Tempus has launched legal action intended to force the Department for Business, Energy and Industrial Strategy (BEIS) to cancel a planned Capacity Market auction that would ‘top up’ capacity levels for next year’s winter (so-called ‘T -1′ auction) and return payments made relating to two auctions held in 2016 and 2017.
In a claim for judicial review against BEIS, Tempus argues that under State Aid laws BEIS cannot operate the Capacity Market while it waits for State Aid approval to be reconsidered. Tempus wants UK courts to order BEIS to recoup payments made under the Transitional Arrangements auctions (held in January 2016 and March 2017) as these were made under the annulled State Aid approval. Tempus also wants the court to halt the replacement T-1 auction planned for this summer and stop BEIS from enforcing existing capacity agreements during the standstill period.
In a blog post, Tempus chief executive Sara Bell said, “The ruling in November created a ‘standstill period’ on the Capacity Market, and during this standstill the UK government has a legal duty to stop the scheme and recover the subsidies (aid) already paid out.” She added, “Payments currently being relied on by the fossil fuel industry are unlawful and will never be made. Investors should take separate legal advice and not rely on statements from the government.”
BEIS said payments related to the Supplementary Capacity Auction held in January 2017 are unaffected as the State aid approval for these has not been annulled.
The business department said, “We will robustly defend this challenge. We continue to believe in the Capacity Market as a mechanism for guaranteeing security of supply and that it was right for the European Commission to approve our State aid notification for the scheme in 2014. We welcome the Commission appealing the Court’s judgment – an appeal in which the UK is intervening to support the Commission.
“We remain confident in the steps we are taking to reinstate the Capacity Market and operate the scheme to the fullest extent possible during the standstill period (within State aid constraints). The actions we have taken are in accordance with the UK’s standstill obligations imposed by the judgment. We have been in frequent contact with the European Commission to discuss the measures we have taken during the standstill period, including rescheduling the T-1 auction and deferred payments.”
As part of the judicial review process, Tempus will serve its claim on all current capacity agreement holders and those capacity providers that received payments under the Transitional Arrangements auctions, as they are directly affected parties.
Further reading
BEIS makes CM supplier payments voluntary but warns of immediate bill on market reinstatement
EC announces in-depth investigation into Capacity Market
Ofgem rejects plan to collect Capacity Market payments during hiatus
BEIS select committee: what is ‘Plan B’ for Capacity Market?
Sara Bell: Capacity Market failings are substantive
What has the Capacity Market ever done for us?