<p>The cost of contracts for difference—i.e. the difference between contracts for difference strike prices and the wholesale electricity price—will be borne by licensed electricity suppliers. Costs will be collected through the 'supplier obligation', which is the licence requirement for suppliers to pay the costs of contracts for difference.</p><p>The detail of that supplier obligation is currently being consulted on. Under those proposals, the supplier obligation will be levied on all suppliers on a pound per megawatt hour basis, i.e. on the basis of electricity supplied.</p><p>The exemption will work by excluding a proportion of the electricity supplied to energy intensive industries (EIIs) from the pound per megawatt levy. This would mean that the contracts for difference costs faced by licensed electricity suppliers would be adjusted to take into account the scale of the EII customer base. We would therefore not expect suppliers to incorporate the costs of contracts for difference in the charges made for the supply of electricity to EIIs as contracts for difference costs are not a cost caused by the supply of electricity to such customers. Market competition should ensure that savings made by licensed electricity suppliers are passed on to EIIs.</p>