Elexon has confirmed the Credit Assessment Price (CAP) will rise to its highest ever level following a short consultation.
Last week, the administrator for the Balancing and Settlement Code (BSC) announced it was consulting on raising the CAP from £96/MWh to £113/MWh.
The CAP is used to calculate the monetary value of the energy indebtedness of BSC parties and therefore determine the appropriate level of credit cover to protect against their insolvency.
Elexon issued the consultation following a divergence between the CAP and the reference price, which is derived from average monthly forward market prices. An adjustment is triggered if the absolute difference between the CAP and the reference price exceeds 10 per cent of the CAP to the nearest pound.
In an announcement today (19 August), Elexon said no responses to the consultation disagreed with the proposed value and the increase will therefore take effect on 8 September.
The CAP review trigger level value will also increase to +/- £11/MWh.
It added that parties may notice a change in their credit cover percentage, and should review the amount of credit cover lodged.
Concerns about the rise were raised last week by a former senior regulatory manager at Good Energy, Tom Steward, who told Utility Week the increase could lead to more supplier failures in the coming months.
He said: “The Credit Assessment Price controls how much money suppliers need to put down as credit. This winter was already going to be tough for rookie suppliers and this rise could undoubtedly lead to even more supplier failures.”