The Department of Business, Energy and Industrial Strategy (BEIS) has confirmed the operational budget of the Low Carbon Contracts Company (LCCC) and the Electricity Settlements Company (ESC) for 2017/18. The groups are involved with the administration of the Capacity Market (CM) and Contracts for Difference (CfD) schemes. Their operational requirements – which are ultimately collected from energy consumers – have increased over 10%. Overall though, these costs remain a fraction of the revenue the companies gather to service the schemes they manage.
The combined operational cost for the coming financial year for both LCCC and ESC is £21,029,000. By comparison, £18,690,000 was secured last year. This cost will be recovered through levies on electricity suppliers which will be passed-through to their customers. The impact on consumer bills is an estimated £0.0524/MWh for costs related to the LCCC which administers the CfD, while the operation of the ESC will cost consumers approximately £0.022/MWh. BEIS decision now awaits Government approval. If received, the new levy rates will come into effect from 1 April 2017.
Consumer impact of the Capacity Market
The full consumer impact of the CfD and CM for 2017/18 are estimated to be around £2.52/MWh and £1.26/MWh respectively.
The operational charge has been appearing on customer bills since April 2015, with administration costs being recovered for the first two years. These increased operational costs for 2017/18 of the two groups are due to software upgrades and legal fees related to the delivery of the CM and CfD schemes.
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