A group of eight companies, including flexible generation firm Peak Gen, have been granted their request for a judicial review of Ofgem’s decision to cut triad avoidance payments.
The appeal was lodged in October after the regulator confirmed its intention to reduce the residual portion of the payments to a fraction of their current value.
“Peak Gen Top Co, along with seven other companies which own or have interests in power generation, has been granted permission for a judicial review in respect of Ofgem’s decision on embedded benefits,” the firm said in a statement.
“This means the case will now be heard in court on a date to be set. In light of the on-going legal action it would not be appropriate to comment further at this time.”
Ofgem has previously vowed to defend the cut, stating: “Our decision stands unless quashed by the court.”
Small-scale generators embedded within distribution networks can receive triad avoidance payments by helping suppliers to reduce their Transmission Network Use of System (TNUoS) charges.
They are able to do this as they are effectively treated as negative demand during the triad periods of peak demand used to set the charges.
The payments form one of the financial advantages known as embedded benefits that are available to small-scale distributed generators.
TNOuS charges contain a forward-looking element, which reflects the cost of reinforcements needed to accommodate individual network users, and a residual element, which covers the sunk costs of the existing transmission network.
In June, Ofgem confirmed plans to slash the residual element of triad avoidance payments from around £47/kW and rising to between £3/kW and £7kWh.
The regulator is concerned the payments are distorting the market by giving an unfair advantage to small-scale distributed generators. It says a feedback loop has also emerged which sees the value of the payments increase as more generators secure them.
Earlier this month Ofgem announced plans to levy residual charges solely on suppliers rather than both generators and suppliers as is currently the case and prevent behind-the-meter generators from avoiding transmission charges.