Electricity Market Reform

Electricity Market Reform (EMR) is a Government initiative to encourage electricity suppliers to meet carbon reduction targets by supplying low carbon power. EMR also aims to stimulate investment and secure supply and its main mechanisms include:

Contracts for Difference (CfD)

These are designed to stimulate long-term investment in low-carbon generation by reducing the risks to investors while also providing predictable revenue streams for generators.

Capacity Market (CM)

This auction-based arrangement aims to secure the UK’s electricity supply and make sure the lights stay on during peak demand by offering financial incentives to CM participants. They get regular payments in return for making their capacity available when the system is ‘tight’. They’ll also face a penalty if it’s not available when needed.

Eligible generators, and customers that can manage their consumption demand, can participate in this scheme.

What does this mean for customers?

The EMR charges on your bills are explained below.

Half-hourly (HH) contracts

If you’re using HH metering, there are four lines on your bills under ‘Taxes, Levies and Other Statutory Obligations’ – see below – with reconciliation appearing as additional lines.

HCfD Operational Levy xxxxx.x, KW at 0.01089 pence per kWh £zz.zz
CfD Interim Levy Rate xxxxx.x,KWh at 1.1522 pence per kWh £zz.zz
CM Settlement Costs Instalment £s per month £zz.zz
CM Supplier Levy £s per month £zz.zz

The HCfD Operational Levy covers the costs of administrating CfD and is charged on a pence per kWh basis (as shown). The relevant regulatory body will review it annually.

The CM Settlement Costs Instalment is designed to recover the administration costs of running the CM, i.e. the costs of the Electricity Settlements Company (ESC). This is then recovered from suppliers based on their market share during periods of high demand. All suppliers recover the charge from their customers via monthly instalments based on an estimate of their consumption in periods of high demand (4-7pm on working days, November – February). Once actual demand for those periods is known, suppliers reconcile the charges.

The CfD Interim Rate Levy and CM Settlement Cost Instalment cover the operational components of CfD and CM. These charges are also subject to reconciliation.

CM Supplier Levy charges are calculated on actual half hourly (HH) consumption between 4-7pm November – February, working days only. This is the main CM charge, which is passed to capacity providers operating the scheme.

Please note: the charges above are calculated using pence per kWh rates to four decimal places, but figures shown on bills are to three decimal places for clarity. Conventional rounding of the figures takes place.

Please find below links to the regulatory bodies responsible for publishing these rates:

Non Half-hourly (NHH) contracts

If you’re on a NHH contract, you’ll see a line on bills under ‘Taxes, Levies and Other Statutory Obligations’ appearing as follows:

EMR Levy xxxxx.x kWh at y.yyy pence per kWh £zz.zz

The EMR Levy is calculated using a pence per kWh rate applied to consumption. It replaces the four lines that appear on HH bills representing the costs associated with EMR legislation. The EMR Levy will not be reconciled and is designed to cover all CM and CfD costs, simplifying them into one line on bills for customers on specific tariffs.

Please note: the charges above (for both HH and NHH) are calculated to six decimal places, but the figures on bills are shown to three decimal places for clarity. Conventional rounding of the figures takes place.

The table below shows EMR Levy Rate values, which we’ve updated on bills as they’ve increased.

Month of consumption EMR Levy Rate (pence per kWh)
July 2023 1.871
August 2023 1.871
September 2023 1.871
October 2023 1.877
November 2023 1.877
December 2023 1.877
January 2024 2.307
February 2024 2.307
March 2024 2.307
April 2024 1.355
May 2024 1.355
June 2024 1.355

Will any customers be exempt from these charges?

The Government’s agreed to make electricity intensive industries (EIIs) exempt from some of the CfD costs, and from other indirect costs incurred from energy and climate change policies.

Keep up to date on the latest Electricity Market Reform news and policy updates.