October 4, 2019 / 12:41 PM / 17 days ago

Exclusive: European Commission set to approve UK billion-pound power backup plan

BRUSSELS/LONDON (Reuters) - The European Commission is set to give the go-ahead for British power companies to receive a total of roughly one billion pounds to help them bear the cost of maintaining extra generation in case of outages, three sources said on Friday.

FILE PHOTO: Electricity pylons are seen in London, Britain August 1, 2017. REUTERS/Neil Hall/File Photo

The payments were delayed after a Luxembourg-based European court ordered the Commission, the EU executive, to get more details on elements of the British capacity mechanism, which pays utilities to make electricity available at short notice.

Shares in British power company Drax (DRX.L), which had won several contracts under the scheme, were up more than 14% by 1312 GMT following the news.

Shares in SSE (SSE.L), which last week said it was unable to recognize payments worth 148 million pounds in the first half of the year from the scheme, were up 2%.

Officials have said the Commission was confident the British plan was now compliant following an indepth investigation and that any legislative breach had been largely procedural.

Three sources, speaking on condition of anonymity, said they expected a decision this month, although a delay was possible.

“There is a decision in the pipeline,” one said.

Another said the Commission was keen to finalize the decision, given the amount of work done and the uncertainty surrounding Britain’s departure from the European Union scheduled for Oct. 31. Although payments promised so far would be released, any future aid could have different conditions attached.

The British government has said that in the event of a no-deal Brexit, in which Britain leaves the bloc without further agreements, national legislation concerning state aid - under which capacity auctions take place - becomes law.

Some non-governmental groups and those working in the industry are seeking to disrupt the scheme, which they say has illegally subsidized fossil fuels and made insufficient allowance for more innovative ways of providing support for the power grid.

A final decision is expected from the European Court of Justice next year, and separate court action is taking place in Britain and in Poland over its capacity mechanism plans.

Britain’s department for Business, Energy and Industrial Strategy did not respond to requests for comment.

The British government previously said it expected the scheme would be reinstated and that companies would receive retrospective payments.

Reporting by Foo Yun Chee in Brussels and by Barbara Lewis in London; additional reporting by Susanna Twidale in London; editing by David Evans

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