Monitoring the Settlement performance standards
This is an update on the Performance Assurance Board (PAB)’s approach to managing the Settlement performance standards for Suppliers during these challenging times.
The PAB is aware that the COVID-19 pandemic has resulted in significant difficulties to Suppliers that have impacted your ability to meet the performance standards. However, the committee is concerned that an increase in estimation can result in significant issues for Suppliers and other BSC Parties including:
- Incorrect Settlement volumes and charges;
- Increased Imbalance Charges as Suppliers, where Suppliers are not using the correct volumes to forecast;
- Increased issues with customer billing and complaints; and
- The impact of these problems exacerbating the existing financial challenges to Suppliers and resulting in an increase of failing Suppliers which places a further burden on BSC Parties.
The PAB has also reviewed analysis which indicates that the pandemic has led to changes in consumption resulting in Non Half Hourly estimation becoming more inaccurate. This analysis was provided in the Performance Thresholds Review and is available to read in the documents section of on the latest PAB meeting page.
The committee is concerned about the Settlement impact associated with both increased estimation and increased estimation inaccuracy. In particular, the PAB noted that, whilst it important to recognise that individual portfolios and Settlement performance for each Supplier will vary and therefore impacts vary too, at an industry level:
- There is a tendency for estimation to understate domestic consumption and therefore there is a risk of under allocation of Settlement volumes to those Suppliers;
- Conversely, there is a tendency for estimation to overstate non-domestic consumption and therefore there is a risk of over allocation of Settlement volumes to those Suppliers;
- Our monitoring suggests an overall dominance of under-stated domestic volumes has led to an increase in GSP Group Correction Factors across the board which is shared evenly across all NHH Suppliers (predominately);
- This is likely to result in a double impact to non-domestic Suppliers, the first through the under-allocation in Settlement and the second through the GSP Group Correction Factor application; and
- As we come out of lockdown this effect is likely to reverse as the reads collected are likely to reflect the period of lockdown and not the forward looking consumption. This could lead to a double Settlement impact being experienced by domestic Suppliers. We do not anticipate this impact to be to the same extent however, as it appears that some of the lockdown consumption behaviour, such as greater working from home, may endure after the pandemic.
Therefore, whilst acknowledging the difficult circumstances, the PAB and Elexon will be closely monitoring the Suppliers with the largest volume of non-compliant estimation (the ‘focus Suppliers’). This is because it considers that focus Suppliers are the biggest risk and impact to Settlement.
The threshold for focus Suppliers will be reviewed on a quarterly basis and is currently set at 4,000MWh of estimated energy a month below the standard for Half Hourly Measurement Class C, Half Hourly Sub 100kW and NHH performance. This threshold will next be reviewed in May 2021.
Suppliers with non-compliant energy levels above the threshold at the time of the quarterly reviews will be likely placed in Error and Failure Resolution (EFR) in accordance with BSCP538 EFR so that the issue can be monitored.
However, due to the current level of restrictions and the level of challenge Suppliers are experiencing the approach to EFR will be different and a “light-touch” now compared to that prior to the pandemic:
- Whilst Suppliers will be expected to provide root cause analysis, to set out the actions being taken against the areas of concern and to provide regular progress updates, detailed forecasts of Settlement performance uplifts will not be mandatory; and
- If Suppliers are able to provide performance forecasts to facilitate discussion and set out expectations to Elexon, failure to achieve the performance increases within these will not result in escalation steps being taken at the current time.
To help Suppliers start to establish best practice for Settlement performance that takes account of the challenges COVID-19 has imposed, Elexon will set up and facilitate discussions for small groups of Suppliers. This will help Suppliers to discuss the challenges, share what has worked well for them and consider new strategies together. If you would like to be involved in one of these sessions, please let me know.
If you would like to discuss any of this further, please do get in touch by contacting the Risk team or contact your Operational Support Manager.