Energy (Windfall Gains in the Energy Sector) (Cap on Market Revenues) Act 2023
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Further provision relating to hedging arrangements | ||
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14. (1) Subject to subsection (3), all losses and gains incurred or earned from every hedging arrangement, applying during or in relation to all or part of the relevant period, entered into by a producer, intermediary or trader shall be taken into account in accordance with section 12 . | ||
(2) Where a hedging arrangement of a producer is not related to a specific identifiable generating unit of the producer then all losses and gains incurred or gained under the hedging arrangement in any imbalance settlement period shall be applied to all generating units of the producer in that imbalance settlement period. | ||
(3) A hedging arrangement shall be taken into account for the purpose of a calculation referred to in section 12 where all of the following conditions are met: | ||
(a) the hedging arrangement is directly related to hedging fluctuations in Single Electricity Market wholesale electricity prices and directly associated with the sale and delivery of electricity in the Single Electricity Market during the relevant period; | ||
(b) the arrangement is made with a person other than the producer, intermediary or trader concerned and it provides for price, volume, duration and terms of settlement; | ||
(c) the hedging arrangement is associated with specific megawatt per hour quantities in each imbalance settlement period and has, subject to subsection (2), been allocated over all generating units referred to in the hedging arrangement; | ||
(d) the loss assigned by the hedging arrangement to a generating unit in an imbalance settlement period is based on a quantity of energy that is less than or equal to the electricity produced by that generating unit in that imbalance settlement period; | ||
(e) the hedging arrangement represents an arm’s length transaction at the market price at the time of entry into the arrangement and the producer, intermediary or trader who has entered into the arrangement and the other party to the arrangement are not affiliated persons; | ||
(f) the hedging arrangement has not been unwound or counter balanced by another transaction conducted by the producer, intermediary or trader or any affiliated person of that person; | ||
(g) there is no separate arrangement to provide a benefit to any person as a result of the hedging arrangement, between the producer, intermediary or trader and the other party to the hedging arrangement or with any affiliated person of a party to the hedging arrangement. | ||
(4) A hedging arrangement referred to in this section may include but need not be limited to the sale of electricity pursuant to— | ||
(a) a contract for differences, | ||
(b) contracts for fuel and carbon contracts that are proxies for electricity contracts, or | ||
(c) a directed contract. | ||
(5) In this section— | ||
“contract for differences” means an agreement through which parties agree the price of a commodity by reference to the difference between a fixed contract price and the market price, which is paid after the trading period; | ||
“directed contract” means a contract for difference where the contract price and volume are directed by the SEM Committee; | ||
“SEM Committee” means the committee referred to in section 8A of the Act of 1999. |