EGL23100 - Generation receipts: attribution of generation to an undertaking

Not all of the power generated by a generation undertaking is necessarily taken into account when calculating its liability to the EGL, only that part which is attributable to it under F(2)A23/S282(3). Power is attributed to the undertaking if it is generated by a relevant generating station that is connected to the grid and intended to be distributed to users via a licensed transmission or distribution system, the meaning of “relevant” generation station is explained at EGL22000+.

Where one or more relevant generating stations are operated in partnership, then see EGL40000 for an explanation of how the rules apply to apportion its output to a generating undertaking that is a partner.

By “the grid” this guidance means the high voltage transmission systems and the local distribution systems that supply power to customers in the UK. The definitions applicable to the networks in Great Britain and Northern Ireland differ. Generation that is provided by “private wire” connections that do not involve the use of licensed transmission or distribution systems is not taken into account for the purposes of the levy as the price of power supplied by this means is not typically subject to volatility in the wholesale market.

Measurement of power output – adjustment of metered outputs.

The starting point for measuring the amount of generation from an undertaking’s stations will generally be the metered output to the grid. Adjustments will then be required for transmission losses. Additional adjustments may also be necessary where actual output is reduced under the balancing mechanism, but there are generation receipts from the wholesale market for power is not actually generated.

The Balancing and Settlement Code (BSC) provides generators in Great Britain with rules that are to be followed when dealing in the wholesale electricity market. The equivalent for the island of Ireland is the Trading and Settlement Code. The BSC includes adjustments that are relevant to make when determining the volume of electricity that has been supplied under a sales contract, or whether the generator might be liable to charges under the Balancing Mechanism because its actual generation does not match what it has undertaken to generate with the National Grid Electricity System Operator (ESO). These take account of transmission losses, in particular.

When measuring their output for EGL purposes, generating undertakings should follow the relevant BSC principles rather than just take the metered output at the generating station. There are equivalent procedures for generators within Northern Ireland.

One of the relevant System Operator’s functions is to ensure that the amount of power supplied to the grid matches demand throughout each day. The fine tuning of this is through the Balancing Mechanism, under which the System Operator can require generators to increase or reduce output to match demand. Generators can offer to increase output and will generally be paid to do this at a market rate determined by the price of offers to meet the system’s needs). They may also bid to reduce output if the system is in surplus, in which case they may be willing to pay the ESO not to generate (for example: where they would save the cost of fuel, etc.). Or they may bid a negative amount with that aim of receiving payment from the ESO (for example: to compensate for the loss of entitlement to Renewable Obligation Certificates (ROCs)). The role of ROCs and similar arrangements, and their treatment for purposes of the levy is explained at EGL23300.

Accepted offers to increase generation will increase metered output, and the receipts in respect of that under the Balancing Mechanism are taken into account as receipts for EGL purposes.

However, where a bid to reduce output is accepted by the ESO, the amount not generated as a result should nevertheless be included with actual generation when calculating the amount of generation for the purpose of the levy threshold and in calculating the maximum amount of receipts that would not be exceptional under step 2 of the calculation required by F(2)A23/S279(5).

Overall, the attributable generation from relevant stations that is to be matched with generation receipts should equate to final metered output, adjusted for transmission losses, but with accepted balancing bids added back.