What is the BSC?
The Balancing and Settlement Code (BSC) is a legal document which defines the rules and governance for the balancing mechanism and imbalance settlement processes of electricity in Great Britain.
The Balancing and Settlement Code Company (BSCCo) is administered by Elexon.
How do the electricity trading arrangements work?
Like most commodities, electricity is traded on a wholesale market.
Most of this trading is done in a forwards market, with generators and suppliers entering into contracts with each other for every half hour of every day; sometimes years in advance. Non-physical traders such as a investment banks also participate in this trading. For each half hour, they can continue to trade up to 1 hour beforehand, at which point the market for that time period is closed. All generators and suppliers have to notify National Grid of their planned supply and demand for each half hour of the day.
National Grid ensures that supply and demand match using a balancing mechanism, which includes the accepting of bids and offers from generators and suppliers to increase or reduce their supply or demand.
Where does Elexon fit in?
Elexon’s systems capture the contracted volumes from generators and suppliers so we can see what they said they would produce or consume. We also capture data on actual supply and demand volumes. Any difference must be paid for. So, if a generator has supplied less than what it said it would for the half hour it must pay for the imbalance between its declared and actual position. Or, if a supplier’s offer to reduce demand for a half hour was accepted by National Grid, then it will be paid for that balancing action. Prices and payment are managed by Elexon through the settlement process.
Changes to the systems and processes of settlement
The BSC and its subsidiary documents, systems and processes are constantly evolving. Any BSC Party – such as a generator or a supplier – can raise a proposal to change them. We work with industry experts and the BSC Panel to assess the impact of each proposal and manage the consultation process.
The electricity regulator, Ofgem, makes the final decision on Modifications to the BSC itself, whereas BSC Panel Committees made up of industry experts oversee changes to the subsidiary documents. Elexon then implements approved changes to the Code and subsidiary documents and manages any changes to central systems.
Assurance that the BSC arrangements work.
Our systems and processes are fundamental to the everyday work of generators, suppliers and National Grid, and those companies need be confident that they work! And, as BSC Parties, those companies also need to adhere to the obligations, performance standards and targets of the BSC.
We give advice and guidance on the BSC and what parties should do to comply with it, and suggest corrective actions where they are not complying. We also provide assurance that other electricity companies are abiding by the rules and provide a disputes service to rectify any settlement errors.
Want to know more?
For more information about the BSC, Elexon and how the balancing and settlement market works, check out our Beginners Guide to the Electricity Arrangements.
We also regularly run an Introduction Seminar for industry newcomers. It will help you understand more about Elexon and some of the trickier aspects of our industry.