The UK’s energy networks are to offer some energy suppliers the ability to defer payment of network charges, in order to offer additional protection to customers, following a request by the energy regulator Ofgem.
Since the start of the coronavirus pandemic, the energy networks have been working to keep Britain’s energy flowing and provide help and support to vulnerable customers.
Deferring the payment of network charges for some suppliers through a facility worth more than £350m will help ease cash flow for these suppliers, reducing the likelihood of them leaving the market.
Ofgem has confirmed that the scheme will be available as a last resort option, once all other lines of credit have been exhausted and that suppliers and gas shippers may apply to access the scheme where they, their parent company or any other company within their group do not have an investment-grade credit rating and therefore have fewer options for securing financing.
The measures are being offered at a time when there is increased pressure across the energy sector. Network companies are continuing to invest heavily in the networks of the future, which must support the UK’s continued need to replace ageing assets and ensure a transition to net-zero emissions.
David Smith, Chief Executive of Energy Networks Association said:
“We are continuing to keep Britain’s energy flowing during the COVID-19 pandemic and offer support to customers, especially those who are vulnerable. The networks are prepared to use their borrowing powers to help ease cash flow for suppliers by more than £350m. We want to ensure customers are protected and recognise that this exceptional measure will help do just that.”
Notes to editors
The energy networks support 36,000 jobs in the UK and further investment in infrastructure which supports a low carbon future is seen as a ‘green print’ to the UK’s economic recovery from the COVID-19 pandemic.
At Ofgem’s direction, the scheme has been created to be in the interests of customers and is consistent with the following high-level principles. It:
- makes a meaningful contribution to the risk of suppliers failing
- preserves network companies’ financial resilience
- avoids moral hazard, targets the source of the problem, and is geared to be used to the minimum extent possible
- is capable of implementation with minimal modification to existing arrangements
- is generally consistent across sectors
The relief will apply to three months’ worth of payments and will be repayable on a revised profile with interest. The networks will not profit from any interest charges.
A minimum payment will be required in accordance with the normal payment terms in respect of any invoice raised.
Any given network company’s scheme will be withdrawn at any time if any entity in that network company’s group breaches any of its financial covenants as a result of continuing to provide the scheme.
Update 8 June 2020: the application form is now available online.
About Energy Networks Association
We’re the industry body for the energy networks. Our members own and operate the wires and pipes which carry electricity and gas into your community, supporting our economy. The wires and pipes are the arteries of our economy, delivering energy to over 30 million homes and businesses across the UK and Ireland. To do this safely and reliably, the businesses which run the networks employ 45,000 people and have spent and invested over £60 billion in the last eight years.