Scotland has confirmed a technical but material change to the Renewables Obligation (Scotland). Under Scottish Statutory Instrument 2026/160-made on 18 March 2026 and coming into force on 1 April 2026-the RO buy-out price and the mutualisation cap will move from Retail Prices Index to Consumer Prices Index. The instrument was approved by the Scottish Parliament following consultation with Ofgem, Citizens Advice and Consumer Scotland, as the legislation requires.

For readers who don’t live and breathe the RO, suppliers serving customers in Scotland must present a set number of renewables obligation certificates (ROCs) to Ofgem for each obligation period running 1 April to 31 March. Generators of accredited renewable output receive ROCs which suppliers purchase, or suppliers can pay a per‑certificate buy-out price instead. The scheme is administered by the Gas and Electricity Markets Authority (Ofgem).

The Order rewrites how annual uplifts are calculated. From the obligation period starting 1 April 2026, the buy-out price and the mutualisation cap will each be the previous period’s figure adjusted by the percentage change in CPI over the 12 months ending 31 December of the prior obligation period, rounded to the nearest penny with halves rounded up. CPI is defined as the index calculated and published by the UK Statistics Authority (or any substitute figure it publishes if the standard index is unavailable).

This change matters because CPI usually runs below RPI due to differences in method and coverage, notably housing costs. In a typical year that means a gentler path for these RO cash parameters than under RPI. For suppliers, that should marginally ease the growth rate of compliance cash outflows versus the old formula, improving budget predictability against a benchmark used more widely across the public sector.

The buy-out price also acts as a reference point for ROC trading since it sets the cash alternative to holding certificates. A slower uplift in that reference price should, at the margin, temper the expected upward drift in certificate price assumptions compared with an RPI path. A quick worked example: if the buy-out price were £60 per ROC, a one‑percentage‑point lower index uplift equates to about 60 pence per ROC the following year-small in isolation but meaningful when multiplied across large portfolios.

For households and SMEs, the near‑term bill effect is likely modest. Environmental and social policy costs are a slice of the power bill, and this change alters the slope from 2026–27 rather than cutting historic costs. Wholesale prices, network charges and policy decisions elsewhere will continue to dominate bill movements, but procurement teams on pass‑through contracts should still note the new index as they model forward‑year charges.

Mutualisation-the mechanism that recovers shortfalls when some suppliers default on RO payments-also shifts to CPI indexation for its cap. The trigger mechanics and administration remain the same; only the annual uplift switches index. For credit and risk teams, that implies the scheme’s maximum potential call grows in line with CPI rather than RPI, a subtle reduction in worst‑case exposure growth over time without changing the underlying default risk calculus.

There is a clear transition. For obligation periods up to and including the one starting on 1 April 2025, the existing RPI‑based approach still applies. CPI takes over for obligation periods from 1 April 2026 onward. Finance directors should align 2026–27 budgets, RO accruals and board papers with the CPI rule, noting that the decisive data point each year is the CPI change over the 12 months to 31 December.

Contract language deserves a quick review. Any tariffs, PPAs or hedging frameworks that reference the RO buy-out price or mutualisation cap-and assume RPI-may need clarifying addenda so cashflows reflect CPI going forward. Modelling of recycle payments from the buy‑out fund should also be refreshed; a gentler buy‑out path can modestly affect expected distributions, though certificate issuance and compliance behaviour will still drive the bigger swings.

The Order is signed by Gillian Martin at St Andrew’s House, Edinburgh. It fits a wider public policy move away from RPI and towards CPI for indexation. For the Scottish power market, this is housekeeping that nudges liabilities onto a more mainstream measure and gives suppliers, investors and customers a clearer rulebook before the new obligation period opens on 1 April 2026.