The High Court has denied a request by a group of peaking plant developers for an injunction to halt plans by Ofgem to drastically reduce triad avoidance payments.
The regulator has welcomed the ruling, saying the year delay sought by the claimants would have cost consumers around £500 million.
The injunction was requested by eight companies, including flexible generation company Peak Gen. In October, they applied for a judicial review of Ofgem’s decision to cut the payments, which was granted the following the month.
Ofgem planned to introduce the cut at the beginning of April but earlier this month revealed the claimants had filed for an injunction to prevent the cut from being implemented until a year later in 2019.
In an update on its website, Ofgem said: “The court’s decision is in the interests of customers.
“The application made by the claimants would have delayed implementation of our decision until April 2019, which we believe would cost customers approximately £500 million.
“Our focus is now on defending our decision in a substantive hearing scheduled for late April 2018.”
Triad avoidance payments are one of a number of so-called embedded benefits that are available to small-scale generators connected to – or embedded within – distribution networks.
They can receive the payments for helping suppliers to reduce their transmission charges and are able to do so because the power they sell is treated as net negative demand during the triad periods used to set the charges.
Transmission charges are split between locational charges, which reflect users’ impact on costs due to investments in new capacity, and residual charges, which are used to recover the sunk costs of the existing network.
Ofgem announced plans in March last year to slash the residual element of triad avoidance payments from around £45/kW to just £2/kW. Despite fierce opposition from distributed generators, Ofgem confirmed the decision in June, revising the new level for the residual element of the payments to between £3/kW and £7/kW.
The regulator said triad avoidance payments give an “unfair advantage” to distributed generators – distorting investment decisions – and would otherwise rise to £70/kW in the coming years due to a feedback loop, whereby the payments become increasingly valuable as more generators connect to the distribution network in order to pursue them.