Design Working Group submits its final report to Ofgem

The Design Working Group (DWG) has now submitted its final report to Ofgem. This report is a culmination of two years’ work by ELEXON and the DWG on the Target Operating Model (TOM) design for Market-wide Half Hourly Settlement (MHHS) and on the approach for transitioning from the current Settlement arrangements to the TOM. On behalf of the DWG, we thank everyone who inputted to this work.

Moving to the MHHS TOM will help progress towards a smarter energy system, as settling consumption every half hour will encourage the roll out of more dynamic and flexible ‘time of use’ energy deals, where consumers save money if they shift their energy usage away from times of peak demand.

The TOM will also leverage the roll out of smart meters to speed up the Settlement process significantly, reducing the current 14 month reconciliation period to 4 months.

The key features of the TOM include the need for three data collection services, which process meter readings for use in electricity Settlement from:

  • Smart and traditional Meters (Smart meters allow for meter readings to be retrieved remotely via the Data and Communications Company)
  • Advanced Meters (which can send readings remotely to data service providers via a dedicated communications line) 
  • Unmetered Supplies (any equipment that draws electricity from the distribution network without a meter recording its energy consumption)

This represents a slight change from the current ‘Supplier hub’ agent services model, where there will no longer be half hourly and non-half hourly variants of Data Collectors and Data Aggregators.

Instead there will be three data service types, one for each of the above ‘segments’ of the Supplier Volume Allocation market (where an electricity supplier’s customers on a distribution network such as homes, smaller businesses and embedded generators are registered). 

There will also be no need for data to be pre-aggregated for Settlement under the MHHS TOM. This is because the Balancing and Settlement Code central systems will perform all the necessary aggregations for Settlement.

About the DWG’s work

The DWG has developed the TOM in two stages. In stage one the DWG developed and assessed a set of ‘skeleton’ TOMs. The output was a report to Ofgem on 4 April 2018, setting out the five skeleton TOMs to be taken forward for industry consultation. The consultation was issued on 30 April 2018 and closed on 29 May 2018.

The responses showed all five TOMs to be viable options and that the DWG had not missed any other TOM or significant aspects of design. They showed no consensus on an overall preferred TOM. The DWG therefore took all of the TOMs forward for further design and evaluation in stage two (completed in August 2019). It comprises development of both the final high-level TOM design and a high-level transition approach.

Design of the Target Operating Model

Between April 2018 and January 2019, the DWG developed high-level service requirements for the TOMs, evaluated the different TOMs and delivered a single preferred TOM to Ofgem. On 15 February 2019, Ofgem published the DWG’s report on its preferred TOM for MHHS.

The DWG  consulted on its report from 18 February 2019 to 15 March 2019.  The responses validated the overall approach and coverage of the TOM design, and resulted in no fundamental changes to the TOM.

The transition approach to MHHS

From January to May 2019, the DWG developed its high-level approach for transitioning from the current Settlement arrangements to the TOM. It consulted on this from 7 June to 8 July 2019. The responses validated the DWG’s transition approach, resulting in some minor clarifications but no changes to the approach itself. 

Final report

On 30 August 2019, the DWG submitted its final Stage 2 report to Ofgem. This concludes both Stage 2 and the DWG’s work under its Terms of Reference. The DWG’s outputs form one of several work streams in Ofgem’s wider Significant Code Review on electricity Settlement reform.

The DWG makes recommendations for Ofgem’s approval. Ofgem will make the final decision on the TOM and transition approach.  Ofgem’s website states that it will make the final decision in Q3 (July-September) 2020 and it will be subject to cost-benefit analysis.

Further information

Visit the DWG webpage for all background information on its work. 

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