Electricity Market
Reform (EMR)
How new legislation will impact bills
The UK has committed to achieving some
ambitious environmental targets. These
include reducing our levels of carbon
emissions by 80% on 1990 levels by 2050
and generating at least 15% of our power
from renewable sources by 2020.
In order to meet these goals – and to
support the development of secure and
sustainable energy generation for the
future – the government has introduced
new legislation for Electricity Market
Reform (EMR).
EMR legislation includes four main
measures – two are already in place and a
further two became operational recently.
EMR elements already in place
• The Emissions Performance Standard
limits emissions on new power stations.
It came into force in Autumn 2014.
• The Carbon Price Floor sets a minimum
price for carbon emissions released by
power generators. It was introduced in
April 2013 with the cost applied
to wholesale prices.
New EMR elements live
from August 2014
• The Capacity Mechanism (CM) is
designed to make sure we have
sufficient power available to meet
our future needs. This is becoming
more important as older, reliable
plant closes to make way for
increasing amounts of new low-
carbon, intermittent generation.
The CM operates as an annual
auction, which started in December
2014, to procure the majority of the
UK’s required energy capacity four
years in advance, with a top-up
auction one year ahead of delivery
to enable demand-side response
to participate.
The cost of running the CM will be
met by consumers, with charges
appearing on bills from April 2015.
• Contracts for Difference (CfD) is
designed to support investment in
low-carbon generation, with a
technology-dependent ‘strike price’
(wholesale price + top-up subsidy).
This scheme launched in November
2014 and will ultimately replace the
current Renewables Obligation (RO)
subsidy. The two schemes will run
concurrently until 2037 (although
there will be no new entry into the
RO after 2017).
The operational costs of CfD will be
met by a levy applied to energy
suppliers, which will then be passed
on to consumers via their energy
bills from April 2015.
How CM costs will be charged CfD costs will be applied differently to
The full CM levy costs will not be Non Half Hourly (NHH) and Half Hourly
introduced until 2016, once demand- (HH) consumption.
side-response participation begins. We For NHH consumption, customers will
will write to you with more information pay a quarterly fixed fee that we will
regarding CM and how this is applied to calculate and revise as necessary each
invoices closer to the start date. quarter. This avoids the need for multiple
As of early 2015, the operational costs reconciliations and complex calculations.
of the Electricity Settlement Company, HH consumption will be invoiced monthly
which administers the CM scheme, have as a direct pass-through charge of the
been set at 0.001p/kWh (£0.012/MWh) for two CfD elements described above.
the 2015/16 year. This cost will be charged The reconciliation of the forecasted
as a pass-through cost to all business element will be applied the following
consumers (both Half Hourly and quarter (month+2), once the actual rate
Non Half Hourly). is released.
However, no additional CM costs will be For customers with mixed portfolios,
applied if you have a Deemed, Default both NHH and HH charging methods
or Tariff contract – or a Fixed Certainty, will be used.
Fixed or Flex contract that states
CM costs are included. And for those with a Deemed, Default
or Tariff contract – or a Fixed Certainty,
How CfD costs will be charged Fixed or Flex contract that states CfD
costs are included – no new costs will
CfD costs are made up of two elements. be applied.
Firstly, there are the operational costs,
as set by the Low Carbon Contracts
Company (LCCC), which the government
has set up to administer the scheme. Any questions?
For the 2015/16 year, this cost is 0.004p/ For more information on EMR
kWh (£0.040/MWh). charges, please contact your Business
Development Manager:
The second element funds the actual
CfD costs, which is calculated by the
Call:
LCCC depending on the amount of low
0800 138 2322
carbon electricity generated within the
scheme. This cost is issued firstly as an Visit:
interim rate for each quarter, then as an npower.com/emr
actual rate once the figures are known.
NB: The interim CfD rate for the first Or email:
quarter (1 April to 30 June 2015) is business@npower.com
0.000p/kWh (£0.000/MWh)^.
^ Following the first allocation round of investment for low-carbon generation as part of CfD, the LCCC has confirmed that no generators require
payment during the first levy period. Therefore the rate has been set at 0.000p/kWh (£0.000/MWh) for this period.

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