 14/06/2019 55.

Views sought on draft Consumer Vulnerability Strategy 2025

Ofgem has launched a consultation that seeks views from key stakeholders and consumers on its draft Consumer Vulnerability Strategy 2025, which aims to safeguard vulnerable consumers by outlining five areas where it believes that the energy industry should focus on to keep consumers abreast of the changes currently underway due to digitalisation, decarbonisation and decentralisation shifting how consumers interact with energy suppliers. Ofgem also aims to improve disconnection protections to support prepayment customers that self-disconnect. The consultation closes on 8 August 2019. See: LNB News 13/06/2019 69.

Ofgem seeks comment on TCR update

Ofgem is consulting on an update to several discrete matters relating to the November 2018 minded-to decision on TCR. The consultation provides further information on four aspects of the project and gives the opportunity for comment ahead of the regulator’s final decision on the matter. The consultation closes 12 July 2019. See: LNB News 19/06/2019 66.

New REC aims to improve energy switching process

Ofgem has opened a consultation on the introduction of a new REC, which intends to bring together code requirements relating to retail energy activities and the underlying arrangements for allowing customers to switch energy suppliers in an effort to make the process faster and more reliable. A transitional REC was designated on 1 February 2019. For comment addressing the REC Manager role and future governance, the deadline for responses is 29 July 2019. For all other responses, Ofgem wants comment by 29 July 2019. See: LNB News 18/06/2019 28.

Shell Energy Retail pays £390,000 after overcharging on default tariffs

Ofgem has confirmed Shell Energy Retail Limited (Shell) will refund and compensate around 12,000 customer accounts and pay £200,000 to Ofgem’s consumer release fund—paying £390,000 in total. This is due to Shell overcharging on its default tariffs when the price cap was introduced on 1 January 2019. Ofgem will not take formal enforcement action against Shell as it has taken appropriate steps to address the failings. See: LNB News 14/06/2019 67.

Ofgem supports taskforce recommendations and releases metadata

Ofgem has published a response to EDT’s recommendations. Ofgem welcomed the EDT’s report, and supported its recommendation that a Data Catalogue be created to describe all data sets in Great Britain’s energy system. See: LNB News 14/06/2019 11.

Networks and network connections

European Energy Regulators assess status of DSO and TSO unbundling

The Council of European Energy Regulators has released a report on the subject of the implementation of Transmission System Operators (TSO) and Distribution System Operators (DSO) unbundling provisions. The report aims to assess the status of DSO and TSO unbundling, highlight new developments since 2015 and provide an overview of the main changes in unbundling-related provisions introduced in the EU 2019 ‘Clean Energy for All Europeans’ package. See: LNB News 14/06/2019 38.

Renewable energy

Revenue and Customs Breif 4/2019: Domestic VAT reverse charge for businesses trading in renewable energy certificates

The government has laid regulations introducing a domestic reverse charge for supplies of gas and electricity certificates in the UK with effect from 14 June 2019. This is to prevent the threat of missing trader intra-community fraud when these certificates are traded. HMRC says it will take a ‘light touch’ approach to penalties in the first six months of operation of the reverse charge, where businesses have made reasonable efforts to comply with the new rules. See: LNB News 13/06/2019 91.

£1.4m in funding granted for Welsh electric vehicle battery development projects

Under the UK government’s £274m Faraday Battery Challenge, £1.4m has been allocated to Welsh companies, Deregallera Ltd and Tri-Wall Europe Limited, in order to utilise the development of the latest battery technologies for electric vehicles to create more highly-skilled, well-paid jobs throughout Wales, benefit the economy and place Wales on the ‘forefront of green innovation’. The Faraday Battery Challenge is critical to the UK’s plans to achieve a net zero emissions economy. See: LNB News 13/06/2019 20.

State aid: Commission approves Italian public support for electricity produced from renewable sources

On 14 June 2019, the European Commission approved under EU State aid rules a scheme to support electricity production from renewable sources in Italy (Case SA.53347). The aid is intended to support electricity production from renewable sources such as onshore wind, solar photovoltaic, hydroelectric and sewage gases and will help Italy reach its renewable energy targets. The scheme, which has an estimated total budget of €5.4bn, will be applicable until 2021, includes a clawback mechanism so that if the market price moves above the average production cost for each renewable technology, the selected installations would no longer receive a premium and would instead have to give back to the Italian authorities the additional revenue. This ensures State support is limited to the minimum necessary. The Commission approved the measure as it will contribute to EU environmental objectives, as it promotes the generation of electricity from renewable sources, without unduly distorting competition. See: LNB News 14/06/2019 43.

Capacity Market, balancing services and energy system flexibility

Results of the T-1 capacity auction for delivery in 2019/20 published

The National Grid Electricity System Operator Limited has published its Capacity Auction (T-1) for delivery in 2019/20 provisional auction report, which details the results of the T-1 Capacity Auction that concluded on 12 June 2019. The results of the auction are provisional for the period of eight working days after the Capacity Market Auction was completed. In that length of time, the Secretary of State may potentially annul the auction on the grounds of regulation 27 of the Electricity Capacity Regulations 2014, SI 2014/2043. See: LNB News 13/06/2019 83.

Capacity Market (Amendment) (No 3) Rules 2019 published

The Department for Business, Energy & Industrial Strategy has published the Capacity Market (Amendment) (No 3) Rules 2019. The rules come into force on the day after the day on which they are made. The rules amend Rule 1.2 in Chapter 1 (General Provisions) and Rule 2.1 in Chapter 2 (Auction Guidelines and De-rating). See: LNB News 14/06/2019 18.

Ofgem consults on costs of smart meter rollout and capacity market

Ofgem has announced consultation on its approach to the third cap period which will run between 1 October 2019 and 31 March 2020. Specifically, Ofgem is seeking views on the proposed the allowance for the net costs of the smart meter rollout and for the costs of the capacity market (CM) in the third cap period. The consultation period ends on 16 July 2019. See: LNB News 19/06/2019 43.

Power purchase and energy trading

Ofgem: Commitments from EPEX Spot SE and EEX to address competition concerns in relation to wholesale trading activities accepted

On 18 June 2019, Ofgem announced its decision to accept commitments from EPEX Spot SE (and its parent company EEX) to take steps required of EPEX to enable other Nominated Electricity Market Operators, in particular Nord Pool, to participate in certain electricity trading auctions between Great Britain and Ireland, and to carry out an internal review of its competition law training. This is to address competition concerns identified by Ofgem in the course of its investigation launched in December 2018 into whether there had been an infringement of Chapter II of the Competition Act 1998 and/or Article 102 TFEU, concerning a potential abuse of a dominant position in relation to wholesale trading activities. The investigation examined whether EPEX Spot SE, a power exchange operating in Great Britain, had abused or was abusing a dominant position in relation to access to cross-border intraday electricity trading platforms and related services between Great Britain and Ireland. The investigation is now closed. See: LNB News 19/06/2019 10.

Oil and gas

Asset Integrity Task Group develops road map to reduce planned and unplanned integrity losses

OGA has announced that the Asset Integrity Task Group has developed a new road map aimed to reduce planned integrity losses by 20% and unplanned integrity losses by 60% in the UKCS. The Asset Integrity Task Group is a subgroup of the MER UK Asset Stewardship Task Force which was formed in 2017 to drive improvements in asset integrity across all UKCS facilities through reducing hydrocarbon losses. See: LNB News 19/06/2019 101.


Nuclear Industry Association report highlight sector collaboration

The Nuclear Industry Association has released a report called ‘National Decommissioning & Waste Management Pipeline—Nuclear Sector Deal’. The authors of the report outline all significant current and future decommissioning and waste management projects, including civil nuclear, defence and naturally occurring radioactive material. The ‘pipeline’—mentioned in the report—brings ‘cross sector information and data together, to establish a platform that can be used to understand opportunities to deliver better value for money across the sector’. See: LNB News 19/06/2019 97.


Euratom Research and Training Programme (Revocation) (Eu Exit) Regulations 2019

SI 2019/1012: This enactment is made in exercise of legislative powers under the European Union (Withdrawal) Act 2018 in preparation for Brexit. This enactment revokes certain retained direct EU legislation in relation to Euratom research and training programme in order to address deficiencies in the operation of retained EU law arising from the UK’s withdrawal from the EU and the European Atomic Energy Community (Euratom). It comes into force on exit day. See: LNB News 14/06/2019 8.

Air emissions, efficiency and climate change

Significant disruption to several industries required to meet net zero targets

The UK Energy Research Centre has published a report assessing the impact of the government’s target of net zero emissions by 2050. The report discusses the level of disruption that is expected to be required in certain sectors to achieve this target, stating that businesses will need to make fundamental changes to business models and operating practices. See: LNB News 19/06/2019 90.

£10m fund to finance clean energy for rural sports clubs, schools and churches

The Department for Business, Energy & Industrial Strategy has announced a £10m fund to finance clean energy for rural sports clubs, schools and churches. Grants of up to £40,000 can be used to finance solar battery storage, wind, hydro and geothermal heat projects. The fund aims to allow savings on energy bills, reduction of emissions and generation of income by selling energy back to the grid. See: LNB News 19/06/2019 14.



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