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ENA and Ofgem announce £350m facility to allow suppliers to defer network payments

Image: Andy Beecroft.

Image: Andy Beecroft.

Energy suppliers will now be able to defer network payments, in an effort to protect them and customers from the impact of COVID-19.

A new mechanism, worth more than £350 million, has been designed by the energy networks through the Energy Networks Association, following a request from Ofgem.

The regulator has been monitoring the impact of COVID-19, looking for ways in which to aid suppliers and shippers who may be experiencing cash flow issues, to ensure they are not forced to leave the market and the strain is not passed onto customers.

According to an open letter, published today (2 May) common features have now been agreed on by network companies. These include the scheme applying over a three month period, as well as being available to only those companies that do not have an investment grade credit rating. It must also be repaid in full by the end of March 2021.

The deferred payments must also be of the right size and availability, so as they do not threaten a network's ability to fulfill its financial covenants and credit metrics. If a network company breaks such covenants at any point, the scheme can be withdrawn.

Network companies are expected to themselves consider the right approach to the scheme, and the facility should be considered a last resort. Ofgem will monitor it to ensure that it is not abused.

In a blog post discussing the change, Ofgem’s CEO Jonathan Brearley added: “We expect companies to be ambitious in restoring their standards of customer service and business as usual activities as quickly as possible.”

He continued that they accepted there would still be challenges and exceptions, and urged companies to follow government guidance for the safety of staff and customers.

The new facility comes after Ofgem put together consultations with energy networks, electricity generators and suppliers in April, to tackle challenges thrown up by COVID-19.

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 £350 million. We want to ensure customers are protected and recognise that this exceptional measure will help do just that.”

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