Transmission constraints are any limits on the ability of the electricity transmission system (or any part of it) to transmit power from where it is supplied to where it is needed. Where transmission constraints occur, then individual electricity generators, or groups of generators in particular areas, can hold a position of market power, with the electricity system operator having limited options to manage the constraint other than reaching an agreement with the owners of those specific units to alter their planned output.
Standard licence condition 20A of the Generation Licence (the Transmission Constraint Licence Condition, or TCLC) exists to protect against this market power. By prohibiting licensees from obtaining an excessive benefit in relation to bids submitted in the Balancing Mechanism in transmission constraint periods, it helps to keep down balancing costs – and, ultimately, consumers’ bills.
We publish guidance for licensees and other interested parties on our interpretation and approach to the enforcement of the TCLC. This includes detailed guidance relating to how we will typically expect to approach the question of whether a given bid price is excessive. This guidance was first published in 2012 when the TCLC was introduced, and last updated in 2017.
Since 2017, the extent to which the ESO has required to take action to manage transmission constraints has grown rapidly as the geographical and technological nature of the generation mix has changed. In recent years we have also on a number of occasions carried out compliance work in relation to potential concerns with specific generators’ bid prices. In some cases these enquiries have led to formal investigations, findings that licensees have breached the TCLC and financial penalties. This compliance work has brought to light some wider concerns about generators’ compliance with (and interpretation of) the TCLC.
Given this background, we are now proposing to update the TCLC guidance so as to bring it up to date, and to provide generators with a greater level of detail in relation to our expectations regarding compliance with the TCLC. The consultation document linked below describes the changes we are proposing to make, and seeks any comments on those proposed changes. Also provided below is a link to a draft of the proposed updated guidance.