During 2019/20, you, our customers and stakeholders, will continue to be our number one priority. We will focus on performing above your expectations to deliver the high levels of service you have come to expect from us under what is becoming an increasingly multi-dimensional industry with many changes and demands impacting your business.
We believe there is clear scope for us to contribute to the energy industry transformation, as a trusted code manager and provider of key central systems and data platforms, while actively supporting and participating in a number of the Government’s and Ofgem’s joint Smart Systems and Flexibility Plan work streams. These workstreams include:
Working with Ofgem and BEIS to ensure that the supply volumes used to settle amounts due under the CFD scheme and CM auctions are calculated appropriately for storage.
Supporting new business models
Designing a Target Operating Model for Market-wide Half-Hourly Settlement to facilitate all the possible innovations it could offer, in particular smart tariffs
EV rollout and integration
Participating in the EV Energy Taskforce, we will explore the flexibility of the energy market and the arrangements in delivering EVs’ potential to provide Demand Side Response and storage services to ensure the efficient grid integration.
Energy industry data
Participating in the Energy Data Taskforce, which will identify opportunities in the energy sector where data can be used more efficiently. In light of the changing market landscape and priorities and to further build on our history as trusted, independent, reliable market experts, our corporate strategy for 2019/20 is summarised below:
With the support of our stakeholders and partners, simplify and consolidate complex and fragmented services, develop new market solutions and actively facilitate innovation for the benefit of GB energy markets and the UK economy.
Whereas last year we used Delivery, Improvement, Engagement, and Capability to describe our strategic activities; in 2019/20 we have explored our approach to focus on Quality Delivery, Innovation, Engagement, Customer Centric, Simplification and Consolidation, Digital Platform and Talented People.
The section on the next pages will provide details on the key contributions where ELEXON will focus its efforts in the coming year.
Strategic priorities for 2019/20
We will focus on performing above your expectations to deliver the high levels of service you have come to expect from us
2019/20 Quality delivery: Actively managing our services to ensure that we deliver in a reliable, economic and efficient way
As well as business-as-usual, during 2019/20, we will continue to support the Government and Ofgem in their work to simplify and create consolidated, leaner and more agile market governance arrangements. The information below provides details on the key areas where we will focus in the coming year.
You can be assured that throughout 2019/20 we will continue to focus on the day-to-day delivery of our BSC obligations to the highest standard you have come to expect from us. See figure 07
Industry rules management
Trusted critical friend
Dedicated customer support
Central data platform delivery
New policy support
Impartial, expert advice/guidance
Providing support to deliver policy outcomes
Types and uses of Data by ELEXON and Industry
02. Delivering Change
We know that our BSC Change process is regarded as an industry leader for good governance and best practice, but as the market evolves, we will too.
While continuing to provide industry-leading customer service and expertise that we know you expect, we will always look at ways to simplify the BSC. We will also try to make it easier for you to get involved in changes and to keep you informed. We will look to:
make Workgroup materials available on our public website
use video conferencing facilities so that it is easier for you to join and participate in meetings
make it easier for you to follow the progress of changes from ‘raise to implement’, by providing more visual information on our website and smarter information and a notification subscription service
Your expectations are changing and we believe these improvements will make sure that the BSC Change process remains the ‘go-to’ model and fit for the future.
03. Data and Reporting
We know that data openness and transparency is currently top of the industry agenda and is being explored by many industries, including our sector.
And we are aware that we maintain critical processes for the wholesale market data collection, verification and reporting, so through a range of continuous improvements at every level we will deliver a better and faster service to the industry.
In fact, we see our business model evolving to include more data services.
Publishing data is one of our key functions and delivering a high quality service continues to be our top priority. During the year, we will improve the BMRS platform in terms of accessibility, openness, consistency, so it can become your onestop-shop for electricity market data e.g. expanding the number of APIs.
We will work closely with you to determine the scope of data that should be reported, while ensuring that any new initiatives to publish data fall within this scope.
Market report and insights
We will continue to improve and enhance our market reports and insights that you value so they provide you with the information you need.
ELEXON embraces the open data culture and we will work in line with Ofgem’s efforts to create a new paradigm of shareable industry data that can be queried and passed on to provide a collective benefit.
We aim to make use the rapidly growing estate of open data for your benefit by:
Removing barriers for our smaller/potential customers so that you can access information and direct your trials prior to joining the market.
Opening up certain files (e.g. SAA-I014) so it is no necessary to have specially designed software to interpret the data.
See figure 08
04. Performance Assurance Framework (PAF) Review
We know performance assurance is a highly visible element of the service we provide you.
We have a dedicated page on our website that gives you with more information on the PAF Review and Issue 69.
While the approved recommendations from workstreams 1 and 2, around the Performance Assurance Framework (PAF), move into routine operations, we will continue to work on the remaining two work streams:
Workstream 3 – Review of the Performance Assurance Techniques (PATs)
This will produce a set of recommendations to enhance the risk mitigation ‘toolkit’ of efficient and cost effective assurance techniques that have sufficient preventative elements, and provide robust and flexible audits, performance monitoring and escalation.
Workstream 4 – Data Provision
Here we will create proofs of concepts to test the viability of alternative methods of data provision that place less burden on you to provide data and supports more accurate risk appraisal. See figure 09 & 10
05. European developments
We are working with other Code Administrators and engaging with Ofgem and BEIS to ensure we are as prepared as possible for Brexit. Regardless of the UK’s relationship with the EU after the planned withdrawal, we will update the BSC accordingly. Throughout the year, we will implement, where necessary, any further changes needed due to European developments like the European Electricity Balancing Guideline (EB GL), Harmonisation of Imbalance Settlement, Project MARI (Manually Activated Reserves Initiative) and the Clean Energy Package. We will provide you with timely information as soon as we can. See figure 11
06. Review of Section D Charges (BSC Cost Recovery and Participation Charges)
We are reviewing BSC Section D Charges to make sure that they are appropriately set and fit for purpose. The Issue Group, initiated in 2018/19, is assessing what behaviours are driving the costs, whether the current charging structure is fit for purpose and, if not, what alternative approach BSC Parties would prefer.
The Panel has encouraged the Issue Group to focus on simplicity and cost reflectivity, with a particular focus on charges that have not changed since pre-NETA Go-Live.
Timeline for the PAF Review
Figure of the PAF
1. What is PAF?
Framework that allows BSC Parties to have confidence in the accuracy of the allocations of energy and charges
2. Why review it?
Challenge and change
New business models
Number and nature of risks
Re-assessing the current risks
Engaging Performance Assurance Parties
Ensure the PAF
Continues to meet the challenges of a rapidly changing market
Is flexible enough to identify and address current and future settlement risks and issues
Provides values to its stakeholders
Assures accuracy of settlement and that the cost is attributed to those causing risk
2019/20 Innovation: enhancing and evolving our services to support industry changes and development of the energy market.
We are keen to ensure the BSC is an enabler to innovation, be it new services or business models that deliver benefits to our customers and end consumers. We do this through a mixture of evolving our services and working in close cooperation with a number of leading regulatory and industry bodies and initiatives.
In 2019/20, core modifications will aim to make BSC arrangements more inclusive for a wider range of market participants.
01. Opening up Balancing Mechanism for new market participants
BSC Modification P344 ‘Project TERRE’ aligns the BSC with the European Balancing Project TERRE (Trans European Replacement Reserves Exchange) requirements. ‘Project TERRE’ is a pan-European balancing product implementation project, developed by some of the European Transmission System Operators (TSOs), including the GB TSO National Grid.
This project will provide new opportunities for independent aggregators and customers to participate in markets that weren’t previously open to such participants, hence promoting competition.
The P344 solution to also widens access to independent aggregators participating in the BM market, thus opening up the balancing mechanism and other balancing services to a wider and more diverse set of market participants. See figure 12
344 Implementation timeline
Changes to the Central Registration Agent (CRA), Energy Contract Volume Allocation Agent (ECVAA) and Supplier Volume Allocation Agent (SVAA) software to allow Virtual Lead Parties (VLP) to accede to the BSC and allow BSC Parties and VLPs to register Secondary Balancing Mechanism Units (SBMU).
GB TERRE Go Live Date, which will be determined by ELEXON and the ESO:
Changes to the Supplier Volume Allocation Agent (SVAA), Settlement Administration Agent (SAA), Balancing Mechanism Report Agent (BMRA), Funds Administration Agent (FAA) and BSC Portal software to give full effect to the TERRE arrangements.
“All very helpful for me. Going to the event not knowing much about project TERRE the introduction to project before going into more detail was useful to set the scene.”
Customer feedback from TERRE Industry Day, January 2018.
02. Leadership on future markets and settlement design
We are proud to have been at the forefront of the work on Half-Hourly Settlement since 2010. We see it as a key enabler for new innovations, including Demand Side Flexibility (DSF) as the data, which will be available through the smart meter rollout will enable more companies, existing and new, to participate in flexibility markets and therefore deliver benefits to the end consumer.
We will continue to lead on Market-wide Half-Hourly Settlement with the Design Working Group (DWG), working closely with Ofgem to deliver our completed design work on the Target Operating Model towards the end of 2019.
Pre-requisites from integrating EVs into the energy system: smart meter roll out and Half-Hourly Settlement.
Looking at the transition to EVs from the electricity market’s perspective, we believe that a whole-system approach will be critical to enable the Government’s ambition on the roll out of EVs.
An accurate measurement and attribution of metered volumes and energy imbalances between different service providers will be key to assuring settlement accuracy.
03. Enabling new paradigms in the energy sector Multiple Providers White Paper
We believe our white paper ‘Enabling Customers to Buy Power from Multiple Providers’ offers a practical proposal to enable new business models.
During 2019/20 we will continue to champion this opportunity, working on a technical solution, which could potentially be implemented in 2020.
Behind the meter’ resources
As the proportion of renewable generation increases and demand becomes more volatile due to ‘Behind the Meter’ generation and demand response, the need for increased systems flexibility becomes crucial. We will use the benefits that the P344 Project TERRE and Foundation programme will bring to the industry to support our customers in these enhanced services.
04. DNO to DSO transition
We believe that the transition from Distribution Network Operator (DNO) to Distribution System Operator (DSO) is a key enabler for further innovation in the electricity markets. We will continue to provide our knowledge and expertise to the ENA’s Open Networks Project and other initiatives putting our customers’ and stakeholders’ needs first.
2019/20 Simplification and consolidation: Reducing complexity and fragmentation
We know that the use of electricity and the administration of energy services are radically changing, with the UK Government’s commitment to the decarbonisation of the economy and considerable advances in technology means that end consumers are being presented with a growing number of new energy services.
To date the industry has operated within the limits of established rules and regulations set out in legislation, licences and the industry codes and we believe these established rules and systems are not changing quickly enough to keep up with the pace of innovation across the energy market.
We have been advocating for a number of years that changes across market governance arrangements are needed to ensure the GB energy system as a whole remains flexible, responsive and rapidly evolving to support a range of new business models. We will continue our close cooperation with BEIS/Ofgem on smart and flexible energy systems work, Ofgem’s Innovation Link (regulatory sandbox), InnovateUK, Energy Systems Catapult and other key industry players and initiatives to support innovative businesses into the market arrangements.
We understand that navigating the industry governance landscape can be extremely challenging for new (and indeed existing) market entrants, with numerous licence conditions and codes governing the wholesale and retail operations in gas and electricity markets. We have been highlighting a number of steps that should significantly improve the landscape of code services in a timely manner. These proposals range from amending code panel and code manager delivery body objectives to appropriate empowerment of code managers to raise changes that are beneficial to competition and consumers.
We will continue to support and contribute to the Energy Codes Review, launched by BEIS and Ofgem in 2018 advocating change for the benefit of our customers and end consumers.
We have highlighted an opportunity arising from the Retail Energy Code (REC) to look beyond the retail part of the market. There could be an opportunity to align the wholesale/settlement aspects of the gas and electricity code governance framework and administration further; something that would reduce the complexity and cost burden for market participants and consumers respectively.
We have been fully involved in shaping and delivering a number of Ofgem’s Significant Code Review (SCR) programmes to bring the electricity industry’s central arrangements in line with changes in generation and consumption of electricity. Under its Faster Switching programme, Ofgem plans to consolidate the retail market code provisions under a newly introduced Retail Energy Code (REC).
We believe that greater alignment and even consolidation of central code services is possible, bringing the ‘whole systems’ approach to life across the gas and electricity codes.
End customer-facing business models such as peer-to-peer trading, smallscale electricity storage (residential and small to medium commercial), smart tariffs (time-of-use tariffs) and a number of other new services rely on changes to the wholesale/settlement market arrangements specified under the BSC. That is why we firmly believe that a closer alignment between retail and wholesale markets is a much needed first step to allow for further alignment between electricity and gas, energy and transport, energy and heat networks.
“We believe that greater alignment and even consolidation of central code services is possible, bringing the ‘whole systems’ approach to life across the gas and electricity codes.”
2019/20 Customer centric: Improving the customer experience and develop richer customer relationships
We are proud that our programme of comprehensive training and bespoke advice, tailored to every BSC signatory’s needs, is well regarded in the industry. Our high levels of service have been independently verified through Ofgem’s code administrators’ performance survey for 2017 and 2018 where ELEXON came top two years running, in addition to our own independent annual customer survey.
01. Delivering the highest standard of services to BSC Parties
Industry days, educational sessions and webinars for all customers
We will continue to organise industry days and training sessions that are of interest to you and your business.
We will always make sure that the agenda of events is updated to reflect market trends and your business needs.
We will also increase the number of webinar topic-led, bespoke training sessions, making them available on our website to all.
During the year, we will monitor your training needs and look to add more specialised training to ensure that ‘off-the-shelf’ suppliers are aware of their obligations under the BSC and can deliver those successfully.
New ways to support BSC Parties
Through your feedback and as part of the renovation of the website, you have inspired us to improve the user experience for market entrants, including a more interactive and informative website with forms and tracking tools to increase engagement and usability. We will, through the implementation of the new Party Management Platform, reduce the amount of forms required by market entrants.
“Really impressed with the knowledge of the speakers regarding the Imbalance Settlement, Imbalance Prices and SVA presentations… All presenters were friendly and welcoming.”
Customer feedback on Introducing ELEXON seminar 2018
02. Helping new market entrants to navigate industry processes
We understand that the landscape of industry codes is complex for a new entrant, so we will identify further opportunities to help new and existing BSC Parties overcome this complexity by sharing information on the BSC through our continued efforts to drive better coordination between code administrators. See figure 13
ELEXON's Programme of Training
2019/20 Engagement: Working in partnership to enable 'whole-system' approach and industry convergence
As a major industry code manager we know that a whole-system approach to the fundamental changes in the GB energy industry structure requires close collaboration between all parties, if the vision of the Clean Growth Plan and Industrial Strategy and the Smart Systems and Flexibility Plan are to be delivered and implemented on time. To this end, we will continue our work with the industry, key government departments and Ofgem with an aim to identify practical solutions to the numerous challenges.
” It is always useful to stay up to date with developments and a positive sign to see two Ofgem colleagues at the event. The subject matter doesn’t directly impact my company at present, however, the white paper created good debate.”
Feedback from Half-Hourly Settlement design stakeholder event, 15 May 2018
01. Enabling whole-system approach to industry changes
Over years of operation, we have developed deep in-house expertise which the industry, Ofgem and government rely upon in bringing changes and new arrangements to the energy industry.
During 2019/20, we will use our expertise to proactively support change management, workgroups with guidance and advice in technical solutions, and sound legal advice so we continue to play a key role in the timely completion of the major industry change initiatives
2019/20 Digital platform: Creating a digital platform to meet the changing energy market
In 2018/19 we embarked on a multi-year programme to re-architect our central systems, which have served the industry well since their introduction in 2001 under the NETA programme. The first release will deliver P344 (TERRE) on hybrid architecture. The programme has been designed as a phased approach to leverage the BSC change investment to minimise the overall cost and risk to Parties and to spread the cost across financial years to reduce the financial impact of BSC costs. Upon completion the Foundation architecture will deliver a flexible, scalable and open platform to provide market entry, settlement and data insight services to meet the future needs of a changing energy market.
01. Foundation architecture: Data and services platform
Our new services and open data platform will provide enhanced capabilities to the electricity market. The modernised technical architecture of the BSC systems will be more flexible, making them easier and quicker to adapt to the needs of the future market and customers.
Specifically, the new data processing framework and settlement microservices will enable us to more quickly and clearly define new and improved services facilitating requests for smaller changes economically and new services more rapidly.
Intelligent auto-provisioning of computer resources allows for truly elastic scaling in response to data growth with no impact on settlement performance and on-demand.
The new data platform provides the foundation on which to build new capabilities, providing options for developing services that use different technologies while leveraging common governance and security services. It aims to help foster innovation by providing common data related services and governance capabilities, freeing new service designs from non-valueadd overheads.
In 2019/20 we will be completing the Data and Services Platform built for TERRE, adding Analytics capability and migrating further Legacy Agent services in line with our technology route map. See figure 14
02. Foundation architecture: Party Management Platform
Our new Digital Party Platform will digitise the existing process of submitting paper forms for the Market Entry, Exit, Balancing Mechanism (BM) Units, Authorised Signatories and other central registration data through a modernised digital platform. The benefits of having this ‘self-service’ gateway for submission and management of central registration data are:
Reduce the risk of manual error and rework through automated data validation
Three-way visibility of status and progress in terms of where potential Participants are in the Registration Process (Customer, ELEXON, our Service Providers)
Guidance in respect to BSC obligations and processes compliance
Support to P344 Modification for registration of Virtual Lead Parties and an increase in new entrants will be accommodated and facilitated effectively.
Improved customer engagement more streamlined end-to-end customer journey.
In 2019/20 we will build on the Digital Party Platform to include more of the market entry and registration services to enhance customer experience focusing on CDCA (Central Data Collection Agent) and MDD (Market Domain Data) processes.
2019/20 Talented people: Developing our end-to-end service capabilities to enable industry to benefit from our experience
We recognise the importance of developing our people’s skills to continue delivering our value-adding services in code management, central systems delivery and policy support.
01. Building on our end-to-end service capabilities
We are proud that our remit extends beyond basic code administration. We are responsible for managing and delivering the end-to-end services set out in the BSC and aiding the development of industry change proposals and parties’ understanding.
We will continue to focus on developing our peoples’ expertise in order to build capability in the business as we gain a better understanding of the skills needed to perform in a rapidly changing energy market.
This is particularly important in our Foundation Programme delivery where we have and will bring in people with new skills and experience as the programme requires.
02. Developing and retaining talent
Internally, the evolving programme of manager’s training, coaching and mentoring will ensure we achieve the right balance betvween a high degree of flexibility and the robust, predictable service delivery for which ELEXON is recognised.
03. Maintaining our investor in people status
We are extremely proud to earn the Silver Investor in People accreditation in recognition of our efforts to develop our people. We are committed to maintaining this status and reaching the next level.
04. Knowledge sharing and transfer
We will maintain our focus on knowledge sharing and transfer to enable our experts of tomorrow. We will continue to build on our process of mentoring, whereby we will identify individuals within ELEXON who are willing to take on the role of trusted advisor, teacher and wise counsel to another person or group of people, to ensure that tacit knowledge is transferred between long standing and new ELEXON employees. This will also present a new opportunity for our staff in developing their mentoring skills as well.
EMR Settlement Services Provider
BSC Parties will be aware that ELEXON calculates, collects and distributes the payments to EMR Contracts For Difference (CFD) generators and Capacity Market (CM) providers. We do this via our wholly owned,separate subsidiary EMR Settlement Ltd (EMRS) under a contract with the Low Carbon Contracts Company (LCCC) and the Electricity Settlements Company (ESC).
Under the EMR contract ELEXON:
collects meter data for Contracts For Difference (CFD) generators and Capacity Market (CM) providers
maintains systems to collect, securely store and transmit data
manages settlement of payments
holds and manages reserve funds
calculates and collects payments.
Our business separation ensures that any risk or liabilities from EMR settlement cannot impact ELEXON. This separation ensures risks and liabilities from EMR settlement activities cannot impact ELEXON. Whilst some of our people are full-time on this EMR activity, other of our experts are parttime but regardless, all record their time to ensure their cost is allocated appropriately to BSC or EMR activities. This enables us to allocate a proportionate share of the ELEXON overheads such as office costs etc. To date nearly £3.5m of such costs have been borne by EMRS, meaning that without the EMR activities, BSC Parties would have had to bear an additional £3.5m.
The contract with LCCC and ESC provides for five yearly extensions and they are currently considering whether to extend or tender the services afresh. Based on our excellent track record of service delivery and system implementation, our not-for-profit charging model (like the BSC) and the synergies enjoyed from swift access to ELEXON’s settlement experts, we would hope LCCC/ESC extend the contract. However, we must also be able to participate in any tender. Fortunately, the changes to the BSC which enabled ELEXON to provide the EMR settlement services anticipated this and provide for the cost of our participation in such a tender to be treated as BSC costs.