Renewables Obligation (RO) Mutualisation

The RO payment shortfall by various suppliers will affect customers with pass-through contracts who were on supply between July and September 2018.

What is the Renewables Obligation?

The Renewables Obligation (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.

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 in the buy-out fund for 2017-2018 at 31 August 2018 was £102.9 million. Suppliers had until 31 October 2018 to pay outstanding sums into the late payment fund to meet their obligations.

Ofgem has confirmed that a shortfall of £58.6million remains. Suppliers who have not met their obligations in full are in breach of the Renewables Obligation Orders.

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”.

How much will the Renewables Obligation Mutualisation cost be?

For 2017/18, suppliers will pay their share of the mutualisation pot which amounts to £58.6m.
A customer’s charges will depend on their respective supplier’s contribution to the mutualisation fund, which is the same percentage as their RO market share.

Who will be affected?

This will affect customers with pass-through contracts who were on supply between July and September 2018. The charges will be applied by the supplier of that period, even if the meter has since transferred to a new supplier.

Some suppliers will issue a bill with a one-off ‘RO mutualisation’ charge in either September or October 2019, while others have only committed to Q4 2019.

Pulse will continue liaising with suppliers to ensure that these costs are correct when applied.

Do you need Energy advice? Talk to our experts