Written statement to Parliament

Written ministerial statement by Edward Davey on the Contingencies Fund

This speech was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

WMS on the Contingencies Fund: Setting up an institutional framework for the delivery of electricity market reform and putting in place transitional arrangements

The Department of Energy and Climate Change requires a cash advance of £4,851,000 for financial year 2012/2013 from the Contingencies Fund to support urgent preparatory work by National Grid PLC, to initiate recruitment for an Panel of Technical Experts, and to fund external advisers in relation to transitional arrangements for early investors. This work needs to begin before Parliamentary approval can be obtained of both the specific enabling legislation and the necessary estimate.

The Energy Bill will, subject to Royal Assent, require the System Operator to deliver two measures as part of the reform of electricity markets in the UK, namely Feed in Tariffs with Contracts for Difference and the establishment of a Capacity Market. National Grid in its role as electricity System Operator needs to undertake work now to ensure it is ready to implement the measures immediately following Royal Assent. The Energy Bill also makes provision for transitional arrangements to enable developers to take investment decisions, where required, ahead of full implementation of electricity market reform. The Department needs to engage external advisers before the Bill receives Royal Assent to support the negotiation of any such arrangements to ensure they represent value for money for consumers.

These measures are designed to ensure sufficient investment comes forward in time to replace old generating plant due to close from 2016 onwards with new low carbon plant. This will ensure continued security of supply for the UK and will significantly contribute towards achievement of our legally binding EU 15% renewable energy target, and the decarbonisation targets established by virtue of the Climate Change Act 2008.

Accordingly, Parliamentary approval for additional resources of £4,851,000 for this new service will be sought in a Supply Estimate for the Department of Energy and Climate Change. Pending that approval, urgent expenditure estimated at £4,851,000 will be met by repayable cash advances from the Contingencies Fund.