Struggling electricity retailers will be permitted to defer 60 days worth of transmission and distribution payments for up to nine months, Marc Daalder reports
In an effort to alleviate the financial burden electricity retailers may be facing in the Covid-19 economy, the Electricity Authority will allow selected retailers to defer payment of some transmission and distribution payments for up to nine months.
“The Authority and many participants in the sector have been concerned about the prospect that the Covid-19 lockdown will lead to increased levels of non-payment of electricity bills, and additional doubtful debt, as households and small and medium-sized enterprises (SMEs) default,” the Authority said in a release.
“At the same time, there is increased pressure on retailers to try to avoid disconnecting customers who haven’t paid their bills. Generally, managing price risk and debt is a major part of our expectation of retailers. However, Covid-19 is an extraordinary event and there is a real and increased potential for some retailers to exit the market.
“The Authority wants to ensure Covid-19 and the lockdown does not result in substantially less retail competition and innovation in the future. Less competition means less choice for consumers and potentially higher electricity bills. We consider the risk of multiple defaults due to Covid-19 and the restrictions of lockdown justifies a sector specific response.”
Under the proposal, retailers must meet three criteria to be eligible for the deferment rights.
First, they must have been financially stable prior to Covid-19. Second, they must have “been materially impacted by additional doubtful debt as a result of the impact of the Covid-19 lockdown”. Third, they must not be covering that additional doubtful debt through other facilities or shareholder support.
Eligible companies at risk of failing due to Covid-19 will then be “provided with breathing space by having their distribution debt from the six largest distributors (including passed through transmission charges) deferred, by allowing an additional 60 days for payment of distribution charges for a period of up to nine months”.
“This effectively means qualifying retailers will benefit from a holiday of up to nine-months from a maximum of 60 days of distribution and transmission charges,” the Authority noted.
“The Authority has written to the six largest distributors to notify them of our decision. The Authority has selected the six largest distributors on the basis they have the financial strength to cope with deferred payments from qualifying retailers.”