Renewables Obligation (RO) Mutualisation – 2018/19

The latest RO payment shortfall by various suppliers will affect customers with pass-through contracts who were on supply between April 2018 and March 2019.

What is the Renewables Obligation?

The Renewables Obligation (RO) is an Ofgem support scheme which requires all licensed electricity suppliers to obtain an amount of their energy from renewable (low carbon) sources.

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.

It seems to be an annual occurrence / expectation that there will be several suppliers who cease operation and/or fail to meet their Renewables Obligation (RO) contribution. As a result, Ofgem is distributing the shortfall across all suppliers that have already made their payment. This distribution is referred to as “mutualisation”.

The overall shortfall amounts to £97.5m.

How much will the Renewables Obligation Mutualisation cost?

Your charges will depend on your respective supplier’s contribution to the £97.5m mutualisation fund. Each supplier’s contribution will match their percentage of the RO market share and will be calculated based on the uplift rate against your electricity usage between April 2018 – March 2019.

Who will be affected?

This will affect customers with pass-through contracts, where the RO charges were not included in the energy unit rate and supplied between April 2018 and March 2019. The charges will be applied by the supplier of that period, even if the meter has since transferred to a new supplier or has ceased supply for any other reason.

Some suppliers will issue a bill with a one-off ‘RO mutualisation’ charge on upcoming invoices, as early as December 2020 while others may issue the uplifted charges later.

Looking Forward

For the 2019 – 2020 period, Ofgem has reported a £105m shortfall, so far in the Renewables Obligation buy-out fund. This is due to 33 suppliers failing to pay the full amount due by the latest deadline of 31 October 2020. However, this figure is not final and is expected to decrease before the shortfall total is once again spread among the remaining suppliers and passed on to customers.

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

Do you need Energy advice? Talk to our experts