Capacity Market: LCCC operational cost levy to increase from April

Capacity Market: LCCC operational cost levy to increase from April

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 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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Veronica Truman

Posted by on Thursday, the 9. February at 17.19

Veronica Truman has been working in the energy industry since 2002 and currently manages the Market Intelligence, Analytics and Bureau Teams for Utilitywise. These teams are responsible for bespoke strategic consultancy projects for their clients, as well as delivering detailed analytics on clients’ consumption data. In addition to this, the Analytics team have developed models to forecast commodity and non-commodity charges out to 2040, and a market-leading Triad forecasting model.