The Electricity Capacity (Amendment and Transitional Provision) Regulations 2026, S.I. 2026/850, were made on 16 July 2026, signed by Energy Minister Michael Shanks, and came into force on 17 July 2026. According to the instrument on legislation.gov.uk, the changes were approved by both Houses under the Energy Act 2013 and extend to England and Wales, and Scotland. This is not a wholesale redesign of the Capacity Market. It is a targeted amendment package affecting the Electricity Capacity Regulations 2014, the Electricity Capacity (Supplier Payment etc.) Regulations 2014 and the Electricity Capacity (No. 1) Regulations 2019. The Department for Energy Security and Net Zero presents the measure as a technical update to prequalification, credit cover, termination and settlement rules.
The Explanatory Note sets out the basic structure the Regulations sit within. The Capacity Market pays capacity providers for being available to deliver electricity capacity during system stress events. Applications are prequalified by the National Energy System Operator as delivery body, auctions then award capacity agreements, and payments are administered by the Electricity Settlements Company as settlement body. Those payments are funded through supplier charges on electricity suppliers in Great Britain. That matters here because the 2026 instrument changes both the entry rules for capacity market participants and the settlement mechanics used to calculate and reconcile supplier contributions.
One of the more important policy clarifications concerns the boundary between Capacity Market support and Contracts for Difference. The amended prequalification rules now distinguish more clearly between direct award CFDs and allocation round CFDs. Where a generating station has a live allocation round CFD, the delivery body must not prequalify the relevant CMU. For a direct award CFD, prequalification remains blocked unless the applicant provides a non-support confirmation by the close of the prequalification window. That confirmation must state that no generation counterparty payment will be received, and no generation party payment will be due, for the relevant CMU during any part of the delivery period. In practical terms, the Regulations open a narrow route for some projects whose CFD support will not overlap with their capacity agreement, while keeping the wider ban on double support in place. The same amendment package also requires auction guidelines to be republished as soon as reasonably practicable after any extension to the prequalification window, which addresses cases where serious IT problems affect the application portal.
The most immediate financial change is the higher fee and security package. The Regulations extend the termination fee structure from TF5 to TF9 and insert new rates of £6,500, £13,000, £19,500 and £45,500 per MW. Put simply, the scheme now carries a steeper penalty ladder where a provider fails to meet key obligations under a capacity agreement. Applicant credit cover also rises. The base figures move from £5,000 to £6,500 per MW for certain applications, and from £10,000 to £13,000 per MW in higher-risk cases. For new build CMUs, cover must increase to £19,500 per MW if twelve months have passed after auction results day and the financial commitment milestone has not been met, before dropping to £13,000 per MW once that milestone is met. A further rule allows the delivery body to require £45,500 per MW within 15 working days for certain non-DSR CMUs. A transitional provision preserves the earlier credit cover figures for applications made before 17 July 2026.
The instrument also rewrites the treatment of insolvency-related terminations. Under the amended regulation 51, once a capacity provider is issued with a termination notice for an insolvency termination event, monthly capacity payments for the affected CMU stop from the date of that notice and the settlement body must withhold credit using a pro-rata formula. Regulation 52 adds the matching repayment mechanism. If the termination notice is later withdrawn, the settlement body must calculate and release the withheld amount using a second formula tied to the remaining days in the month. For providers, funders and restructuring advisers, that is a material change to cash-flow assumptions once a distress event reaches the formal termination stage.
On the supplier side, the Supplier Payment Regulations are amended to give Ofgem more flexibility over reconciliation timing. Where the Authority decides that the usual periods should not apply, it may direct the settlement body to run scheduled monthly and annual reconciliation calculations within windows ending 7, 30 and 84 working days after the end of the relevant month or year. If Ofgem gives that direction after a timetable has already been published, the settlement body must reschedule the remaining runs and publish a revised timetable as soon as possible. This is an operational change rather than a fresh charging policy, but it affects the timing of billing certainty, data correction and dispute management for suppliers.
The Regulations also make several smaller clean-up amendments. The definition of auction clearing price is redrafted, the credit obligation period is tied more closely to completion of rule-based requirements that could otherwise trigger termination or block payments, and Chapter 1 of Part 3 of the 2019 Regulations on standstill-period supplier charge payments is removed as redundant. The Explanatory Note says no new impact assessment has been prepared because the broader Capacity Market was assessed when first introduced and the present amendments are expected to have only minor effects on business, with no effect foreseen for the voluntary or public sector. Even so, the start date was immediate. For capacity providers, suppliers and advisers, 17 July 2026 is therefore a live compliance date requiring updated credit planning, revised CFD checks and closer attention to settlement timetables.