P361

Formal title: Revised treatment of BSC Charges for Lead Parties of Interconnector BM Units

Current Status

Submission
Initial Written Assessment
Assessment Procedure
Report Phase
With Authority
Awaiting Implementation
Implemented

Summary

Under the EU Third Package (Article 2 of Regulation 714/2009) Interconnector flows should be treated as part of the Transmission System and not as Production or Consumption. The P361 Proposer contends that the current BSC charging arrangements are not aligned with the EU Third Package.

For the purposes of calculating Balancing and Settlement Code (BSC) Charges, Interconnector Balancing Mechanism (BM) Units in Great Britain, are currently treated as either a Production BM Unit  (generation) or a Consumption BM Unit (demand). The BSC Charges derived from Credited Energy Volumes are paid for by all BSC Parties having Production and Consumption BMUs with non-zero Metered Volumes, including Interconnector Users.

P361 seeks to exclude Interconnector BM Units from the Main Funding Share and SVA (Production) Funding Share BSC Charges, in order to better facilitate the EU Third Package.

Progression

If Ofgem wants to approve P361, it can no longer be delivered in the February 2019 Release, as there is no longer enough time to deliver the system changes. Ofgem has not provided an indicative decision date.

P361 proposes to remove Interconnector BM Unit volumes from the Funding Share calculations. This means that, should P361 be approved, those Parties with Interconnector BM Units will pay less, whilst those without will pay more. If approved, P361 will now only apply from 1 April 2019 and will not re-calculate and re-bill the 2018/2019 financial year (1 April 2018 to 31 March 2019).

P361 was raised by Nord Pool Spot AS on 31 October 2017. The Initial Written Assessment (IWA) was presented to the Panel at its meeting on 9 November 2017. The Panel agreed to progress P361 to the Assessment Procedure.

The Proposer requested P361 be treated as an Urgent Modification Proposal on 31 January 2018. The request was taken to the Panel on 8 February 2018, who unanimously recommended to Ofgem that P361 be treated as an Urgent Modification Proposal. Ofgem rejected the Proposer’s request to treat P361 as an Urgent Modification Proposal on 22 February 2018 – see Ofgem response letter below for details.

The first P361 Workgroup meeting was held on Monday 8 January 2018. The Workgroup discussed the issue and the proposed solution. The Workgroup agreed to seek additional legal guidance on the defect. A second meeting was held on Monday, 12 February 2018 and discussed the ELEXON legal guidance and the solution options. The Workgroup agreed to seek external legal guidance and agreed on a solution for impact assessment. A third Workgroup meeting was held on 13 March. In this meeting, the external legal guidance was presented and discussed. Following this, the Proposer amended his solution as to only exclude Main Funding Share and SVA (Production) Funding Share charges from Interconnector BM Units. The Proposed solution will impact the Settlement Administration Agent (SAA), along with the ELEXON Funding Share System (FSS).

The Assessment Procedure Consultation and Industry Impact Assessment were issued on the 26 April 2018 with responses due by 15 May 2018. The fifth Workgroup was held on 24 May 2018, where the Assessment Consultation responses were discussed. An Alternative Modification was raised by the Workgroup, whereby the revised formula for the Main Funding Shares and SVA (Production) Funding Share, excluding Interconnector BM Units, would be effective from the date of the Authority decision. The formal implementation date would still remain as previously discussed, as the 28 February 2019. The majority of the Workgroup believes that P361 would better facilitate Applicable BSC Objectives (e) compared to the current baseline and so should be approved. In addition, the majority of the Workgroup believe that the P361 Alternative Modification would overall better facilitate the Applicable BSC Objectives compared with both the existing baseline and the Proposed Modification.

The intent of the Proposed solution is that the excluded BSC Charges will be recalculated and re-billed from the implementation date back to the start of the previous financial year (1 April). The effects of this will be that any BSC Charges in the current financial year to date, will be recalculated and re-billed as one lump sum payment, subject to P361 approval.

In regard to the Alternative Modification, the charges would be recalculated from the implementation date back to the Authority decision. These recalculated charges would then be billed as one lump sum,  on the next available billing run after implementation.

The Assessment Report was presented to Panel on 14 June 2018. The BSC Panel initially recommended that both the P361 Proposed and Alternative Modifications should be rejected. The Report Phase Consultation was issued on 20 June 2018, with responses due by 3 July 2018. The Draft Modification Report was presented to the Panel on 12 July 2018. The Panel’s final recommendation was that both the P361 Proposed and Alternative Modifications should be rejected. The Final Modification Report was submitted to the Authority on 13 July 2018.

Next Events

P361 is awaiting Ofgem decision

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