Elexon has announced it will begin using an alternative process to set the Credit Assessment Price (CAP) so it can be adjusted faster in response to the rapidly changing market conditions.
The new arrangements will enable it to decrease the latest CAP of £259/MWh, due to come into effect tomorrow (4 November), to £240/MWh on 18 November.
Soaring wholesale costs have seen the Balancing and Settlement Code (BSC) administrator raise the CAP, which is used to calculate the monetary value of the energy indebtedness of BSC parties, multiple times in recent months.
The CAP has risen by a total of £163/MWh since August.
According to Elexon’s CAP review guidance, its Credit Committee may decide to use the alternative review process where there are multiple consecutive CAP review trigger events or large changes in the CAP.
Once the committee has agreed to use the alternative process, the normal CAP review process will be suspended.
Under the alternative process, the consultation period is reduced from five to two working days and the notification period from 15 working days to 10. The Credit Committee will also review the CAP every two weeks.
The alternative process additionally allows the committee to use a wider range of data sources to set the CAP, including the reference price, forward market prices and previous energy imbalance prices. Furthermore, consultation responses to previous proposed values may also be considered.
BSC parties have until 5pm this afternoon to respond to the consultation on decreasing the CAP to £240/MWh.