On 15 November 2018 the General Court of the Court of Justice of the European Union found in favour of Tempus Energy, against the European Commission, removing the Commission’s state aid approval for the UK capacity market. The Court held that the Commission should have consulted more fully before granting state aid approval in 2014.
This judgment was decided on procedural grounds. It was not a challenge to the nature of the UK capacity market mechanism itself.
The judgment removes state aid approval for the capacity market, preventing the UK Government from holding any capacity auctions or making any capacity payments under existing agreements until re-approval.
National Grid has confirmed that it does not believe the judgment will cause any risk to security of supply this winter. It has informed market participants of the judgement.
We are considering the judgment in detail alongside the European Commission and are working to support it as it considers the legal options available.
We believe the capacity market is an effective mechanism that is designed in such a way as to minimise costs to consumers. The design of the capacity market has not been called into question, and our focus is therefore on ensuring it can be reinstated as soon as possible.
As part of this, we are seeking immediate state aid approval for a T-1 auction that will cover winter 2019-20. Alongside this, we are working to reinstate the full capacity market regime and are discussing the swiftest means of doing so with the Commission.
The Government and National Grid will ensure that market participants are kept updated.
I will keep the House updated as appropriate.