Supplier Charges in the Capacity Market

Public Supplier Charges in the Capacity Market Webinar 7 September 2016 Jo Alexander

Disclaimer: Please note that whilst these slides have been prepared with due care, EMR Settlement Limited does not make any representation, warranty or undertaking, express or implied, in relation to the completeness and or accuracy of information contained within them, and accordingly EMR Settlement Limited shall not be liable for any damages resulting from the use of this information or action taken in reliance on it. EMR Settlement Limited has used example numbers in the calculations which are based on fictional metered volumes and in some cases fictional amounts as well. The actual EMR charges that EMR parties are liable to pay is as stated in invoices and may be significantly different to the examples shown on these slides due to the nature of the calculations.

Agenda Overview of payments and data Credit Cover and Supplier Charge Break for questions Non-compliance Break for questions Penalty Residual Supplier Amount Reconciliation Monthly reconciliation Annual reconciliation Break for questions Summary and further information 3

Where does EMRS fit in? BEIS 100% ownership Capacity Market Electricity Settlements Company (ESC) EMR Delivery Body (National Grid) EMR Settlement Limited (EMRS) (ELEXON) 4

Capacity Market payments Supplier Charge monthly/annual reconciliation charges Capacity Market Penalty Residual Supplier Amount Scheme administration Settlement Costs Levy Protected by: Credit cover Mutualisation All payments are due 3 working days after billing 5

Capacity Market metered data 16:00-19:00, working days, November February Net demand, therefore does include embedded generation Distribution losses are applied, but transmission losses are not Payment types Capacity Market Supplier Charge monthly/annual reconciliation amount Settlement Costs Levy Penalty Residual Supplier Amount Metered data Forecast data then SF-R2 Forecast data then SF-DF SF settlement run only N/A. Related to the % of Capacity Market Supplier Charges paid 6

Credit Cover and Supplier Charge

Supplier Charge payments Timeline for 2016/2017 Delivery Year schedule for Supplier Charge and Credit Cover issued Supplier Charge Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2016 2017 demand forecast submitted 1 Jun 2016 Delivery Year first invoice for Supplier Charge 3 Oct 16 8

Demand forecast Suppliers must provide a demand forecast for the period of high demand Needs to be submitted no later than 1 June prior to the Delivery Year to which the forecasted demand relates The demand forecast is used to calculate the Capacity Market Supplier Charges Example forecast form 9

Supplier Charge payments Timeline for 2016/2017 Delivery Year schedule for Supplier Charge and Credit Cover issued 1 st Credit Cover deadline Supplier Charge Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2016 2017 demand forecast submitted 1 Jun 2016 Delivery Year first invoice for Supplier Charge 3 Oct 16 10

Supplier Charge payments Timeline for 2016/2017 Delivery Year schedule for Supplier Charge and Credit Cover issued Supplier Charge based on forecasted share of demand Supplier Charge Supplier Charge based on actual share of demand Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2016 2017 demand forecast submitted 1 Jun 2016 Delivery Year Period of High Demand 1 Nov 16 to 28 Feb 17 revised schedule for Supplier Charge and Credit Cover issued 24 Mar 17 11

Supplier Charge calculation Payments made to fund Capacity Providers for each month The expected monthly costs are apportioned to each Supplier by share of demand (period of high demand), either on forecasted or actual data Monthly capacity market supplier charge Total annual capacity payments Monthly weighting factor Supplier s net demand Net demand of all suppliers Total annual capacity payments are determined from the Capacity Market auction results The monthly weighting factor profiles payment during the year 12

Supplier Charge example Monthly Total Capacity Provider payments for October 2014: 60 million Supplier s Net Demand for 2014/15 Delivery Year: 1.8 million MWh All Suppliers Net Demand for 2014/15 Delivery Year: 12 million MWh Calculation: 60 million x (1.8 million 12 million) = 9 million 13

Supplier Charge backing data /BIC/N1_J18 89 /BIC/N1_J19 50 /BIC/N1_J19 49 /BIC/N1_J19 51 /BIC/N1_J19 52 TESTSUPP 905 20141001 20141006 10000000 SUPP Delivery Year Month Total Monthly Capacity Payments Supplier Net Demand for Periods of High Demand /BIC/N1_MP ID Net Demand for Periods of High Demand All backing data starts with the same 6 columns and contains: EMR Party ID EMR Invoice Number EMR Invoice Issued Date EMR Invoice Payment Date EMR Invoice Total MPID Reference Period Start Date Reference Period end Date Capacity Market Supplier Charge Net Payment /BIC/N1_J1923 /BIC/N1_J2029 /BIC/N1_J2009 /BIC/N1_J2031 /BIC/N1_J1993 /BIC/N1_J1992 /BIC/N1_J1901 /BIC/N1_J1972 201410 60000000 1800000 12000000 20141101 20150228 9000000 9000000 60 million x (1.8 million 12 million) = 9 million Key resource: https://dtc.mrasco.com/listdataflows.aspx 14

What Credit Cover do I need? Your monthly Credit Cover requirements were provided in your schedule (these are not cumulative!) Credit Cover = requirement e.g. 9.9 million Monthly Capacity Market Supplier Charge e.g. 9 million 110% i.e. 1.1 You must have lodged at least enough Credit Cover to meet the monthly requirement, 12 working days in advance of the month Credit Cover can be provided in cash or Letter of Credit 15

Questions

What happens if a Supplier doesn t comply?

What happens if a Supplier doesn t comply? There are processes to ensure that ESC has the required funds in place to make payments to Capacity Providers if a Supplier doesn t meet their obligations. Credit cover Mutualisation Invoicing Non Payment

Timeline - Credit Default and Mutualisation last day to lodge Credit cover additional time to lodge Credit Cover issue invoice 3 WD 5 WD 2 WD 2 WD 3 WD Credit Default notice issued Stage 1 Credit Default considered in Stage 2 Credit Default Mutualisation amounts calculated payment due 12 WD before the commencement of the month commencement of the month 19

Mutualisation calculation If Supplier reaches Stage 2 Credit default then their Supplier Charge will be mutualised amongst non-defaulting suppliers. Mutualisation amount Defaulting Supplier s Capacity Market Supplier Charge Nondefaulting Supplier s Net Demand Total nondefaulting Suppliers Net Demand If the defaulting Supplier pays the mutualised amount then the non defaulting Suppliers who made a mutualisation payment will receive a mutualisation credit at the next reconciliation run. 20

Mutualisation example Defaulting Supplier s Capacity Market Supplier Charge: 6 million Non-defaulting Supplier s Net Demand: 1.8 million MWh Total non-defaulting Suppliers Net Demand: 10.8 million MWh Calculation: 6 million x (1.8 million 10.8 million) = 1 million 21

Mutualisation backing data Amount in Default Defaulted Amount due date Reference Period Supplier Net Demand for Periods of High Demand Reference Period Total Net Demand for Periods of High Demand Reference Period Start Date Reference Period end Date Supplier Mutualisation Amount /BIC/N1_J1893 /BIC/N1_J1941 /BIC/N1_J1996 /BIC/N1_J1999 /BIC/N1_J1993 /BIC/N1_J1992 /BIC/N1_J2008 6000000 20140925 1800000 10800000 20141101 20150228 1000000 6 million x (1.8 million 10.8 million) = 1 million 22

What happens if a Supplier doesn t pay? Ofgem ESC informed Credit Cover may be used Credit Cover Default register Non- Payment Register EMRS chase, issue Non- Payment notice Mutualisation happens in advance of non-payment 23

Timeline Non-Payment of Supplier Charge Timeline: Issue invoiced Payment Due Initiate credit cover draw down 3 WD 3 WD 2 WD 1st WD of the month notice issued If Non-Payment happens there isn t a further Mutualisation charge because: a)if the Supplier isn t in Credit Cover default then there is enough Credit Cover to draw down on to cover the payment. b)if the Supplier is in Credit Cover default then the payment has already been mutualised. 24

Late payment interest summary Interest is applied to late payment amounts for: Settlement Costs Levy Capacity Market Supplier Charge Reconciliation Amounts Charged at 5% per annum over the Bank of England (BoE) base rate - rate for Jan to Jun uses the BOE rate in force on 31 Dec the previous year - rate for Jul to Dec uses the BOE rate in force on 30 Jun that year 25

Questions

Penalty Residual Supplier Amount

Penalty Residual Supplier Amount A method of distributing out to Suppliers any Capacity Provider Penalty Payments which remain (after total amount of Over-Delivery Payments are paid). Applies where: One or more stress events have occurred in the Delivery Year, AND Net penalties have been collected from Capacity Providers, AND The Supplier has paid Supplier Charges in that Delivery Year Penalty Payments Over- Delivery Payments Penalty Residual Supplier Amount 28

Penalty Residual Supplier Amount Penalty Residual Supplier Amount Residual Capacity Provider Penalties Supplier Charge paid by Supplier Total Supplier Charges paid by all This calculation will be performed after the end of the Delivery Year (early November). Credit note issued 26WDs after the end of the Delivery Year. 29

Reconciliation

Reconciliation Payments made after the due date Termination of a Supplier s license Payments made in previous reconciliation runs Mutualisation amounts Adjustments to payable Capacity payments Any revised or additional data Reconciliation Supplier Charge, Mutualisation, Penalty Residual Supplier amounts Disputes

Reconciliation Timeline A run needs to be commenced by: End of relevant month 90 WD 1 st reconciliation run 160 WD 2 nd reconciliation run 295 WD 3 rd reconciliation run Within these timescales, re-determination invoicing and payment activities occur: re-determination payment due re-calculate credit amounts and issue credit notes 2 WD 3 WD 7 WD 2 WD 3 WD issue invoice draw down of existing credit cover payment of credit amount 32

Monthly reconciliation Monthly reconciliation calculates the difference between the Supplier Charge a Supplier has already paid for a month and re-determined Supplier Charge for that month Monthly Reconciliation Payment Re-determined Monthly Supplier Charge Monthly Supplier Charge Re- determination of the Supplier Charge takes into account 33 Transition from forecast to meter data Adjustments to Capacity Provider payments payable Mutualisation credit

Reconciliation meter data Reconciliations runs carried out will all use meter data for the period of high demand Periods of High Demand 1 Nov to 28 Feb Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Delivery Year Reconciliations runs carried out will use a mixture of meter data and forecast data for the period of high demand If SF run data is available for the whole of the month then this will be used in reconciliation calculations. If it is not or it is only partially available then forecast data is used. 34

Monthly reconciliation example Re- determination of Supplier Charge: Actual Monthly Total Capacity Provider Payments for October 2014: 49 million Supplier s Net Demand for 2014/15 Delivery Year (including actual data for Nov & Dec): 1.5 million MWh All Suppliers Net Demand for 2014/15 Delivery Year (including actual data for Nov & Dec): 10.5 million MWh 45 million x (1.5 million 10.5 million) = 7 million October 2014 Supplier Charge amount: 9 million Monthly Reconciliation Payment: 7 million 9 million = - 2 million 35

Monthly reconciliation backing data These columns provide information on payment amount /BIC/N1_J1 923 /BIC/N1_J2 /BIC/N1_J2 /BIC/N1_J2 /BIC/N1_J1 /BIC/N1_J1 /BIC/N1_J1 /BIC/N1_J1 /BIC/N1_J0 /BIC/N1_J0 /BIC/N1_J1 /BIC/N1_J1 /BIC/N1_J0 /BIC/N1_J1 /BIC/N1_ 029 009 031 993 992 901 972 073 146 937 938 074 984 J1985 201410 49000000 1500000 10500000 20141101 20150228 7000000-2000000 201410 49000000 1500000 10500000 20141101 20150228 7000000-2000000 20141103 R1 108.8 132503.9 33 17.7 20437.66 201410 49000000 1500000 10500000 20141101 20150228 7000000-2000000 20141103 R1 108.8 132503.9 34 17.95 21895.16 201410 49000000 1500000 10500000 20141101 20150228 7000000-2000000 20141103 R1 108.8 132503.9 35 18.125 22842.01 201410 49000000 1500000 10500000 20141101 20150228 7000000-2000000 20141103 R1 108.8 132503.9 36 18.25 22788.49 201410 49000000 1500000 10500000 20141101 20150228 7000000-2000000 20141103 R1 108.8 132503.9 37 18.375 22471.21 201410 49000000 1500000 10500000 20141101 20150228 7000000-2000000 20141103 R1 108.8 132503.9 38 18.4 22069.38 Key resource: https://dtc.mrasco.com/listdataflows.aspx 36 These columns provide information on metered volumes

Monthly reconciliation backing data- payment amounts This amount takes account in any reduction in payments payable to Capacity Providers These amounts includes metered data for November and December and forecast data for January or February CM Month Id Total Monthly Capacity Payments Supplier Net Demand for Periods of High Demand Total Net Demand for Periods of High Demand Reference Period Start Date Reference Period end Date Capacity Market Supplier Charge Net Payment /BIC/N1_J1923 /BIC/N1_J2029 /BIC/N1_J2009 /BIC/N1_J2031 /BIC/N1_J1993 /BIC/N1_J1992 /BIC/N1_J1901 /BIC/N1_J1972 201410 49000000 1500000 10500000 20141101 20150228 7000000-2000000 49 million x (1.5 million 10.5 million) = 7 million 7 million October Supplier Charge paid (9 million) = -2 million You will have to look at backing data associated with October Supplier Charge for what the original amounts were 37

Monthly reconciliation backing data- metered data Settlement Date Settlement Code Daily Supplier Net Demand for Periods of High Demand Daily Total Net Demand for Periods of High Demand Settlement Period ID Period Supplier Net Demand for Periods of High Demand Period Total Net Demand for Periods of High Demand /BIC/N1_J0073 /BIC/N1_J0146 /BIC/N1_J1937 /BIC/N1_J1938 /BIC/N1_J0074 /BIC/N1_J1984 /BIC/N1_J1985 20141103 R1 108.8 132503.9 33 17.7 20437.66 20141103 R1 108.8 132503.9 34 17.95 21895.16 20141103 R1 108.8 132503.9 35 18.125 22842.01 One settlement date 20141103 R1 108.8 132503.9 36 18.25 22788.49 20141103 R1 108.8 132503.9 37 18.375 22471.21 20141103 R1 108.8 132503.9 38 18.4 22069.38 Provides net demand detail for a settlement date Provides net demand detail for a settlement period 38

Annual Reconciliation

Annual reconciliation Supplier s Annual Reconciliation Amount Supplier s Redetermined Supplier Charge Total Supplier Charge paid by the Supplier Reconciliation of Supplier s Penalty Residual Amount Three annual reconciliation runs happen for each Delivery Year. This allows for the Penalty Residual Supplier Amount to also be reconciled. It follows the same timeline as monthly reconciliations. 40

Annual reconciliation End of relevant year 90 WD 1 st re-determination 160 WD 2 nd re-determination 295 WD 3 rd re-determination Three annual reconciliation runs happen for each Delivery Year. This allows for the Penalty Residual Supplier Amount to also be reconciled. It follows the same timeline as monthly reconciliations. 41 (Slide inserted for image to be viewable in non-presenting mode)

Reconciliation timeline How Supplier Charge payment for October 16 will be reconciled BSC calendar released, EMR calendar updated and annual reconciliation dates known Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Invoice for supplier charge [3 Oct 16] 1 st Monthly [10 Feb 17 invoice, 28 Feb 17 credit] 2 nd Monthly [24 May 17 invoice, 12 Jun 17 credit] 1 st Annual [~Jan 18] 3 rd Monthly [01 Dec 17 invoice, 19 Dec 17 credit] 2 nd Annual [~May 18] 3 rd Annual [~Nov 18] 42

Reconciliation timeline Once annual reconciliations start then monthly reconciliations stop so not every month of a Delivery Year will have three monthly reconciliations. Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept The 1 st monthly reconciliation will take place for these months The 2 nd monthly reconciliation will take place No 1st monthly reconciliation as annual reconciliations have started No 2nd monthly reconciliation as annual reconciliations have started The 3 rd monthly reconciliation will take place No 3 rd monthly reconciliation as annual reconciliations have started 43

Questions

Summary and further information

Supplier Activities linked to a Delivery Year Demand Forecast Credit Cover Suppliers need to provide a Suppliers are required to lodge demand forecast for the periods valid Credit Cover for each month of high demand by 1 June of a Delivery Year, 12 Working before a Delivery Year. This is Days before the start of a used to calculate Credit Cover month. and Supplier Charge payments. Key Documents Working Practice 5 Delivery Year Guidance Document 12 Supplier Charge Reconciliation Monthly and annual reconciliations take place. Key Documents EMR Settlement Calendar 46 Exception Processes If a Supplier doesn t lodge Credit Cover or make a payment then Credit Cover default, mutualisation and non payment processes may be enacted Key Documents Working Practice 41 Key Documents Working Practice 45 Suppliers are required to make monthly payments to fund Capacity Provider payments for each month. Suppliers are invoiced for these on the 1st Working Day of a month in Delivery Year. Key Documents Guidance Document 2 EMR Settlement Calendar

Further information EMRS website http://emrsettlement.co.uk/ Sign up to our EMR circulars https://emrsettlement.co.uk/publications/emrscirculars-2 Settlement data Key figures for Supplier payments in 2016/17 EMR Settlement Calendar https://emrsettlement.co.uk/publications/settleme nt-data/ ESC https://electricitysettlementscompany.uk All queries contact@emrsettlement.co.uk 020 7380 4333

Next event: 9 November, Introduction to EMR