Introduction to EMR for New Suppliers. Thursday 3 December 2015

Transcription

1 Introduction to EMR for New Suppliers Thursday 3 December 2015

2 Agenda Item Time Lead Welcome and information about the day LCCC Overview of Electricity Market Reform LCCC The LCCC Forecasting Team LCCC Break: Supplier Charges and Calculations EMRS Lunch: What will you receive from EMRS? EMRS What should you be aware of for the future? EMRS Plenary and close LCCC

3 Overview of Electricity Market Reform Matthew Taylor Head of Strategy and External Relations Low Carbon Contracts Company

4 Overview of Electricity Market Reform Aim of Electricity Market Reform Roles and responsibilities Description of the main instruments Contract for-difference Capacity Market Role of the Low Carbon Contracts Company Key Timings

5 What is the aim of Electricity Market Reform Aim of Electricity Market Reform Ensure secure electricity supply through having sufficient capacity to meet demand, a diverse portfolio of generation technologies and a reduced reliance on fossil fuels. Ensuring sufficient investment in sustainable low-carbon technologies to provide the necessary support and stable revenues to decarbonise electricity generation. EU 2020 renewables target and to reduce carbon emissions by at least 80% of 1990 levels by In a way which maximises benefits and minimises costs to the UK economy and to taxpayers and consumers.

6 Roles and Responsibilities There are a number of roles and responsibilities Low Carbon Contracts Company & Electricity Settlements Company: CFD Counterparty manages CFDS, Supplier Obligation, CM Credit Cover EMR Settlement Ltd Manages settlement operations on behalf of LCCC National Grid (Delivery Body) Runs application, allocation and auction processes for CFD and CM DECC Sets policy for EMR: Allocation Framework for CFD, Auction rules for Capacity Market Ofgem Monitor costs of Delivery Body and disputes role

7 Description of the main instruments The main instruments to achieve these objectives are Contract for Difference (CFD) Capacity Market (CM) Carbon Price Floor Electricity Demand Reduction

8 CFD The CFD framework is designed to provide revenue stability Attract a wider pool of capital sources Allows investment to come forward at a lower cost of capital Introduce competition as a conduit for cost reduction Delivery of a range of technologies

9 CFD The CFD framework consists of a number of components The contract itself the CFD The Supplier Obligation which regulates payment flows between the consumer and the generator The Allocation Process Regulatory underpinning the Energy Act 2013 and supporting legislation and regulation

10 CFD The CFD is a private law contract Defines rights and obligations between the generator and the counterparty (the Low Carbon Contracts Company) Provides a number of protections for the generator to protect against erosion of value over the term of the contract including: Change in law Indexation Force majeure Dispute resolution process Other mechanisms to preserve value

11 The Supplier Obligation allows for payments between the consumer (supplier) and generator CFD Obligation on electricity suppliers to make payments to the LCCC Obligation periods quarterly, commencing from 1 April 2015 Supplier Obligation payments cover: Suppliers Supplier Obligation Levy Funds the payments to generators Interim levy Reconciliation amounts Reserve payment Suppliers Reserve Payment Amount prepaid by suppliers to provide LCCC with sufficient funds with 95% confidence Other contingency provided through credit cover (cash or LOC) Mutualisation payments Credit Cover Suppliers Operational cost levy Funds the ongoing operating costs of LCCC and ESC Funds own capex through depreciation charge

12 Whilst the Allocation Process is the mechanism by which developers compete for a CFD CFD Governed by the Allocation Framework DECC defines eligible technologies and sets the administrative strike price Last allocation round had three pots Pot 1: onshore wind, solar, energy from waste CHP, hydro, landfill gas, sewage gas Pot 2: offshore wind, tidal stream, wave, ACT, dedicated biomass with CHP, geothermal Pot 3: biomass conversion

13 CFD The allocation process drives competition in order to reduce costs to consumers Application Generator applies to Delivery Body, can request minor and necessary changes Valuation Delivery Body values total number of qualifying applications Qualification Delivery Body checks qualifications Sealed Bids If valuation is above set level (driven by LCF etc.) then sealed bid auction commences Review Review of applications Allocation Post auction Delivery Body allocates CfDs Appeals Generator can appeal any decisions made by Delivery Body on application qualifications Notification Delivery Body notifies LCCC. LCCC offers CfD

14 CFD Outcomes of the first allocation round were positive with a mix of technologies TECHNOLOGY MW Advanced Conversion Technology 62 Energy from waste Onshore wind Offshore wind 4346 Solar PV Biomass with combined heat and power 299

15 CFD And with a lower cost to consumers Competition seems to have delivered lower cost to consumers when compared with Renewables Obligation Allocation Round delivered 2.1GW at price lower than ASP And lower than had the capacity been supported under the RO Source: Independent Evaluation of the Electricity Market Reform, Grant Thornton and Pὅry, October

16 The Capacity Market

17 Capacity Market The Capacity Market Is designed to ensure sufficient, reliable capacity in periods of system stress Gives eligible capacity providers reliable revenue stream Capacity providers face penalties if fail to deliver capacity when required Philosophy is to allow the market to competitively set the price for capacity Agreements are offered to providers of existing and new capacity four years ahead of when the capacity is required

18 Capacity Market Timeline Capacity Market Scheme design T-4 Auction T-2.5 T-1 Auction Delivery Year T+1.5 (Milestone) Auction parameters Prequalification Auction Termination Event Auction parameters Prequalification Auction Payments and Penalties Termination Event (2) Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

19 Capacity Market Results of the 2014 Capacity Auction 65GW participated in auction GW of capacity secured for 2018/2019 at price of per kw per annum. 2.6GW of new generation including 1.6GW CCGT 15 year agreements MW 70,000 1% 0.35% CCGT 60,000 50,000 40,000 9% 6% 4% 45% Coal/Biomass Nuclear CHP 30,000 16% Storage 20,000 10,000 19% OCGT & Reciprocating engines Hydro 0 DSR

20 Capacity Market Transitional Arrangements, support growth of demand side response Capacity Market The Same 1. Annual cycle: summer-autumn prequal, autumn auction, delivery year. 2. T-1 auction demand curve methodology. 3. Prequalification, 2MW de minimus and bid bonds for unproven DSR (10% of main CM). 4. Auction format. 5. Participation in the balancing services. 6. New and existing resources permitted. 7. Penalty. Different 1. Target volume not set to meet system demand. 2. Only non-cmrs and DSR CMUs, capped at 50MW for non-cmrs CMUs. 3. Two products load following and time banded year agreements for all resources. 5. Simulated stress events. 6. Testing regime.

21 Next auction is December 2015, with over 59GW of capacity pre-qualifying Capacity Market 1, MW 938 8, Existing IC New Build IC DSR New Build Generation Refurbishing Exisitng Generation Qualifying capacity 47,159

22 Role of the Low Carbon Contracts Company (LCCC) and Electricity Settlements Company (ESC)

23 Role of the LCCC High level roles and responsibilities Low Carbon Contracts Company Considers requests for Minor and Necessary modifications to the CFD. Manages the process for entering into CFDs with successful generators notified to it by National Grid (as EMR Delivery Body). Electricity Settlements Company Process credit cover for capacity auctions Undertake meter verification of capacity providers Manages and monitors CFDs (including Investment Contracts transferred from the Secretary of State) throughout their lifetime. Forecasts CFD payments to generators, and sets and collects the Supplier Obligation Levy. Acts as Implementation Coordinator for systems and processes required for CFD implementation. Calculates and settles the amounts payable to generators and suppliers.

24 Role of the LCCC Our objectives Delivery first OBJECTIVES: Proactively manage CFDs with low carbon generators in a way that builds investor confidence. Provide accountability, governance and delivery of settlement operations under the CFD Supplier Obligation regulations and, on behalf of ESC, the Capacity Market payment regulations. Striving for excellence OBJECTIVES: Strive for operational excellence, through robust, reliable and transparent operations delivered efficiently and sustainably, to minimise costs to consumers. Create a great place to work built on our core values. Fostering partnerships OBJECTIVE: Support our stakeholders in Government and industry to continue to implement EMR and seek continuous improvements in its delivery.

25 Key Timings

26 Key Timings CFD, the first allocation round took approximately 6 months Key Timings LCCC: forecasting LCCC Contract Management

27 Key Timings Capacity Market Milestone / Activity Indicative date Impacts Capacity Market Auction commences 8 Dec 2015 National Grid & Capacity Providers Demand Side Response TA auction 26 Jan 2016 National Grid & Capacity Providers Settlement Cost Levy adjustment to actual peak demand Nov to Feb volumes Suppliers to provide forecast volumes of demand for winter peak periods 24 Mar 2016 Suppliers Before 1 Jun 2016 Suppliers Settlement Cost Levy Refund to ESC actual cost Circa Jun 2016 Suppliers Suppliers to lodge Credit Cover for TA Supplier Charge Sep 2016 Suppliers First CM TA Supplier Charge 1 Oct 2016 Suppliers First Payment to TA capacity providers Dec 2016 Capacity Providers

28 LCCC and ESC website for further information and updates Introduction to EMR for New Suppliers 3 December 2015

29 Forecasting the Supplier Levy Andrew Miller Head of Forecasting Low Carbon Contracts Company

30 Agenda 1. Introduction Meet the team Overview of Supplier Obligations Overview of LCCC Forecasting Team 2. More about the Supplier Obligation 3. The Transparency Tool 4. Key dates 5. Longer Term Outlook

31 Introduction to the team Andrew Miller Head of Forecasting 20+ years in electricity industry MSc Renewables & PhD plasma physics Harold Anuta, Forecasting Analyst PhD candidate in energy storage Industry consultancy background Emily Lewis, Forecasting Analyst MSc in finance Previously at Centrica mid and downstream roles

32 Introduction: Overview of Supplier Obligations Contracts for Differences are a key part of Electricity Market Reform designed to support low carbon generators Paid for by a levy on suppliers Based on initial payments (reserve and interim rate) and later reconciliations Rate set quarterly, 3 months in advance, with ability for LCCC to raise in period adjustments if required Credit requirements (cash or letter of credit) Supplier payments: Interim levy rate & Reserve payments Supplier levy reconciliation LCCC Payments to generators with CFDs Note in some cases generators pay us

33 Introduction: Role of Forecasting 1. Regulations require we set an Interim Levy Rate and Total Reserve Amount each quarter, at a level giving a 19 in 20 confidence that LCCC will have sufficient money to pay 2. Regulations therefore imply we must make probabilistic forecasts taking into account the uncertainties regarding CFD payments 3. Also need to take into account the flow of cash considering the payment timing 4. We need to continually re-forecast within period to check we are still likely to be able to pay 5. We also plan to produce longer term forecasts to give suppliers a longer term view of likely obligations in future quarters Levy setting Cash monitoring Advanced warning

34 Agenda 1. Introduction 2. Supplier obligation (SO) Main drivers of uncertainty How we deal with uncertainty Process Forecasting The reserve 3. Transparency tool 4. Key dates 5. Longer term outlook

35 SO: What are the main drivers of uncertainty? SO Levy ( /MWh) = (StrikePrice ( /MWh) MarketReferencePrice /MWh ) Generation (MWh) Total Eligible Demand (MWh) Market reference prices: Baseload (eg biomass) Intermittent (eg wind or solar) both dependent on market prices Generation Wind very uncertain day to day Solar uncertain hour to hour Biomass reasonably certain unless there is an unplanned outage

36 SO: Dealing with uncertainty Market reference prices Spectron* power prices Industry standard volatility model Wind generation Sampled from historic wind speeds Use NASA MERRA** data set for UK Solar data Sampled from historic sunshine hours Use met office data from across UK All input into Supplier Obligation Forecasting Model (SOFM) Montecarlo*** Simulation Model Typically run with simulations *Spectron is a leading commodities broker and has a leading position in GB power market ** The MERRA data includes worldwide wind speeds at defined longitude latitude and height and is made available free of charge by NASA *** Montecarlo simulation is a standard industry approach to assessing the impact of uncertainty

37 SO Process Explained

38 Agenda 1. Introduction 2. More about the supplier obligation 3. The Transparency Tool 1. Purpose of the tool 2. View of current tool 3. Intended development 4. Key dates 5. Longer Term Outlook

39 Transparency Tool Remit 1. We have developed this Transparency Tool, consulting closely with experts from our Working Groups, in order to provide our stakeholders with insight into our assumptions and calculations. Requires access via LCCC Site and supplier logon credentials 2. Purpose is to give visibility of the calculations supporting the Interim Levy Rate and Total Reserve Amount Confidence for suppliers that the calculations are correct Understanding of the generation assumptions in the model Understanding of the uncertainty 3. Includes 15 month forecasts, with base case and sensitivities (see later)

40 Transparency Tool: current view (demonstration)

41 Transparency tool shows ILR/TRA and forecasts

42 For non-zero ILR we provide more detail of the calculation

43 We also provide forecasts for future periods

44 Closer look the base case

45 Agenda 1. Introduction 2. More about the supplier obligation 3. The transparency tool 4. Key dates 5. Longer Term Outlook

46 Key Dates for 2016 Date Event By 31 Dec 15 Set levy rate and reserve for April-June 16, refresh forecast for July-Sept 16 and Oct Dec 16 and first forecast for Jan-Mar 17 By 31 Mar 16 Set levy rate and reserve for July-Sept 2016, refresh forecast for July-Sept 16 and Oct Dec 16 and first forecast for Jan-Mar 17 By 30 June 16 Set levy rate and reserve for Oct-Dec 2016, refresh forecast for Jan-Mar 1716 and Apr-June 17 and first forecast for July-Sept 17 By 30 Sept 16 Set levy rate and reserve for Jan-Mar 17, refresh forecast for Apr-June 17 and July Sept 17 and first forecast for Oct-Dec 17 By 31 Dec 16 Set levy rate and reserve for April-June 17, refresh forecast for July-Sept 17 and Oct Dec 17 and first forecast for Jan-Mar 18

47 Agenda 1. Introduction 2. More about the Supplier Obligation 3. The Transparency Tool 4. Key dates 5. Longer term outlook Why forecast? Principles of forecasting Way forward

48 Longer term outlook: principles 1. Mimic the SOFM forecasting process for producing the Interim Levy Rate (ILR) and Total Reserve Amount (TRA) Essentially same approach to uncertain generation Market price uncertainty mimicking the way in which the levy setting run would be produced Forecast point Market price 4 months to quarter Start of quarter Market price kept constant until 4 months before quarter, then uncertainty brought in calculate correct TRA 2. Forecast only for known CFD generators No speculation on contracts arising from future allocation rounds Using public information for generator start dates (TCDs or other information the generator consents to be used for the purpose) 3. Approach to CFD start dates Base case and potentially one or more sensitivities (eg generator commissions late, market price drops )

49 Longer term outlook: way forward 1. Forecasting refresh intend to refresh forecasts quarterly in line with setting the rate and reserve for a new quarterly obligation period Look at appropriate base case and sensitivities on a case-by-case basis 2. Feedback! Please us at forecasting@lowcarboncontracts.uk

50 Break

51 Supplier Charges and Calculations 3 December 2015

52 What will we cover? Before lunch Metered data used in EMR settlement The first payment you will be required to make What are the Supplier CFD calculations? What are the Supplier CM calculations? After lunch What you will receive from EMRS? What should you be aware of for the future? 52 Introduction to EMR for New Suppliers 3 December 2015

53 What does our role involve? For Suppliers, CFD Generators and Capacity Providers Receive metered data Calculate payments and charges Invoice and monitoring payments Manage reconciliations of payments Hold and manage reserve amounts and credit cover 53 Introduction to EMR for New Suppliers 3 December 2015

54 What metered data are we using? From the BSCCo Settlement Period level metered volumes Received on a daily basis 7 Settlement Run Types from II to DF Later run types contain more actual data Run Type II SF R1 R2 R3 RF DF When is it run 5 WDs ~16 WDs ~35 WDs ~85 WDs ~ 150 WDs ~15 months Up to 28 months 54 Introduction to EMR for New Suppliers 3 December 2015

55 Gross Demand vs Net Demand? Scheme Net or Gross Losses Applied File CM Net Distribution SAA-I014 CFD Gross Distribution and Transmission SAA-I042 Gross Demand does not include embedded generation Net Demand does include embedded generation 55 Introduction to EMR for New Suppliers 3 December 2015

56 What is the first payment I need to make?

57 Supplier Payment Timeline CFD Payments Daily Quarterly Operational Cost Payment Interim Rate Payment Reserve Payment & Reconciliation CM Payments Monthly Annually Settlement Costs Levy Payment Capacity Market Supplier Charge Penalty Residual Supplier Amount 57 Introduction to EMR for New Suppliers 3 December 2015

58 Operational Cost Payment CFD Operational Cost Payment CM Settlement Costs Levy Payment Invoiced daily Calculated based using Gross Demand and the Operational Levy Rate Invoiced monthly Calculated using market share based on Net Demand and the Total Settlement Costs 58 Introduction to EMR for New Suppliers 3 December 2015

59 CFD: Operational Cost Payment Supplier s Operational Cost Payment Supplier s daily Gross Demand Operational Levy Rate The Operational Levy Rate valid from 1 April March 16 is /MWh DECC s consultation on the operating costs of the LCCC and ESC for the 2016/17 year has just closed Introduction to EMR for New Suppliers 3 December 2015

60 CFD: When s my first Operational Cost Payment? 3 Dec 2015 ~18 WD 31 Dec WD 8 Jan 2016 Billing period Calculation period Invoice sent Payment due Based on SF data only 60 Introduction to EMR for New Suppliers 3 December 2015

61 CFD: How is my refund calculated? Supplier s Operational Cost Repayment Supplier s proportion of Total Gross Demand over financial year Excess Operational Cost Payment collected LCCC determines if there is are any excess Operational Cost Payment Credit Note would be issued as soon as reasonably practicable after the end of the financial year 61 Introduction to EMR for New Suppliers 3 December 2015

62 CM: Settlement Costs Levy Payment Total Settlement Costs Suppliers Net Demand Net Demand of all Suppliers 1/12 Monthly Settlement Cost Levy for Supplier The Total Settlement Costs is determined by the ESC and consulted upon Net Demand for periods of high demand in the previous financial year Periods of high demand are 4 to 7pm during workings days, from 1 November to last day of February Total Settlement Costs for the financial year 2015/16 is 3,891,000 DECC s consultation on the operating costs of the LCCC and ESC for the 2016/17 year has just closed.

63 CM: When is my first Settlement Costs Levy Payment? Supplier payment timeline Notice of amounts for every month sent by the end of March 2016 Invoices issued each month of the financial year Billing period - enduring 1 Apr to 30 Apr 16 Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Data period 1 Nov 15 to 28 Feb 16 Payment due 6 Apr 16 Invoice issued 1 Apr 16 Suppliers notified of monthly amounts [28 March 16] 63 Introduction to EMR for New Suppliers 3 December 2015

64 CM: What is the Settlement Costs Levy revision? Settlement Costs Levy undergoes a process similar to reconciliation Total Costs Revised Suppliers Net Demand Revised Net Demand of all Suppliers Revised Settlement Cost Levy for Supplier Total costs are calculated with respect to the financial year Net demand for periods of high demand within the financial year The revised amount for each month is compared to the initial amount and Suppliers are either invoiced or credited the difference 64 Introduction to EMR for New Suppliers 3 December 2015

65 CM: When is the revision calculated? Timeline for revised calculation for the financial year 2015/2016 First invoice issued 1 Apr 15 Last invoice issued 1 Mar 16 Invoices issued 1 WD each month 1 Apr 15 to 31 Mar 16 Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Initial data period 1 Nov 14 to 28 Feb 15 Revised data period 1 Nov 15 to 29 Feb 16 Payment due and payment date [30 Mar 16] Suppliers notified of monthly amounts [25 March 15] Revised amounts issued as invoices or Credit Note [24 Mar 16] The data periods are used to calculate market share 65 Introduction to EMR for New Suppliers 3 December 2015

66 CM: How is my Settlement Costs Refund calculated? Refund calculation performed after the end of the financial year (if any excess) Excess Settlement Costs Levy Settlement Costs Levy received from Supplier Settlement Costs Levy received from all Suppliers Settlement Cost Levy Refund for Supplier Calculated using a payment share based on the amount of paid Settlement Costs Levy Payments 66 Introduction to EMR for New Suppliers 3 December 2015

67 CFD Calculations

68 What do I need to pay? Payment Types Operational Cost Payment CFD Payments Interim Rate Payment Reserve Payment and Reconciliation Settlement Costs Levy Payment CM Payments Capacity Market Supplier Charge Penalty Residual Supplier Amount 68 Introduction to EMR for New Suppliers 3 December 2015

69 Electricity Price ( /MWh) CFD: Generator Payments CFD Generator Payments are calculated based on the difference between the Strike Price and the Market Reference Price Generator toppedup to strike price Strike price Generator pays back 24hrs CFD Payment ( /MWh) Market Revenue ( /MWh) Market reference price ( /MWh) 69 Introduction to EMR for New Suppliers 3 December 2015

70 CFD: How are CFD Generator Payments funded? Daily CFD Interim Rate Payment is invoiced 7WD after the relevant date 70 Introduction to EMR for New Suppliers 3 December 2015

71 CFD: How is my Interim Rate Payment calculated? Daily Interim Rate Payment Supplier s Gross Demand Interim Levy Rate Interim Levy Rate is a /MWh rate LCCC forecasts the expected CFD Generator Payments and demand over the quarterly obligation period Adjusted Interim Levy Rate LCCC has the discretion to perform an in-period adjustment to the Interim Levy Rate 71 Introduction to EMR for New Suppliers 3 December 2015

72 CFD: When will I first pay my Interim Rate Payment? 3 Dec 2015 ~7 WD 14 Dec WD 21 Dec 15 Billing period Calculation period Invoice sent Payment due The LCCC determined the Interim Levy Rate for: 1 October 2015 to 31 December 2015 as 0.000/MWh 1 January 2016 to 31 March 2016 as 0.348/MWh 72 Introduction to EMR for New Suppliers 3 December 2015

73 CFD: What if Interim Rate Payments aren t enough? Reserve Payments are used to cover shortfalls in Interim Rate Payments Supplier s Reserve Payment Total Reserve Amount Supplier s Gross Demand Total Demand The LCCC determined the Total Reserve Amount for: 1 October 2015 to 31 December 2015 as January 2016 to 31 March 2016 as 8,861, Introduction to EMR for New Suppliers 3 December 2015

74 CFD: When is my first Reserve Payment due? New Supplier Reserve Payment New Supplier s 1 st New Supplier s enters the market Notice for Q5 Reserve Payment Reserve Payment due Invoice for Q5 90 days Q3 Q4 Q5 Oct Nov Dec Jan Feb Mar Apr May Jun Data Reference Period for Q5 74 Introduction to EMR for New Suppliers 3 December 2015

75 CFD: What if I do not pay? Credit Cover is used for: Operational Cost Payment Interim Rate Payment Reserve Payment Mutualisation Accrued interest CFD Credit Cover = 21 days of metered volume Interim Levy Rate 75 Introduction to EMR for New Suppliers 3 December 2015

76 CFD: When would I first lodge Credit Cover? A new Supplier is required to lodge credit in an obligation period if they supplied electricity in that period 11 Dec Jan Jan calendar days ~7WD 3 Sum the most recent Gross Demand for each day in the 21 day period and multiply by the Interim Levy Rate SF II 2 Find most recent Settlement Day for which we have metered volumes 1 Every WD calculate minimum credit required 76 Introduction to EMR for New Suppliers 3 December 2015

77 CFD: What else do I need to know? We ve published these documents to support Suppliers: WP42 Supplier CFD Credit Cover G5 Supplier CFD Credit Cover The bank account details and the approved Letter of Credit template can all be found in WP42 Supplier CFD Credit Cover. A Supplier is sent a Daily Credit Cover Report on each Working Day and this details the Suppliers Credit Cover requirement. If a Supplier has a shortfall in Credit Cover the Supplier has two Working Days to resolve prior to escalation. The process is detailed in WP42 Supplier CFD Credit Cover. 77 Introduction to EMR for New Suppliers 3 December 2015

78 Capacity Market Calculations

79 What do I Need To Pay? Payment Types Operational Cost Payment CFD Payments Interim Rate Payment Reserve Payment and Reconciliation Settlement Costs Levy Payment CM Payments Capacity Market Supplier Charge Penalty Residual Supplier Amount 79 Introduction to EMR for New Suppliers 3 December 2015

80 CM: How are Capacity Providers funded? Monthly CM Supplier Charge will be invoiced on the first working day of the month Calculated using market share based on Net Demand applied to the Total Capacity payments that are to be paid 80 Introduction to EMR for New Suppliers 3 December 2015

81 Weighting (%) CM: Capacity Provider Payments Capacity Providers are paid monthly 29WD after the end of each month in the Capacity Year (October to September) Payments based on the capacity obligation and the relevant auction clearing price Capacity Year 81 Introduction to EMR for New Suppliers 3 December 2015

82 CM: Capacity Market Supplier Charge - Calculation Supplier Charge initial and revised calculation Total Annual capacity Provider Payments Monthly weighting factor Suppliers Net Demand Net Demand of all Suppliers Monthly CM Supplier Charge for Supplier Total Annual Capacity Payments are determined post Auction Results Net Demand for periods of high demand in the Delivery Year Net Demand is initially forecasted data and then replaced once actual data is available The monthly weighting factor profiles payment during the year 82 Introduction to EMR for New Suppliers 3 December 2015

83 CM: When will I first pay a Supplier Charge? Supplier payment timeline for Delivery Year 2016/2017 Supplier charge based on forecasted market share Oct 16 to Apr 17 Supplier charge based on actual market share May 17 to Sep 17 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ma y Jun Jul Aug Sep Forecast of Net Demand provided [1 Jun 16] Data Period for market share 1 Nov 16 to 28 Feb 17 First invoice for supplier charge [3 Oct 16] 83 Introduction to EMR for New Suppliers 3 December 2015

84 CM: When will I first pay a Supplier Charge? If you become an active Supplier after 1 June before a Delivery Year Supplier Charge based on forecasted market share Oct 16 to Apr 17 Supplier Charge based on actual market share May 17 to Sep 17 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ma y Jun Jul Aug Sep Data Period for market share 1 Nov 16 to 28 Feb 17 First day of supply First invoice for Supplier Charge May Introduction to EMR for New Suppliers 3 December 2015

85 CM: What if I do not pay? Credit Cover is used for: Settlement Costs Levy Capacity Market Supplier Charge Penalty Residual Supplier Amount Mutualisation Reconciliation Amounts CM Credit Cover = Monthly Capacity Market Supplier Charge 110% 85 Introduction to EMR for New Suppliers 3 December 2015

86 CM: When will I Need to Lodge Credit Cover? Example for the 2016/2017 Delivery Year Schedule of Credit Cover issued [29 Jul 16] Credit Cover based on forecasted market share Oct 16 to Apr 17 Credit Cover based on actual market share May 17 to Sep 17 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Ma y Jun Jul Aug Sep Data Period for market share 1 Nov 16 to 28 Feb 17 Forecast of Net Demand provided [1 Jun 16] Revised Schedule of Credit Cover issued [24 Mar 17] First Credit Cover lodged [15 Sept 16] First revised Credit Cover lodged [14 April 17] 86 Introduction to EMR for New Suppliers 3 December 2015

87 System Demand CM: What is the Penalty Residual Supplier Amount? During times of system stress Capacity Providers need to meet their obligations If they fail they will be penalised System Capacity Capacity obligations triggered If they over deliver they will receive an additional payment Penalty payments are used to fund the over delivery payments Any remainder is shared amongst those Supplier who have paid the monthly CM Supplier Charge 12 am 5 pm Demand less than Capacity Sufficient Capacity System Demand (GWh) 87 Introduction to EMR for New Suppliers 3 December 2015

88 What is Reconciled? CFD CM What is reconciled? Interim Rate Payments Reserve Payments Supplier Charge Settlement Costs Levy When is it reconciled? Follows BSC Settlement Calendar Fixed timeline 88 Introduction to EMR for New Suppliers 3 December 2015

89 Any questions?

90 Lunch

91 What will you receive from EMRS?

92 Supplier Registration Supplier Registration Form is issued once Ofgem have granted a supply licence Form includes: Company details Interface Method Bank Account Details Contact details Working Practice 21- Supplier Registration publications/workingpractices/ 92 Introduction to EMR for New Suppliers 3 December 2015

93 EMR Aggregation Rules We ll notify a Supplier of its EMR Aggregation Rules This determines how a Supplier is charged for both CM and CFD Example extract a Supplier will receive and this is provided for both CFD and CM For more details: WP25 - EMR Aggregation Rules WP 93 Introduction to EMR for New Suppliers 3 December 2015

94 What will you receive from EMRS? Invoices and Credit Notes Backing Data Operational Notices Guidance and Working Practices Circulars 94 Introduction to EMR for New Suppliers 3 December 2015

95 Invoices and Credit Notes Invoices and Credit Notes will be issued as PDF files (attached to s) Invoices will contain: Contact Details Invoice number Invoice date Due date Payment Type/s LCCC or ESC Bank Account details (associated to the Payment Type) Total Invoice Amount 95 Introduction to EMR for New Suppliers 3 December 2015

96 Sample Invoices

97 EMR Interface Methods Backing Data Information Method Notices PDF attachment via Invoices PDF attachment via Credit Cover Report TXT / CSV attachment via DTN Backing Data TXT / CSV attachment via DTN 97 Introduction to EMR for New Suppliers 3 December 2015

98 Formats for Backing Data Reporting channels for backing data (and daily CFD Credit Cover report). Data Transfer Service (DTS): Data files will comply with Data Transfer Catalogue (DTC) Pipe-separated records (not easily human-readable) One file per invoice DTC - attachment: CSV format (loadable as table of data in Excel) Normally one file per invoice, but in some cases different payment types in different files.txt version is a DTC file format in User File Format Portal: 98 Part of a future release

99 CFD Backing Data Backing data will contain the same data items, regardless of which route is used: Invoice Item DTC File CSV File Interim Rate Payments Operational cost payments Reserve payments Reconciliation payments Mutualisation payment CFD Supplier Credit Cover Report D0362 file (groups 55I, 56I, 57I) D0362 file (groups 55I, 58I, 59I) D0362 file (groups 55I, 60I-64I) D0362 file (groups 55I, 65I) D0363 file T001 file T002 file (or T003 for additional payments) T004 file T005 file T018 file Default interest D0362 file (groups 66-67I) T100

100 CSV Format T003 CSV file (as it might look if loaded into Excel) Column headers identify fields from the DTC definition e.g. J1973 is the Obligation Period Fields from different DTC groups combined into a tabular structure /BIC/N1_J1950 /BIC/N1_J1973 /BIC/N1_J0073 /BIC/N1_J0146 /BIC/N1_J1904 /BIC/N1_J2023 /BIC/N1_J1905 /BIC/N1_J SF SF SF SF SF Introduction to EMR for New Suppliers 3 December 2015

101 CM: Backing Data As for CFD, backing data will contain the same data items, regardless of which route is used: Invoice Item DTC /TXT File CSV File Settlement Cost Levy (Monthly Invoice) D0364 file (groups 71I-74I) T045 file Settlement Cost Levy (Revision Invoice) D0364 file (groups 71I-74I) T044 file Settlement Cost Levy (2014/15 invoice) D0364 file (groups 71I-74I) T078 file 101 Default interest Introduction to EMR for New Suppliers 3 December 2015 D0364 file (Groups 84-85I) T101

102 Suppliers Notices, Schedules, Advices and Reports CFD Interim Levy Rate Notice Reserve Payment Notice Minimum Credit Report Late Payment Advice Formal Non Payment Notice Credit Default Notice CM Settlement Costs Levy Notice Schedule of Credit Cover Late Payment Advice Formal Non Payment Notice Credit Default Notice 102 Introduction to EMR for New Suppliers 3 December 2015

103 Guidance Guidance Documents G2 - Calculation of Supplier Demand for EMR G3 - CFD Reserve Payments G4 - EMR Settlement Authorisations G5 - Supplier CFD Credit Cover ns/guidance/ Introduction to EMR for New Suppliers 3 December 2015

104 Working Practices Working Practices WP1 - Overview of EMR WP21 - Supplier Registration WP25 - EMR Aggregation Rules WP31 - Amending EMR Party Detail WP41 - Late Payment Procedure WP42 - Supplier CFD Credit Cover

105 Further EMRS Publications Settlement Data Key figures for Supplier payments in 2015/16 EMR Settlement Calendar EMR Circulars Introduction to EMR for New Suppliers 3 December 2015

106 EMR Settlement website EMR Settlement website Keep updated via our website by checking our News and our Calendar for key dates Sign up to our EMR Circular Sign up to our ELEXON Newscast (ELEXON website) All queries Introduction to EMR for New Suppliers 3 December 2015

107 What should you be aware of for the future? CFD Green Excluded Electricity - Quarterly Obligation Period Ofgem s consultation on Green Excluded Electricity closes on 8 Jan 2016 Green Excluded Electricity 6 month Application Window Green Excluded Electricity Relevant Reconciliation Run Oct 2016 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan * * * * * Energy Intensive Industries commenced 1 Oct 2015 Interim Rate Payments & Credit Cover 1 Jan 2016 Operational Cost Payment for Financial Year 1 Apr 2016 Operational Cost Payment revised for LCCC to determine 107 * LCCC determine the Interim Levy Rate and Total Reserve Amount December 2015 confirms Q5 Apr-Jun 2016 March 2016 confirms Q6 Jul-Sept 2016 June 2016 confirms Q7 Oct-Dec 2016 September 2016 confirms Q8 Jan-Mar 2017 December 2016 confirms Q9 Apr-Jun 2017

108 What should you be aware of for the future? CM Settlement Costs Levy revised for ESC to determine Schedule of Credit Cover issued 29 Jul 2016 Lodge Credit Cover Sep 2016 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Auction Results Day for TA 2016 & T Settlement Costs Levy schedule for Late Mar 2016 Submit forecast of Net Demand for Capacity Market Supplier Charge 1 Jun 2016 First TA Delivery Year Capacity Market Supplier Charge commences 1 Oct

109 Any questions?

110