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2019

A short guide to RO mutualisation

Tim Dixon Team Lead

Ofgem confirmed on 7 November that mutualisation for the Renewables Obligation (RO) has been triggered for 2018-19 (Compliance Period (CP) 17), the second consecutive year this has happened. On 1 September, suppliers were required to comply with their 2018-19 RO by: presenting RO certificates (Rocs) to Ofgem or paying the buy-out price by 31 August, which was set by Ofgem at £47.22/Roc (or a combination of the two). If suppliers do not meet their obligations by these deadlines, they must make late payments by 31 October. Ofgem confirmed 42 suppliers did not meet their obligations by these dates and subsequently owed late payments. The initial shortfall in buy-out payments was £206.0mn, more than double last year’s level, against a total amount owed of £943.5mn. Ofgem also confirmed a number of suppliers failed to meet the 31 October late payment deadline, enough to trigger mutualisation (i.e. being >£16.94mn). The total amount to be mutualised will be confirmed in December 2019. From the £737.5mn of buy-out payments made, Ofgem redistributed £732.4mn to suppliers who presented Rocs, equivalent to a £6.8/Roc. Late payments made will be redistributed to suppliers before 1 January 2020, but this amount will depend on how much of the £206.0mn has been paid. Will mutualisation reach the full £206.0mn? In short, no. While it is highly unlikely that the mutualisation amount will reach £206.0mn, it is probable that it will exceed the £58.6mn shortfall seen in CP16. This is because 15 suppliers with volumes in ...

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