Twenty Fifth Report Contents

Appendix 2: Draft Electricity Supplier Payments (Amendment) Regulations 2017

Additional information from the Department for Business, Energy and Industrial Strategy (BEIS)

Q1: In 201718, what is the amount of the increase in professional and legal fees?

A1: The budgeted costs for professional and legal fees have increased by £0.591m from £3.032m in 2016–17 to £3.623m in 2017–18.

Q2: In 201718, what is the extent of the activity required for the Contracts for Difference (CfD) Counterparty’s management of the Hinkley Point C nuclear CfD and renewables CfD activities?

A2: Management of CFDs requires entering into contracts, verification of compliance with contractual requirements, consideration of requests for contractual changes, periodic adjustments to contract prices, regular engagement with contract holders, reporting to Government on contract management issues and information requirements, assessment of the need to terminate a contract for failure to comply and defending contract decisions in Court, through arbitration or in expert determination. Each annual budget is developed on the basis of the contracts currently in operation and reasonable assumptions of numbers of new contracts to be signed. For the 2017–18 budget, the estimated costs of managing information requirements under the Hinkley Point C contract and of defending contract decisions under renewables CfDs represented key pressures on funding requirements.

Q3: Given the statement that “the CfD Counterparty’s approach to procuring external technical and professional advice, instead of having more of its own in-house resources, allows it to access the required support only when it is needed”, what would be the cost of employing in-house professional and legal staff to assist the CfD Counterparty in these activities? Has BEIS seen a comparison of the estimated costs of in-house resources with those of the external resources to be used?

A3: The CfD Counterparty is responsible for carrying out its activities in such a way as to maintain confidence in the policies and protect the interests of consumers. It considers that it has the appropriate human resources to manage the contracts and undertake the expected core activities throughout a typical year, including lawyers, accountants and contract managers. The CfD Counterparty has decided that it would not be appropriate to recruit further legal, financial or technical employees on a permanent or contract basis on the off-chance of their services being needed, especially to support litigation or arbitration that may or may not arise. Furthermore, where specialised legal, financial or technical expertise is required to resolve issues that arise from time to time, the CfD Counterparty has taken the view that it would not be efficient for that expertise to be provided in-house if the nature of expertise required were to vary on a case by case basis. Therefore, currently, the CfD Counterparty judges that the most efficient approach is to procure such external technical and professional advice. It will, however, continue to review its needs in this area to assess whether at some point in the future it is cost-effective to recruit more of this expertise in-house.

The CfD Counterparty formulates its annual budget and presents it for scrutiny and approval to its Board and to BEIS as the sponsoring department and sole shareholder. BEIS challenges the budget and the underlying assumptions and seeks and receives evidence on significant items. Advice is presented to Ministers on the budget and Ministerial decisions are relayed to the CfD Counterparty. Revised budget is then presented for approval to the Board and to BEIS. BEIS then undertakes a public consultation on the budget and the corresponding levy and publishes a Government Response prior to laying the relevant regulations.

8 February 2017

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