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Performance Assurance Framework (PAF) Techniques Guiding Principles

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Performance Assurance Framework (PAF) Techniques Guiding Principles

Guidance Note

This document contains the guiding principles for PAF techniques and how they are applied by the Performance Assurance Board (PAB)

Breach and Default

This technique takes into account which Settlement Risks a Performance Assurance Party (PAP) is failing against and the impact of this failure on the rest of the industry.

Guiding principles

    • An incentive technique;

    • The application of the technique is ‘non-standard’;

    • The breach provisions are in Section H of the BSC;

    • It can be applied to BSC Parties (Suppliers and Licensed Distribution System Operators (LDSOs));

    • The Panel may apply default where the Authority advises they have a regulatory concern that a Party may have breached their obligations and this breach is identifiable against one or more Settlement Risks;

    • It’s only switched on if non-compliance is either persistent or quantifiably material across a wide range of Settlement Risks; and

    • It’s switched on after Error and Failure Resolution (EFR) is applied, if applying EFR didn’t address the area of concern.

BSC Audit

The scope of the BSC Audit is set by the Panel and can change each year, taking into account factors such as: the findings of the previous year’s audit; changes to the BSC; and issues identified by other detective techniques.

Guiding principles:

    • A detective technique;

    • The application of the technique is ‘standard’;

    • It’s applied to:

      • Central Volume Allocation (CVA) and Supply Volume allocation (SVA) PAPs, Elexon, and BSC Agents;

      • CVA and SVA Settlement Risks and controls; and

      • PAPs according to the BSC Auditor’s rotational approach (see below and the BSC Auditor’s approach document for more information).

The technique can be partnered/supported by other detective techniques e.g. Technical Assurance checks (the results of which are passed to the auditor) and Technical Assurance of Metering. The BSC Audit is the main feed into the EFR process (a remedial technique).

Audit work is performed to the extent required to provide reasonable assurance that the calculations and allocations performed in relation to Settlement have been carried out in accordance with the relevant provisions of the Code. In designing and delivering the audit, the auditor takes account of the risk posed by Participants and the functions they perform. Although the technique is applied to all PAPs, the extent of the application of audit procedures will vary. A risk assessment to identify those audited entities (Party Agents only) that represent a higher risk to Settlement and those that represent a lower risk is performed and the amount of audit work is flexed accordingly. Audited entities will be categorised as a high, medium or low risk. In all cases any old or outstanding audit issues will be followed up. In performing the risk assessment the auditor considers the following factors:

    • Size of audited entity (in terms of Meter System Identifier (MSID) numbers, volume of energy);

    • Complexity of systems and processes;

    • Role type (i.e. Non Half Hourly Data Collector (NHHDC) or Non Half Hourly Data Aggregator (NHHDA));

    • Control environment of the audited entity and number of known audit issues (identified by the application of accumulated knowledge and experience);

    • Level of manual processing as opposed to automated; and

    • Performance in the market and information received from other PAF techniques.

Some audited entities may not be subject to a physical site visit, although they may be asked to submit data. Whether a Participant will receive a visit is considered annually as part of the risk assessment. As a guideline, it is likely that a site visit will be required if one or more of the following criteria are met:

    • MSID count over 500 (HH) or 50,000 (NHH);

    • The role is perceived as higher risk (e.g. NHHDC); and/or

    • Performance issues have been detected by other Performance Assurance Techniques (PATs).

If it is anticipated that a Supplier or Agent will receive an audit visit for the first time in the next period, an education visit will be arranged in advance. The intensity of audit procedures performed on the site visit will vary as rotation is applied, for example medium and low risk audited entities will receive full1, medium2 or limited3 visits within a four year cycle with all receiving full visits at least once in the cycle. Suppliers and CVA systems are not subject to rotation.

Bulk Change of Agent (BCoA)

Suppliers only are obliged to inform the PAB when they plan to transfer more than 20,000 Metering Systems per Supplier Meter Registration Service (SMRS) per day. Applications to carry out this Bulk Change of Agent (BCoA) activity are submitted under the BSCP513 process.

Guiding principles:

    • A preventative technique;

    • The application of this technique is ‘non-standard’;

    • It mitigates various NHH Settlement Risks;

    • It’s applicable to Suppliers (they’re responsible for managing the process) but also covers risks around moving Meter Technical Details (MTDs) and Meter reading history between Supplier Agents; and

    • It’s only applied if the criteria for BCoA are met (BSCP513).

Change Mechanism

The PAB can ask Elexon to raise a Change Proposal (CP) to address Settlement Risk areas, or to make a recommendation to the Panel to raise a Modification Proposal. BSC Parties can also raise changes to the BSC and Code Subsidiary Documents (CSDs).

Guiding principles:

    • A remedial technique;

    • The application of this technique is ‘standard’;

    • It can affect all industry (based on the nature of the change);

    • It’s initiated by the PAB, or independently by a Party at any time;

    • It’s used alongside other PAF techniques, but operates within its own framework; and

It’s used if non-compliances are found to be as a result of unclear/unreasonable obligations (evidenced in the change process itself)

Education

We provide education at an industry level for market-wide issues. Education includes seminars, workshops and guidance notes, and is distinct from guidance provided to individual PAPs as part of the EFR process.

Guiding principles:

    • A preventative technique;

    • The application of this technique is ‘standard’;

    • Deployed as directed by the PAB;

    • Education can be applied to any type of PAP;

    • Ideally covers all PAPs, but can’t be enforced as such;

    • Education is provided subject to an agreed understanding of the particular query that has given rise to the support request;

    • Education is not intended to mitigate the entire risk of any possible failure or error in a step or process required under the Code;

    • Information provided by Elexon in connection with the implementation of the BSC shall be set out in plain English wherever possible; and

    • Should a Trading Dispute be raised following information being provided by Elexon, the Trading Disputes Committee will determine whether a Settlement Error has occurred on a case by case basis.

Error and Failure Resolution (EFR)

Error and Failure Resolution (EFR) can be applied against all Settlement Risks where an associated issue has been identified.

Guiding principles:

    • A remedial technique;

    • The application of this technique is ‘non-standard’;

    • EFR is used to assist PAPs to understand and rectify performance issues and non-compliances;

    • It’s applicable to any type of PAP;

    • When applying EFR against a Settlement Risk, we take into account the net significance of the risk and the PAP’s contribution to the issue identified; and

    • The PAB can define specific escalation criteria for specific Settlement Risks or net significance values.

Material Error Monitoring (MEM)

This technique is applied to the higher net significance Settlement Risks associated with Settlement-wide error that has a quantifiable impact on Trading Parties.

Material Error Monitoring (MEM) is applied to the Settlement Risk areas:

    • Erroneously Large Estimated Annual consumption (EACs) and Annual Advances (AAs);

    • Erroneous Values of Unmetered Supplies (UMS); and

    • Incorrect Energisation Status.

Guiding principles:

    • A detective technique;

    • The application of the technique is ‘standard’;

    • Issues covered under MEM are agreed by the PAB. The PAB’s decision to include a new issue under MEM takes into account the net significance of the Settlement Risk, evidence of materiality identified by other detective techniques, and the cost of putting in place systems to carry out monitoring;

    • MEM may be applied in conjunction with EFR if monitoring indicates that a PAP’s contribution to the issue is over their threshold;

    • It can also result in using the education technique so the PAP has a better understanding of the issue; and

The PAB can agree to stop monitoring an issue, taking into account the measured materiality of the issue and the net significance of the Settlement Risks related to the error that is being monitored.

Peer Comparison

This technique can be applied to Settlement Risks that are measured by Performance Assurance Reporting and Monitoring System (PARMS) Serials. The suite of PARMS Serials is defined in BSCP533, although peer comparison isn’t currently carried out on all of these. You can find out which ones are in scope of Peer Comparison from the BSC Website.

Guiding principles:

    • An incentive technique;

    • It provides a mechanism for publishing performance at key control points in Settlement among PAP’s peer groups;

    • The application of the technique is ‘standard’;

    • The PAB can, at its discretion, select which PARMS Serials it publishes as public peer comparison and the frequency at which reports are circulated;

    • It can be applied to Suppliers and on the serials defined in BSCP533; and

    • Amending the scope of the peer comparison technique depends on:

      • Settlement Risks identified as of particular regulatory concern and covered by an applicable PARMS Serial; and

      • Persistent or quantifiably material under performance.

Performance Assurance Reporting and Monitoring (PARMS)

This technique is applied to Settlement Risks that can be measured by a PARMS Serial.

Guiding principles:

    • A detective technique;

    • The application of the technique is ‘mandatory’;

    • It provides a mechanism for collecting and reporting data to identify performance at key control points in Settlement;

    • It’s applied to all PAPs monthly for all Settlement processes (and therefore risk areas) defined in the BSC and BSCP533 (the PARMS Serials and standards); and

Performance issues identified under Performance Assurance Reporting and Monitoring could trigger EFR, Education or Technical Assurance of PAPs (e.g. a drill down check).

Qualification

New PAPs entering the market need to complete Qualification under the BSCP537 process. Qualification is applied against Settlement Risks relating to the requirements in the Self Assessment Document completed by new entrants (BSCP537, Appendix 1).

Guiding principles:

    • A preventative technique;

    • The application of this technique is ‘non-standard’;

    • It’s initiated by a Qualification application;

    • It’s applied to all types of PAP including Licensed Distribution System Operators (LDSOs) when acting in their capacity as a Supplier Meter Registration Agent (SMRA) and Unmetered Supplies Operator(UMSO); and

    • The technique can be partnered by a detective technique (e.g. Post-Qualification Technical Assurance check) at the direction of the PAB.

Re-Qualification

PAPs (other than Suppliers) need to re-Qualify under the BSCP537 process when they make material changes to how they operate their service. Re-Qualification is applied against the Settlement Risks relating to applicable requirements in the Self Assessment Document (BSCP537, Appendix 1).

Guiding principles:

    • A preventative technique;

    • The application of this technique is ‘non-standard’;

    • It’s applicable to all PAPs with the exception of Suppliers;

    • It’s normally initiated by the PAP based on a risk and impact assessment of the change it wishes to make;

    • The PAB can also enforce a re-Qualification under the provisions of Section J 3.5.4 of the BSC; and

The technique can be partnered by a detective technique (e.g. Post-Qualification Technical Assurance check).

Removal of Qualification

This technique takes into account any Settlement Risks a PAP is failing against, and the impact of the failure(s) on the rest of the industry.

Guiding principles:

    • An incentive technique;

    • The application of this technique is ‘non-standard’;

    • The technique can be applied to all PAPs that are ‘Qualified Persons’, but not Suppliers (Suppliers would go through the default technique);

    • It’s switched on when non-compliance is either persistent or quantifiably material across a wide range of Settlement Risks; and

    • Removal of Qualification process should be followed only after a Qualified Person has failed to rectify the non-compliance through the Error and Failure Resolution process.

Supplier Charges

This technique is applied to Settlement Risks that are measured by certain PARMS Serials (SP014, SP025, SP046 and SP087).

Guiding principles:

    • A remedial technique;

    • The application of this technique is ‘mandatory’;

    • It’s only applied to Suppliers; and

It’s a mechanism for applying liquidated damages to Suppliers failing to meet certain performance levels.

Technical Assurance of Metering (TAM)

This technique is applied to Half Hourly (HH) Settlement Risks relating to HH Metering Systems.

Guiding principles:

    • A detective technique;

    • The application of this technique is a combination of ‘standard’, ‘non-standard’ and ‘mandatory’;

    • The technique is applied to CVA and SVA HH Registrants, CVA MOAs, SVA HH Data Collectors (DCs) and the Central Data Collection Agent (CDCA). The technique does also check the activity of SVA Retail Energy Code Metering Equipment Managers (REC MEMs), but only to be able to check the end to end Commissioning process. The results of REC MEM audits are passed to the REC for any follow up action;

    • The technique is applied to:

      • CVA Registrants (including LDSOs where they are the Registrant), CVA MOAs and the CDCA as a mandatory technique for all relevant CVA Settlement Risks and non-standard for targeted visits; and

      • SVA HH Suppliers, HHDCs (and LDSOs where they are an asset owner) and HH REC MEMs as a standard technique for the main sample, and as a non-standard technique for the specific sample and targeted visits.

    • The PAB defines the scope of the audits in the main sample (i.e. the technique can be switched off for particular Settlement Risks/PAPs) and the scope of the specific sample and targeted visits (i.e. the technique would be switched on for particular Settlement Risks/Participants) according to specific areas/Settlement Risks/types of Metering Equipment.

Technical Assurance of Performance Assurance Parties (TAPAP)

This technique provides additional assurance in conjunction with a detective technique.

Guiding principles:

    • A detective technique;

    • The application of the technique is ‘non-standard’;

    • Applied to SVA Settlement Risks where other techniques indicate there is a problem, or do not provide enough detective assurance;

    • Performance issues identified could trigger EFR; and

    • It can be applied to any PAP.

Trading Disputes

This technique can be deployed when a detective technique identifies a market-wide issue (e.g. incorrect energisation status). The PAB can instruct Elexon to investigate an issue before agreeing to deploy the Trading Disputes process.

Delivering and managing the Trading Disputes processes and obligations are the responsibility of the Trading Disputes Committee (TDC). BSC Parties can raise Trading Disputes under Section W of the BSC and BSCP11.

Guiding principles:

    • A remedial technique;

    • The application of the technique is ‘standard’;

    • It provides a mechanism for correcting Settlement errors and the subsequent impacts on Trading Charges;

    • It can only be applied to BSC Parties;

    • The Trading Dispute technique can be applied to any Settlement Risks identified of a particular concern at a market issue level (e.g. following the BSC Audit);

    • It’s only switched on when non-compliance is either persistent or quantifiably material and so is partnered with a detective technique such as MEM, TAM or the BSC Audit; and

    • It can be combined with the EFR and Education techniques.

Need more information?

For more information please contact the BSC Service Desk or call 0370 010 6950.

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1 Full visit - all aspects of testing are completed.

2 Medium visit - auditor will complete modelling, perform testing in areas with outstanding issues and will follow up on key report impacting areas (e.g. EAC/AA).

3 Limited visit - auditor will complete modelling and walkthrough testing on outstanding issues.

4 Delivery of Routine Performance Reports.

5 Delivery of Routine Performance Logs.

6 Installation of HH Metering.

7 Energy and MSIDs on Actuals.