Fight the power: CRU, Huntstown and the Appeal Panel

Lemme hear you say

The indirect impacts of last year’s capacity auction continue to come. An Appeal Panel has determined that the Commission for the Regulation of Utilities (CRU) erred in seeking to enforce a decision on licence changes relating to Huntstown power station. If implemented, they found that the licence changes would have forced Huntstown power station to operate at zero earnings or potentially a loss, without providing them some mechanism to manage their exit from the market. To quote the 4 July decision from the Appeal Panel: “In this case […] the CRU has effectively turned up the heat and locked the door of the kitchen.”

Huntstown Power Company Limited and Viridian Power Limited (collectively “Viridian”) appealed the CRU’s decision on changes to existing generator and supplier licences to implement the Integrated Single Electricity Market (I-SEM). They challenged it on several grounds, but the core focus of their appeal related to the Balancing Market (BM), cost-reflective bidding and the Capacity Market Code (CMC).

The link to the capacity auction arises from Huntstown 2 being unsuccessful in the first T-1 Capacity Remuneration Mechanism (CRM) auction. Viridian had announced its intention to close early as a result. However, the CRU was minded to enforce the Grid Code clause of three years’ notice being required to close a generation plant. As a result, Viridian could have found itself compelled to remain open and operating at a loss.

The Appeal Panel accepted that the licence decision would likely result in the closure of Huntstown 1 and 2. The decision cited Viridian’s assessment that this situation would have meant it generating power at a loss or at zero earnings, rendering the plant unfinanceable,  forcing them to impair the plant, and meaning they could neither service their debts nor undertake many operational and capital activities.

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