Question to the Department for Business, Energy and Industrial Strategy:

To ask the Secretary of State for Business, Energy and Industrial Strategy, what assessment he has made of the effect of the Capacity Mechanism on household electricity prices.

The Capacity Market enables us to buy energy in advance and is designed to ensure that families and businesses have access to secure, affordable energy supplies they can rely on.

As the Capacity Mechanism is a series of auctions, prices are subject to strong competition and the costs depend on the auctions’ clearing prices. The two principal auctions held so far have secured capacity needed for 2018/19, and for 2019/20, at costs in those years of around £980m and £830m respectively (2015 values). This equates to gross household bill impacts of around £10 per year, but this figure will be significantly offset when reduced wholesale price spikes are taken into account. Estimates made at the time of the introduction of the Capacity Market in 2014 suggested it would add only £2 net per year to a typical household energy bill on average over the long-term.