S.11. State Aid

D.

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Tempus Energy files legal challenge to enforce capacity market shutdown

Wednesday, March 6, 2019


The British DSR provider, Tempus Energy, is following the ECJ’s recent ruling on the questionable legality of the British capacity market scheme with an appeal before the UK’s High Court.

Tempus Energy filed a legal claim with the High Court in the United Kingdom in an attempt to enforce a shutdown of the capacity market after the European Court of Justice (ECJ) ruled that the scheme had not been adequately assessed under EU State Aid rules (see news of November 15, 2018: “Landmark ruling in favour of DSR provider Tempus Energy confirms generation bias in UK capacity market design”).

The company is accusing the UK government of ignoring the ECJ’s verdict by instructing capacity providers to continue to meet the obligations laid down in the capacity contracts they had negotiated with the government prior to the suspension of the market. Tempus also alleges that energy suppliers have been encouraged to continue making voluntary capacity payments to the Electricity Settlements Company (ESC), arguing that the funds already disbursed to capacity providers should be returned to customers.

In a consultation published in December 2018, the Department for Business, Energy and Industrial Strategy (BEIS) expressed its intention to continue the collection of capacity charges. BEIS also restated its intention to hold a T-1 auction over the summer to replace the auction previously planned for early 2019.

In February 2019, Ofgem rejected a BEIS proposal to organise the collection of capacity payments through the Balancing and Settlement Code (BSC) administrator, Elexon, as a temporary measure, stating that it did not have the necessary legal powers to approve the proposal.

The EC will appeal the ECJ’s Judgment and in the meantime has opened an in-depth investigation into the UK capacity market (see news of February 21, 2019: “EC opens in-depth investigation into British capacity market mechanism”).