Ofgem has confirmed a mutualisation process will be triggered following a shortfall of payments into the Renewables Obligation (RO) late payment fund.
The industry regulator said an external party has been appointed in order to carry out an audit. Once completed, Ofgem will publish the level of shortfall, which well then be mutualised for the first time ever.
A spokesperson for the regulator said: “Suppliers that have not met their obligations are in breach of the Renewables Obligation Orders and Ofgem stands ready to take action as needed to secure good outcomes for consumers.”
In a further statement, the regulator announced that a shortfall of payments into the levelisation fund for the Feed-in Tariff (FIT) scheme has also triggered a mutualisation process.
The spokesperson added: “To ensure consumers continue to benefit in full from the scheme, Ofgem will be issuing reduced payments to complying FIT suppliers and will issue invoices to these suppliers requesting mutualisation payments.”
Ofgem said it is similarly ready to take action against suppliers in breach of the Feed-in Tariff Order.
Last month it was revealed an “unprecedented” 34 suppliers had missed the 1 September deadline for meeting their obligations under the RO scheme and collectively owed almost £103 million in buyout payments.
Earlier in November an industry source told Utility Week that suppliers still owed more than £50 million following the 31 October deadline for late payments. Another industry insider suggested the figure could be as high as £70 million.
The RO scheme requires suppliers to buy a certain percentage of the power they sell to customers from renewable sources.
Accredited generators receive a set number of Renewable Obligation Certificates (ROCs) for each megawatt hour they produce, with the rate depending on a number of factors including technology type. They can then sell these certificates to suppliers.
Suppliers must present enough ROCs to Ofgem each year to demonstrate they have met their yearly obligation and make up any difference with buyout payments. These payments are first used to cover the administration costs of the scheme, with the rest being returned to suppliers in proportion to the number of ROCs they submitted to Ofgem.
If the outstanding payments following the final deadline exceed a certain threshold known as the relevant shortfall, the mutualisation process is triggered. The relevant shortfall is £15.4 million for England and Wales and £1.54 million for Scotland.
Suppliers who met all or part of their obligation must together fill the gap over four quarterly payments.
The charges for each individual supplier are calculated on the basis of their obligation as a share of the total obligation for the year in question, taking into account that failed suppliers cannot contribute.
The money collected, including any interest accrued, is redistributed to suppliers in proportion with the number of ROCs they presented to Ofgem, again in four quarterly instalments. Those which have failed to meet their obligation in full are not entitled to receive any payments.