Electricity Market Reform (EMR) is a package of Government policies designed to deliver new investment in lower carbon energy sources. The UK needs approximately £110 bn of investment in its energy infrastructure over the next decade in order to secure power supplies for the future, and reduce our environmental impact - and to do so in a way that controls the impact on customer bills. New power generation capacity is needed to replace retiring nuclear and fossil-fuelled power stations and to help maintain a secure power supply and it’s crucial that we deliver new investment in lower carbon generation to help meet Government environmental targets.

What is Electricity Market Reform?

Electricity Market Reform (EMR) is a package of Government policies designed to deliver new investment in lower carbon energy sources.

The UK needs approximately £110bn of investment in its energy infrastructure over the next decade in order to secure power supplies for the future, and reduce our environmental impact - and to do so in a way that controls the impact on customer bills. New power generation capacity is needed to replace retiring nuclear and fossil-fuelled power stations and to help maintain a secure power supply and it’s crucial that we deliver new investment in lower carbon generation to help meet Government environmental targets.

The key mechanisms of EMR will create a system of support for lower carbon power generation (e.g. wind farms) as well as providing security for those who ‘keep the lights on’ by keeping their plants available as back-up for times when renewable sources are unavailable.

What are the key elements of EMR?

Through the EMR, two key mechanisms will be introduced:

• Feed-in Tariffs with Contracts for Difference (CfD) – this will pay generators a fixed price for low carbon generation, providing greater certainty to those investing in new technologies. CfDs work in tandem with the wholesale energy market, providing an extra payment for generators when the market price falls below the pre-agreed ‘strike’ price, with generators paying back any surplus should the market price rise above it.
• A Capacity Market (CM) – a capacity market has been set up to make sure that supply will be available when it’s needed the most. It provides incentives for developers and owners of generating capacity (e.g. power plants) to make their capacity available. Capacity providers are paid on a kilowatt per year basis for the capacity that they can make available.

Is there any way of avoiding EMR charges?

Unfortunately not, EMR is legislation passed by Parliament and affects all electricity consumers. However, controlling how much energy is used and when it is used may help to reduce the total costs.

The government is seeking to exempt energy intensive industries from some of the Contracts for Difference (CfDs) costs. Details of which industries will be exempt and by how much are still to be determined but initial discussions suggest these customers may receive a considerable discount.

What does this mean for customers?

• Any contract agreed prior to 1st August2014 will not include any EMR charges
• Contracts agreed between 1st August 2014 and 31st March 2015 have included a forecast of EMR and we will absorb any difference between our forecast & the actual charges.
• All contracts agreed from 1st April 15 include actual EMR charges.

What are the forecasts for EMR costs?

We anticipate that costs associated with EMR will initially be low - in 2015 we expect the total charge to be under 0.1p/kWh. However we expect charges to rise over time as the new market mechanisms come in to play.