Maintaining Credit Cover
The purpose of Credit Cover is to ensure that, should a Trading Party default, sufficient collateral is available to pay any debts. If a Party does not have sufficient funds it will enter into Credit Default.
On Friday 28 September 2018, the CAP value will increase from £59/MWh to £75/MWh.
As a result, Parties may notice a change in their Credit Cover Percentage, and should review the amount of Credit Cover lodged. The CAP review trigger level value will remain at its current value of +/- £6/MWh.
How it relates to you
Each BSC Party is required to lodge collateral with ELEXON to ensure that there are sufficient funds available to cover that Party’s Trading Charges should the Party become unable to pay.
Under the BSC arrangements, payments to and from Trading Parties in respect of Trading Charges arising on any particular Settlement Day are made, on average, 29 calendar days later. Therefore, at any given time, Trading Parties may have debts (or be due payments) in respect of Trading Charges incurred, on average, over the previous twenty-nine days.
Amount of Credit Cover
The BSC does not stipulate the amount of Credit Cover that Trading Parties must provide.
Instead Trading Parties decide on the level of Credit Cover that they wish to provide based on their Trading characteristics, and credit checking is intended to ensure that a Trading Party cannot accumulate a debt over the twenty-nine day period that exceeds the amount of Credit Cover provided.
Keeping ELEXON informed
A credit check is completed each Settlement Period , 24 hours a day and if a Credit Default occurs it has to be progressed regardless of whether ELEXON has been able to speak directly to the relevant Party.
Please help us to ensure that we have up to date contacts for your Party so that if a Credit Default occurs you can be contacted immediately during both working and non-working hours.
Credit Assessment Load Factors
For the few days of the Credit Cover calculation, until real metered data becomes available, Credit Assessment Load Factors (CALFs) are one of the Parameters used to determine Credit Assessment Energy Indebtedness (CEI) for non-Interconnector, non-Credit Qualifying Balancing Mechanism (BM) Units.
Credit Assessment Price
The Credit Assessment Price (CAP) is a parameter set by the Credit Committee on behalf of the BSC Panel and subject to periodic review. The CAP is a notional pound value of 1 MWh of energy that is used in determining a Party’s Energy Indebtedness and amount of Energy Credit Cover and hence adequacy of Credit Cover.
The Credit Committee is responsible for all matters under the BSC that relate to the CAP including determining the value.
A trigger level system is used to determine when reviews of CAP shall be held.
The Credit Default processes are triggered when a Party’s Credit Cover Percentage (CCP) exceeds a number of thresholds. The Level 1 Credit Default process is triggered when the CCP exceeds 80% and the Level 2 Credit Default process is triggered when the CCP exceeds 90%.
Entering Credit Default status
If a Party enters Credit Default a notice will be published by the Energy Contract Volume Aggregation Agent (ECVAA) on the Balancing Mechanism Reporting Service (BMRS) and will remain on the website for 7 calendar days.
The Party’s trades may also be rejected by the ECVAA system if they are deemed to worsen the position of the Party.
If a Party fails to resolve a Credit Default situation the Party will potentially be in default of the Balancing and Settlement Code Section H3.1.1. If this occurs, a meeting of the BSC Panel will be convened for decision on the next steps regarding the Party’s status under the BSC.
If a BSC Party believes that its Credit Cover Percentage is not accurate, then the Party can submit evidence to ELEXON to be considered for Material Doubt.
Where the evidence is considered valid and substantial, ELEXON will monitor the Credit Cover Percentage calculated by the central systems and estimate a corrected percentage.