Contracts for Difference (Allocation) Regulations 2014
What this means for your business
- Applies to
- United Kingdom
- On this page
- 28 compliance obligations, 1 practical guide
What you must do
28 compliance obligations under this legislation.
Management duties 9
Approve or reject credit cover and notify the creditor
If you work for the Settlement Body that manages Contracts for Difference credit cover, you must decide whether the credit cover from a credit provider (A) is fully approved, partially approved, or not approved, and then send A a written notification of that decision. The notification must be sent within 15 working days, or within 2 working days if it is an added credit cover.
Exercise capacity market functions in line with regulations
If your company is a Delivery Body responsible for capacity auctions, you must perform the duties that the Regulations set out and do so in accordance with the capacity market rules. In practice this means acting on the tasks you are given, keeping records of your actions and ensuring you stay within the legal framework. Breaching the duty could trigger enforcement.
Maintain credit cover for capacity market units
If your business provides applicant credit cover for a Capacity Market Unit (CMU), you must keep that credit in place at the required level until one of a set of triggering events occurs – for example, the auction outcome, a transfer of the agreement, or providing the required DSR test certificate. The amount of cover you must hold is calculated under regulation 59 (and further rules) and you must keep records to show the cover is maintained.
Maintain required credit cover for CFD contracts
You must keep enough credit cover (e.g., letters of credit or other guarantees) in place at all times for your CFD positions. If the Settlement Body tells you any cover is not approved, you have five working days to add more. And at least ten working days before any cover expires, you must either extend it (by at least six months or the remaining contract term) or provide a replacement.
Meet performance requirements to avoid payment reductions
If your business supplies capacity under the Capacity Market, you must demonstrate the required level of performance by 30 April each delivery year. Failing to do so means the Settlement Body will cut or withhold your monthly capacity payments and may require you to repay any payments already received.
Notify downgrade and replace credit cover within 10 working days
If you discover that the bank which issued your letter of credit is no longer a qualifying bank, you must immediately tell the Settlement Body. Within 10 working days of either your notice or any notice you receive from the Settlement Body, you must provide new credit cover that meets the required amount. Failing to do so allows the Settlement Body to draw down the existing letter of credit and treat those funds as your credit cover.
Protect confidential capacity market information
If your business receives information that is classified as "protected" under the Contracts for Difference (Allocation) Regulations, you must keep that information secret and only use it for activities directly related to the capacity market. You may only share or use the data if you have the individual's consent or if a law, licence condition, or court order requires it.
Provide and manage demand‑side response capacity in the Capacity Market
If your business offers demand‑side response services and signs a capacity‑market agreement, you must have contractual control over the customers whose demand you will adjust, ensure each site is measured by a half‑hourly meter, commit a amount of capacity that exceeds the minimum threshold and keep total capacity across multiple sites below 50 MW. You must be ready to deliver that capacity when the system operator calls for it.
Withdraw applicant credit cover when required
If you are an applicant in the Contracts for Difference scheme, the settlement body must pull the credit cover you set aside for a capacity market unit (CMU) when certain conditions arise – for example, if the CMU’s demand‑side response capacity hasn’t been proven or if a termination fee comes due. The body has to do this within 60 days of the event (or as soon as reasonably practicable after a fee is due).
Notifications 5
Notify a capacity provider of data default and revoke when data is supplied
If a capacity provider fails to provide the data required by the capacity‑market rules, the Settlement Body must immediately send them a notice telling them they’re in default. Once the provider submits all the missing data, the notice must be revoked. It’s a simple communication process that keeps the market running smoothly.
Notify and publish capacity auction results promptly
If you run the delivery body for a capacity auction, you must give the Secretary of State the results as soon as you can, tell each bidder whether they won or not within one working day, and make the full results public within eight working days. The published results must include the clearing price, the capacity awarded, the CMUs involved and the exact terms of each successful bid. This keeps the market transparent and shows you’re working within the law.
Respond to a capacity agreement offer within 5 working days
If, after a successful review or appeal, you are offered a capacity agreement for your proposed capacity unit (CMU), you must reply to the Delivery Body within 5 working days to say whether you accept the offer. If you fail to respond, you lose any other right to challenge or renegotiate.
Send a disputes notice within 28 days of receiving a calculation
If you receive a calculation or determination that you think is wrong, you must let the Settlement Body know by sending a disputes notice. The notice must explain the issue and what you want to happen, and it has to be sent no later than 28 days after you receive the calculation.
Send a properly signed CFD transfer or ROO conversion notice on time
If you hold a capacity agreement and want to end it so you can apply for a Contracts for Difference (CFD) or claim Renewable Obligation Certificates (ROCs), you must send the Delivery Body a CFD transfer notice or ROO conversion notice at least 16 months before the delivery period starts. The notice must contain the required statements and be signed by two directors (or the sole director) of your company.
Other requirements 4
Comply with information duties and other requirements under the CFD regulations
Unlimited fineEven if your business is not a regulated CFD participant, you must still follow the information duties set out in Part 8 of the Contracts for Difference (Allocation) Regulations and any other requirements that apply under these rules or the Supplier Payment Regulations. The Authority can enforce these duties against you as if you were a regulated person.
Ensure your capacity unit meets eligibility for capacity auctions
If your business supplies or trades electricity capacity, you must make sure your capacity market unit (CMU) is located in Great Britain or the offshore area, has a connection or demand‑side‑response capacity of at least 1 MW, and is not one of the excluded CMUs covered by regulations 16 or 17. Only units that satisfy these rules can be pre‑qualified for capacity auctions.
Keep privileged legal communications confidential
If a regulator or capacity‑market rule asks you for information, you do not have to hand over any communications between you (or your client) and a legal adviser that relate to giving legal advice or to legal proceedings, unless the material is being used to further a criminal purpose. In practice you must recognise such communications as protected and can refuse to disclose them.
Provide required credit cover in an approved form
If your business is required to give credit cover under the Contracts for Difference (Allocation) Regulations, you must supply it for at least the amount specified and in a form the regulator accepts – either a qualifying bank letter of credit or a cash deposit in a designated Settlement Body account. The cover must stay valid for the whole period you are obligated to provide it.
Payments and fees 8
Pay capacity‑provider credit notes within 33 working days
If you are a capacity provider and you receive a credit note for a capacity payment or an over‑delivery payment, the Settlement Body must pay that amount to you by the end of the 33rd working day after the month (or delivery year) to which the payment relates. Your job is simply to make sure you can receive that payment on time.
Pay capacity provider penalty charges when invoiced
If, in any month, a settlement‑period penalty is triggered for capacity you supplied to the electricity capacity market, you must pay the resulting penalty charge to the Settlement Body. The Settlement Body will send you an invoice no later than the 35th working day after the month ends, and you must settle the amount shown.
Pay invoice for outstanding relevant expenditure/benefit
If the Settlement Body reduces the credit you would receive for a capacity payment because you have un‑deducted expenditure or benefit, they will send you an invoice. You must pay the invoiced amount (up to the total of the outstanding amount or the remaining credit) promptly.
Pay invoices on time and pay statutory late interest
When you receive an invoice from the Settlement Body you must pay the full amount by the stated due date. If you are late you must also pay simple interest at the rate set in the regulations on the outstanding balance from the due date until you pay. If you dispute the invoice and the Settlement Body reduces but does not cancel it, interest is payable on the reduced amount; if it is cancelled, no interest is due.
Pay non‑completion fee if new interconnector is not finished on time
If your business is providing capacity for a new‑build interconnector and you do not reach the required operational capability by the end of the delivery year, the Settlement Body will calculate a non‑completion fee and send you an invoice. You must pay that fee as soon as practicable after receiving the invoice.
Pay termination fee if capacity agreement is terminated on specified grounds
If a capacity agreement you hold is ended for a reason set out in the capacity market rules, and those rules say a termination fee applies, you must pay that fee to the Settlement Body. The amount is calculated from the amount of capacity you were contracted for and the fee rate published on the capacity market register.
Repay capacity payments if metering test is invalid
If a metering test certificate or DSR test certificate for your capacity provision is judged invalid under the capacity market rules, you must pay back any capacity payments you have received for the relevant period. The Settlement Body will calculate the amount and send you an invoice, which you must settle.
Repay capacity payments if your agreement is terminated
If your business provides capacity under the capacity market and the agreement is ended on a ground that the market rules say requires repayment, you must pay back the relevant capacity payments. The Settlement Body will calculate the amount and send you an invoice, and you must pay it as soon as reasonably practicable.
Record keeping 1
Keep records of your monthly capacity commitments for payment
If you supply capacity to the electricity market, each month you should keep a clear record of the power you committed (measured in CMUs). The Regulations say you will receive a payment for those commitments, but only if you have proven you were a capacity provider that month. Keeping those records lets the Settlement Body confirm your entitlement and calculate the amount you receive (or reduce it if overall charges fall short).
Reporting and filing 1
Provide an electronic address for invoices and credit notes
If your business supplies electricity or provides capacity, you must give the Settlement Body an electronic address (such as an email address) where they can send you invoices and credit notes. Supplying this address lets the Settlement Body deliver billing information to you electronically.
Penalties for non-compliance
1 penalty under this legislation. 1 carry an unlimited fine.
Comply with information duties and other requirements under the CFD regulations
Unlimited fine
Practical guidance
Our guides explain how to comply with the requirements above.
Sections and provisions
101 classified provisions from this legislation.
Duties 44
- s.5 “Demand side response CMU”
- s.7 Annual electricity capacity report
- s.8 Electricity capacity reports: supplementary
- s.15 General eligibility criteria The Delivery Body
- s.20 General duty of Delivery Body
- s.21 Auction guidelines changes made
- s.22 Determination of eligibility
- s.25 Notification of results
- s.26 Cancellation, postponement or stopping of capacity auction and
- s.31 Capacity market register
- s.34 Termination of capacity agreements: CFDs and ROO conversions
- s.35 Null and void capacity agreements
- s.37 Data default notices
- s.38 Invoices and credit notes: general
- s.40 Capacity payments
- s.41 Capacity provider penalty charges
- s.43 Termination fees
- s.46 Payment of invoices and accruing interest
- s.47 The non-payment register
- s.48 Payment of credit notes
- ... and 24 more duties
Powers 13
- s.9 Information, directions, and assumptions
- s.10 Determining whether capacity auction is to be held
- s.13 Adjustment of auction parameters following prequalification
- s.27 Power to annul capacity auction
- s.28 Rearranged capacity auctions
- s.33 Termination of capacity agreements: Secretary of State's discretion
- s.63 Duties to provide information
- s.70 Appeals to the Authority
- s.72 Appeals to the court
- s.74 Disputes
- s.77 Authority's power to make capacity market rules
- s.80 Appointment of Settlement Body
- Reduction of the duration of capacity agreements: Reduction of the duration of capacity agreements: Secretary of State’s discretion
Definitions 21
- Schedule 2 Documents
- s.3 “Providing electricity”; “reducing demand for electricity”; “electricity supplier” providing electricity reducing demand for electricity electricity supplier
- s.6 Reliability standard
- s.11 Meaning of auction parameters 3 year minimum £/kW threshold 9 year minimum £/kW threshold 15 year minimum £/kW threshold
- s.12 Determination of auction parameters by the Secretary of State
- s.14 Eligibility to bid in capacity auctions
- s.16 Excluded capacity: low carbon support scheme CMUs
- s.19 Regulations 16 and 17 : interpretation
- s.24 Holding the capacity auction
- s.30 Capacity agreements
- s.32 Termination fee rates
- s.36 The settlement calculations
- s.39 Determination of adjusted load-following capacity obligation, net output and adjusted net output
- s.42 Over-delivery payments
- s.45 General in default invoiced amount payment due date
- s.53 Application of this Part and interpretation
- s.59 Requirement to provide applicant credit cover
- s.68 Delivery body reviewable decisions delivery body reviewable decision
- s.69 Requesting reconsideration by the Delivery Body
- "Interconnector CMU" "Interconnector CMU" existing interconnector prospective interconnector
- ... and 1 more definitions