Public Annual BSC Meeting The challenges and changes facing Settlement 9 July 2015
Health & Safety 2 Insert: Document title
Public ELEXON’s strategic priorities and performance against BSCCo Business Strategy 9 July 2015 Mark Bygraves
The Annual BSC Meeting – why? Because the BSC requires us to Because it’s a great opportunity for us to engage with our customers
Let me introduce the Executive team David Osborne, Mark Bygraves, Chief Director of BSC Executive Officer Operations David Jones, Acting Nigel Smith, Chief Director of Strategy Financial Officer & Delivery 5
The BSCCo Business Plan Strategy - Budget - approved by approved by the BSC Panel the Board
Our strategic priorities Priority • Actively manage, and continually improve, BSC services to ensure that we 1 deliver in an efficient, effective and economic way Priority • Drive efficiencies and savings in the operation of the BSC 2 Priority • Improve the customer experience and develop richer customer relationships 3 Priority • Develop balancing & settlement services to address industry challenges 4 Priority • Invest in our people for the benefit of the industry 5
2014/15 in brief 2500 Settlement Runs carried out Resp Re sponded to to 16 16 ind ndustry co consult ltations Core Co re Se Sett ttlement Sys System pe perf rformance >99 >99%, , 10 100% 0% of the the ti time The BSC Audit 360m Credit held at the end of the year was not qualified 79 Trading Disputes raised 12 approved Modifications 20 Modification Proposals raised and 20 approved Change Proposals implemented 27 Change across three BSC releases 22 new Proposals raised 2.2 million BSC C Par arties ies Energy Contract Volume Notifications regist istere ered d (ECVNs) received
Priority 1 Actively manage, and continually improve, BSC services to ensure that we deliver in an efficient, effective and economic way Updating our Reviewing Supporting reporting the Disputes the BSC Panel applications Process Implementing BSC systems a new BMRS strategy platform
Priority 2 Drive efficiencies and savings in our operation of the BSC 2014 customer survey showed that our customers’ Our activities are perception of our value for money was higher than funded by BSC Parties ever before Value For Money (%) We have a responsibility to ensure value for money SCORE 8+ (Out of 10) 41 40 1 = Not At All Satisfied/ 10 = Extremely Satisfied through controlled 38 1 = Poor/ 10 = Excellent Value For Money financial management 31 27 26 26 22 We aim to deliver +1% vs 2013 innovation in +29% vs 2003 13 12 partnership with our 11 10 service providers 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Priority 3 Improve the customer experience and develop richer customer relationships Support for Introduction Annual BSC new entrants seminars Meeting Increased Online Website Exec-level training improvements engagement videos
Priority 4 Develop Balancing and Settlement services to address industry challenges Smart metering: all Horizon scanning and Electricity Balancing aspects, including keeping the Panel Significant Code Smarter Markets and informed Review data quality/change of Supplier Support to the Competition and Europe Markets Authority (CMA) investigation
Priority 5 Invest in our people for the benefit of the industry Our people are To continue to be our most viewed as an important asset expert in our field Investing in Retaining existing colleagues to Recruiting new expertise develop their talent skills
In addition to our core BSC roles Warm EMR Homes
Any questions? ■ mark.bygraves@elexon.co.uk ■ 020 7380 4137
Public Financial performance 2014/15 9 July 2015 Nigel Smith
FINANCIAL RESULTS FOR 2014/15 ■ Final group report and accounts for the year show cost of sales of £32.9m ■ Costs relating to BSC activity (removing pass-through & EMR related) £29.5m ■ This compares to a budget for the year of £36.3m ■ Key points : – £1.4m under budget on Demand Led – £1.3m unutilised budget re System Strategy work – £1.9m unutilised budget re Market Development – Contribution of £1.6m due to EMR activity – Savings of £0.7m against our budgeted contracted costs – No controls deficiencies identified by auditor for the fourth year running and assurance from Deloitte regarding segregation of costs 17 Insert: Document title
FINANCIAL RESULTS FOR 2014/15 ■ The table below shows the change in costs over time These exclude NETA set-up costs ■ RPI has been applied to prior years to re- state these in “today’s money” ■ Costs of Regular ELEXON Activity Since NETA Go Live £'000 £'000 (in 14/15 money) 100,000 90,000 ISIS (Reprocurement) Project 80,000 Demand Led 70,000 Operational Costs 60,000 Contracted 50,000 40,000 30,000 20,000 10,000 - 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 18 Insert: Document title
Any questions? nigel.smith@elexon.co.uk 020 7380 4295
Reflections of a governance groupie Nigel Cornwall BSC AGM, 9 July 2015
What I will address … Over ten years on BSC panel, five on BSCCo board, but also active engagement across industry governance CMA report confirms we are entering a period of further significant change is industry governance up to it? – what can we learn from experience? – – what can we expect next? CMA identify seven adverse effects on competition (AECs) – BSC is on critical path for 3 of these Dangers of not being responsive to new technologies and business models
Flexible governance Sir David Currie’s remarks during Beesley lecture 2000 here “No system is perfect, so that any system of electricity trading is likely to need periodic – adjustment and reform. The major virtues of NETA are twofold: that NETA moves the electricity market much closer to that of a normal market; and that it puts in place a governance structure that allows for relatively easy adjustment and change. In both respects, it represents a major advance on the Pool…..” NETA style governance objective tests (applicable objectives) – • regulatory determination – (mostly) independent panels and committees hardwired processes – Changes with Code Governance Review, especially: – introduction of SCR – nod to self-governance – Code of Practice, including critical friend
BSC modification participants 600 Independent suppliers – 13% Independent suppliers – 8% Independent suppliers – 11% Independent generators 9% Independent generators - 4% Independent generators 9% 500 400 300 200 Independent suppliers – 7% Independent generators 11% 100 0 Proposers Working group Assessment responses Report responses Big Six Distribution Other Regulator Transmission operator/System operator Independent supplier Independent generator
Two recent perspectives Ofgem reinvigoration of CGR: – open letter and post implementation review potential further reforms – – closed out 26 June CMA has become increasingly focussed on code governance: can lead to inconsistent or delayed outcomes – – creates material burdens on parties, in particular smaller ones, which could undermine incentives to promote changes – concern is Ofgem’s limited ability to influence development & implementation processes – AEC through stifling innovation and slowing change
Possible remedies Possible remedies: – 18A: code administration a licensable activity monitoring performance, giving directions and imposing sanctions • • introduce consistency • more efficient development – 18B: give Ofgem more powers to intervene directly reserve power to intervene and at least set timetables • • ensure key mods developed and implemented in timely manner – 18C: appointment of an independent code adjudicator more powers to project manage and set timetable • Keep up with market developments and wider policy objectives • Views by 31 July
A third perspective But need for more holistic solution Last week’s Energy spectrum set out wider thoughts - here Single code administrator – don’t think its practical or desirable to combine as codes do different things, enabled under statute, with clear delegated authority from the regulator. Would best complement remedy 18A? Allow Ofgem to intervene less, not more – not 18B? Would render 18C unnecessary? Common objectives, best practice process, explicit responsibility for acting as a critical friend
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