What are the Credit rules under the BSC?
Under the BSC arrangements, payments to and from Trading Parties in respect of Trading Charges arising on any particular Settlement Day are made, on average, twenty-nine calendar days later. Thus, at any given time, Trading Parties may have debts (or be due payments) in respect of Trading Charges incurred, on average, over the previous twenty-nine days.
The purpose of Credit Cover is to ensure that, should a Trading Party default, sufficient collateral is available to pay these debts.
The BSC does not stipulate the amount of Credit Cover that Trading Parties must provide. Instead Trading Parties decide on the level of Credit Cover that they wish to provide, and credit checking is intended to ensure that a Trading Party cannot accumulate a debt over the twenty-nine day period that exceeds the amount of Credit Cover provided.
If a Party does not have sufficient funds it will enter into Credit Default.
What is Credit Default?
Each BSC Party is required to lodge collateral with ELEXON to ensure that there are sufficient funds available to cover that Party’s Trading Charges should the Party become unable to pay. If a Party does not have sufficient funds it will enter into Credit Default.
When does a Credit Default occur?
The Credit Default processes are triggered when a Party’s Credit Cover Percentage (CCP) exceeds a number of thresholds. The Level 1 Credit Default process is triggered when the CCP exceeds 80% and the Level 2 Credit Default process is triggered when the CCP exceeds 90%.
What are the consequences of Credit Default?
If a Party enters Credit Default a notice will be published by the Energy Contract Volume Aggregation Agent (ECVAA) on the Balancing Mechanism Reporting Service (BMRS). The Party’s trades may also be rejected by the ECVAA system.
If a Party fails to resolve a Credit Default situation the Party will potentially be in default of the Balancing and Settlement Code. If this occurs, a meeting of the BSC Panel will be convened for decision on the next steps regarding the Party’s status under the BSC.
What is Material Doubt?
If a BSC Party believes that its Credit Cover Percentage is not accurate, then the Party can submit evidence to ELEXON to be considered for Material Doubt. More information on the circumstances under which a Party can claim material doubt can be found in the Material Doubt Guidance Document.
Where the evidence is considered valid, ELEXON will manage the difference between the Credit Cover Percentage calculated by the central systems and the estimated correct percentage.
We need your help!
The credit checking process occurs 24 hours a day and if a Credit Default occurs it has to be progressed regardless of whether ELEXON has been able to speak directly to the relevant Party.
Please help us to ensure that we have up to date contacts for your Party so that if a Credit Default occurs you can be contacted immediately both during working and non-working hours. Click here to update Credit Default contact details.
If a Party raises a Dispute regarding a Level 1 or Level 2 Credit Default statement and this Dispute is upheld, details will be published on this page.
Credit Assessment Price (CAP)
The Credit Assessment Price (CAP) is a parameter set by the BSC Panel and subject to periodic review. The CAP is a notional value of 1 MWh of energy that is used in determining a Party’s Energy Indebtedness and amount of Energy Credit Cover and hence adequacy of Credit Cover. CAP Values can be found on the ELEXON Portal.
The Credit Committee is responsible for all matters under the BSC that relate to the CAP including determining the value.
A trigger level system is used to determine when reviews of CAP shall be held. For more information on this process please see the CAP Review Guidance Document.