Renewables Obligation (RO) / Feed-in-Tariffs (FiT) Mutualisation
The payment shortfall will affect customers with Pass-through and Flex contracts who were on supply between July and September 2018.
What are they?
The RO is a support mechanism which requires all licensed electricity suppliers to source an amount of their supply from renewable sources. It was introduced by the Government to support large-scale renewable electricity generation in the UK.
The FiT scheme is an environmental programme that promotes the use of small-scale low carbon electricity generation. The scheme requires FiT licensees, such as electricity suppliers to make payments to generators for the electricity generated, including any exported back to the National Grid.
What has happened?
Under the government’s Renewables Obligation (RO) schemes, suppliers who do not source the required proportion of electricity from renewable sources have to pay into a buy-out fund administered by Ofgem.
The amount of payments outstanding into the buy-out fund for 2017-2018 at 31 August 2018 was £102.9 million. Suppliers had until 31 October to pay outstanding sums into the late payment fund to meet their obligations.
Ofgem confirmed on 21 November, subject to review by an auditor, that a shortfall of £58.6million remains. Suppliers who have not met their obligations in full are in breach of the Renewables Obligation Orders.
Furthermore, there is a shortfall of £4.2 million of supplier payments into the FiT Levelisation Fund for Q2 of year 9. Suppliers who have failed to pay by the levelisation deadline are in breach of the Feed-in Tariffs Order. As a result, Ofgem is distributing the shortfall across all of the suppliers that have already made their payment. This distribution is part of a process called “mutualisation”.
Who will be affected?
This will affect customers with Pass-through and Flex contracts who were on supply between July and September 2018.
Some suppliers will issue a bill in December 2018 with a one-off ‘Reconciliation’ cost to account for the resulting FiT cost.
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