BEIS issues further information on UK Capacity Market judgment

Last week’s State aid judgment against the European Commission on the Tempus case – which annulled the Commission’s State aid approval for the UK Capacity Market – was decided on procedural grounds, says BEIS in a statement published today.

“The Court held that the Commission should have consulted more fully before granting State aid approval in 2014. It was not a challenge to the nature of the Capacity Market mechanism itself. The judgment removes State aid approval for the Capacity Market, preventing the UK Government from holding any capacity auctions or making any capacity payments under existing agreements until re-approval.”

Impact of Capacity Market judgment

National Grid has confirmed that it “…does not believe the judgment will cause any risk to security of supply this winter.”

BEIS is now working closely with National Grid to ensure that market participants are informed of the judgment.

BEIS to consider legal options

BEIS says it is now considering the judgment in detail alongside the European Commission. It says it is working to support the Commission as it considers the legal options available to them.

In its update published today (17.11) BEIS concludes:

“We believe the Capacity Market is an effective mechanism that is designed in such a way as to minimise costs to consumers. The design of the Capacity Market has not been called into question, and our focus is therefore on ensuring it can be reinstated as soon as possible. As part of this, we are seeking immediate State aid approval for a T-1 auction that will cover winter 2019/20. Alongside this, we are working to reinstate the full Capacity Market regime and are discussing the swiftest means of doing so with the Commission.”

The Government and National Grid says it will work hard to ensure that market participants are kept updated.