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BSC Panel 204

BSC Panel 204. 11 October 2012. Report on Progress of Modification Proposals. Adam Lattimore. 11 October 2012. Modifications Overview. 204/04 P274: Cessation of Compensatory Adjustments. Talia Addy 11 October 2012. P274: Issue.

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BSC Panel 204

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  1. BSC Panel 204 11 October 2012

  2. Report on Progress of Modification Proposals Adam Lattimore 11 October 2012

  3. Modifications Overview

  4. 204/04 P274: Cessation of Compensatory Adjustments Talia Addy 11 October 2012

  5. P274: Issue • Data for Settlement periods that have been subject to Final Reconciliation cannot be changed • If an error is identified in a Settlement Period it can be compensated for in a later period, that has not yet been subject to RF, by using Gross Volume Correction • P274 contends that the use of GVC can adversely affect Settlement • P274 seeks to more clearly define and impose restrictions on the use of such compensatory techniques

  6. P274: Proposed Solution • The P274 Proposed solution introduces definitions of GVC and Re-initialisation into the BSC • Re-initialisation formalises existing dummy meter exchange process • Restricts use of GVC to errors that are not ‘excessive’ and for volumes within 28 months of the date of GVC application • Mandates the use of Re-initialisation for excessive error volumes • Introduces requirements for NHHDC audit trail for both Re-initialisation and GVC • BSC changes are high level, details are in BSCP504 drafting

  7. P274: Alternative Solution • The P274 Alternativesolution continues to allow the use of GVC under existing rules but introduces a definition of GVC into the BSC and limits use of GVC to only volumes within a defined period • Limits would initially be five years prior to the latest RF Run at the date GVC is performed • Limit can be changed by the SVG following review • BSC changes are high level, details are in BSCP504 drafting

  8. P274: Proposed Modification Impacts and costs • ELEXON costs: • £1,200 (5 Man Days) • Industry Impacts: • Significant impacts and costs for both Suppliers and NHHDCs • One-off impacts and costs associated with system changes • On-going annual costs in additional resource to manage process • Impacts to GVC activities that would require staff training • Amending existing processes • Documentation changes

  9. P274: Alternative Modification Impacts and costs • ELEXON costs: • £1,200 (5 Man Days) • Industry Impacts: • Minor impacts and costs for Suppliers and NHHDCs • One-off costs and impacts associated with system changes • Little on-going annual cost in additional resource to manage process • Limited impact to GVC activities that would require staff training • Minor amendment of existing processes • Documentation changes

  10. P274: Implementation Date • Group Recommends an Implementation Date of: • Proposed - next BSC Release at least 12 months from approval date • For example, Implementation Date will be 7 November 2013 (November Release) if approval is received by 7 November 2012 • Alternative - next BSC Release at least 3 months from approval date • For example, Implementation Date will be 28 February 2013 (February Release) if approval is received by 28 November 2012

  11. P274: Consultation Responses • Respondents consisted of 5 Suppliers (1 small, 4 big), 1 Distributor and 2 Party Agents • No new arguments raised • Workgroup addressed comments received on solutions and drafting

  12. P274: Applicable BSC Objectives (1 of 4) • Majority of Workgroup members believe P274 Proposed would notbetter facilitate Objectives (c) and (d) • Objective (c) • Creates a barrier to entry as new Suppliers are likely to have difficulty managing data and addressing issues • Restriction GVC use would decrease the accuracy of Settlement • Objective (d) • Introduces significant additional complexity and cost • Arrangements excessively onerous on Suppliers and Supplier Agents • There is no defect in the BSC so changes are unnecessary • The issues identified by P274 arose due to the implementation of CP1310 and are unlikely to recur

  13. P274: Applicable BSC Objectives (2 of 4) • Minority of Workgroup members believe P274 Proposed would better facilitate Objectives (c) and (d) • Objective (c) • New entrants less likely to have energy volumes attributed to them that relate to periods before they began trading • Reduces attribution to Suppliers of energy volumes that relate to periods with different wholesale energy prices • LDSOs better able to produce suitable forward looking Line Loss Factors for use in Settlement • Addresses unreasonable GVC usage, i.e. application over excessive periods • Objective (d) • Additional incentive to settle the correct volume of energy within the 14-month reconciliation window • Review of threshold introduces flexibility into the arrangements

  14. P274: Applicable BSC Objectives (3 of 4) • Majority of Workgroup members believe P274 Alternative Modification would better facilitate Objectives (c) and (d) • Objective (c) • Provides additional control around GVC and confidence in GVC application, which should be generally beneficial for competition • Addresses unreasonable GVC usage • Objective (d) • Review of threshold introduces flexibility into the arrangements • Retains GVC as a sensible means of correcting errors

  15. P274: Applicable BSC Objectives (4 of 4) • Minority of Workgroup members believe P274 Alternative Modification would not better facilitate Objectives (c) and (d) • Objective (c) • If an error is identified it should be corrected in its entirety, which GVC currently permits and the Alternative would limit • Objective (d) • Additional complexity for no benefit • No change is required

  16. P274: Conclusions • Majority of Workgroup therefore believes: • Only the Alternative better than the existing baseline • P274 Alternative is better than P274 Proposed • Workgroup’s majority recommendation is: • Approve P274 Alternative Modification • Reject P274 Proposed Modification

  17. P274: Recommendations (1 of 2) The Panel is invited to: • NOTE Assessment Report • AGREEdraft BSC & BSCP504 legal text for Proposed and Alternative • AGREE Implementation Date: • Proposed Modification - next BSC Release at least 12 months from the date of approval • Alternative Modification - next BSC Release at least 3 months from the date of approval

  18. P274: Recommendations (2 of 2) • AGREE views against Applicable BSC Objectives: • Agree Proposed Modification not better than baseline against Objectives (c) and (d) • Agree Alternative Modification better than the baseline against Objectives (c) and (d) • Agree Alternative Modification better than Proposed Modification against Objectives (c) and (d) • AGREE initial recommendation to: • Approve Alternative Modification (and therefore reject Proposed) • AGREE to submit P274 to Report Phase • ELEXON will issue Report Phase Consultation • Draft Modification Report to December Panel meeting

  19. 204/05 P282:‘Allow MVRNs from Production to Consumption or Vice Versa’ David Kemp 11 October 2012

  20. P282: Issue (1 of 2) BM Unit • Current arrangements: Production and Consumption kept separate • Fundamental principle of NETA • Keep level playing field between different types of Party • Promotes liquidity • Energy from BM Units allocated to Lead Party’s corresponding Energy Account • P BM Units to P Energy Account • C BM Units to C Energy Account P C P C Energy Account

  21. P282: Issue (2 of 2) BM Unit • Can use MVRNs to reallocate energy to corresponding Energy Account of another Party • Can reallocate either a specified volume or a percentage of the BM Unit’s volume • Can only use MVRNs from: • P BM Units to P Energy Accounts; or • C BM Units to C Energy Accounts • Trading between Production and Consumption must be done using ECVNs • ECVNs must be for specified volumes of energy • MVRNs can be for a percentage of the BM Unit’s volume P C P C Energy Account

  22. P282: Solution BM Unit • Proposal: Allow MVRNs from P BM Unit to C Energy Account or vice versa • Would also allow a Party to MVRN energy from own P BM Unit to own C Energy Account or vice versa • Can replace relevant ECVNs with percentage MVRNs • Proposer considers: • P282 increases flexibility for smaller Parties • Larger Parties have found ways around current restrictions • Exempt Export BM Units can currently choose P/C Status P C P C Energy Account

  23. P282: Costs and Impacts • Costs: • Central Costs: Approx. £140k • Party Costs: Range from minimal to £130k • Participant Impacts: • MVRNAs • BSC Trading Parties • ECVAA and SAA • Document Impacts: • BSC Sections D, P, T, X-1 & X-2 • ECVAA & SAA Service Descriptions & URSs • NETA IDD Part 2

  24. P282: Applicable BSC Objectives (1 of 5) • Workgroup’s majority view is to Approve P282 • Views based on Applicable BSC Objectives (b), (c), (d) and (e)

  25. P282: Applicable BSC Objectives (2 of 5) • ‘Winners’ and ‘Losers’ from P282 • Reduction or no change in Parties’ imbalance charges • But reduction in amount of RCRC, disbenefiting Parties paid RCRC • Parties worse at balancing seem to benefit the most from P282 • Only benefit if long in one Account and short in the other • Net shortfall in one Account with gain in other – avoid SBP/SSP spread • Notified Volume Charge also impacted • Calculated on volume of ECVNs and fixed-volume MVRNs • P282 likely to result in ECVNs being replaced with percentage MVRNs • Materiality much lower than imbalance charge/RCRC impacts

  26. P282: Applicable BSC Objectives (3 of 5) • P282 will allow Parties to consolidate all volumes in one Account • Biggest benefit to Parties on both sides of market • May allow smaller Parties to club together, but other obstacles remain • Interconnector Users could net imports and exports • SO feels P282 may increase no. of balancing actions required • Reduce incentive to go long, reducing ‘free’ reserve • Constraint actions could become balancing actions – impact SBP/SSP • But ‘self-balancing’ could help balance system • Consideration that P282 unlikely to have significant impact on incentive to balance

  27. P282: Applicable BSC Objectives (4 of 5) • Unconvinced separation of Production and Consumption has led to intended liquidity • Can currently use ECVNs/MVRNs to ‘self-balance’ • Unconvinced P282 will have material impact on liquidity • Impact confined to short-term intra-day market due to better self-balancing • Unsure about longer-term – impacted by other factors • Liquidity about who Parties trade with, not number of Energy Accounts

  28. P282: Applicable BSC Objectives (5 of 5)

  29. P282: Consultation Responses • Views of respondents split equally for and against • Agree with Workgroup’s views for and against • No new arguments raised

  30. P282: Implementation Date • Workgroup recommends Implementation Date of: • 07 Nov 13 if P282 is approved on or before 07 Feb 13 • 27 Feb 14 if P282 is approved after 07 Feb 13 but on or before 27 May 13 • Lead time to make required Central System changes • ECVAA, SAA and Funding Share changes

  31. P282: Conclusions • Workgroup has discharged its Terms of Reference • Workgroup recommends that P282isApproved

  32. P282: Recommendations (1 of 2) The P282 Workgroup invites the Panel to: • AGREEan initial recommendation that P282 should be made; • AGREE an initial Implementation Date of: • 7 November 2013 if an Authority decision is received on or before 7 February 2013; or • 27 February 2014 if an Authority decision is received after 7 February 2013 but on or before 27 May 2013; Continues

  33. P282: Recommendations (2 of 2) • AGREE the draft legal text; • AGREE that P282 is submitted to the Report Phase; and • AGREE that ELEXON will issue the P282 draft Modification Report (including the draft BSC legal text) for a 15 Working Day consultation and will present the results to the Panel at its meeting on 13 December 2012.

  34. 204/06 P285:Revised treatment of RCRC for Interconnector BM Units David Kemp 11 October 2012

  35. P285: Issue • CMP202: Removed BSUoS charges from Interconnector BM Units • Implemented on 30 August 2012 • Proposer considers RCRC to be related to imbalance cost element of BSUoS • Potential to distort cross-border trades • Potential for windfall gains/losses • Could also be perceived as non-compliant with Third Package • Requires no additional charges levied on cross-border trades • P285 raised following consideration of relationship by CMP202 Workgroup

  36. P285: Solution • Proposal: Exclude Interconnector BM Units from RCRC • RCRC would be allocated based on Parties’ non-Interconnector volumes • Materiality: Approx. 3% of total RCRC • Net redistribution of £700k in 2011 • Materiality of current situation low, but should be resolved as soon as possible

  37. P285: Costs and Impacts • Costs: • Central Costs: Approx. £70k • Combined central saving of 40% if deployed in parallel with P286 • Party Costs: Range from minimal to £10k • Participant Impacts: • Interconnector Users and IEAs • All other BSC Trading Parties that are subject to RCRC • SAA and ECVAA • Document Impacts: • BSC Section T • SAA Service Description & URS

  38. P285: Applicable BSC Objectives (1 of 3) • Workgroup’s majority view is to Approve P285 • Views based on Applicable BSC Objectives (a), (c) and (e)

  39. P285: Applicable BSC Objectives (2 of 3) • Unclear if RCRC is a charge on cross-border flows • Part of imbalance cash-out mechanism, which Third Package permits • Not convinced RCRC and BSUoS are related • RCRC part of imbalance charges; BSUoS is a cost-recovery mechanism • Believe correlation is poor

  40. P285: Applicable BSC Objectives (3 of 3)

  41. P285: Consultation Responses • Majority of respondents agree with Workgroup’s view • Agree with Workgroup’s views for and against • No new arguments raised

  42. P285: Implementation Date • Workgroup recommends Implementation Date of: • 27 Jun 13 if P285 is approved on or before 24 Jan 13 • 07 Nov 13 if P285 is approved after 24 Jan 12 but on or before 06 Jun 13 • Lead time to make required Central System changes

  43. P285: Conclusions • Workgroup has discharged its Terms of Reference • Workgroup recommends that P285isApproved

  44. P285: Recommendations (1 of 2) The P285 Workgroup invites the Panel to: • AGREEan initial recommendation that P285 should be made; • AGREE an initial Implementation Date of: • 27 June 2013 if an Authority decision is received on or before 24 January 2013; or • 7 November 2013 if an Authority decision is received after 24 January 2013 but on or before 6 June 2013; Continues

  45. P285: Recommendations (2 of 2) • AGREE the draft legal text; • AGREE that P285 is submitted to the Report Phase; and • AGREE that ELEXON will issue the P285 draft Modification Report (including the draft BSC legal text) for a 15 Working Day consultation and will present the results to the Panel at its meeting on 13 December 2012.

  46. 204/07 P286: Revised treatment of RCRC for generation BM Units David Kemp 11 October 2012

  47. P286: Issue • CMP201: Proposes to remove BSUoS charges from generation BM Units • CUSC Panel recommends implementing Original Solution • Currently with Ofgem for decision • Allows GB generators to compete on equal basis with imports over Interconnectors • Proposer considers RCRC to be related to imbalance cost element of BSUoS • Potential for windfall gains/losses • P286 raised following consideration of relationship by CMP201 Workgroup

  48. P286: Solution • Proposal: Exclude BM Units in delivering Trading Units from RCRC • RCRC would be allocated based on Parties’ volumes from BM Units in offtaking Trading Units • Materiality: Approx. 35% of total RCRC • Net redistribution of £7.5m in 2011

  49. P286: Costs and Impacts • Costs: • Central Costs: Approx. £70k • Combined central saving of 40% if deployed in parallel with P285 • Party Costs: Range from minimal to £10k • Participant Impacts: • Generators • All other BSC Trading Parties that are subject to RCRC • SAA and ECVAA • Document Impacts: • BSC Section T • SAA Service Description & URS

  50. P286: Applicable BSC Objectives (1 of 3) • Workgroup’s majority view is to Approve P286 • Conditional on CMP201 being approved – if CMP201 is rejected, then Workgroup’s unanimous view is to Reject P286 • Views based on Applicable BSC Objectives (a), (b) and (c)

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