Providing a Price-Maker Memorandum to the Authority: Guidance
Guidance
Publication date
Industry sector
Generation and Wholesale Market
This document contains our guidance for Existing Generating Capacity Market Units (CMUs), or Interconnector CMU on providing a Price-Maker Memorandum to Ofgem. Applicants must submit their Price-Maker Memorandum in accordance with this guidance as stated in the Capacity Market Rules.
Frequently Asked Questions
What is the difference between a Price-Maker and Price-Taker?
If successful in the auction Price-Takers are offered a one-year price and capacity agreement at the clearing price. The threshold is set on a technology-neutral basis and at a level to ensure that the majority of existing plants should be willing to participate in the Capacity Market without being Price-Makers.
Any existing plants wishing to bid above the threshold must qualify as a Price-Maker as set out in the Rules and are then able to set a price in the auction. This may be higher or lower than the threshold. New plants and DSR capacity are automatically able to participate as a Price-Maker without providing justification.
What is a Price-Maker Memorandum and who should submit one?
A price-maker memorandum refers to information submitted to Ofgem by an Existing Generating CMU or Interconnector CMU as part of the process by which it becomes a Price-Maker within the Capacity Market auction. Existing Generating CMUs and Interconnector CMUs automatically become Price-Takers upon qualification and must go through the process outlined in the CM Rules in order to qualify as a Price-Maker. This process includes submitting a Price-Maker Memorandum to Ofgem, and submitting the receipt obtained from Ofgem to the Electricity Market Reform Delivery Body (Delivery Body). The Price-Maker applicant must also submit a Price-Maker Certificate directly to the Delivery Body which comprises a statement approved by their Board stating they may need to receive a price higher that the Price-Taker threshold.
What information is contained within a Price-Maker Memorandum?
A Price-Maker Memorandum contains information justifying why the Applicant should have the right to bid above the Price-Taker Threshold during the coming auction. The evidence provided should support the statement that the relevant CMU needs to secure a higher price to continue to operate in the Delivery Year, as given in the Price-Maker Certificate.
What is Ofgem’s role?
As set out in the Capacity Market Rules, Ofgem receives the Price-Maker Memorandums from Applicants and issues a receipt upon submission which the Applicant then submits to the Delivery Body. Ofgem’s role as outlined in the rules is solely to receive submissions and issue receipts, although the submissions will be securely stored for future reference. Ofgem is also responsible for providing guidance on how submissions should be made and this guidance is available on the Ofgem website.
Why does Ofgem have this role?
As the National Regulatory Authority it is appropriate that we hold this information, we have the processes in place by which to do so securely, and it will also then be available if needed for regulatory purposes.