British power plant owners are in line for £1 billion of belated subsidy payments after the European Commission reapproved a government scheme to help keep the lights on. The “capacity market”, which pays companies consumer-funded subsidies to guarantee their power stations will be available when needed, was suspended last November after a legal challenge. The European Commission said it had conducted an in-depth investigation and reiterated its original 2014 decision that the scheme was compatible with state aid rules. The government said it expected that it would now be able to restart the scheme, resulting in about £1 billion of back-payments to cover the past year being made by January and the scheme operating as planned for future years. The decision is good news for companies including Drax and SSE who will all receive substantial payments. It could however pile more pressure on some financially stretched energy suppliers who will have to stump up their share of the cash for the deferred payments. Suppliers are supposed to have been collecting the cash from their customers over the past year and setting it aside, but there are concerns that some small companies may instead have dipped into the funds to cover other expenses and could now struggle to pay the substantial bill. The legal challenge was brought by Tempus Energy, a small company which alleged that the scheme unjustly favoured fossil-fuel power plants.
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