24th Oct 2019 14:16
(Alliance News) - The European Commission has approved the UK's Capacity Market Scheme, the country's Energy department said Thursday.
The Capacity Market scheme provides financial incentives to UK power companies for providing back-up electricity when demand is at its peak, especially during the winter months.
The UK's Department for Business, Energy & Industrial Strategy said: "The European Commission has confirmed its original decision in 2014 to grant State aid approval for the GB Capacity Market."
This decision concludes the investigation opened by EC following a European Court ruling in November 2018, which annulled the EC's earlier State aid approval of the capacity scheme and introduced a standstill period, preventing the UK government from making further capacity payments to power companies.
The UK government said the decision means it can restart the Capacity Market scheme for making payments to power companies, including the GBP1 billion of deferred payments that have been suspended because of the standstill period as well as future capacity payments.
The government, which expects to make vast majority of the back-payments by January, also said it will now be able to go ahead with the capacity auctions scheduled for early 2020, securing majority of our capacity needs out to 2023/24.
FTSE 250 listed Drax Group PLC separately noted the European Commission's decision and said that it now expects to receive GBP75 million in backdated capacity payments.
The Selby, England-headquartered company expects to include the GBP75 million payments in its 2019 earnings before interest, taxes, depreciation, and amortisation.
"This is great news for the UK energy system," said Drax Chief Executive Will Gardiner. "The capacity market helps to ensure Britain has the flexible and reliable power generating capacity needed to support the economy as it continues to decarbonise, keeping the lights on at the lowest cost for millions of homes and businesses."
Drax shares were trading 0.8% lower in London on Thursday at 311.20 pence each.
By Evelina Grecenko; [email protected]
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