BSC Panel 209 15 January 2013 Report Phase P289: Enabling ELEXON - - PowerPoint PPT Presentation

BSC Panel 209

15 January 2013

P289:

Enabling ELEXON to participate

in tendering for the DCC Licensee role via a subsidiary

Dean Riddell 15 January 2013

Report Phase Recommendation: Approve Proposed

208/01

2

• ELEXON cannot bid for the DCC License under the current BSC

drafting, which precludes ELEXON undertaking non- BSC work

• P289 contends that ELEXON participating in the DCC bid process

and, if successful, performing the DCC Licensee role, would have benefits for Parties under the BSC and for the wider industry

P289: Issue

3

• The Panel agreed to raise P289 based on a request from ELEXON

that identified potential benefits against Objective (d), efficiency

• The Panel agreed to an expedited timetable for P289 due to the

interaction with the DCC tender process

• Panel mindful timetable had drawbacks (tight and falling over the

Christmas period) but believed the potential benefit to Parties contended by P289 meant an effort should be made to put P289 through the Modification Process in a useful timeframe

P289: Raising the Modification

4

• Enable ELEXON to establish a subsidiary to bid for the DCC role
• Introduce into the BSC arrangements for funding a DCC Licensee

bid, with bid costs specified and capped

• Prohibit cross-subsidy between ELEXON and the DCC subsidiary
• Introduce explicit BSC obligation to ensure that ELEXON maintains

BSC services and has sufficient resources (including personnel) to discharge its BSC responsibilities

• Does not include SEC, initial chairman appointed by BSCCo Board

P289: Solution

5

• Solution changes from Modification (reflected in draft legal text)
• Replaced references to ‘Smart Co’ with ‘DCCCo’ to reflect that scope is

now limited to DCC Licensee role only

• Removed ability of BSCCo to grant security, etc. to DCCCo
• Inserted obligation on BSCCo to procure DCCCo’s contractual

agreement to a dividend policy and shared costs allocation - latter point is how BSC Costs would be defrayed

• Reduction in loan repayment term to a maximum of five years

P289: Development of Solution

6

• Costs:
• Minimal costs associated with Code changes
• Estimated costs for DCC bid range from £50,000 up to £600,000

depending on how far ELEXON gets in the bid process

• Bid costs capped at £300,000 (internal) and £300,000 (external)
• Bid costs repaid to Parties if DCC bid successful
• No impacts on Parties besides funding requirement
• No impact on National Grid as either Transmission Company or

BSCCo Shareholder

• National Grid believe a Transmission License change would be needed

P289: Impacts and costs

7

Relevant Objectives is (d) - no impact on other Objectives

• Majority view - better facilitates (d):
• Potential benefits (efficiency savings, reducing Party costs by
• ffsetting BSC costs) outweigh definite DCC bid costs
• BSCCo participation in DCC bid adds competitive pressure
• Minority view - does not better facilitate (d):
• No benefit of ELEXON participating in DCC bid process
• Mandates Parties funding non-BSC activities
• Funding lost if bid unsuccessful
• Risk to delivery of BSC services - contract model gives more protection
• Contended benefits depend on DCC bid success, therefore uncertain
• Counter to P289 Workgroup majority views and recommendation

P289: Panel’s initial views on Applicable Objectives

8

Implementation Date

• Unanimous Panel support for Workgroup’s proposed

Implementation Dates:

• 1 Working Day after approval

Legal drafting

• Majority Panel agreement with drafting for Report consultation

P289: Panel’s initial views

9

• Majority (10 of 17) support for Implementation Date
• Significant minority did not agree:
• 4 respondents believed that documentation relating to the DCC (e.g.

articles of association, Shareholder agreement, dividend policy) is needed before P289 could be implemented

• 1 felt the timescale was too brief given P289 is substantial, and felt as

a principle of good governance the lead time should be 5 - 10 days

• 1 disagreed with solution and 1 believed period of assessment

insufficient - neither factor relevant to P289 implementation if approved

P289: Report Phase Responses

Agree? Yes No Implementation Date 10 7

10

• Majority (7 of 17, with 4 respondents having no confirmed view) did

not believe the legal text would deliver P289

• The seven respondents that disagreed had substantial

comments/queries on the proposed provisions

• Six respondents agreed with the legal text
• One had some queries and suggested changes to improve the text
• One noted that while the legal text adequately represented the solution,

they did not believe P289 had been sufficiently developed

P289: Report Phase Responses

Agree? Yes No Legal Text 6 7

11

• Large majority (12 of 17) disagreed with initial recommendation by

Panel to approve P289, and believed it should be rejected

• Most arguments same as Panel’s, though some respondents (both for

and against P289) put arguments against Objectives other than (d)

• Of the 12 that disagreed, six were concerned primarily with the process

followed for P289 (where arguments against the Objectives have not been identified it is implicit that respondents believe no benefit has been adequately demonstrated)

P289: Report Phase Responses

Agree Yes No Should P289 be approved? 5 12

12

• Arguments put forward that differ from the Panel’s are that:
• DCC licence damages/liabilities unclear/uncertain and (with potential

service degradation and non-BSC costs) detrimental to Objective (c)

• Mandatory funding of non-BSC related activities likely to have

detrimental impact on effective competition (Objective (c)) as funding is additional cost consideration for smaller prospective market entrants

• potential disincentive to market participation

P289: Report Phase Responses

13

7th December:

• Usual email to the Panel sending out agenda and papers
• Panel secretary noted to the Panel that a late paper would be issued

11th December:

• Potential Workgroup calling and draft Mod issued to P284 Group

around 3pm

12th December:

• Paper to request Panel raise a modification issued as late paper to

Panel

P289 – Process followed so far

14

13th December:

• Panel meeting
• Panel agree to raise Modification (with some changes, notably removal
• f SEC Administrator from scope)
• Panel agree expedited timetable (though longer than expedited

timetable requested)

• Confirmed to P284 Workgroup that P289 raised and meeting would

take place

14th December:

• Industry notified Panel raised Modification (around 1pm)
• P289 Workgroup issued Modification and legal text (around 1pm)

17th December:

• P289 Workgroup meeting (approximately 10am – 2pm)

P289 – Process followed so far

15

18th December:

• Around 1pm (following ISG) Adam L spoke to Lisa to capture final

views for report - Discussed DCCCo Board and BSCCo Board

• Adam believed outcome was group had discussed and not progressed
• Lisa believed outcome was she had raised an alternative solution
• Around 5pm Cem (a workgroup member) emailed potential alternative

to seek Workgroup views on and note to the Panel

19th December:

• Draft Assessment Report issued to Workgroup for review around 11am
• Potential Alternative solution issued to Workgroup around 2pm
• Papers issued to Panel around 3pm

P289 – Process followed so far

16

20th December:

• Around 9.30am Lisa clarifies a possible alternative where the BSCCo

Board would be the DCCCo Board

• Panel meeting
• Panel agree to send Modification to Report Phase
• Panel agree initial recommendation to approve Proposed Modification

21st December:

• Report Phase Consultation issued

14th January:

• Report Phase Consultation closed

P289 – Process followed so far

17

Raising P289

• In usual email to the Panel sending out the agenda and papers for that

meeting, the Panel secretary noted that a late paper (a request from ELEXON to the BSC Panel to raise a Modification Proposal) would be issued

• This paper was subsequently sent on Tuesday 11th December
• This is consistent with the process for issuing later papers that we have

followed in the last ten years and in line with BSC Section B 4.1.5

P289 – BSC Process

18

Section B 4.1.5 - Any meeting of the Panel shall be convened by the Panel Secretary by notice to each Panel Member: (a) setting out the date, time and place of the meeting and (unless the Panel has otherwise decided) given at least 5 days before the date of the meeting, and (b) accompanied by an agenda of the matters for consideration at the meeting and any supporting papers available to the Panel Secretary at the time the notice is given (and the Panel Secretary shall circulate to Panel Members any late papers as and when they are received by him).

P289 – BSC Process

19

Raising P289

• The Panel debated the paper and noted that ELEXON had requested

they raise a Modification Proposal as they believed such a change was beneficial under objective (d) - this is in line with BSC Section F: Section F 2.1.1 (d) (i) which states that the Panel may raise a Modification “on the recommendation of BSCCo in accordance with Section C3.8.8”. Section C3.8.8 states that “…BSCCo shall keep under review whether any possible modification of the Code from time to time would better facilitate the objective in Condition C3(3)(d) of the Transmission Licence, and shall recommend to the Panel any particular such modification which in BSCCo’s

• pinion would do so.”.

P289 – BSC Process

20

Raising P289 The Transmission Licence Condition C3(3)(d) references Applicable Objective (d), which is “promoting efficiency in the implementation and administration of the balancing and settlement arrangements.” In short, BSCCo may request the Panel raise a Modification where BSCCo believe that it better facilitates Applicable Objective (d).

• At the meeting the Panel agreed to raise the Modification, and the

necessary communication was issued on Friday 14th December informing the wider industry that a new Modification had been raised

P289 – BSC Process

21

Timetable

• At the same meeting, the Panel (in line with Section F 2.2.3 (b) (ii))

agreed to send the Modification into the Assessment Procedure

• In line with Section F 2.2. 3 (c) (ii) the Panel also agreed a timetable for

the assessment of P289 - when setting this timetable the Panel did so in line with Section F 2.2.8: 2.2.8 - In setting the timetable referred to in paragraph 2.2.3(c)(ii), the Panel shall exercise its discretion such that, in respect of each Modification Proposal, a Modification Report may be submitted to the Authority as soon after the Modification Proposal is made as is consistent with the proper definition and/or assessment and evaluation of such Modification Proposal, taking due account of its complexity, importance and urgency.

P289 – BSC Process

22

Timetable

• The Authority may veto the timetable; they did not do so.

P289 – BSC Process

23

Assessment

• The BSC defines the Assessment Procedure in Section F 2.6.2 as:

The purpose of the Assessment Procedure is to evaluate whether the Proposed Modification identified in a Modification Proposal better facilitates achievement of the Applicable BSC Objective(s) and whether any alternative modification would, as compared with the Proposed Modification, better facilitate achievement of the Applicable BSC Objective(s) in relation to the issue or defect identified in the Modification Proposal.

P289 – BSC Process

24

• To help deliver the Assessment Procedure F 2.6.3 establishes a

Workgroup.

• Section F 2.6.4 states that:

The Workgroup shall: (a) evaluate the Modification Proposal for the purpose set out in paragraph 2.6.2; (b) where appropriate, develop an alternative proposed modification (the "Alternative Modification") which, as compared with the Proposed Modification, would better facilitate achievement of the Applicable BSC Objective(s); and (c) prepare a report for the Panel (in accordance with the timetable determined by the Panel pursuant to paragraph 2.2 or 2.5.9(b)) which shall set out, in relation to the Proposed Modification and any Alternative Modification, the matters referred to in Annex F-1, to the extent applicable to the proposal in question.

P289 – BSC Process

25

• Not ideal, but group asked within Assessment whether they had any
• ther matters for consideration - nothing raised at meeting
• Suggestion raised by Cem after meeting - one member: should consider,
• ne member: unsure how it would work but should consider options
• Other suggestion re DCCCo board make up - from its discussions, the

Workgroup had considered this could not be done under the DCC requirements (Lisa may not have been present for this discussion)

• With additional time, Workgroup might create Alternative solution it

considers better than Proposed and develop it so fit for implementation, but in agreed expedited timetable, Workgroup was only able to consider whether any clear Alternatives and note suggestions it unable to pursue

• Note also that Workgroup developed Proposed solution

P289 – BSC Process

26

National Grid assessment

• The BSC requires that National Grid is asked to assess Modifications
• National Grid was represented in P289 Assessment and concerns were

noted - Workgroup and ELEXON asked for its advice re Transmission Licence

• Indicated that National Grid’s views would be confirmed as part of the

Report Phase consultation, so no National Grid assessment formally sought during Assessment

• Report Phase Consultation issued to grid along with industry, results

included in report

P289 – BSC Process

27

• ELEXON recommends the Panel confirm its initial recommendation

to approve P289, acknowledging majority disagreement of respondents and the Panel must be satisfied on some key points

• A significant majority of respondents disagree with the initial

recommendation, but no substantial new arguments were identified

• Six respondents disagree primarily due to the process followed –

while the timescales have been short ELEXON believes assessment

• f P289 was adequate and in accordance with the BSC
• The five respondents that support P289 cover a range of participant

types (large Parties, smaller Party, Distributor, Party agent)

P289: Rationale for recommendation to approve (1 of 2)

28

However, the Panel must consider

• That responses indicate the majority of participants are against

P289 either based on the impact on the Objectives or because they believe the process followed has been inadequate

• Whether it is satisfied the P289 solution, and the legal text to

implement that solution, is satisfactory

• That National Grid believes P289 would impact the Transmission

Licence - ELEXON does not; if there is an impact P289 is probably rendered futile due to the timescales for a Licence change - Ofgem would ultimately determine whether a Licence change is required

P289: Rationale for recommendation to approve (2 of 2)

29

To help us clearly record Panel Members’ views we request that

• Panel Members that gave initial views on P289
• Confirm their final views
• Indicate any changes to their views, including any further or changed

arguments against the Applicable BSC Objectives

• Panel Members that did not give initial views on P289
• Confirm what Objectives they believe are relevant to P289
• Confirm what their views are against these Objectives and which

arguments they support

P289: Final Panel views

30

• NOTE Draft Modification Report
• CONFIRM view Proposed Modification better than baseline on Applicable

BSC Objective (d)

• CONFIRM recommendation to approve P289
• APPROVE Implementation Date:
• 1 Working Day after approval
• APPROVE BSC legal text, subject to any agreed amendments
• APPROVE Modification Report

P289: Recommendations

209/02

P290 ‘Enabling ELEXON to participate in roles in support of the Smart Energy Code (SEC) Panel’

David Kemp 15 January 2013

Enabling ELEXON to participate in roles in support of the Smart Energy Code (SEC) Panel.

P290

33 The Issue

• SEC Administrator role removed from P289 scope (BSC Panel meeting 13

December 2012).

• We believe there are benefits to Elexon providing either DCC or SEC Admin
• role. Due to time constraints the modification needs to be raised now.
• The current BSC drafting means effectively that ELEXON Ltd may not

participate in the tender process for any roles that support the SEC Panel.

• This prevents ELEXON from offering the service and leveraging its skills

and expertise for the wider benefit of the industry.

• ELEXON’s exclusion from the award process would be detrimental to SEC

Parties (which include all domestic suppliers and Distributors) by precluding the evaluation of a credible delivery model and precludes the possible saving for BSC Parties through defrayed costs.

34 The Proposed Solution

Key features of this proposal:

• The BSC shall be amended to allow ELEXON to pursue and undertake
• pportunities that support the SEC Panel.

The following features are shared with P289:

• If ELEXON is awarded any roles in support of the SEC Panel, ELEXON will

use revenues from delivering such new services to offset ELEXON costs for the benefit of BSC Parties; and

• If ELEXON is awarded any roles in support of the SEC Panel, such

activities will make a fair and reasonable contribution for use of any common or shared infrastructure and such contributions will be used to

• ffset existing BSCCo costs for the benefit of BSC Parties.
• Expedited, not urgent (DECC are likely to commence an award process by

the end of January 2013 but there are no definitive dates).

Justification

• There are similarities between the roles and responsibilities required to

support the SEC and those already provided by ELEXON as the BSC Code Administrator  enables ELEXON to leverage its skills and services in delivering the SEC and utilise the shared infrastructure and experience, should it be appointed.

• ELEXON’s participation in the award process will enhance any competition,

leading to depressed tender prices and improved the offers of competing bidders (benefiting Government, electricity and gas suppliers and the consumer).

• BSC Objective (d) ‘promoting efficiency in the implementation and

administration of the balancing and settlement arrangements’ in its wider sense is met.

• Not unprecedented: Ofgem are consulting separately on the potential for

another existing central body to participate in smart opportunities, including roles in support of the SEC Panel.

35

36

• Amend the BSC to enable ELEXON to undertake roles that support

the SEC Panel

• In particular for the SEC Administrator and SEC Secretariat roles

P290: Modification Proposal

37

• Recommend progress to an Assessment Procedure
• Workgroup membership should include:
• P284 & P289 Workgroup members
• GSMG members
• Other relevant experts & interested parties
• Recommend an expedited timetable

P290: Proposed Progression

38

• Would there be benefit in ELEXON participating in the SEC bid

process?

• If successful, would there be benefit in ELEXON undertaking the

SEC role?

• Does the Modification meet the four Ofgem expansion criteria? In

particular:

• Do you understand the monies at risk?
• Are the funding arrangements appropriate?

P290: Terms of Reference (1 of 2)

39

• What changes are needed to BSC documents, systems and

processes to support P290 and what are the related costs and lead times?

• Are there any Alternative Modifications?
• Does P290 better facilitate the Applicable BSC Objectives than the

current baseline?

P290: Terms of Reference (2 of 2)

40

• SEC Administrator and Secretariat roles intended to be in place in

time for SEC to Go-Live in July

• Full timetable for award process not yet announced, but likely to

begin by end of January

• Expedited timetable recommended to allow a decision from Ofgem

by end of February

• ‘Normal’ timetable wouldn’t allow a decision until April
• Ofgem recently consulted on allowing another central body to

participate in smart roles

P290: Timetable (1 of 3)

41

Expedited Timetable P290: Timetable (2 of 3)

Event Date Present IWA to Panel (ad-hoc meeting) 15 Jan 13 Workgroup Meeting 16 Jan 13 Present Assessment Report to Panel (ad-hoc meeting) 22 Jan 13 Report Phase Consultation 23 Jan 13 – 08 Feb 13 Present Draft Modification Report to Panel 14 Feb 13 Issue Final Modification Report to Ofgem 15 Feb 13

42

‘Normal’ Timetable P290: Timetable (3 of 3)

Event Date Present IWA to Panel (ad-hoc meeting) 15 Jan 13 Workgroup Meeting 16 Jan 13 Assessment Procedure Consultation 25 Jan 13 – 15 Feb 13 Workgroup Meeting W/B 18 Feb 13 Present Assessment Report to Panel 14 Mar 13 Report Phase Consultation 15 Mar 13 – 05 Apr 13 Present Draft Modification Report to Panel 11 Apr 13 Issue Final Modification Report to Ofgem 12 Apr 13

43

• Panel invited to agree P290 should undergo an Assessment

Procedure

• Agree Workgroup’s membership and Terms of Reference
• Panel invited to agree progression timetable
• Recommend P290 progressed with the expedited timetable

P290: Panel’s Considerations

44

The Panel is invited to:

• DETERMINE that Modification Proposal P290 progresses to the

Assessment Procedure;

• AGREE the expedited Assessment Procedure timetable such that

an Assessment Report should be completed and submitted to the Panel at an ad-hoc meeting on 22 January 2013;

• DETERMINE that the P290 Workgroup should be formed from

members of the P284 & P289 Workgroups and the Governance Standing Modification Group and any other interested parties; and

• AGREE the Workgroup’s Terms of Reference.

P290: Recommendations

Any Other Business