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EU Commission approves UK billion-pound power backup scheme

EU Commission approves UK billion-pound power backup scheme
FILE PHOTO: An employee works inside the control room at Drax power station in Drax, northern England, February 16, 2011. REUTERS/Nigel Roddis/File Photo Copyright Nigel Roddis(Reuters)
Copyright Nigel Roddis(Reuters)
By Reuters
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BRUSSELS/LONDON (Reuters) - The European Commission said on Thursday it had approved the British capacity market scheme that is designed to safeguard the security of electricity supply in the country.

The scheme allows UK power companies to receive a total of roughly £1 billion to help them bear the cost of keeping extra generation available at short notice in the case of sudden supply disruptions.

However, these payments have been delayed after a European court ordered the Commission to get more details on certain elements of the scheme, such as information on energy consumers willing to reduce their consumption when needed.

The Commission said on Thursday it found no evidence that capacity providers or the consumers ready to reduce consumption were at a disadvantage and found that the scheme was in line with EU state aid rules.

The British government said it was preparing a response.

Earlier this month, sources told Reuters they expected the scheme to be cleared, potentially before Oct. 31 when Britain was expected to leave the European Union.

Shares in British power company Drax <DRX.L>, which had won several contracts under the scheme, were up 1.4% following the announcement but stocks had soared earlier this month after the Reuters story.

Shares in SSE <SSE.L>, which has said it was unable to recognise payments worth £148 million in the first half of the year from the scheme, were barely changed.

The British government has said that in the event of a no-deal Brexit, in which Britain leaves the bloc without further agreements, national legislation concerning state aid - under which capacity auctions take place - becomes law.

The British government previously said it expected the scheme would be reinstated and that companies would receive retrospective payments.

Some non-governmental groups and those working in the industry have sought to disrupt the scheme, which they say has illegally subsidised fossil fuels and made insufficient allowance for more innovative ways of providing support for the power grid.

(Reporting by Philip Blenkinsop and Nina Chestney; editing by David Evans)

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