Utility Week

6 | 21ST - 27TH FEBRUARY 2020 | UTILITY WEEK Policy & Regulation This week Capacity auction target reduced again T-4 capacity auction target is cut by 200MW to take account of procurement in recent T-3 auction Energy minister Kwasi Kwarteng has lowered the target for the upcoming T-4 capacity auction by 200MW to reflect procurement in the recent T-3 auction. The T-3 was held as a replace- ment for last year's T-4, which was cancelled following the sus- pension of the capacity market due to an EU court ruling. The delivery body, National Grid Electricity System Operator (ESO), recommended cuts of 200MW to the targets for both auctions in November – the T-3 to 44GW and the T-4 to 43.3GW. Andrea Leadsom, business and energy secretary at the time, accepted the changes the following month. However, she ignored its request to lower the target for the recently held T-1 auction from 300MW to zero. At the beginning of February, the ESO recommended a further 200MW reduction to the target for the T-4 auction, which is due to kick off on 5 March, to account for the 215MW of capacity contracted for its first delivery year (2023/24) in the one-off T-3. The T-3 auction, which was held at the end of Janu- ary, was the first in which intermittent renewables secured agreements, with five onshore wind farms bag- ging contracts. The T-1 auction took place earlier this month. There were large surpluses in both the T-3 and T-1 auctions, resulting in low clearing prices of £6.44/kW and £1/kW respectively. TG ENERGY Outfox the Market order is revoked Ofgem has rescinded the provi- sional order it placed on Outfox the Market, which obliged the energy supplier to make a feed-in tariff payment of nearly £603,000 by 12 February. Outfox owed £602,930 for the Ofgem-administered scheme, which provides subsidies to small-scale renewable gen- erators and is funded through a levy on suppliers. The company is, however, still listed as owing more than £875,000 in capacity market payments, which were due towards the end of last year. A spokesperson for Outfox the Market said the capacity market payments "will be fully paid by 24 March". In a statement, Outfox expressed its disappointment in the energy regulator for issuing a public release prior to the due date of 12 February. The statement added: "For Ofgem to issue a provisional order to Outfox the Market because it 'believes Outfox the Market is likely to contravene SLC 33' is presumptive and ulti- mately inaccurate." ELECTRICITY Decision made on flex service funding Ofgem has reached a minded-to decision on the funding model for an innovative demand-side response service that unlocks spare power on electricity distri- bution networks by lowering the voltage by imperceptibly small amounts. The regulator said it intends to continue allowing distribution network operators (DNOs) to sell the service to the Electricity Sys- tem Operator (ESO) beyond the end of their current price control period in 2023. The service emerged from an innovation project called CLASS (Customer Load Active System Services), undertaken by Electricity North West between 2013 and 2016, which found the voltage on distribution networks could be reduced by up to five per cent without customers reporting a noticeable effect on power quality. The DNO installed new voltage controllers at 60 of its substations serving 485,000 cus- tomers and trialled the service for a year. It has since incorporated the service into its day-to-day opera- tions and is rolling out the capa- bility to 260 primary substations serving around 2 million custom- ers. The service can currently provide up to 40MW of flexibility during the summer and up to 110MW during the winter. In 2016, Ofgem issued a direction that DNOs should not receive additional price control revenues to cover the costs of providing such a service. They should instead be allowed to sell the service to the ESO and split the profits and losses with customers. Kwarteng: accepted request for further cut Ofwat has revoked Tor Water's water supply and sewerage licences and warned that other retailers may face the same fate as the "market evolves". The regulator will assign existing customers to a new supplier a¦er the Devon-based company announced its exit from the market. The revocation came into effect on 19 February and Ofwat is working with MOSL to ensure WATER Ofwat cancels Tor Water licences as company quits 'toxic' market customers are not affected. Ofwat's senior director of markets and enforcement, Emma Kelso, reassured Tor Water customers that there would be no disruption to their water and wastewater services while they are assigned to a new retailer. Kelso said: "It is always dif- ficult to see a company fail, but this is the market in action. Not all retailers will thrive, and it is possible that, in the future, oth- ers will leave the market too. "As the market structures evolve, we will continue to make sure that customers are pro- tected and continue to benefit from competition." The company announced its plan to enter liquidation earlier this month, claiming the non-domestic market was "toxic" and it was "not viable" to continue operating under the current market conditions. Tor Water is the second com- pany to quit the non-household market since it opened in 2017; the first was Aquaflow, which entered liquidation last year. Tor founder and chief execu- tive Jiro Wilson told Utility Week that despite securing a refinanc- ing package, he decided to liquidate the company because market conditions made it unworkable. The ESO recommended a further 200MW reduction to the target for the T-4 auction on 5 March

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