What are the NFFO/SRO schemes?
The Non Fossil Fuel Obligation (NFFO) and the Scottish Renewables Obligation (SRO) were imposed by the Electricity Act 1989. Before the introduction of the Renewables Obligation in 2002, they were the Government’s primary instrument of renewable energy policy.
The NFFO and SRO schemes are no longer open to new generators, but existing contracts will continue until the last of them expires in 2019.
The Orders required the then Public Electricity Suppliers (PESs (1990 – 2001) were the successors of the former Area Electricity Boards (1948 – 1990)) to purchase electricity from renewable generators and provided for this electricity to be purchased at fixed prices for long term contract periods (typically for 15 years).
The power purchaser under each NFFO contract is the Non Fossil Purchasing Agency Limited (NFPA). The PESs established NFPA in England and Wales to enable them to carry out their obligations to collectively contract with renewable generators and so comply with the Orders. More information on the NFPA is available on their website - link opens in a new browser window.
The Scottish Supply Successor Companies (SSE Energy and Scottish Power) were the purchasers of SRO power until 31 March 2006. Subsequently, NFPA Scotland has been the purchaser.
The NFFO legislation (England and Wales)
There were five Orders made in England and Wales. NFFO Orders 1,2,3,4 and 5 were made in 1990, 1991, 1994, 1997 and 1998. NFFO contracts under the first two Orders have now expired.
The relevant pieces of legislation for NFFO contracts are:
• The Electricity (Non-Fossil Fuel Sources) (England and Wales) Order 1994 (Statutory Instrument (SI) 1994 No. 3259)
• The Electricity (Non-Fossil Fuel Sources) (England and Wales) Order 1997 (SI 1997 No. 248)
• The Electricity (Non-Fossil Fuel Sources) (England and Wales) Order 1998 (SI 1998 No. 2353)
• Electricity from Non-Fossil Fuel Sources Saving Arrangements Order 2000 (SI 2000 No. 2727)
• Electricity from Non-Fossil Fuel Sources Saving Arrangements (Amendment) Order 2001 (SI 2001 No. 3268), and
• The Electricity from Non-Fossil Fuel Sources (Locational Flexibility) Order 2001 (SI 2001 No. 3914) which enables NFFO projects to move location and continue to be a qualifying arrangement.
All this legislation is published on the Office of Public Sector Information website.
The SRO legislation (Scotland)
There were three Orders in Scotland. The SRO Orders 1, 2 and 3 were made in 1994, 1997 and 1999.
The relevant pieces of legislation for SRO contracts are:
• The Electricity (Non-Fossil Fuel Sources) (Scotland) Order 1994 (SI 1994 No. 3275 (S.190))
• The Electricity (Non-Fossil Fuel Sources) (Scotland) Order 1997 (SI 1997 No. 799 (S.76))
• The Electricity (Non-Fossil Fuel Sources) (Scotland) Order 1999 (SI 1999 No. 439 (S.24))
• Electricity from Non-Fossil Fuel Sources (Scotland) Saving Arrangements Order 2005 (SI 2005 No. 549), and
• The Electricity from Non-Fossil Fuel Sources (Locational Flexibility) (Scotland) Order 2002 (SI 2002 No. 92) which enables SRO projects to move location and continue to be a qualifying arrangement.
What is Ofgem’s role?
We are given specific duties under the Orders. We must ensure that all parties continue to meet their Obligations under the Orders.
We also have duties in relation to NFFO/SRO contracts in respect of:
• requests for amendments to the contracts;and
• determining whether a NFFO/SRO contract can be terminated on the grounds of economic viability.
We must establish whether such a contract amendment would cause that revised arrangement to cease to be a qualifying arrangement for the purposes of the Fossil Fuel Levy (FFL).
The NFFO/SRO contracts allow a generator to request that the contract be terminated because it is no longer, or can reasonably be expected no longer to be, economically viable.
Associated documents
Readers should be aware of the following documents:
• procedure for dealing with requests for economic termination of NFFO/SRO contracts; and
• Ofgem’s approach to the payment of Fossil Fuel Levy in respect of contract amendments to NFFO/SRO contracts.
Contacts
Rebecca Dixon, Manager CCL, REGO and NFFO
on 020 7901 7409 or rebecca.dixon@ofgem.gov.uk