The Regulations set out, in Parts 2 to 9:
a) how applicants must apply for a Contract for Difference (CFD);
b) how the delivery body must assess an application;
c) how the Secretary of State establishes an allocation round;
d) how an allocation framework (which contains the rules for the competitive process applied to applications for CFDs) is applied to an allocation round;
e) what an allocation framework must and may contain;
f) how a budget is set for allocation rounds;
g) how the delivery body must decide whether a competitive process is required for the allocation of CFDs;
h) when a CFD notification must be given and the process the delivery body needs to follow in respect of giving a CFD notification.
The Regulations also include a 3-tiered appeals procedure.
Part 10 of the Regulations allows the Secretary of State to direct the CFD Counterparty to offer a CFD to an eligible generator. This power might be used to offer CFDs to projects that are not currently suitable for the generic CFD allocation process, for example, CCS, nuclear and large tidal.
The Allocation Framework sets out the allocation process, including the auction rules and the valuation formula that will be used.
The Allocation Framework is not a statutory instrument and must only contain provision which is permitted by the Contracts for Difference (Allocation) Regulations 2014.
The Allocation Framework also contains supplementary provision relating to:
- Information that applicants must provide at the point of application
- Documents that National Grid must check to determine whether an applicant is a qualifying applicant
- Additional qualification requirements
- Any adjustments to timing of steps in the allocation round
- Publication of information during and after the allocation round
An Allocation Framework must be published at least 10 days before an allocation round opens.
A copy of the latest draft of the Allocation Framework has been placed in the House Library.
These Regulations control three aspects of the way in which a 'generic' CFD - one which is offered following a CFD notification from the Delivery Body - may be drawn up, offered and publicised. The Regulations:
1) set out the provision to be included in standard terms issued or revised by the Secretary of State;
2) govern the way in which an applicant may request a change to the generic CFD terms; and
3) control the process through which a CFD is completed and offered.
These Regulations also require that certain information be published concerning those applicants who successfully enter into a CFD.
These Regulations establish the 'supplier obligation' mechanism, which enables the CFD Counterparty to raise a levy from all licensed electricity suppliers in Great Britain to pay low carbon generators entitled to payment under the Contracts for Difference scheme. The Regulations also:
· allow the CFD Counterparty to return money to suppliers where appropriate.
· set out arrangements for the CFD Counterparty to hold sums in reserve and to cover its losses in the situation of default by an electricity supplier.
· set out the arrangements for collection of a levy from all licensed electricity suppliers to pay for the CFD Counterparty's operating costs.
These Regulations set out a number of general provisions relating to the Contract for Difference (CFD) policy, including:
· a requirement on the Delivery Body to provide information in relation to the CFD strike prices;
· provisions determining how and when a Supply Chain statement application should be made; and
· provision to shield National Grid Electricity Transmission plc (NGET) against liability in damages to third parties for anything done or omitted to be done in performing its EMR Delivery Body functions relating to the CFD.