Updated proposal to amend DCC s Implementation Milestones. DCC consultation

Transcription

1 DCC s Implementation DCC consultation Date: 4 May 2016 Classification: DCC PUBLIC

2 Table of Contents 1 EXECUTIVE SUMMARY Purpose Background Conclusion on IM8 and proposal for IM9 and IM Next steps INTRODUCTION AND BACKGROUND Background May 2015 consultation December 2015 Contingency Request Principles of the general review CONCLUSION AND PROPOSAL Summary Key updates to the proposal IM9 proposal Criteria and due date Taper profile IM10 proposal Criteria and due date Taper profile Other features Recovery mechanism Regional incentives Recognition of external dependencies CONSULTATION PROCESS Appendix A Consolidated proposal Appendix B Consultation questions Appendix C Glossary DCC PUBLIC Page 2 of 24

3 1 EXECUTIVE SUMMARY Smart DCC Ltd (known as the Data and Communications Company or DCC ), holds the Smart Meter Communication Licence 1, granted by the Department of Energy and Climate Change (DECC), to establish and manage the data and communications network to connect smart meters to the business systems of energy suppliers, network operators and other authorised users of the network. 1.1 Purpose The purpose of this consultation is to consult stakeholders (principally the SEC Panel and SEC Parties 2 ) with respect to our updated proposals to amend Schedule 3 of the Licence to reflect the general review of all of the Implementation (IMs) as required under paragraph 3.9(a) of Schedule 3, Part F of the Licence, and to conclude on IM Background DCC is required to achieve each of the IMs as laid out in Schedule 3 of the Smart Meter Communication Licence (the Licence ), in order to earn the total amount of Baseline Margin associated with the implementation phase of DCC. The regime is designed to incentivise DCC to achieve certain programme milestones in a timely manner. On 8 May 2015, we issued a consultation setting out proposed changes to all of the remaining IMs (referred to in this document as the May 2015 consultation ) 3. The conclusions of that consultation were submitted to the Secretary of State on 29 July 2015 (referred to in this document as the July 2015 conclusions ) Conclusion on IM8 and proposal for IM9 and IM10 We are consulting on an updated proposal to realign the remaining IMs with the phased release to live services. We propose to simplify the regime by proposing two remaining IMs which relate to the two key consumable initial live releases on 20 July 2016 and 26 September We consider that this approach ensures simplicity and provides the strongest incentive to achieve each of the live releases as soon as possible, whilst aligning the incentives with those of SEC Parties. 1 Ofgem, 10 February 2016, Smart Meter Communication Licence : %20Smart%20Meter%20Communication%20Consolidated%20Licence%20Conditions%20-%20Current%20Version.pdf 2 As required under paragraph 3.6 of Schedule 3, Part F of the Licence 3 DCC, 8 May 2015, Proposed changes to : 4 DCC, 29 July 2015, Proposed changes to : DCC conclusions and application to the Secretary of State : DCC PUBLIC Page 3 of 24

4 IM IM title IM due date Weighting (% BMIT) m at risk Conclusion IM8a IM8b Licensee is ready for Systems Integration Testing in the North Region Licensee is ready for Systems Integration Testing in the Central and South Regions 1 Sep Sep % 0.577m 7.5% 0.577m IM9a Licensee is ready for commencement of DCC Live (R1.2) in the North Region 20 Jul % 1.153m Proposal IM9b IM10a Licensee is ready for commencement of DCC Live (R1.2) in the Central and South Regions Licensee is ready for commencement of Release 1.3 in the North Region 20 Jul Sep % 1.153m 15% 1.153m IM10b Licensee is ready for commencement of Release 1.3 in the Central and South Regions 26 Sep % 1.153m 75% m Next steps Table 1 May 2016 conclusion and proposal summary DCC considers that the updated proposal represents a challenging but achievable incentive framework, which principally strengthens the overall incentive for DCC to meet both live releases. The consolidated proposal is set out in Appendix A. The deadline for responses to this consultation is 31 May Please your response to contact@smartdcc.co.uk. 5 The total BMIT available is 75% as 25% of BMIT has already been placed at risk against IMs 1 to 7. (IM1 = 2%, IM2=3%, IM3=4%, IM4=4%, IM5=4%, IM6=4%, IM7=4%). 6 This is calculated as BMIT (Licence condition 35.5: Baseline Margin Implementation Total (BMIT) means the Licensee s Baseline Margin, in total, for the period running from 23 September 2013 until the end of the Regulatory Year 2015/2016 (and, arising from the Licence Application Process), is calculated for the purposes of Schedule 3 to this Licence to have the value of million, subject to adjustments for inflation as set out in paragraph 35.6 of the Licence) multiplied by the corresponding weighting. DCC PUBLIC Page 4 of 24

5 2 INTRODUCTION AND BACKGROUND DCC holds the licence, granted by DECC, to establish and manage the data and communications network to connect smart meters to the business systems of energy suppliers, network operators and other authorised users of the network. The Baseline Margin represents the return, to DCC s parent company, for the delivery and management of the DCC Service, this amount was fixed in nominal terms at Licence award. The Baseline Margin associated with the implementation phase of DCC is known as the BMIT 7 which has the value of 7.687m. The Implementation Performance Regime places 100% of the BMIT at risk against specific IMs as set out in Schedule 3 of the Licence. The regime is downside only. 2.1 Background To date, seven milestones have passed, each of which placed a portion of the BMIT at risk, see Table 2 below. IM % of BMIT m placed at risk Status IM1: Completion of Licensee mobilisation 2% 0.154m Achieved 8 IM2: Submission of integrated solution delivery plan 3% 0.231m Achieved 6 IM3: Establishment of service design authority 4% 0.307m Achieved 6 IM4: Submission of the test strategy 4% 0.307m Achieved 6 IM5: Submission of DSP interface specification 4% 0.307m Not achieved 6 IM6: Submission of the intimate communications hub interface specification IM7: Approval of the service management systems design 4% 4% 0.307m Achieved m Achieved 9 25% 1.922m Table 2 Status of previous IMs We have a duty to undertake a general review 10 of all of the Implementation Due Dates and Implementation Criteria that remain in force as soon as is reasonably practicable following the achievement of IM4. IM4 was achieved on 28 February If the review concludes that a variation is required, DCC must consult the SEC Panel and SEC Parties 7 Licence condition 35.5: Baseline Margin Implementation Total (BMIT) means the Licensee s Baseline Margin, in total, for the period running from 23 September 2013 until the end of the Regulatory Year 2015/2016 (and, arising from the Licence Application Process), is calculated for the purposes of Schedule 3 to this Licence to have the value of million, subject to adjustments for inflation as set out in paragraph 35.6 of the Licence 8 Ofgem, 27 February 2015, DCC: Price control decision 2013/14 Final decision : 9 Ofgem, 25 February 2016, DCC Price Control Decision: Regulatory Year 2014/15 : 10 Smart Meter Communication Licence, paragraph 3.9, Schedule 3, Part F. DCC PUBLIC Page 5 of 24

6 and then make an application to the Secretary of State with respect to the findings of that review May 2015 consultation On 8 May 2015, we issued a consultation setting out proposed changes to all of the remaining IMs (referred to in this document as the May 2015 consultation ) that proposal was based on the GB Companion Specification (GBCS), Smart Metering Equipment Technical Specification (SMETS), Communication Hubs Technical Specification (CHTS) and SEC versions at that time. That consultation asked ten questions in relation to the proposal to amend the IMs. We received eight responses which we summarised in the July 2015 conclusions. We are now consulting on an updated proposal in light of further changes to the DCC plan (see Section below). IM7 conclusions and direction The May 2015 consultation also included conclusions in relation to IM7 which was consulted on alongside the revised DCC plan in November The Secretary of State issued a direction to effect this change on 12 November (the November 2015 direction ). In that same direction the IMs relating to RY14/15 were temporarily deleted to remove the risk of DCC being in inappropriately assessed against those IMs in the Price Control process for RY14/15. IM8 conclusions In the May 2015 consultation, we proposed amendments to the IM8 title, criteria and due dates so as to effectively incentivise DCC to be ready to commence SIT (Systems Integration Testing) 13 in line with the JIP (Joint Industry Plan) and in accordance with DCC s entry criteria for SIT as set out in the SIT Approach Document, which is approved by the SEC Panel. We proposed a small amendment to one of the IM8a and IM8b criteria to clarify that the functionality to be ready for testing would be confirmed before each release into SIT. The updated IM criteria were set out in the July 2015 conclusions document. We are not proposing any further changes to this IM as its due date has already passed December 2015 Contingency Request On 6 November 2015, we submitted SMIP Contingency Request Form 01 (referred to in this document as the Contingency Request ) to DECC (who sought views from SEC Parties and all Smart Metering Delivery Group (SMDG) members). This included requests to draw down: 11 DCC, November 2014, Consultation on changes to the DCC Plan and Implementation : 12 DECC, 12 November 2015, DCC General Review of Implementation Direction given by the Secretary of State for the purposes of Schedule 3 Part F of the Smart Meter Communication Licences: 13 Further information on Systems Integration Testing can be found here: DCC PUBLIC Page 6 of 24

7 functional contingency to allow delivery of full go-live functionality of the DCC system to be delivered over two releases (R1.2 and R1.3), instead of in a single release; and schedule contingency of 3.5 months to amend the initial DCC Live date (for DCC Live (R1.2) functionality) to 20 July 2016 with Release 1.3 functionality delivered on 26 September Both categories of contingency were required to align the DCC service with the externally driven changes to GBCS (i.e. changes from v0.8.1 and v0.8.2) and related specifications, and to implement a number of high priority Change Requests required on DCC Systems. This request triggered the formal contingency process agreed by SMDG, and also resulted in a revised DCC plan which was approved by the Secretary of State in accordance with Part E of Condition 13 of the Licence on 18 December Our May 2015 IM consultation did not reflect the two-release strategy as it was based on the versions of GBCS and related specifications at that time and the DCC plan approved on 5 March In light of this we are now re-consulting on IM9 and IM10 such that they align with the revised DCC plan. We are also concluding on IM8 as SIT related milestones were removed in the November 2015 direction Principles of the general review In undertaking our general review(s) we sought to apply the following principles: Maintaining the simplicity of the Implementation Performance Regime; Aligning DCC incentives with key milestones in the JIP; Maintaining the risk profile agreed during the licence application process; Aligning DCC incentives with the provision of value to the consumer; and Ensuring IMs are unambiguous. 14 DECC, 18 December 2015, Approval given for the purposes of condition 13 of the Smart Meter Communication Licences DCC plan and trialling and testing : 15 DECC, 5 March 2015, Approval given for the purposes of condition 13 of the smart meter communication licences DCC plan for trialling and testing : DCC PUBLIC Page 7 of 24

8 3 CONCLUSION AND PROPOSAL As discussed above, we are updating our proposal in light of the Contingency Request as discussed in Section As a result, we have sought to realign the remaining IMs with the two-release strategy. We are also concluding on IM8 consistent with the July 2015 conclusions as SIT related milestones were removed in the November 2015 direction. 3.1 Summary We propose to simplify the regime through two remaining IMs (divided equally by region category, see Section 3.4.2) which relate to the two key consumable initial live releases on 20 July 2016 and 26 September This approach jointly places the entire remaining BMIT of 4.6m at risk (see Table 3 below). IM IM title IM due date Weighting (% BMIT) m at risk Conclusion IM8a IM8b Licensee is ready for Systems Integration Testing in the North Region Licensee is ready for Systems Integration Testing in the Central and South Regions 1 Sep % 0.577m 1 Sep % 0.577m IM9a Licensee is ready for commencement of DCC Live (R1.2) in the North Region 20 Jul % 1.153m Proposal IM9b IM10a Licensee is ready for commencement of DCC Live (R1.2) in the Central and South Regions Licensee is ready for commencement of Release 1.3 in the North Region 20 Jul % 1.153m 26 Sep % 1.153m IM10b Licensee is ready for commencement of Release 1.3 in the Central and South Regions 26 Sep % 1.153m 75% m 17 Table 3 May 2016 conclusion and proposal summary We propose that IM9 and IM10 should be weighted equally (i.e. 30% each) and further divided equally (i.e. 15% each) by region category, see Section 3.4.2, reflecting the overall importance of both releases to industry. This approach ensures simplicity and maintains 16 The total BMIT available is 75% as 25% of BMIT has already been placed at risk against IMs 1 to 7. (IM1 = 2%, IM2=3%, IM3=4%, IM4=4%, IM5=4%, IM6=4%, IM7=4%). 17 This is calculated as BMIT ( 7.687m) multiplied by the corresponding weighting. DCC PUBLIC Page 8 of 24

9 the strongest incentive each of the live releases as soon as possible, whilst aligning the incentives with those of Parties and the JIP Key updates to the proposal The proposal we set out in the May 2015 consultation is summarised in Table 4 below (the table excludes milestones that have now passed). Previous IM Previous IM title Due date Weighting (% BMIT) m at risk IM8a IM8b IM9a IM9b IM10a IM10b Licensee is ready for Systems Integration Testing in the North Region Licensee is ready for Systems Integration Testing in the Central and South Regions Licensee is ready for Interface Testing in the North Region Licensee is ready for Interface Testing in the Central and South Regions Licensee is ready for commencement of live Enrolment and Communication Services in the North Region Licensee is ready for commencement of live Enrolment and Communication Services in the Central and South Regions 1 Sep % 0.577m 1 Sep % 0.577m 2 Feb % 0.769m 2 Feb % 0.769m 1 Apr % 1.345m 1 Apr % 1.345m IM11 Initial stabilisation complete 3-6 months after IM10 achieved 5% 0.384m 75% 5.765m Table 4 May 2015 proposal summary As set out in Tables 3 and 4, the total BMIT at risk is unchanged, the key differences between the May 2015 proposal and the updated May 2016 proposal are: the removal of an Interface Testing readiness IM; an update to the DCC Live IM due date; the inclusion of the Release 1.3 IM; and the removal of the stabilisation IM. Removal of an Interface Testing readiness IM The May 2015 proposal included an IM which incentivised readiness for Interface Testing, this was proposed at that time to ensure consistency with the previous IM framework. Having reviewed this approach we now consider it would be appropriate to remove this IM because: DCC PUBLIC Page 9 of 24

10 the requirement to complete Interface Testing is a pre-requisite to achieving DCC live, and therefore the incentive to commence this testing is appropriately covered under the proposed DCC Live (and Release 1.3) IMs; and to include an Interface Testing related IM as well as two live release IMs would stretch the BMIT available thinly which would reduce the strength of the incentives on the key go-live milestones. Updated DCC Live IM due date We consider that the amendment of the DCC Live IM is appropriate as it aligns with the DCC Live date in the revised JIP. Inclusion of the Release 1.3 IM The May 2015 proposal did not include an IM to incentivise timely delivery of Release 1.3, although the principle of the potential to postpone functionality to a subsequent release had been established. Given the approved changes to the plan (see Section 2.1.2) we consider it appropriate to incentivise the timely delivery of Release 1.3 as well as DCC Live (R1.2) as it would be consistent with the programme objectives to provide full functionality to Users and consumers as soon as possible. Removal of the stabilisation IM The May 2015 proposal included a small stabilisation IM, for which the criteria and due date were subject to later agreement. Having revisited the proposal we consider that it would be appropriate to remove this IM because any such stabilisation or support throughout the rollout period should be incentivised under the Operational Performance Regime (OPR) as set out in Ofgem s current consultation on the principles and objectives of the OPR 18. This also creates a larger pot to split across the two significant known releases which therefore creates a stronger financial incentive for delivery. IM8 proposals have been left unchanged, we are concluding on this IM in this document. 3.2 IM9 proposal Criteria and due date We propose that the due date for IM9 is 20 July 2016 which aligns with the approved DCC Plan and JIP date and DCC plan for DCC Live (R1.2), as reset following the Contingency Request (see Section 2.1.2). The key driver for this date change is due to externally driven change to GBCS (i.e. changes from v0.8.1 and v0.8.2) and related specifications and to implement a number of high priority Change Requests required on DCC Systems. The changes to GBCS and related specifications were specifically called out in the list of external dependencies in the May 2015 proposal 19. The proposed IM criteria for IM9 are set out in Table 5 below. 18 Ofgem, 22 March 2016, DCC Operational Performance Regime: Principles and Objectives : 19 See paragraph 87, bullet 1, footnote 20 DCC PUBLIC Page 10 of 24

11 IM9: Licensee is ready for commencement of DCC Live (R1.2) in the [x] Region The Licensee has made an application to the SEC Panel in accordance with section T3.24 of the Smart Energy Code for a determination that the exit criteria for Interface Testing for Release R1.2, as set out in the Interface Testing Approach Document, in respect of the [x] Region, have been met. This condition will not be achieved, however, if the SEC Panel subsequently determines, before or after the Implementation Due Date, pursuant to section T3.25 of the Smart Energy Code that the exit criteria cited in such application have not been met. For the [x] Region, the number of Communications Hubs Delivered by the Licensee to SEC Parties is equal to or greater than 80% of the total number of Communications Hubs Orders accepted by the Licensee (in accordance with the Order Verification and Acceptance procedure in clauses 3.19 to 3.23 of the CH Handover Support Materials) with an Agreed Delivery Date falling on or before the DCC Live date. For the purposes of this condition, Agreed Delivery Date means the Delivery Date, but disregarding any changes to the Delivery Date made by the Licensee under clause 6.5 of the CH Handover Support Materials. The Licensee has provided the DCC Live Services Criteria Report in respect of DCC Live (R1.2) in the [x] Region, including any associated work off plans as appropriate, to the [Secretary of State/SEC Panel] pursuant to a direction by the Secretary of State under section X1.18 of the Smart Energy Code, and that assurance and/or evidence in the report was not subsequently rejected by [Secretary of State/SEC Panel]. Table 5 Proposed IM9 criteria These criteria largely replicate the IM10 criteria consulted on in the May 2015 consultation, and now specifically refer to DCC Live (R1.2). We also propose some additional amendments (see below). Exit from Interface Testing We have amended the criteria so that it focuses on DCC s activity instead of third party activity. The condition can only be deemed to have been achieved if the SEC Panel has not subsequently rejected the achievement of the exit criteria therefore it still requires the SEC Panel to have approved exit without the process delaying DCC s achievement of this IM. This is also reflected in the proposed IM10 criteria, see Section Communications Hubs We have amended the second criterion so that: It reflects responses to the previous consultation in relation to the use of the term substantial majority (see Section of the July 2015 conclusions); and it requires DCC to deliver all Communications Hubs orders which are due for delivery on or before the DCC Live date. This replaces the previous text which required the orders due for delivery in the prior month to be delivered. This reflects the fact there are no orders due for delivery before 20 July For the avoidance of doubt, this does not affect DCC s obligation under the SEC to fulfil all Communications Hubs orders. We have set out some worked examples below, which for ease assume that the DCC has accepted a total of 10,000 Communications Hubs (CHs) due to be delivered on 20 July 2016 and a further 10,000 CHs due to be delivered on 17 August 2016 these numbers are hypothetical for this illustration only. DCC PUBLIC Page 11 of 24

12 # Scenario Impact on IM achievement Scenario 1 Scenario 2 Scenario 3 the DCC Live (R1.2) date remains unchanged the DCC Live (R1.2) date moves to 17 August because of a non CH related issue DCC Live (R1.2) date moves to 17 August 2016 because CHs are not available in time Where DCC has delivered at least 8,000 CHs by 20 July 2016 (and all other criteria are also achieved) the IM will have been achieved on 20 July Where DCC has delivered at least 16,000 CHs by 17 August 2016 (and all other criteria are also achieved) the IM will have been achieved on 17 August DCC will have failed to achieve the IM. DCC Live Services Criteria We have amended the third criterion: Table 6 IM9 CH worked examples so that it refers specifically to the new DCC Live Services Criteria, which is a new requirement under Section X1.18 of the SEC as set out in DECC s February 2016 SEC consultation 21 ; so that it focuses on DCC s activity instead of third party activity. The criterion can only be deemed to have been achieved if the SEC Panel has not subsequently rejected the DCC Live Services Criteria therefore it still ensures approval without the process delaying DCC s achievement of this IM; and to include two options (Secretary of State or the SEC Panel) for the role to confirm that the DCC Live criteria have been met, which reflects DECC s view, as set out in its February 2016 SEC consultation, that it sees merit in the SEC Panel taking a role in assessing performance against the DCC Live Criteria. This is also reflected in the proposed IM10 criteria, see Section DCC acknowledges that DECC is currently working with stakeholders to develop a plan for DCC Live decision-making which includes the approval process and timelines for Interface Testing and DCC Live Services Criteria. Independent of the outcome of these discussions, we are proposing the approach above to allow us to consult in a timely manner. DCC recognises that DECC may consider that the IM criteria should reflect the outcome of that work Taper profile We propose the following tapering profile for IM9. 20 DCC Live would be a date set out in the latest plan for the purposes of testing and trialling which would be approved by the Secretary of State in accordance with Part D of Condition 13 of the Smart Meter Communication Licence 21 DECC, 25 February 2016, A consultation on New Smart Energy Code Content and Related Licence Amendments : (Chapter 9) DCC PUBLIC Page 12 of 24

13 Date Proposed Time Factor 20 Jul Aug Aug Oct Nov Table 7 Proposed Time Factors for IM9 We have updated the taper profiles to align to the current dates set out in the JIP, and to broadly retain DCC s risk profile. As discussed above, 20 July 2016 is the agreed date for delivery of DCC Live (R1.2) as set out in the JIP and we do not consider it appropriate to lose any of the BMIT available if we deliver on this date. 17 August 2016 is the new DECC defined central planning assumption for the industry, therefore we think it would be reasonable to lose a small amount of 5% on this date. We consider that it would be reasonable to lose a further 5% of the BMIT available by 31 August 2016 (two weeks after the central planning assumption date and six weeks after the 20 July date) this would maintain a strong incentive to deliver as close as possible to the central planning assumption. We consider a further loss of 80% by 12 October 2016 (six weeks after 31 August 2016) would be reasonable, reflecting the amount of time that would have elapsed by that stage. This results in a steeper taper during the period between August 2016 and October 2016, allowing a strong incentive to deliver as early as possible. We consider a shallower taper thereafter is reasonable to ensure a small incentive in case the IM is not met in October By way of comparison, under the May 2015 proposal, we would have lost 10% four months after the previous go live date, therefore this updated proposal is more challenging to DCC. This approach reflects that we are now closer to DCC Live and therefore have a clearer understanding of deliverability than at Licence award. Figure 1 below illustrates the proposed IM9 taper profile compared against the May 2015 proposal for the DCC Live IM. DCC PUBLIC Page 13 of 24

14 Figure 1 Proposed IM9 taper profile Consultation question 1: Do you agree with our proposal to update IM9? Please provide rationale for your response. 3.3 IM10 proposal Criteria and due date We propose that the due date for IM10 is 26 September 2016 which aligns with the JIP milestone and DCC plan for Release 1.3. The proposed criteria for IM10 are set out in Table 8 below. IM10: Licensee is ready for commencement of Release 1.3 in the [x] Region The Licensee has made an application to the SEC Panel in accordance with section T3.24 of the Smart Energy Code for a determination that the exit criteria for Interface Testing for Release R1.3, as set out in the Interface Testing Approach Document, in respect of the [x] Region, have been met. This condition will not be achieved, however, if the SEC Panel subsequently determines, before or after the Implementation Due Date, pursuant to section T3.25 of the Smart Energy Code that the exit criteria cited in such application have not been met. The Licensee has made an application to the SEC Panel in accordance with section T5.19 of the Smart Energy Code for a determination that the exit criteria for Additional SMKI and Repository Testing as set out in the SMKI and Repository Testing Approach Document, in respect of the [x] Region. This condition will not be achieved, however, if the SEC Panel subsequently determines, before or after the Implementation Due Date, pursuant to section T5.21 of the Smart Energy Code that the exit criteria cited in such application have not been met. The Licensee has provided the DCC Live Services Criteria Report in respect of Release 1.3 in the [x] Region, including any associated work off plans as appropriate, to the [Secretary of State/SEC Panel] pursuant to a direction by the Secretary of State under section X1.18 of the Smart Energy Code, and that assurance and/or evidence in the report was not subsequently rejected by [Secretary of State/SEC Panel]. Table 8 Proposed IM10 criteria DCC PUBLIC Page 14 of 24

15 These criteria largely replicate the IM10 criteria consulted on in the May 2015 consultation, although they now specifically refer to Release 1.3. We also propose some additional amendments (see below). Exit from Interface Testing See Section above. Additional SMKI and Repository Testing We have inserted a new second criterion which sets the requirement for DCC to have exited Additional SMKI and Repository Testing, which is a new requirement under Section T5 of the SEC as concluded in April Communications Hubs We have removed the Communications Hubs delivery criterion as this is relevant to DCC Live (R1.2) only, as the same Communications Hubs can be used after Release 1.3. DCC Live Services Criteria See Section above Taper profile We propose the following tapering profile for IM10. Date Proposed Time Factor 26 Sep Oct Nov Dec Jan Table 9 Proposed IM10 taper profile The taper profile for IM10 replicates the proposed IM9 taper profile, except that it starts on 26 September which is the DCC Plan and JIP date for delivery Release 1.3. It is set so that there is a loss of 5%, of the BMIT available, at 28 October which is the industry planning assumption for Release 1.3. We have proposed this approach to retain simplicity and to broadly retain DCC s risk profile, consistent with the principles of the general review (see Section 2.1.3). Figure 2 below illustrates the proposed IM10 taper profile. DCC PUBLIC Page 15 of 24

16 Figure 2 Proposed IM10 taper profile Consultation question 2: Do you agree with our proposal to update IM10? Please provide rationale for your response. 3.4 Other features Recovery mechanism The concept of a recovery mechanism is a longstanding principle, which was included in the original Implementation Milestone Regime on the basis that it rewards achievement and strengthens delivery incentives, therefore what has been proposed is not new, but has been enhanced to reflect the challenging timescales to achieve the new DCC Live dates. The May 2015 consultation proposed that any previously lost BMIT (through non/late achievement of IM4 IM8) could be recovered against the DCC Live IM, with recovery matched to corresponding region and taper profiles. We propose to update the mechanism such that it continues to achieve the objective above and aligns with the newly proposed IMs. We have set out two options for updating the recovery mechanism; these are set out in Tables 10 and 11 below. DCC PUBLIC Page 16 of 24

17 Option one (full IM9 recovery) IMs IM1 to IM8 22 IM9 IM9 IM10 Option one (full IM9 recovery) any margin lost from IMs 1-8 is recoverable against IM9, proportionately to the taper profile for IM9; and the recovery of lost margin from IMs 1-7 are divided equally into two portions which would mirror the taper profile of IM9a and IM9b respectively (IM8a and IM8b would mirror the taper profile for IM9a and IM9b respectively). 100% of any margin lost from IM9a and IM9b mirrors the tapering of IM10a and IM10b respectively. Any previously lost margin is divided equally into two portions which would mirror the taper profile of IM9a and IM9b respectively. Table 10 Recovery mechanism option one (full IM9 recovery) We consider that allowing the recovery of IM5 and IM8 in proportion to the achievement of IM9 would maintain the strong incentive for timely achievement of IM9 even if it has missed the original due date of earlier IMs. We consider that allowing 100% of any margin lost from IM9 (including any previously lost margin) to be recoverable against IM10, would strengthen the IM10 incentive which would reflect the need to incentivise the provision of full functionality which includes: prepayment, export metering, all service requests and use cases, full reporting capability, full performance management, full demand management, accounting management and remedy outbound . Option two (partial IM9 recovery) IMs IM5 and IM8 IM9 IM9 IM10 Option two (partial IM9 recovery) as in option one as in option one 50% of any margin lost from IM9 (including any previously lost margin) is recoverable against IM10, proportionately to the taper profile for IM10; 50% of any margin lost from IM9 (including any previously lost margin) is divided equally into two portions which would then mirror tapering of IM10a and IM10b, respectively. Table 11 Recovery mechanism option two (partial IM9 recovery) Option two is largely similar to option one except that it proposes that just 50% of any margin lost from IM9 (including any previously lost margin) is recoverable against IM10. This approach would focus the incentive more on DCC Live (R1.2) instead of Release 1.3. We are seeking views on both options. 22 To date, the Authority has determined that IMs 1-7, except IM5, have been achieved. Therefore, as it currently stands, only the margin in relation to IM5 would be subject to this proposed recovery mechanism. We expect Ofgem to issue its determination on IM8 in February DCC PUBLIC Page 17 of 24

18 Consultation question 3: Do you have a preference between the two options for updating the recovery mechanism proposal? Please provide rationale for your response Regional incentives We propose that IM9 and IM10 should be sub-divided by two Region categories (a. the North Region (Arqiva), b. Central and South Regions (Telefonica)) 23. This approach continues to incentivise DCC in the event that one of the Communications Service Providers is unable to achieve the IM Due Date for a given IM. We consider that this approach ensures the maximum incentive for DCC to achieve the milestones in all Regions. Under this approach the maximum financial incentive will continue to be available to DCC where the IM is achieved by the Due Date in both Region categories. In practical terms this means that IM9 would be made up of IM9a and IM9b which would each be weighted at 15% of BMIT. Similarly, IM10 would be made up of IM10a and IM10b which would each also be weighted at 15% of BMIT. This proposal is the same as the proposal consulted on in the May 2015 consultation Recognition of external dependencies In the May 2015 consultation, we proposed the introduction of the recognition of external dependencies, and the concept of matters beyond DCC s reasonable control. We retain the view that there are deliverables that are required which are outside DCC s control and which may affect its ability to meet a given IM criteria by the due date. DCC considers that the Implementation Performance Regime should recognise these external dependencies. We are actively managing our external dependencies and mitigating risks, however this activity allows us to set out the key external dependencies (see below) which we consider could be taken into consideration when assessing the achievement of IMs. The matters solely beyond DCC s reasonable control include the following: amendments to the following technical and/or regulatory documentation required to be delivered by the Secretary of State that have significant impacts for DCC Live (R1.2) or Release 1.3: GB Companion Specification (GBCS) v0.8.2, baselined on 3 December ; 23 Where Implementation have been split by Region category, the titles acknowledge the split by referencing them as a and b. 24 SECAS, 3 December 2015, GB Companion Specification (GBCS) v0.8.2 : DCC PUBLIC Page 18 of 24

19 Smart Metering Equipment Technical Specification (SMETS) v1.59, baselined on 3 December ; Communications Hub Technical Specification v1.47, baselined on 3 December ; Smart Energy Code (SEC) 27. delayed decision on approval, acceptance and/or designation by the Secretary of State of technical/regulatory documentation 28 (this may be the result of undue delay to feedback as to amendments that may be required and/or appeals and would only be considered where the Licensee has provided the documentation for approval of an appropriate quality and within appropriate timescales); delayed decision on approval, acceptance and/or designation by the SEC Panel of the technical/regulatory documentation 29 (this may be the result of undue delay to feedback as to amendments that may be required and/or appeals and would only be considered where the Licensee has provided the documentation for approval of an appropriate quality and within appropriate timescales); insufficient number of Testing Participants being ready for the relevant test phase and where the lack of readiness is not due to DCC s inability to provide any Services that the Party requires in order to be ready for the relevant test phase in the requisite timescales; an externally managed specification being incomplete, delayed beyond the required milestone, or no longer stable, including; Zigbee SEP B (v1.0) (managed by Zigbee Alliance) CPA (Commercial Product Assurance), version 1.0 (managed by the National Technical Authority for Information Assurance (CESG)) 25 SECAS, 3 December 2015, Smart Metering Equipment Technical Specification (SMETS) v1.59 : 26 SECAS, 3 December 2015, Communications Hubs Technical Specification (CHTS) v1.47 : 27 The baseline design and testing requirements for DCC Live (R1.2) and Release 1.3 were those contained in the most current version of the SEC (as at 18 December 2015) resulting from the publication of the government conclusions document on 17 December 2015 and other documents, this is explained in more detail in _sofs_direction_v1.0.pdf - DECC, 18 December 2015, Approval given for the purposes of condition 13 of the smart meter communication licenses DCC plan for trialling and testing: Annex B. 28 This would include documents such as SEC subsidiary documents and any other document required under the SEC or the Licence 29 This would include documents such as testing approach documents and the DCC Live Services Criteria Report (subject to this approach being agreed for IM9 and IM10) and any other document required under the SEC or the Licence 30 SEP Smart Energy Profile DCC PUBLIC Page 19 of 24

20 Device Language Message Specification, blue book version 12 (managed by the DLMS User Association) Device Language Message Specification, green book version 8 (managed by the DLMS User Association) a certification body being unavailable for certification of relevant devices (e.g. Communications Hubs certification) a test house being unavailable for testing (e.g. any third-party test house that suppliers and/or or Meter Asset Providers might place a dependency upon before being willing to install SMETS2 equipment lest it be stranded as not compliant with technical specifications) SMETS2 electricity and/or gas meters intended to align with GBCS v0.8.2 and SMETS v1.59 (in required variants) being deemed unusable for testing after having been successfully selected through the Device Selection Methodology process 31 a Registration Data Provider not being ready for testing or being unable to complete testing challenges arising in relation to design and implementation for first live release as a result of the requirement for EU notification of SEC subsidiary documents (e.g. Common Test Scenarios). DCC proposes that where any additional external dependencies come to light between now and DCC Live, it would notify the Secretary of State. We recognise that this approach may require further consultation on amendments to the IM due dates and/or criteria under Part F of Schedule 3 of the Licence. We concluded on this approach in in the July 2015 conclusions document, we have included it here for completeness and to recognise the updates to the external dependencies since July CONSULTATION PROCESS The proposals made in this document form a package. The consolidated set of proposals that make up this package are set out in Appendix A. DCC considers that these proposals represent a challenging but achievable incentive framework, which principally strengthens the overall incentive for DCC to meet both live releases. The deadline for responses to this consultation is 31 May Please your response to contact@smartdcc.co.uk. Consultation responses may be published on DCC s website with the exception of any part that is confidential. Please state whether all, or any part, of your consultation response is confidential. Please note that responses in their entirety (including any text marked confidential) may be made available to DECC and Ofgem. 31 DCC notes that it may apply to the SEC Panel to use test stubs for SIT and Interface Testing, recognising that the date at which an issue is identified relating to availability of meters allows the use of this mitigation in time. DCC PUBLIC Page 20 of 24

21 Appendix A Consolidated proposal IM IM9a Due: 20 Jul 2016 Weighting:15% IM9b Due: 20 Jul 2016 Weighting:15% Proposed IM title and criteria IM9a: Licensee is ready for commencement of DCC Live (R1.2) in the North Region The Licensee has made an application to the SEC Panel in accordance with section T3.24 of the Smart Energy Code for a determination that the exit criteria for Interface Testing for Release R1.2, as set out in the Interface Testing Approach Document, in respect of the North Region, have been met. This condition will not be achieved, however, if the SEC Panel subsequently determines, before or after the Implementation Due Date, pursuant to section T3.25 of the Smart Energy Code that the exit criteria cited in such application have not been met. For the North Region, the number of Communications Hubs Delivered by the Licensee to SEC Parties is equal to or greater than 80% of the total number of Communications Hubs Orders accepted by the Licensee (in accordance with the Order Verification and Acceptance procedure in clauses 3.19 to 3.23 of the CH Handover Support Materials) with an Agreed Delivery Date falling on or before the DCC Live date. For the purposes of this condition, Agreed Delivery Date means the Delivery Date, but disregarding any changes to the Delivery Date made by the Licensee under clause 6.5 of the CH Handover Support Materials. The Licensee has provided the DCC Live Services Criteria Report in respect of DCC Live (R1.2) in the North Region, including any associated work off plans as appropriate, to the [Secretary of State/SEC Panel] pursuant to a direction by the Secretary of State under section X1.18 of the Smart Energy Code, and that assurance and/or evidence in the report was not subsequently rejected by [Secretary of State/SEC Panel]. IM9b: Licensee is ready for commencement of DCC Live (R1.2) in the Central and South Region The Licensee has made an application to the SEC Panel in accordance with section T3.24 of the Smart Energy Code for a determination that the exit criteria for Interface Testing for Release R1.2, as set out in the Interface Testing Approach Document, in respect of the Central and South Regions, have been met. This condition will not be achieved, however, if the SEC Panel subsequently determines, before or after the Implementation Due Date, pursuant to section T3.25 of the Smart Energy Code that the exit criteria cited in such application have not been met. For the Central and South Regions, the number of Communications Hubs Delivered by the Licensee to SEC Parties is equal to or greater than 80% of the total number of Communications Hubs Orders accepted by the Licensee (in accordance with the Order Verification and Acceptance procedure in clauses 3.19 to 3.23 of the CH Handover Support Materials) with an Agreed Delivery Date falling on or before the DCC Live date. For the purposes of this condition, Agreed Delivery Date means the Delivery Date, but disregarding any changes to the Delivery Date made by the Licensee under clause 6.5 of the CH Handover Support Materials. The Licensee has provided the DCC Live Services Criteria Report in respect of DCC Live (R1.2) in the Central and South Regions, including any associated work off plans as appropriate, to the [Secretary of State/SEC Panel] pursuant to a direction by the Secretary of State under section X1.18 of the Smart Energy Code, and that assurance and/or evidence in the report was not subsequently rejected by [Secretary of State/SEC Panel]. Date Proposed taper profile Proposed Time Factor 20 Jul Aug Aug Oct Nov DCC PUBLIC Page 21 of 24

22 IM IM10a Due: 26 Sep 2016 Weighting:15% IM10b Due: 26 Sep 2016 Weighting: 15% Proposed IM title and criteria IM10a: Licensee is ready for commencement of Release 1.3 in the North Region The Licensee has made an application to the SEC Panel in accordance with section T3.24 of the Smart Energy Code for a determination that the exit criteria for Interface Testing for Release R1.3, as set out in the Interface Testing Approach Document, in respect of the North Region, have been met. This condition will not be achieved, however, if the SEC Panel subsequently determines, before or after the Implementation Due Date, pursuant to section T3.25 of the Smart Energy Code that the exit criteria cited in such application have not been met. The Licensee has made an application to the SEC Panel in accordance with section T5.19 of the Smart Energy Code for a determination that the exit criteria for Additional SMKI and Repository Testing as set out in the SMKI and Repository Testing Approach Document, in respect of the North Region. This condition will not be achieved, however, if the SEC Panel subsequently determines, before or after the Implementation Due Date, pursuant to section T5.21 of the Smart Energy Code that the exit criteria cited in such application have not been met. The Licensee has provided the DCC Live Services Criteria Report in respect of Release 1.3 in the North Region, including any associated work off plans as appropriate, to the [Secretary of State/SEC Panel] pursuant to a direction by the Secretary of State under section X1.18 of the Smart Energy Code, and that assurance and/or evidence in the report was not subsequently rejected by [Secretary of State/SEC Panel]. IM10b: Licensee is ready for commencement of Release 1.3 in the Central and South Region The Licensee has made an application to the SEC Panel in accordance with section T3.24 of the Smart Energy Code for a determination that the exit criteria for Interface Testing for Release R1.3, as set out in the Interface Testing Approach Document, in respect of the Central and South Regions, have been met. This condition will not be achieved, however, if the SEC Panel subsequently determines, before or after the Implementation Due Date, pursuant to section T3.25 of the Smart Energy Code that the exit criteria cited in such application have not been met. The Licensee has made an application to the SEC Panel in accordance with section T5.19 of the Smart Energy Code for a determination that the exit criteria for Additional SMKI and Repository Testing as set out in the SMKI and Repository Testing Approach Document, in respect of the Central and South Regions. This condition will not be achieved, however, if the SEC Panel subsequently determines, before or after the Implementation Due Date, pursuant to section T5.21 of the Smart Energy Code that the exit criteria cited in such application have not been met. The Licensee has provided the DCC Live Services Criteria Report in respect of Release 1.3 in the Central and South Regions, including any associated work off plans as appropriate, to the [Secretary of State/SEC Panel] pursuant to a direction by the Secretary of State under section X1.18 of the Smart Energy Code, and that assurance and/or evidence in the report was not subsequently rejected by [Secretary of State/SEC Panel]. Date Proposed taper profile Proposed Time Factor 26 Sep Oct Nov Dec Jan Table 12 Consolidated proposal DCC PUBLIC Page 22 of 24