UK Power Reserve chief executive Tim Emrich is “100 per cent certain” that Ofgem’s plan to slash Triad export payments will be contested via Judicial Review.
Any challenge would likely focus on Ofgem’s analysis to support its decisions, he told The Energyst.
Embedded benefit rates, specifically the so-called demand TNUoS residual (or Triad payment), are set to be slashed from £45/kW to less than £2/kW under Ofgem’s plans. The regulator says this “could potentially save consumers up to £7bn by 2034“.
While Ofgem has yet to make a final decision, Emrich believes it is currently on a legal collision course.
“There will certainly be some entities that are considering their options. If they take that step, I can’t blame them. Ofgem is going to have a Judicial Review on its hands,” he said, “and it is going to be well deserved.”
Judicial Reviews tend to turn on technicalities and Emrich believes that Ofgem’s “rushed, poor” analysis can be picked apart, particularly around the cost of ‘grandfathering’ the rate of Triad benefit for embedded generators with 2014 and 2015 capacity market contracts.
Those contracts were awarded before embedded benefits changes were floated by Ofgem and the regulator appears to have ruled out grandfathering.
“Analysis by Aurora has [since] come out and said grandfathering CM14 and CM15 results in a system saving of almost £600m, versus Ofgem which says it will cost £800m – that is a £1.4bn swing,” said Emrich. “I am no economist [but] you can’t go with that analysis.”
If Ofgem is going to use analysis to support its decision, he said, “then I think the public has a right to know that it was done in a genuine manner. Whenever there is a £1.4bn discrepancy… that is no grey area.”
Emrich would not be drawn on whether UK Power Reserve would join any legal action, instead expressing faint hope that the regulator might change its mind about grandfathering.
“I don’t see Ofgem changing course, but their CEO Dermot Nolan is now engaging and he’s got a reputation for being fair and pragmatic and we could very well see some late-stage, eleventh hour pragmatism,” he suggested.
“If not, then you have to give Ofgem credit for being 100 per cent consistent for more than a year about exactly what action they planned to take all along.”
Ofgem did not wish to comment.
A full interview with Tim Emrich will be published in the June/July issue print issue of The Energyst, going to press next week. Subscribe here for free.
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