EGL24500 - Allowable costs: exceptional revenue sharing costs, calculating the amount of relief

The method of calculating the allowable amount for exceptional revenue sharing costs for a generating undertaking is:

  • Step 1: Identify the generating stations that have arrangements where payments are made by reference to the price received or wholesale price of electricity.
  • Step 2: Calculate the amounts paid under each of the arrangements in step 1.
  • Step 3: For each arrangement, calculate the amount that would have been paid had the generation been sold at the benchmark price then deduct that amount from the amount determined at step 2.
  • Step 4: Total the amounts calculated at step 3. If the result is a positive amount, then that sum may be claimed as an exceptional revenue sharing cost.

This rule does not apply to arrangements where the amount paid to the third party are reduced to take account of the EGL payable by the generation undertaking.

Example

A Local Authority has contracted its domestic refuse collection to a group that provides a range of services in the waste industry. A large proportion of the non-recyclable refuse is used as fuel in a single energy from waste facility and the electricity produced is then sold in the wholesale market.

The arrangement with the Local Authority is that the generator will pay 30% of any revenues from electricity sales relating to the waste generation above £85 per MWh. During the generator’s 1-year qualifying period ending on 31 March 2024 the average price it received for its output was £100 and 40,000 MWh was attributable to generation from the Local Authority’s waste. The generator was therefore required to pay (£100 - £85) x 40,000 x 30/100 = £180,000 in respect of the period. It would not have been required to pay anything had it achieved a price of £75 so it is able to claim the full amount as a deduction when calculating its exceptional generation receipts. The amount paid to the Local Authority is not chargeable to the levy. The authority is not a generating undertaking itself, because it does not operate the generating station.