Ofgem is consulting on issuing two energy suppliers with final orders to compel them to make £1,021,943.60 in outstanding payments to comply with the Renewable Obligations (RO) scheme. The suppliers are Delta Gas and Power (“Delta”), which is non-domestic and Logicor Energy Limited (“Logicor”) which is a domestic supplier.
Under the Government’s Renewables Obligation (RO) scheme, the suppliers had to demonstrate they had sourced enough electricity from renewable sources to meet their obligation. Suppliers are required to present Renewables Obligation Certificates (ROCs) to Ofgem by 1 September, or instead make payments to the buy-out fund administered by Ofgem by 31 August 2022 deadline. Where suppliers fail to meet these deadlines, they have until 31 October to make a late payment plus interest.
If the suppliers do not pay, Ofgem could start the process of revoking their licences to supply energy.
Charles Hargreaves, Ofgem Enforcement and Emerging Issues Deputy Director said:
“We are deeply committed to working with government and industry to help reduce Britain’s reliance on expensive gas imports, particularly when the price is set in volatile international markets. This allows us to accelerate the transition towards cleaner and more secure home-grown energy, reflecting a world where the economics have changed, and renewable options are increasingly the cost-effective choice.
“There has never been a more important time to make use of sustainable energy, and schemes such as the Renewable Obligation Certifications reduce carbon emissions from the supply of electricity. It is important suppliers follow through on their obligated payments not only to support consumer interests, but also the wider energy market ecosystem and the UK’s 2050 Net Zero ambition.”
If suppliers do not have enough ROCs to meet their obligation, they must have made up the shortfall by paying into a buy-out fund administered by Ofgem by 31 August. Suppliers who failed to comply in full by 31 August/1 September must now make a late payment, including accrued interest, by 31 October.
The RO schemes are government schemes in England, Scotland, Wales and Northern Ireland to support large-scale renewable electricity projects in the UK. They place an obligation on UK electricity suppliers to source a proportion of the electricity they supply from renewable sources.
Ofgem has engaged with all suppliers that missed the 31 August and 1 September RO deadlines to seek assurances that they will be able to make the necessary payments by the late payment deadline.
Suppliers can meet their annual obligation by presenting ROCs, making a payment into the buy-out fund or a combination of the two. Once paid, Ofgem redistributes the money held to suppliers in proportion to the number of ROCs each supplier presented to Ofgem for that compliance period (once scheme administration costs are withdrawn).
The two suppliers have failed to fully discharge their obligation by either presenting the required number of ROCs by the deadlines, or paying the full buy out payment, and have since failed to provide adequate assurances they will make the payment by the late payment deadline.
If the final orders are confirmed later this month, the two suppliers will be compelled to pay into the buy-out fund by 31 October 2022. If they do not pay, Ofgem could start the process of revoking their licences to supply energy.
In all instances Ofgem will seek to secure the best outcomes for consumers and the wider energy market.
Notes to editors
The final orders will be consulted on for 21 days before being made (subject to any representations or objections made to Ofgem).
The amounts owed for each supplier are:
Amount owed (excluding interest)
Delta Gas and Power
Logicor Energy Limited
The named suppliers are, in Ofgem’s view, likely to contravene article 7 of the Renewables Obligation Orders, following their failure to meet the 31 August and 1 September 2022 deadlines and possibly the 31 October 2022 late payment deadline.
Where suppliers have given adequate assurances, Ofgem will keep the situation under close review and will not hesitate to intervene if this becomes necessary.
The Renewables Obligation schemes are government schemes in England, Scotland, Wales and Northern Ireland to support large-scale renewable electricity projects in the UK. They place an obligation on UK electricity suppliers to source an increasing proportion of the electricity they supply from renewable sources. Ofgem administers the schemes on behalf of government.
ROCs are certificates issued to operators of accredited renewable generating stations for the eligible renewable electricity they generate. Operators can trade ROCs with other parties. ROCs are ultimately used by suppliers to demonstrate that they have met their obligations.
Shortfalls in the late payment fund for the Renewables Obligation scheme will trigger mutualisation if the relevant threshold (£63.7 million for England and Wales, and £1.54 million for Scotland) is met. This means that suppliers who have complied with their obligations in full or in part will be required to make up the shortfall. Mutualisation is a process where a proportion of costs that a licensed supplier cannot meet are passed on to other market participants.