Energy companies struggling to manage their finances are set to be hit again at the start of November when they are called on to post more cover to back the rising cost of energy – and the credit calculation process itself has come under pressure as the energy crisis sees prices spike.
The energy industry is being asked to give its approval to another increase in the Credit Assessment Price, used to determine how much credit cover has to be posted by energy companies with the central settlements company, which would bring it to £259/MWh. The increase, which would take effect from 2 November, would mean it had more than doubled over the month of October. It will come immediately after an increase due to take effect on 21 October, when the CAP will rise to £184/MWh – a rise agreed by the Credit Committee despite objections made from some parties when the increase was under consultation.
Now the Balancing and Settlements Code (BSC) Settlements Committee has decided to escalate the situation to the BSC Panel. It has asked the Panel to discuss the CAP process and whether it remains sustainable “under the current fast market circumstances”. The CAP is calculated and an increase or decrease is automatically triggered depending on reference market prices.
The new figure would be the highest CAP since the parameter was introduced in March 2001. Before this year there were just six previous instances of the CAP value being greater than £100/MWh, in November and December 2008 and in January 2017.
In the year to September CAP prices were adjusted less than once a month and with as much as three months between changes, with the CAP falling in some months, from £54/MWh in October 2019 to as low as £30/MWh.
It rose to £77/MWh in August and if the latest change is made it will have been raised four times since then.
Responses to the consultation are required by 17:00 on 12 October. See the consultation here