PUBLIC BSC Panel Strategy Strategic Wrk Prgramme Victria Mxham V3.0 14 Octber 2015
CONTENTS BSC PANEL AND PANEL COMMITTEE MEMBER OBJECTIVES... 3 1. BSC Panel Objectives... 3 2. Applicable BSC Objectives... 3 3. Scpe... 3 STRATEGIC PRIORITIES... 4 1. Delivery f Cre BSC Services... 4 2. Reslutin f Knwn BSC Issues... 5 3. Efficient Wrking Practice and Cmmunicatin between Panel Cmmittees... 5 4. Evaluatin and Management f Evlving Risks... 5 5. External Drivers fr change that may impact the BSC... 6 6. Other Cnsideratins... 7 STRATEGIC WORK PROGRAMME... 8 1. Purpse... 8 2. Ownership, Review and Maintenance... 8 3. Structure... 8 4. Limitatins and Exclusins... 9 5. Cmmentary n Delivery, Resurcing and Impacts... 10 APPENDIX 1... 11 Applicable BSC Objectives... 11 APPENDIX 2... 12 BSC Panel Pwers and Functins... 12 ATTACHMENT 1 BSC PANEL AND PANEL COMMITTEE STRATEGIC WORK PROGRAMME... 14 BSC Panel Strategy 14 Octber 2015 Page 2 f 14 v2.3 ELEXON 2015
BSC PANEL AND PANEL COMMITTEE MEMBER OBJECTIVES 1. BSC Panel Objectives 1.1 The BSC places an bligatin n the BSC Panel t cnduct its business with a view t achieving a number f key bjectives. These bjectives, which can be fund in BSC Sectin B1.2.1, can be summarised as: Giving full and prmpt effect t the BSC cnsistent with achieving the Applicable BSC Objectives in a transparent, ecnmic, efficient and nn - discriminatry way. 2. Applicable BSC Objectives 2.1.1 Cnditin C3 f the Electricity Transmissin Licence establishes six Applicable BSC Objectives. These are set ut in full in appendix 1 and can be summarised as: a) Efficient Discharge f Transmissin Licence Obligatins; b) Efficient Operatin f Transmissin System ; c) Prmting Effective Cmpetitin ; d) Efficient Implementatin f the Balancing and Settlement Arrangements ; e) Cmpliance with Eurpean Regulatins; and f) Facilitating Delivery f Electricity Market Refrm. 2.1.2 The BSC Panel must undertake wrk and make recmmendatins s as t better facilitate the delivery f these bjectives. 3. Scpe 3.1 The BSC gverns balancing and settlement activities in Great Britain. Other aspects f the electricity trading arrangements are dealt with under different gvernance arrangements. Fr example issues relating t transmissin system peratin are cntained within the Grid Cde and the Cnnectin and Use f System (CUSC) arrangements, whereas issues assciated with settlement registratin are dealt with under the prvisins f the Master Registratin Agreement (MRA) and the Distributin Use f System Cde (DCUSA) gverns issues arund cnnectin t and use f the varius distributin systems. 3.2 The BSC Panel has a general respnsibility t keep itself infrmed f issues that fall utside the direct gvernance f the BSC and assess (and take steps t address) any impact n it in a c-rdinated way. BSC Panel Strategy 14 Octber 2015 Page 3 f 14 v2.3 ELEXON 2015
STRATEGIC PRIORITIES The BSC Panel s verall fcus and main pririty cntinues t be the delivery f its BSC bligatins and the nging prvisin f rbust, effective BSC services. The Panel als remains mindful that the energy market is experiencing a perid f substantial change and that it must take this int accunt when cnducting its wrk. The Panel s pririties are therefre: 1) Prtecting, maintaining and efficiently managing the balancing and settlement arrangements as they exist tday; and 2) Lking ahead t the evlutin f the market and hw the current balancing and settlement arrangements need t adapt t facilitate such change. T deliver these strategic pririties, the Panel has identified wrk t be prgressed in the fllwing areas. 1. Delivery f Cre BSC Services 1.1 The Panel will cntinue t fcus n the delivery f its respnsibilities, pwers and functins as set ut in appendix 2. 1.2 Over the cming year, particular fcus will be placed n: Best-practice change prvisins: The cre prvisins relating t Mdificatins under the BSC and thse that set ut the dcument architecture shuld be reviewed t ensure cntinued best practice in light f feedback frm industry. Cncerns have included: clarity f gvernance prvisins fr Mdificatin Wrkgrups; cnsideratin f hw recmmendatins are put t the Panel, hw the Panel makes decisins, and the recmmendatins it makes t the Authrity; cncerns that BSC prvisins limit the develpment f Alternative Mdificatin Prpsals; and a desire t ensure there is clarity in the status f, and relatinship between, BSC dcuments. BSC Website review and imprvement: Onging wrk t imprve the ELEXON website fcusing n making navigatin mre intuitive. Ofgem s review f Cde Gvernance: Ofgem reviewed industry cde gvernance in 2010 and 2013. Hwever, with the anticipated scale f change required in the cming years, Ofgem has cncerns that the arrangements may nt be perating in the best interests f cnsumers. Ofgem believes it is timely t review the refrms it previusly implemented and ptentially intrduce further refrms. This review was annunced in Spring 2015 and is likely t take arund a year t cmplete, with the ptential fr subsequent Mdificatins t the BSC t implement any recmmended slutins and revisins t the current arrangements. Review f market entry and exit arrangements: The Panel has identified a need t review the current market entry and exit arrangements. The review shuld cnsider whether the current arrangements are fit fr purpse, reflective f wrking practices and whether they encurage and enable cmpetitin within the market, particularly within the cntext f nn-traditinal business mdels. BSC Panel Strategy 14 Octber 2015 Page 4 f 14 v2.3 ELEXON 2015
2. Reslutin f Knwn BSC Issues 2.1 The BSC Panel and its Cmmittees have identified particular cncerns relating t: Credit: Wrk cntinues n changes t the existing credit prvisins in rder t ffer greater flexibility and alternative methds fr securing credit under the BSC. Metering: Key areas f cncern raised in the mst recent BSC Audit related t metering and data quality issues in the nn half hurly market, including: Errrs in the capture f metered data: The health f metering systems, including cmmissining, in the half hurly market appears t be decreasing, leading t energy allcatin errrs between BSC Parties. Prving tests: Cncerns have been raised ver the prving test prcess (prving tests either nt being perfrmed, r results nt being cmmunicated t Data Cllectrs). Change f Measurement Class (CMC): The Auditr s assurance wrk has cntinued t highlight prblems with the CMC prcess, largely due t issues with prvisin f infrmatin between Party Agents. Meter reads and meter technical details: This year s audit saw an increase in material audit issues related t inadequate prvisin f meter reads r meter technical details between Meter Operatr Agents and Data Cllectrs. Metering system faults: Issues have been identified with metering system faults nt being crrected, leading t backlgs, r crrect data flws nt being sent t BSC Parties and Party Agents. Dispensatins and COPs: The Imbalance Settlement Grup cntinues t be cncerned by the high vlume f metering dispensatins. This encmpasses bth new applicatins and requests t extend lng-standing dispensatins where crrective actin has nt been prgressed. The Panel has suggested that it may be apprpriate t address this issue via a review f the relevant Cde f Practices t ensure that they are fit fr purpse. 3. Efficient Wrking Practice and Cmmunicatin between Panel Cmmittees Panel gvernance: Panel has initiated a piece f wrk t cnsider its wn gvernance t ensure that it remains fit fr purpse and demnstrates best practice. This review, and implementatin f agreed slutins, will cntinue int 2016/17, and includes cnsideratin f wrking practices and plicies, accuntability and delegatin f respnsibilities. 3.1 The BSC Panel and its Cmmittees have als endrsed wrk being undertaken by ELEXON in relatin t: Flexible, efficient reprting: Delivery f an efficient, cherent and secure reprting suite that will allw BSC Parties and the Panel and its cmmittees t have direct and timely access t their wn and market-wide public date, with services such as trend based reprting and an easy t use secure nline interface. Such a reprting suite will transfrm the way that ELEXON prvides data, reprts t industry and the supprt that can be prvided t the Perfrmance Assurance Bard. BSC systems and prcesses change prgramme: Current systems architecture is rted in the last century; it is difficult and expensive t maintain and develp and its risk f failure is increasing. Given the high level f change frecast and in light f the rapidly evlving industry arrangements, imprvements are needed t the BSC systems ver the next five years. 4. Evaluatin and Management f Evlving Risks BSC Panel Strategy 14 Octber 2015 Page 5 f 14 v2.3 ELEXON 2015
Changing risks and risk management: Changes in market design, including the intrductin f Smart Metering and Electricity Market Refrm, are likely t change the prfile f risk acrss BSC Systems and Prcesses. It is imprtant t ensure that apprpriate assurance can be prvided in relatin t this changing risk prfile. On behalf f the Panel, ELEXON shuld cnduct regular, recurrent checks t review the impacts f Smart Metering and EMR n the PAF. The Panel has als requested that budgetary prvisin shuld be made t ensure that ELEXON has the capability t scale up activity t address any errrs that may ccur as a result f these changing risks (with a particular fcus n riskmanagement pst-smart rllut). Review f the main IT system underpinning the Perfrmance Assurance Framewrk (PAF): The main IT system underpinning the current PAF prcess is PARMS. It takes data submissins frm ELEXON and BSC Agent systems and frm Suppliers and Supplier Agents. ELEXON uses PARMS t analyse and cmpare Perfrmance Assurance Parties perfrmance against a number f measures. PARMS calculates and generates the assciated invicing and reprting dcumentatin fr the Supplier Charges that are payable under the terms f the BSC. It als generates the reprts used fr Peer- Cmparisn f Supplier perfrmance. The PAB has identified tw business pririties fr imprvement f the PAF and perfrmance reprting, with different timeframes: in the shrt t medium term, imprvements t the efficiency f the current perfrmance reprting prcesses; and in the lnger term, a review f the whle PAF mdel t take accunt the rll-ut f smart meters. 5. External Drivers fr change that may impact the BSC 5.1 The Panel and its Cmmittees have acknwledged that it is imprtant t remain well infrmed and t prvide supprt and input, where apprpriate, in relatin t the fllwing drivers fr change: P305 mnitring: P305 will implement the cnclusins t the Electricity Balancing Significant Cde Review, putting in place a single, marginal imbalance price, intrduce Reserve Scarcity Pricing and intrduce pricing fr Demand Cntrl actins. In additin t a pst-implementatin review f the impacts f P305, nging BAU mnitring shuld be intrduced, supprting a wider, annual review in the lead up t the Nvember 2018 reductin in PAR value. Ofgem s Future Whlesale Market Wrk: Ofgem is due t annunce a way frward fr its newly frmed Future Whlesale Market wrk (replacing the Future Trading Arrangements wrk). The wrk is likely t take int accunt changes driven by, fr example, the EU Netwrk Cde n Balancing, lcal balancing markets, demand side respnse and ther smart grid driven market innvatins. Cmpetitin Markets Authrity investigatin int the energy industry: The CMA has published its prvisinal findings and ntice f pssible remedies, t which the Panel has written a respnse. The CMA may hld subsequent hearings r request additinal infrmatin ahead f publishing its final findings by the June 2016. Fllwing this, the Panel and ELEXON will be in a psitin t assess the final remedies, priritise actins and determine an apprpriate set f wrk streams t prgress the CMA s findings. Ptential impacts include: intrductin f lcatinal pricing fr transmissin lsses increased fcus n intrductin f a cst-effective HH settlement f dmestic electricity meters; and ptential fr cde administratin t becme a licensable activity. Develpment f Smarter Markets: There are a wide range f implicatins arising frm the mve twards smart metering and smart grids. These include: BSC Panel Strategy 14 Octber 2015 Page 6 f 14 v2.3 ELEXON 2015
the practicalities and assciated mnitring f mandated half hurly settlement fr meters in Prfile Classes 5-8; impacts n residual nn-half hurly prvisins such as prfiling; impacts n settlement f increasing exprt spill vlumes assciated with Feed in Tariffs; data quality arrangements and swifter change f supplier prcess t enhance cmpetitin (and, in particular, changes arising frm Ofgem s significant cde review); and calls t reduce the Settlement timetable. Wrk will cntinue t prgress under the BSC and under Ofgem s Smarter Markets prgramme. Eurpean Harmnisatin: Wrk cntinues t harmnise energy markets acrss Eurpe. It is imprtant t insure that the Panel is made aware f Eurpean develpments via ELEXON s mnitring and updates. Mre widely, the Panel has a rle in ensuring that apprpriate supprt is c-rdinated within GB and that the BSC is ready t accmmdate changes arising frm Eurpean develpments which have the ptential t fundamentally impact market design and the balancing and settlement prvisins. 6. Other Cnsideratins 6.1 BSCC Gvernance: In 2015 the Bard reviewed its gvernance arrangements and wrked with the Panel t develp a prpsal t imprve accuntability and ensure cmpliance with the UK crprate gvernance cde. Tw mdificatins t the BSC are being prgressed t implement changes reflecting this review. BSC Panel Strategy 14 Octber 2015 Page 7 f 14 v2.3 ELEXON 2015
STRATEGIC WORK PROGRAMME 1. Purpse 1.1 The Strategic Wrk Prgramme takes accunt f the strategic pririties nted abve. It is a living dcument that presents a 3-year+ rlling view f the wrk prgrammes and activities arising frm, and designed t address, the BSC Panel s strategic pririties. 1.2 The Strategic Wrk Prgramme will be used as a key input t the develpment f the annual BSCC business plan prepared by ELEXON fr each BSC Year. It will als be used t supprt: Regular reviews f pririties by Panel Cmmittee Chairs and Panel Spnsrs C-rdinatin f Cmmittee wrk prgrammes and actins by Cmmittee Chairs and Panel Spnsrs Cmmunicatin f activities acrss ELEXON, the BSC Panel and Panel Cmmittees. 2. Ownership, Review and Maintenance 2.1 The Strategic Wrk Prgramme is wned by the BSC Panel. It is maintained by the BSC Panel Secretary and is updated peridically (n mre than quarterly). The Strategic Wrk Prgramme will be reviewed by Panel Cmmittee Chairs and Panel Spnsrs n a quarterly basis and by the BSC Panel every six mnths. 2.2 Ad hc reviews may take place shuld significant events create a need fr review f the Strategic Wrk Prgramme. 3. Structure 3.1 The Strategic Wrk Prgramme is set ut in three parts: a) Wrk-plan view: This ne-page view set uts the high level activities and wrk streams t be prgressed ver the next three years and beynd. It utlines the anticipated timing fr the wrk and identifies key milestnes bth within the BSC and in relatin t wider activities that culd impact the balancing and settlement arrangements. The Wrk-plan view is split int seven sectins cvering: Planning Cycle: The standard annual reviews and reprts used t develp the verall strategy; PRIORITY 1: Delivery f Cre BSC Services: Thse wrk streams and activities intended t ensure cntinued delivery f best practice BSC Services. PRIORITY 2: Addressing Knwn Settlement Issues: Thse wrk streams and activities intended t address knwn prblems in the balancing and settlement arrangements. PRIORITY 3: Efficient Wrking Practice and Cmmittee Cmmunicatin: Thse streams and activities intended t imprve efficiency and effectiveness f Panel and Panel Cmmittee functins and delivery f BSC bligatins. PRIORITY 4: Addressing Evlving Settlement Risks: Thse wrk streams and activities intended t imprve the way in which evlving Settlement Risks are managed. PRIORITY 5: Future Settlement Design and Develpment - Drivers fr Change: Thse wrk streams and activities intended t prvide insight int the ptential impacts n BSC Parties, BSC systems and BSC prcesses arising frm external drivers fr change. Wrk may encmpass infrmatin gathering and the assessment f impacts and prpsed changes. Other Cnsideratins: Activities that sit utside the BSC Panel s strategic pririties but which may impact it. BSC Panel Strategy 14 Octber 2015 Page 8 f 14 v2.3 ELEXON 2015
The Wrk-plan view ffers a brad indicatin f the gvernance under which each activity will be prgressed (e.g. Panel/ELEXON, Panel Cmmittee, Mdificatin Wrkgrup etc). The majrity f (but nt all) wrk-streams fllw a standard apprach including: i) Initial scping and develpment f a way frward r candidate ptins; ii) Develpment and assessment f prpsed changes under the apprpriate gvernance (e.g. Mdificatins r Change Prpsals); iii) Implementatin f apprved changes where the case fr change has been demnstrated. b) Highlights and Key Matters: This ne-page summary utlines the key elements f the wrk-plan arising in the last quarter and sets ut the main elements that are anticipated t be delivered in the frthcming quarter. Any majr changes r adjustments in the timing r priritisatin f existing wrk, r the intrductin f additinal wrk streams, are highlighted in this sectin. c) Overview f Strategic Wrk Streams and Deliverables: The final part f the Strategic Wrk Prgramme summarises each wrk stream and activity in the wrk prgramme shwing the ELEXON lead and, where applicable, the Panel Spnsr. These descriptins are included fr reference and it is nt anticipated that they will change significantly thrughut their lifespan. Since the Planning Cycle sets ut standard reviews and reprts, these are detailed at the end f this sectin which is therwise structured t match the wrk-plan view. 4. Limitatins and Exclusins 4.1 The Strategic Wrk Prgramme sets ut the nn-business as usual activities that address the strategic cncerns highlighted abve. It includes a selectin f Mdificatin wrk (either existing Mdificatin r anticipated Mdificatins) which relate t the Panel s strategic cncerns t prvide cntext. 4.2 The Strategic Wrk Prgramme des nt cntain: An exhaustive list f all existing Mdificatins and Change Prpsals in assessment r awaiting implementatin (this can be fund in the varius change reprts already published by ELEXON). Standard business required by the BSC, including, fr example, the varius scheduled parameter reviews cnsidered by the Panel and Panel Cmmittees (usually n an annual basis); Standard demand driven activities and services prescribed by the BSC such as Accessin, Market Entry and Exit, SVA Qualificatin assessments, cnsideratin f Balancing Mechanism Unit Registratins, Metering Dispensatins and the investigatin and assessment f Trading Disputes etc; and Wrk assciated with the implementatin and delivery f Electricity Market Refrm which is delivered by the whlly wned ELEXON subsidiary, EMR Settlement Limited, under the gvernment Grant (fr implementatin) and Lw Carbn Cntracts Cmpany Ltd (LCCC) / Electricity Settlement Cmpany Ltd (ESC) cntract (fr peratin) 1. 1 Wrk that is required t be undertaken within the BSC t facilitate the delivery f EMR wuld, hwever, be included in the Strategic Wrk Prgramme where applicable, cnsistent with the delivery f Applicable BSC Objective (f). BSC Panel Strategy 14 Octber 2015 Page 9 f 14 v2.3 ELEXON 2015
5. Cmmentary n Delivery, Resurcing and Impacts 5.1 The amunt f change acrss the industry is high and the vlume f wrk under the BSC is likely t reflect this. While the BSC Panel and ELEXON remain cmmitted t delivering services in an efficient and ecnmic manner, it seems unlikely that it will be pssible t deliver further reductins in peratinal csts as has been seen acrss the previus fur years. 5.2 The Panel acknwledges that addressing its strategic pririties may require an increase in the cst f delivering the BSC. 5.3 Any additinal activities beynd thse currently set ut n the Strategic Wrk Plan r significant increases in the vlume f business as usual services will require a re-adjustment f pririties r cnsideratin f alternative ptins fr delivery. 5.4 The Panel further acknwledges that it is imprtant fr BSC Parties t be engaged acrss the range f activities nted in this strategy. In particular, the BSC Panel has reflected n the recent BSC Audit where it was cncluded that greater effrts will be needed by all thse invlved t reslve lng-standing issues and ensure apprpriate cntrls are in place ging frward. When cmbined with the current level f change (bth within and ut with the BSC), the BSC Panel recgnises that this may cntribute twards an upward pressure n cst. The Panel has highlighted the fact that this may be further exacerbated by the risk f errrs arising frm large industry change prgrammes, particularly the rll-ut f smart metering. The Panel has made it clear that ELEXON shuld ensure it has the capacity t mnitr and address these increased risks and assciated errrs, shuld they arise. BSC Panel Strategy 14 Octber 2015 Page 10 f 14 v2.3 ELEXON 2015
APPENDIX 1 Applicable BSC Objectives Cnditin C3 f the Electricity Transmissin Licence establishes six Applicable BSC Objectives: a) The efficient discharge by the Transmissin Cmpany f the bligatins impsed under the Transmissin Licence; b) The efficient, ecnmic and c -rdinated peratin f the natinal electricity transmissin system; c) Prmting effective cmpetitin in the generatin and supply f electricity, and (s far as cnsistent therewith) prmting such cmpetitin in the sale and purchase f electricity; d) Prmting efficiency in t he implementatin and administratin f the balancing and settlement arrangements; e) Cmpliance with the Electricity Regulatin and any relevant legally binding decisin f the Eurpean Cmmissin and/r Agency; and f) Implementing and administrating the arrangements fr the peratin f cntracts fr difference and arrangements that facilitate the peratin f a capacity market pursuant t EMR legislatin. BSC Panel Strategy 14 Octber 2015 Page 11 f 14 v2.3 ELEXON 2015
APPENDIX 2 BSC Panel Pwers and Functins The BSC prescribes the pwers and functins f the BSC Panel in Sectin B.3. The Panel has the pwer t: Decide any matter which, under any prvisin f the Cde, is r may be referred t the Panel fr decisin; Establish Panel Cmmittees and t delegate its pwers, functins and respnsibilities as prvided fr under the Cde t any such Panel Cmmittee. Panel Cmmittees cannt further delegate their respnsibilities r pwers unless the BSC r the BSC Panel permits this. Specific pwers and functins are identified in BSC Sectin B3.1.2 and are detailed further in the relevant sectins f the BSC and the Cde Subsidiary Dcuments (BSC Prcedures etc.). The Panel has delegated sme f these functins and respnsibilities t its Panel Cmmittees as utlined belw. In summary, the BSC Panel is respnsible fr: a) Deciding (subject t a reference t r apprval f the Authrity, as prvided in the Cde) n the expulsin r suspensin f the rights f any Party (see Sectin H fr the Default prvisins relating t Credit Default r breach f the BSC); Nt Delegated b) Implementing r supervising the implementatin f the prcedures fr mdificatin f the BSC (see BSC Sectin F fr the prcedures); c) Establishing arrangements fr the reslutin f Trading Disputes (see BSC Sectin W); Nt Delegated Delegated (in part) t: TDC d) Determining values fr trading parameters (t be applied in the BSC) as may be required f the Panel in accrdance with any prvisin f the Cde; e) Adpting and frm time t time revising Cde Subsidiary Dcuments (see BSC Sectin F3); f) Taking steps t ensure that the Cde is given effect in accrdance with its terms, and (but nly where expressly s prvided in the Cde) taking steps t ensure cmpliance by Parties with the prvisins f the Cde; Delegated (in part) t: ISG, SVG and Credit Cmmittee Mainly delegated t: ISG and SVG but als TDC & PAB Mainly delegated t: PAB BSC Panel Strategy 14 Octber 2015 Page 12 f 14 v2.3 ELEXON 2015
g) Prviding r arranging fr the prvisin f reprts and ther infrmatin t the Authrity in accrdance with the further prvisins f the Cde; Delivered by Panel and acrss Panel Cmmittees as apprpriate h) Apprving the Business Strategy prepared by ELEXON fr each BSC Year, and revisins t that plan; Nt Delegated i) Deciding matters which are referred t it (pursuant t any prvisin f the Cde prviding fr such referral) fllwing any decisin r determinatin f ELEXON r a BSC Agent; Nt Delegated j) Setting the terms f reference fr the BSC Auditr and cnsidering the BSC Audit Reprt; Delegated (in part) t: PAB k) If requested by the Authrity, cnveying any directin r request f the Authrity t any Party, ELEXON, the BSC Auditr r any BSC Agent; Nt Delegated l) Preparing, cnsidering, recmmending changes (if necessary) and apprving dcuments relating t perfrmance assurance (in accrdance with BSC Sectin Z) and hearing and determining Risk Management Plan Appeals. Mainly delegated t: PAB BSC Panel Strategy 14 Octber 2015 Page 13 f 14 v2.3 ELEXON 2015
ATTACHMENT 1 BSC PANEL AND PANEL COMMITTEE STRATEGIC WORK PROGRAMME BSC Panel Strategy 14 Octber 2015 Page 14 f 14 v2.3 ELEXON 2015