Interconnectors exempted from Funding Share BSC Charges
Given the approval of BSC Modification P396 by Ofgem in March 2020, from 1 December all BSC Trading Parties that are not Interconnectors will have to pay the BSC Funding Share costs that were previously attributed to Interconnectors.
In line with Modification P396 ‘Revised treatment of BSC Charges for Lead Parties of Interconnector BM Units’, the reallocation of these costs will be backdated to the start of the current BSC Year (1 April 2020). P396 was proposed by Nordpool, which runs a European power exchange and is also a BSC Party, in October 2017.
Recommended rejection of P396 by BSC Panel
The BSC Panel recommended that Ofgem reject P396, as it believed that the change would put GB generators at a disadvantage compared with their European counterparts. However, in March 2020 Ofgem set out in its decision letter that BSC costs can be considered as network access costs and should no longer be charged to Interconnectors. Ofgem stated that this treatment is in line with European regulations (the Electricity Regulation and Commission Regulation (EU) No 838/2010).
Elexon’s costs for managing the BSC are recovered via BSC charges on a not-for-profit basis. The amount paid by BSC Parties depends on the role they play in the market, and the volume of electricity they generate, supply or trade. These amounts are the Funding Shares. Other charges (Specified Charges) are set on a fixed tariff basis. The BSC Costs are separate from Imbalance Charges, payable as part of the Settlement process.
Elexon has kept the industry informed of the progress of P396 through our regular bulletins and other communications.
We estimate that the change will result in around £400,000 of Funding Share costs each month that would previously have been paid by Interconnectors, now being paid by BSC Parties that do not own Interconnectors.
Back-dating the reallocation of costs to April 2020 will result in a larger initial adjustment of around £3.5 million in the December 2020 invoices to be paid by non-Interconnector BSC Parties.
Which Parties are impacted by the decision?
The decision means that bills to recover the Funding Share BSC Costs will increase for:
- Non-Physical Traders
P396 was implemented on 5 November 2020 therefore, BSC Funding Share cost invoices issued on 1 December will be the first to reflect the P396 changes. Invoices from January 2021 onwards will only cover the relevant month. In line with BSC requirements, all invoices need to be paid within 12 business days of receipt.