BSC Panel 209 15 January 2013
Report Phase P289: Enabling ELEXON to participate in tendering for the DCC Licensee role via a subsidiary Recommendation: Approve Proposed 208/01 Dean Riddell 15 January 2013
P289: Issue ELEXON cannot bid for the DCC License under the current BSC • drafting, which precludes ELEXON undertaking non- BSC work P289 contends that ELEXON participating in the DCC bid process • and, if successful, performing the DCC Licensee role, would have benefits for Parties under the BSC and for the wider industry 2
P289: Raising the Modification The Panel agreed to raise P289 based on a request from ELEXON • that identified potential benefits against Objective (d), efficiency The Panel agreed to an expedited timetable for P289 due to the • interaction with the DCC tender process Panel mindful timetable had drawbacks (tight and falling over the • Christmas period) but believed the potential benefit to Parties contended by P289 meant an effort should be made to put P289 through the Modification Process in a useful timeframe 3
P289: Solution Enable ELEXON to establish a subsidiary to bid for the DCC role • Introduce into the BSC arrangements for funding a DCC Licensee • bid, with bid costs specified and capped Prohibit cross-subsidy between ELEXON and the DCC subsidiary • Introduce explicit BSC obligation to ensure that ELEXON maintains • BSC services and has sufficient resources (including personnel) to discharge its BSC responsibilities Does not include SEC, initial chairman appointed by BSCCo Board • 4
P289: Development of Solution Solution changes from Modification (reflected in draft legal text) • Replaced references to ‘Smart Co’ with ‘DCCCo’ to reflect that scope is • now limited to DCC Licensee role only Removed ability of BSCCo to grant security, etc. to DCCCo • Inserted obligation on BSCCo to procure DCCCo’s contractual • agreement to a dividend policy and shared costs allocation - latter point is how BSC Costs would be defrayed Reduction in loan repayment term to a maximum of five years • 5
P289: Impacts and costs Costs: • Minimal costs associated with Code changes • Estimated costs for DCC bid range from £50,000 up to £600,000 • depending on how far ELEXON gets in the bid process Bid costs capped at £300,000 (internal) and £300,000 (external) • Bid costs repaid to Parties if DCC bid successful • No impacts on Parties besides funding requirement • No impact on National Grid as either Transmission Company or • BSCCo Shareholder National Grid believe a Transmission License change would be needed • 6
P289: Panel’s initial views on Applicable Objectives Relevant Objectives is (d) - no impact on other Objectives Majority view - better facilitates (d): • Potential benefits (efficiency savings, reducing Party costs by • offsetting BSC costs) outweigh definite DCC bid costs BSCCo participation in DCC bid adds competitive pressure • Minority view - does not better facilitate (d): • No benefit of ELEXON participating in DCC bid process • Mandates Parties funding non-BSC activities • Funding lost if bid unsuccessful • Risk to delivery of BSC services - contract model gives more protection • Contended benefits depend on DCC bid success, therefore uncertain • Counter to P289 Workgroup majority views and recommendation • 7
P289: Panel’s initial views Implementation Date Unanimous Panel support for Workgroup’s proposed • Implementation Dates: 1 Working Day after approval • Legal drafting Majority Panel agreement with drafting for Report consultation • 8
P289: Report Phase Responses Agree? Yes No Implementation Date 10 7 Majority (10 of 17) support for Implementation Date • Significant minority did not agree: • 4 respondents believed that documentation relating to the DCC (e.g. • articles of association, Shareholder agreement, dividend policy) is needed before P289 could be implemented 1 felt the timescale was too brief given P289 is substantial, and felt as • a principle of good governance the lead time should be 5 - 10 days 1 disagreed with solution and 1 believed period of assessment • insufficient - neither factor relevant to P289 implementation if approved 9
P289: Report Phase Responses Agree? Yes No Legal Text 6 7 Majority (7 of 17, with 4 respondents having no confirmed view) did • not believe the legal text would deliver P289 The seven respondents that disagreed had substantial • comments/queries on the proposed provisions Six respondents agreed with the legal text • • One had some queries and suggested changes to improve the text • One noted that while the legal text adequately represented the solution, they did not believe P289 had been sufficiently developed 10
P289: Report Phase Responses Agree Yes No Should P289 be approved? 5 12 Large majority (12 of 17) disagreed with initial recommendation by • Panel to approve P289, and believed it should be rejected Most arguments same as Panel’s, though some respondents (both for • and against P289) put arguments against Objectives other than (d) Of the 12 that disagreed, six were concerned primarily with the process • followed for P289 (where arguments against the Objectives have not been identified it is implicit that respondents believe no benefit has been adequately demonstrated) 11
P289: Report Phase Responses Arguments put forward that differ from the Panel’s are that : • DCC licence damages/liabilities unclear/uncertain and (with potential • service degradation and non-BSC costs) detrimental to Objective (c) Mandatory funding of non-BSC related activities likely to have • detrimental impact on effective competition (Objective (c)) as funding is additional cost consideration for smaller prospective market entrants - potential disincentive to market participation 12
P289 – Process followed so far 7 th December: Usual email to the Panel sending out agenda and papers • Panel secretary noted to the Panel that a late paper would be issued • 11 th December: Potential Workgroup calling and draft Mod issued to P284 Group • around 3pm 12 th December: Paper to request Panel raise a modification issued as late paper to • Panel 13
P289 – Process followed so far 13 th December: Panel meeting • Panel agree to raise Modification (with some changes, notably removal • of SEC Administrator from scope) Panel agree expedited timetable (though longer than expedited • timetable requested) Confirmed to P284 Workgroup that P289 raised and meeting would • take place 14 th December: Industry notified Panel raised Modification (around 1pm) • P289 Workgroup issued Modification and legal text (around 1pm) • 17 th December: P289 Workgroup meeting (approximately 10am – 2pm) • 14
P289 – Process followed so far 18 th December: Around 1pm (following ISG) Adam L spoke to Lisa to capture final • views for report - Discussed DCCCo Board and BSCCo Board • Adam believed outcome was group had discussed and not progressed • Lisa believed outcome was she had raised an alternative solution Around 5pm Cem (a workgroup member) emailed potential alternative • to seek Workgroup views on and note to the Panel 19 th December: Draft Assessment Report issued to Workgroup for review around 11am • Potential Alternative solution issued to Workgroup around 2pm • Papers issued to Panel around 3pm • 15
P289 – Process followed so far 20 th December: Around 9.30am Lisa clarifies a possible alternative where the BSCCo • Board would be the DCCCo Board Panel meeting • Panel agree to send Modification to Report Phase • Panel agree initial recommendation to approve Proposed Modification • 21st December: Report Phase Consultation issued • 14 th January: Report Phase Consultation closed • 16
P289 – BSC Process Raising P289 In usual email to the Panel sending out the agenda and papers for that • meeting, the Panel secretary noted that a late paper (a request from ELEXON to the BSC Panel to raise a Modification Proposal) would be issued This paper was subsequently sent on Tuesday 11th December • This is consistent with the process for issuing later papers that we have • followed in the last ten years and in line with BSC Section B 4.1.5 17
P289 – BSC Process Section B 4.1.5 - Any meeting of the Panel shall be convened by the Panel Secretary by notice to each Panel Member: (a) setting out the date, time and place of the meeting and (unless the Panel has otherwise decided) given at least 5 days before the date of the meeting, and (b) accompanied by an agenda of the matters for consideration at the meeting and any supporting papers available to the Panel Secretary at the time the notice is given (and the Panel Secretary shall circulate to Panel Members any late papers as and when they are received by him). 18
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