BSC Panel Strategy (Draft)

PUBLIC BSC Panel Strategy (Draft) Strategic Wrk Prgramme Adam Richardsn V1.1 30 September 2014

CONTENTS BSC PANEL AND PANEL COMMITTEE MEMBER OBJECTIVES... 3 1. BSC Panel Objectives... 3 2. Applicable BSC Objectives... 3 3. Scpe... 3 STRATEGIC CONCERNS... 4 1. Knwn BSC Issues... 4 2. Majr Matters... 4 3. External Drivers fr change that may impact the BSC... 5 4. BSC Services and Infrastructure... 5 STRATEGIC WORK PROGRAMME... 7 1. Purpse... 7 2. Ownership, Review and Maintenance... 7 3. Structure... 7 4. Limitatins and Exclusins... 8 APPENDIX 2... 9 Applicable BSC Objectives... 9 APPENDIX 2... 10 BSC Panel Pwers and Functins... 10 ATTACHMENT 1 BSC PANEL AND PANEL COMMITTEE STRATEGIC WORK PROGRAMME... 12 Page 2 f 12 V1.1 ELEXON 2014

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. Page 3 f 12 V1.1 ELEXON 2014

STRATEGIC CONCERNS 1. Knwn BSC Issues 1.1 The BSC Panel and its Cmmittees have identified particular cncerns relating t: Credit: Cncerns have been raised that the existing credit prvisins limit cmpetitin in a number f ways and culd be made mre flexible t accmmdate changes in the financial marketplace. Offering greater flexibility and additinal ptins fr BSC Parties t ldge Credit Cver under the BSC culd imprve the ptins fr prviding cllateral n their liabilities and lwer the barriers fr entering the market. Metering: Cncerns have been raised that half hurly and metering issues may be ne f the main causes f energy allcatin errrs between BSC Parties. Errneus allcatin f energy vlumes culd undermine cmpetitin by transferring errr frm ne party t anther. Issues are ften identified upn change f metering equipment. In the interests f efficiency, it is imprtant t address these issues nw ahead f the mve twards mre half hurly metering. Installatin and Maintenance: Issues have been identified by the BSC Auditr and the Technical Assurance Agent in the prcesses used fr installing and maintaining Metering Systems. Cncerns relate t cmmissining, measurement transfrmer prgramming and prving test prcesses. Energisatin: It is imprtant that the prcesses fr registering energisatins and discnnectins are efficient, well understd and failsafe, particularly where these require the c-rdinatin f Distributin Businesses and Natinal Grid. Dispensatins: The Imbalance Settlement Grup has raised cncerns at 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. Balancing Mechanism Unit Cnfiguratins: The number f nn-standard applicatins has been increasing which suggests that the existing prvisins may need t be revised. 2. Majr Matters 2.1 The BSC Panel and its Cmmittees have identified the fllwing areas fr cnsideratin: Changing Risks: The intrductin f Smart Metering and Electricity Market Refrm (which will utilise data arising under the BSC) is 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. This may include cnsideratin f the cntrl-framewrks that exist acrss BSC Parties and checks and balances relating t changes in measurement class. Mre Efficient Risk Mnitring: The Perfrmance Assurance Bard has identified a number f areas which culd lead t efficiency in the mnitring and management f risk. This includes the streamlining f Risk Management Plans fr parties, ways t better quantify the materiality f underperfrmance and the utilisatin f infrmatin drawn frm the Data Transfer Netwrk. Apprpriate Prvisins fr Assessing Settlement Errr Claims: The BSC Panel and the Trading Disputes Cmmittee have identified imprvements and clarificatins t the mechanisms in place fr cnsidering Trading Disputes t address cncerns raised fllwing the cnsideratin f several large ptential Settlement Errrs. Imprvements relate t clarificatins f rles and respnsibilities and treatment f legal advice and supprt. Page 4 f 12 V1.1 ELEXON 2014

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; Cncerns that BSC prvisins limit the develpment f Alternative Mdificatin Prpsals; A desire t ensure there is clarity in the status f, and relatinship between, BSC dcuments. 3. External Drivers fr change that may impact the BSC 3.1 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: Licence Lite: The Department f Energy and Climate Change (DECC) intrduced the licence-lite supply regime in 2009 in rder t imprve market access fr distributed generatin schemes. The regime culd be said t incentivise a new arrangement with lcal suppliers cmpeting fr lcal custmers, readily mving their meters between senir suppliers and specialist cnslidatrs. Changes t the BSC culd be envisaged, (e.g. the creatin f a Lcal Balancing Unit ) t facilitate the existence f a lcal supplier active within a single regin. N such change has been raised and n wrk is currently underway in relatin t the BSC, hwever, the Panel remains mindful f the prgress f the licence-lite regime. Cash-ut and Balancing: The prpsed changes arising frm Ofgem s Electricity Balancing Significant Cde Review must be apprpriately assessed and implemented under the prvisins f the BSC. It is als anticipated that, in additin t the mve twards single-price cash-ut, changes will arise frm: Ofgem s Future Trading arrangements wrk; and the Cmpetitin Markets Authrity investigatin int the energy industry. Develpment f Smarter Markets: There are a wide range f implicatins arising frm the mve twards smart metering and smart grids. These include: the practicalities f changes f measurement class and assciated migratins; swifter change f supplier prcesses t enhance cmpetitin; impacts n residual nn-half hurly prvisins such as prfiling; and calls t reduce the Settlement timetable. Wrk is already prgressing under the BSC and als under Ofgem s Smart Prgramme. Eurpean Harmnisatin: Wrk cntinues in Eurpe t harmnise energy markets. The Panel has already established (jintly with ther Cde Panels) the Jint Eurpean Standing Grup and the Eurpean Cde C-rdinatin and Applicatin Frum t cnsider such matters arising. It is imprtant t ensure that apprpriate supprt is c-rdinated within GB and that the BSC is ready t accmmdate changes arising frm this wrk which culd, in due curse, fundamentally impact market design and the balancing prvisins. 4. BSC Services and Infrastructure 4.1 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 data, with services such as trend based reprting and an easy t use secure nline Page 5 f 12 V1.1 ELEXON 2014

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 Framewrk. Transfrmatin f BSC Systems and Prcesses: Current systems architecture is rted in the last century it is difficult and expensive t maintain and develp, and the risk f failure is increasing. Transfrmatin is required, given the high level f change frecast in light f the rapidly evlving industry arrangements. Clear and Accessible Web-Channels: Delivery f an imprvement prgramme fr the ELEXON website t enhance the search facility and review the hme page cntent and structure t make navigatin mre intuitive. Revised Custmer Supprt Services: Standardisatin f gd-practice custmer supprt prvisins acrss ELEXON t imprve the way in which ELEXON supprts its custmers. Gvernance and Vires: The BSCC Bard has reviewed its gvernance and is wrking with the BSC Panel t develp a prpsal t imprve accuntability and ensure cmpliance with the UK crprate cde. The BSC Panel has als expressed a desire t cnsider its wn gvernance t ensure that it remains fit fr purpse and demnstrates best practice. Ofgem has supprted these reviews and, separately, has indicated that it will prgress a change t the Transmissin Licence t remve the restrictin preventing BSCC frm prviding nn-bsc services. It is anticipated that this wuld enable ELEXON t prvide supprt and services where it is felt apprpriate fr the benefit f industry prjects and initiatives. Any subsequent changes arising wuld prgress under the Mdificatins prcesses. Page 6 f 12 V1.1 ELEXON 2014

STRATEGIC WORK PROGRAMME 1. Purpse 1.1 The Strategic Wrk Prgramme takes accunt f the strategic cncerns 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 cncerns. 1.2 The Strategic Wrk Prgramme will be used as a key input t the develpment f the BSCC Business Strategy 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 Chairman n behalf f 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 n a quarterly basis and by Panel Spnsrs 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 fur sectins cvering: Planning Cycle: The standard annual reviews and reprts used t develp the verall strategy; Addressing Settlement Risks and Issues: Thse wrk streams and activities intended t address knwn prblems in the balancing and settlement arrangements r designed t imprve the way in which evlving Settlement Risks are managed. Future Settlement Design and Develpment: 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. BSC Services and Infrastructure: Thse wrk streams being prgressed t imprve the services prvided by ELEXON t BSC Parties and Panel Cmmittees and ensure that BSC Agent services cntinue t be delivered effectively, efficiently and ecnmically. 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; Page 7 f 12 V1.1 ELEXON 2014

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). Page 8 f 12 V1.1 ELEXON 2014

APPENDIX 2 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 the implementatin and administratin f the balancing and settlement arrange ments; 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. Page 9 f 12 V1.1 ELEXON 2014

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 Page 10 f 12 V1.1 ELEXON 2014

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 th at 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 Page 11 f 12 V1.1 ELEXON 2014

ATTACHMENT 1 BSC PANEL AND PANEL COMMITTEE STRATEGIC WORK PROGRAMME Page 12 f 12 V1.1 ELEXON 2014