Commentary on Sections Part 2: Sustainability and Renewable Energy Sources Chapter 4: Renewables Obligations Relating to Electricity Section 115: Discharge of renewables obligation in Great Britain by payment
270.Section 32(3) of the Electricity Act 1989 provides that electricity suppliers must before one or more specified days provide to GEMA evidence regarding their supply of electricity generated from renewable sources to discharge their renewables obligation. The effect of section 115(1) is to make it clear that the Secretary of State may provide for more than one specified day in a year. This would mean suppliers would be required to produce evidence of their compliance with the renewables obligation before each of the days. The timing of each specified day and the associated obligation periods would be set out in an order.
271.Section 32C of the Electricity Act 1989 provides that an order made under section 32 may allow electricity suppliers to discharge their renewables obligation by making buy-out payments to GEMA, instead of producing evidence regarding their supply of electricity generated from renewable sources. Section 115(2) – (5) amends section 32C and provides for suppliers who have not discharged their renewables obligation by the specified day, to be treated as having discharged it by making a late buy-out payment. The Secretary of State is also empowered to introduce surcharges which will be added to any late buy-out payments made by a supplier. This power also allows for the surcharge to increase at a daily rate from the date on which the supplier should have complied with the renewables obligation. The Secretary of State may also specify steps under 27A of the Electricity Act 1989 which cannot be taken during a specified period following the date on which the supplier should have complied with the renewables obligation. The period during which late payments can be made, the amount of the surcharge and the manner of its calculation would be set out in an order.
272.Section 115 also provides that an order under section 32 of the Electricity Act may require suppliers to make payments to GEMA to make good some or all of any previous unrecovered shortfall in the buy-out fund. This process is known as mutualisation. Mutualisation payments can be required from either suppliers with a renewables obligation at the time the shortfall occurred, or suppliers with a renewables obligation in a subsequent specified period, and can be adjusted or repaid as provided in the order. To allow for the operation of the late payment regime described above, mutualisation will not take place until after the end of the late payment period. Section 115 also provides that an order under section 32 of the Electricity Act 1989 may provide that sections 25 to 28 of the 1989 Act apply, in relation to mutualisation, to a person who is not the holder of a relevant licence as though they were a holder of such a licence. This provision would enable GEMA to take enforcement action for breach of the mutualisation provisions against a company who had been a licensed supplier at the time of a shortfall, but who had subsequently disposed of its licence. The Secretary of State is also empowered to provide for mutualisation payments to be made where there is a shortfall in the Northern Ireland buy out fund.