Panel Meeting April 2012

Apologies Andrew Pinder 12 April 2012

Report on Progress of Modification Proposals Adam Lattimore 12 April 2012

3 Modifications Overview NewP282, P283 AssessmentP272, P274, P276, P280, P281 ReportP275, P277, P278 With Authority - Authority Determined -

4 Modifications Overview Mod.TitleIWAAssessmentReport Panel Recommend ation Ofgem Decision Decision By Impl. Date Decision By Fall Back Impl. date P272 Mandatory Half Hourly Settlement for Profile Classes Jun-1113-Sep-1211-Oct Feb-1306-April-1413-Feb-1406-Apr-15 P274 Cessation of Compensatory Adjustments 13-Oct-1112-Jul-1209-Aug-12 P275 Extending BSC Performance Assurance 13-Oct-1108-Mar-1212-Apr-12Approve -10 WDs-- P276 Introduce an additional trigger for suspending the market in the event of a Partial Shutdown 13-Oct-1104-May-1214-Jun Feb Jun-13 P277 Allow Interconnector BM Units to choose their P/C Status 13-Oct-1108-Mar-1212-Apr-12Reject 28-May-1228-Feb-1327-Sep-1227-Jun-13 P278 Treatment of Transmission Losses for Interconnector Users 13-Oct-1108-Mar-1212-Apr-12 Approve 01-May-1201-Nov-1228-Aug-1228-Feb-13 P280 Introduction of new Measurement Classes 08-Dec-1114-Jun-1212-July-12 P281 Change of BSCCo Board of Directors & Chairman 12-Jan-1204-May-1214-Jun-12

196/04 November Release Date Colin Berry 12 April 2012

6 BSC Release dates: Last Thursday in February Last Thursday in June First Thursday in November November 12 Release date would be 1 November 2012 Seeking to change Release date to allow technology upgrade Introduction

7 BSC Systems Technology upgrade: Initially developed and tested in 2011 Significant Oracle defects found – delayed implementation Oracle has fixed defects now Cannot restart technology upgrade before June 12 Release work completes Technology upgrade complete in September 2012 Required to ensure BSC Systems fully supported Technology Upgrade

8 Scope of Release: No Approved Modifications to date No approved Change Proposals to date P278 targeted at Release Four Change Requests P278 Impacts SAA software Requires 10 week project Earliest implementation date 29 November November 12 Release date – propose change to 29 November November 12 Release

9 The BSC Panel is invited to: NOTE the rationale to change the November 12 Release implementation date AGREE that the November 12 Release implementation date be changed to 29 November 2012 November Release: Recommendations

196/05 P275: ‘Extending Performance Assurance’ Melinda Anderson 12 April 2012

11 Issue: P275 argues that the Code implies the PAB acts only for Trading Parties This would mean that PAB would not resolve issues for BSC Parties that are not Trading Parties (e.g. LDSOs) even though they rely on Settlement data and processes for a number of business purposes This is not the case Solution : P275 solution is to add a paragraph to Section Z to clarify the relationship between the PAB and all PAPs with respect to Z1.6.1 Code-only change; scope of Performance Assurance unaffected P275: Issue and solution

12 No impact on Applicable Objectives (a), (b), (c) and (e) The Panel unanimously agreed with the Workgroup’s majority view that P275 would better facilitate Objective (d) because increased BSC clarity promotes efficiency in the BSC arrangements Unanimously agreed legal text Unanimously agreed Self Governance Unanimously supported implementation dates 16WD if Self Governance or 10WD following Authority decision P275: Panel’s initial views

13 No new arguments were presented Majority support for Panel’s initial recommendation Unanimous support for Implementation Date Unanimous support for Self Governance One comment on legal drafting It does not deliver the original intent of Modification but delivers the eventual intention P275: Report Phase Responses Agree?YesNo Approve P27551 Implementation Date60

14 The BSC Panel is invited: NOTE Draft Modification Report CONFIRM views on Applicable BSC Objectives CONFIRM that P275 meets Self-Governance Criteria APPROVE P275 P275: Recommendations (1 of 2)

15 APPROVE Implementation Date: 16 WD after approval or 10WD after Authority decision APPROVE BSC legal text APPROVE Self-Governance Modification Report NOTE appeal window closes 15WD after ELEXON’s notification of the Panel’s decision (3 May 2012) P275: Recommendations (2 of 2)

196/06 P277: ‘Allow Interconnector BM Units to choose their P/C Status’ David Kemp 12 April 2012

17 Energy entering GB over Interconnector assigned to different Account to energy leaving GB Applicable to both transit flows and flows starting/ending in GB Without ECVN, in net imbalance even though net volume is zero P277: Issue IFA Moyle 100MW into GB Allocated to P Account Paid SSP 100MW out of GB Allocated to C Account Charged SBP

18 Single BM Unit per Interconnector per User Lead Party can elect P/C Status of these BM Units Allows Party to net import over one Interconnector and export over another Volumes would not net to zero, due to transmission losses Solution would be mandatory P277: Solution

19 Relevant Objectives are (c) and (d) – no impact on (a), (b) and (e) Majority – does not better facilitate (c) and (d): Unduly discriminatory (c) Current arrangements not barrier to entry (c) Wouldn’t improve efficiency (d) Minority – does better facilitate (c) and (d): Interconnectors already treated differently (c) Precedent for different treatment (c) P277: Panel’s initial views on: Applicable Objectives

20 Legal text consulted on during Assessment One minor comment made – amendment made accordingly Drafting for BSCPs 15, 31 & 65 and CRA SD prepared during Assessment Not consulted on during Assessment Panel unanimously agreed drafting for Report consultation P277: Panel’s initial views on: legal drafting

21 Unanimous Panel support for proposed Implementation Dates: February 2013 Release Fall-back June 2013 Release Driven by East-West Interconnector P277: Panel’s initial views on: Implementation Date

22 No new respondents No new arguments raised Majority support for Panel’s initial recommendation Unanimous support for Implementation Date No comments on legal drafting P277: Report Phase Responses Agree?YesNo Reject P27762 Implementation Date80 Changes to Code and CSDs60

23 The BSC Panel is invited to: NOTE the P277 Draft Modification Report and the Report Phase Consultation responses; CONFIRM the recommendation to the Authority contained in the P277 draft Modification Report that P277 should not be made; P277: Recommendations (1 of 2)

24 APPROVE an Implementation Date for P277 of: 28 February 2013 if an Authority decision is received on or before 28 May 2012; or 27 June 2013 if an Authority decision is received after 28 May 2012 but on or before 27 September 2012; APPROVE the BSC legal text for P277; APPROVE the changes to BSCP15, BSCP31, BSCP65 and the CRA Service Description for P277; and APPROVE the P277 Modification Report. P277: Recommendations (2 of 2)

196/07 P278: ‘Treatment of Transmission Losses for Interconnector Users’ David Kemp 12 April 2012

26 BSC allocates transmission losses to Interconnector BM Units Anomalous in light of ITC scheme Compensates TSOs for National losses caused by cross-border flows National Grid passes through compensation to generators and Suppliers through TNUoS Compensation can be positive or negative Interconnectors should not be subject to additional network charges GB arrangements need to comply with European legislation P278: Issue

27 Set TLM to 1 for Interconnector BM Units BSC to no longer adjust Interconnector BM Unit Metered Volumes for any GB transmission losses BSC would still allocate total GB transmission losses proportionally across all other types of BM Unit Interconnector BM Units account for 2% of losses Low materiality – volatility of losses can exceed this amount P278: Solution

28 Relevant Objectives are (a), (c) and (e) – no impact on (b) and (d) Majority – better facilitates (a), (c) and (e): P278 most proportionate solution to demonstrate compliance Minority – does not better facilitate (a), (c), and (e): Undue discrimination (c) May not be needed P278: Panel’s initial views on: Applicable Objectives

29 Legal text consulted on during Assessment No comments received Panel unanimously agreed drafting for Report consultation P278: Panel’s initial views on: legal drafting

30 Unanimous Panel support for proposed Implementation Dates: November 2012 Release Fall-back February 2013 Release Driven by lead time for changes to central systems P278: Panel’s initial views on: Implementation Date

31 No new respondents No new arguments raised Majority support for Panel’s initial recommendation One respondent was unsure Unanimous support for Implementation Date No comments on legal drafting P278: Report Phase Responses Agree?YesNo Approve P27860 Implementation Date70 Changes to Code60

32 The BSC Panel is invited to: NOTE the P278 Draft Modification Report and the Report Phase Consultation responses; CONFIRM the recommendation to the Authority contained in the P278 draft Modification Report that P278 should be made; P278: Recommendations (1 of 2)

33 APPROVE an Implementation Date for P278 of: November 2012 if an Authority decision is received on or before 1 May 2012; or 28 February 2013 if an Authority decision is received after 1 May 2012 but on or before 28 August 2012; APPROVE the BSC legal text for P278; and APPROVE the P278 Modification Report. P278: Recommendations (2 of 2)

196/08 P282: ‘Allow MVRNs from Production to Consumption or Vice Versa’ David Kemp 12 April 2012

P282 Allow MVRNs from Production to Consumption or Vice Versa Nigel Cornwall For Statkraft

36 Metered Volume Reallocation Notifications  Dual trading accounts are key feature of Neta market template –designed to ensure larger, vertically integrated players could not enjoy netting benefit  MVRNs have from outset provided valuable flexibility for licensed parties to –consolidate generation or consumption volumes horizontally –in effect avoid active day-to-day participation in central trading arrangements  An unnecessary restriction exists, which P282 seeks to remove –this prevents energy from Production BM Units being transferred to Consumption Energy Accounts and vice versa

37 MVRN restriction % volume or MWh Trading charges Consumption Production

38 Defects  The current restriction: –is ineffective in its original assumed aim competitive restrictions should be matter for regulation –e.g. mandatory auctions –inappropriately restricts participants’ ability in managing imbalance risk denies organic commercial choices imposes cost –unnecessarily complicates the trading arrangements –creates an inequity with embedded generation can consolidate against demand also sits uncomfortably with trading unit concept –treats trading parties differently from system operator –may not be in line with European practice

39 Key benefits of P282  Additional flexibility to manage imbalance risk, particularly for smaller participants to consolidate positions –increases efficiency reveals true imbalance –competitive benefits benefits relative to off-take market  Levels playing field with embedded generation –P100 de facto acknowledged desire to stimulate competition and permit consolidation  Reduces complexity of trading arrangements and costs of compliance –especially with regard to contract notification process –credit?

40 Against BSC relevant objectives  c) (facilitating competition) - significantly, through additional flexibility to manage imbalance exposure to own circumstances and strategies. Risk reduction increases competition and encourages new entrants  d) (efficiency in arrangements) – removing an unnecessary restriction and helping trading parties manage their own costs  e) (European compliance) - may harmonise arrangements with those in Europe (P277 workgroup)

Issues  Working group invited to consider: –if restriction should remain for participants over a certain size e.g. 20TWh annual production or consumption –single energy account alternative? –allow flag switching?  Targetted and proportionate relative to alternatives 41

42 Allow MVRNs from Production BM Units to Consumption Energy Account or vice versa Would also allow a Party to MVRN energy from their Production BM Units to their own Consumption Energy Account or vice versa P282: Modification Proposal

43 What changes are needed to support the proposed solution? What wider impacts would the proposed solution have? How would GB’s two-Account arrangements be affected? What benefits would Parties gain from P282? What meaning would ‘Production’ and ‘Consumption’ hold? What are the benefits to the Applicable BSC Objectives? P282: Things to consider

44 Recommend: 6-month Assessment Procedure (11 October 2012) Workgroup membership should include: Members of Settlement Standing Modification Group (SSMG) Any other relevant experts and interested Parties 6 months needed to allow: Full assessment of wider impacts, including detailed analysis Full consideration of wider implications 20WD Industry IA and 15WD consultation Avoiding Workgroup meetings during London 2012 Olympics P282: Proposed progression (1 of 2)

45 Proposer believes no link with any current SCRs Possible interactions with Cash-Out SCR Proposer is not requesting Self-Governance Material impact on existing arrangements P282: Proposed progression (2 of 2)

46 The BSC Panel is invited to: DETERMINE that Modification Proposal P282 progresses to the Assessment Procedure; AGREE the Assessment Procedure timetable such that an Assessment Report should be completed and submitted to the Panel at its meeting on 11 October 2012; P282: Recommendations (1 of 2)

47 DETERMINE that the P282 Workgroup should be formed from members of the Settlement Standing Modification Group (SSMG), supplemented with any other relevant experts and interested Parties; AGREE the Workgroup’s Terms of Reference; AGREE that P282 has no interaction with any on-going SCRs; and AGREE that P282 does not meet the Self-Governance Criteria. P282: Recommendations (2 of 2)

196/09 Recommendation to raise a Modification Proposal: ‘Reinforcing the Commission of Metering Equipment Process Dean Riddell 12 April 2012

49 Metering Equipment subject to commissioning process (CoP4) Metering System Registrant responsible Typically discharged via appointed Meter Operator Agent (MOA) Intended to prove accuracy of metering and detect problems Failure may mask significant issues (unlikely to be detected later) Technical Assurance of Metering Expert Group (TAMEG) and ELEXON concerns Certain Metering Equipment usually not within Registrant/MOA control when commissioning required Issues prevent proper commissioning and lead to incomplete records Background

50 Solution principles agreed by TAMEG Make relevant System Operator responsible for Commissioning Current Transformers and Voltage Transformers Providing relevant certificates and commissioning records Require MOA to assess performance and notify Registrant of potential issues (Registrant retains overall responsibility) Require Registrant to consult relevant System Operator and agree steps to minimise risk of issues Workgroup to develop and confirm solution detail and outstanding areas based on TAMEG work Proposed Solution

51 Solution developed by the TAMEG is basis of Proposed Solution Develop Proposed Modification (some specific areas identified) Treatment of test certificates and results Materiality of issue and potential benefit Retrospection/legacy issues are out of scope Standard areas Assess Proposed Modification (and develop any Alternative) against Applicable BSC Objectives Establish impacts and costs Develop BSC legal text Consult BSC Parties and other participants and Recommend Implementation Date and approach Areas to consider

52 Recommend five month Assessment Procedure (12 September Panel) Three Workgroup meetings Develop and assess Proposed Solution If Alternative Solution raised, develop and assess 15WD industry impact assessment and 15WD consultation We will submit to Panel earlier if possible Workgroup membership Members of the TAMEG Members of the Volume Allocation Standing Modification Group (VASMG) Any interested parties Proposed progression (1 of 2)

53 No links with any current Significant Code Review Self-Governance not requested Believe Modification does not meet Self-Governance Criteria Implementation would materially affect participants’ activities (Metering System Registrants, System Operators and MOAs) Proposed progression (2 of 2)

54 The BSC Panel is invited to: RAISE requested Modification Proposal (Attachment A) NOTE IWA SUBMIT the Modification to Assessment Procedure AGREE five month Assessment Procedure timetable AGREE basis for Workgroup membership AGREE Workgroup’s Terms of Reference AGREE the Modification has no SCR interaction AGREE the Modification does not meet Self-Governance Criteria Recommendations

Minutes of Meeting 195 & Actions Arising Adam Richardson 12 April 2012

Chairman’s Report BSC Panel Andrew Pinder 12 April 2012

ELEXON Report BSC Panel Victoria Moxham 12 April 2012

Verbal update on issues loading LLF data into SVAA Caroline Wright 12 April 2012

59 SVAA load of 2012/13 LLF data for the BSC Year system produced exceptions: SVA LLFCs that were not registered in MDD LLFCs registered in MDD with no associated LLFs 8 LDSOs out of 19 impacted Issue 1: 4 LDSOs had not submitted required MDD change requests Issue 2: 4 LDSO had re-submitted SVA LLF files which were not processed by ELEXON What was the issue ?

60 Impacted LDSOs contacted: Instructed to provide MDD change request for May MDD release; or Notified that we still needed to process their SVA files Impacted HHDAs advised not to download outdated files from 4 LDSOs until latest version on the Portal Files loaded on 4 April 2012 All HHDAs confirmed that they have downloaded the correct files Informed the SVG and the ELEXON Board Default LLFs used for impacted MSIDs in II credit calculations 1 April – 3 April 2012 No discernible impact on levels of Energy Indebtedness and required Credit Cover What did we do and what is the impact?

61 Internal investigation to understand process failure Report back to the SVG, Board and Panel with outcome report and recommendations as appropriate Next steps

Smart Update Chris Rowell 12 April 2012

63 & Smart Metering: Consultations & Conclusions DCC Licence P116+ Q14 DCC Licence Application Regulations P116+ Q4 Data Access & Privacy P97 Q30 Consumer Engagement Strategy P92 Q36 Smart Energy Code P160 Q63 1 Jun Updated Impact Assessments 15 May 1 Jun Programme Update (P13) metering-imp-prog-update-apr2012.pdf DECC response to 2011 consultations on Licence Conditions & Installation CoP EC notification of SMETS v1.0

64 Decisions! Rollout (domestic & smaller non domestic) to complete by 31 December 2019 no exemptions for early (non compliant) meter installations Technical Specifications SMETS v1.0 – European Commission ‘shortly’ Communications technology not specified (HAN & WAN) v1.0 compliant meters will count to rollout target Suppliers responsible for v1.0 equipment assurance Consumer Protections Licence obligation for compliance with Installation CoP No sales during installation Data collection: monthly (any purpose) – daily (regulated purposes – consumer opt out) – HH or marketing (consumer opt in)

65 SEC Content Section Activity Participation Party types Accession rules Using DCC Services Enrolment/withdrawal of meters DCC’s Comms Services DCC Charges Governance & Change SEC Relevant Objectives SEC Panel Code Administrator & Secretariat Mods Process Reporting Assurance & Enforcement Compliance & Assurance Liabilities Disputes Suspension & Expulsion Other Matters Intellectual Property Rights Confidentiality Transfer of DCC Licence Force Majeure/Business Continuity 1 Jun Voting Members 4 x large Suppliers 1 x small Supplier 1 x gas transporter 1 x electricity distributor 2 x other DCC comms users up to 2 consumer reps 1 SEC Panel chair appointee 1 SEC Panel chair Non Voting Members 1 x DCC appointee Non Voting Attendees 1 x Authority appointee 1 x Government appointee

66 Privacy & Data Access Proposals User Access Consumer Access via HAN Access via Supplier Suppliers Monthly Data capture for all uses Daily Data capture for all uses except marketing (with opt- out) > Daily or for marketing needs consumer opt-in Networks Options As per Supplier HH access subject to networks developing plans for approval that demonstrate protection of privacy Third Parties Data via consumer consent Can be via DCC, subject to meeting SEC rules Non Domestic premises DECC will consider if any proposals are required Settlement No specific provisions for Settlement but will consider how privacy framework could change if Settlement changes 1 Jun

67 Consumer Engagement Strategy & Tools Indirect Feedback Direct/ Real Time Feedback Motivational Campaigns Advice & Guidance Central Delivery Body? 1 Jun Help consumers make energy savings Ensure vulnerable / low income get benefits Build support & address concerns

68 Licence Application Regulations 4 stage tender exercise Qualification Proposal Best and Final Offer Preferred Applicant DCC Licence & Licence Application Regulations 15 May Draft Licence Copious detail as per other licences… 1 Jun

69 Smart Budget Full Year 2011/12 Released Funds £,000 Spend this month £,000 Full Year £,000 Smart Support Smart Opportunities TOTAL

Distribution Report David Lane 12 April 2012

National Grid Report Ian Pashley 12 April 2012

Ofgem Report Jon Dixon 12 April 2012

Accepting Modification Proposals Adam Richardson 12 April 2012

75 If there’s no Defect in the BSC the Modification is invalid and should be rejected? Should the cost of assessing Modifications be a factor when determining if or how they should be progressed? Recent Modifications: Concerns Arising Complex Modifications with many potential solutions should be considered as Standing Issues instead? Does proposer ownership mean the proposer should dictate the process and progression timescales for Modifications? Can ELEXON or the BSC Panel reject a Modification or force it to be withdrawn?

76 Obligations & Governance The BSC Panel Panel Objectives (B1.2.1) Require Panel to give full and prompt effect to the BSC consistent with achieving the BSC objectives and in a transparent, economic, efficient and non-discriminatory way Panel Modification Responsibilities (F1.2.1 & F1.2.2) Operate Mods in efficient, economical and expeditious manner Take account of complexity and urgency Ensure Code facilitates achievement of the Applicable BSC Objective(s) No undue discrimination between BSC Parties or classes of Party Consistent with Code Administration Code of Practice

77 Obligations & Governance The Code Administrator Code Administration Code of Practice Twelve Principles… Principle 1: Code Administrators shall be critical friends Principle 5: Code Administrators shall support processes which enable users to access a ‘pre-Modification’ process to discuss and develop Modifications The BSC Panel

78 Obligations & Governance The Code Administrator Modification Discuss Issue Modification Secretary To Authority Modification Workgroup (Issue Group) The BSC Panel Standing Issue

79 Obligations & Governance The Code Administrator Modification Secretary Modification Standing Issue Discuss Issue To Authority Modification Workgroup (Issue Group) The BSC Panel

80 The BSC and BSCP40 Help Desk Queries Direct Contact Web-pages: Guidance Notes Process Diagrams Groups and Forums – E.g. Panel Committees (ISG, SVG) Expert Groups (PSRG, TAMEG) Cross Codes Forum etc. Help and Support Available Discuss Issue F1.2.4A requires BSCCo to provide assistance in relation to Modifications including assistance with drafting a Modification Proposal

81 To be accepted by the Modification Secretary a Modification Proposal must contain (F2.1.2): Name of Proposer & Proposers Rep Description of issue or defect Description of nature / purpose of Mod Indication of Code Sections to be amended (& nature of amendment) Rationale why Proposer believes Mod would better facilitate achievement of the Applicable BSC Objective(s) Indication of impact on Core Industry Documents Indication of impact on BSC Systems / Party’s systems & processes Rationale for urgency/self governance/exemption from SCR What is a “Valid” Modification? Description of issue or defect

82 The scope of the BSC is defined in Condition C3.2 of NGET's Transmission Licence, which defines the 'balancing and settlement arrangements' Definition is short & unspecific and may be construed widely It must be taken to encompass everything currently in the BSC What is a valid “Issue” or “Defect”? Unless a proposed Modification is wholly unrelated to balancing, imbalance determination or settlement it is likely to be difficult to conclude with certainty that it falls outside the scope in C3.2. New things can be introduced into the BSC so long as they fall within the scope of C3.2. Unless a proposed Modification is wholly unrelated to balancing, imbalance determination or settlement it is likely to be difficult to conclude with certainty that it falls outside the scope in C3.2. New things can be introduced into the BSC so long as they fall within the scope of C3.2.

83 NGET Transmission Licence Condition C3.2 C3.2 The balancing and settlement arrangements are: a)arrangements pursuant to which BSC parties may make, and the licensee may accept, offers or bids to increase or decrease the quantities of electricity to be delivered to or taken off the total system at any time or during any period so as to assist the licensee in coordinating and directing the flow of electricity onto and over the national electricity transmission system and balancing the national electricity transmission system; and for the settlement of financial obligations (between BSC parties, or between BSC parties and the licensee) arising from the acceptance of such offers or bids b)arrangements: i.for the determination and allocation to BSC parties of the quantities of electricity delivered to and taken off the total system, and ii.which set, and provide for the determination and financial settlement of, obligations between BSC parties, or (in relation to the system operator's role in co-ordinating and directing the flow of electricity onto and over the national electricity transmission system) between BSC parties and the licensee, arising by reference to the quantities referred to in sub-paragraph (i), including the imbalances (after taking account of the arrangements referred to in sub-paragraph (a)) between such quantities and the quantities of electricity contracted for sale and purchase between BSC parties. C3.2 The balancing and settlement arrangements are: a)arrangements pursuant to which BSC parties may make, and the licensee may accept, offers or bids to increase or decrease the quantities of electricity to be delivered to or taken off the total system at any time or during any period so as to assist the licensee in coordinating and directing the flow of electricity onto and over the national electricity transmission system and balancing the national electricity transmission system; and for the settlement of financial obligations (between BSC parties, or between BSC parties and the licensee) arising from the acceptance of such offers or bids b)arrangements: i.for the determination and allocation to BSC parties of the quantities of electricity delivered to and taken off the total system, and ii.which set, and provide for the determination and financial settlement of, obligations between BSC parties, or (in relation to the system operator's role in co-ordinating and directing the flow of electricity onto and over the national electricity transmission system) between BSC parties and the licensee, arising by reference to the quantities referred to in sub-paragraph (i), including the imbalances (after taking account of the arrangements referred to in sub-paragraph (a)) between such quantities and the quantities of electricity contracted for sale and purchase between BSC parties.

84 Issues may arise when it is unclear if all of the Modification Proposal falls within C3.2, but part of it does In this case it is arguable that the Modification Proposal would change the BSC into something of which at least part was still contemplated by C3.2, and therefore the BSC Panel must progress it through the Modifications Process in Section F of the BSC Previous Legal Advice on C3.2 C3.2 The balancing and settlement arrangements encompass matters relating to: a) bids or offers to adjust quantities of electricity on the total system b)assisting licensee in coordinating & directing the flow of electricity onto & over the national electricity transmission system c)aiding licensee balancing national electricity transmission system d)the allocation of the quantities of electricity to BSC Parties e)the settlement of financial obligations between BSC parties C3.2 The balancing and settlement arrangements encompass matters relating to: a) bids or offers to adjust quantities of electricity on the total system b)assisting licensee in coordinating & directing the flow of electricity onto & over the national electricity transmission system c)aiding licensee balancing national electricity transmission system d)the allocation of the quantities of electricity to BSC Parties e)the settlement of financial obligations between BSC parties

85 Two Considerations: 1.Valid Mod: Over-rule acceptance / rejection of Modification Proposal by the Modification Secretary (based on compliance with F2.1.2) 2.Related Mods: Refuse to accept the Modification Proposal if it has substantially the same effect as a Pending Modification or a Modification that has been rejected within the past two months (F2.1.4). (The Authority can overrule this BSC Panel decision.) Acceptance of Modification Proposals by the BSC Panel The BSC Panel is not entitled to decline to process a Modification Proposal on any of the grounds for which the Authority might not approve a Modification Proposal. These are matters for the Authority. The BSC Panel may express a view on such issues but it cannot exclude a proposal from being processed on these grounds. The BSC Panel is not entitled to decline to process a Modification Proposal on any of the grounds for which the Authority might not approve a Modification Proposal. These are matters for the Authority. The BSC Panel may express a view on such issues but it cannot exclude a proposal from being processed on these grounds.

86 Proposers Own their Modification & can amend Proposed Solution Proposers may withdraw their Modification prior to the Workgroup reporting its recommendations to the Panel Modification Workgroups can derive an Alternative Solution BUT THE PANEL OWNS THE PROCESS The Panel may require a Modification Proposal to be withdrawn at any time if the Proposer of that Modification is deliberately and persistently disrupting or frustrating the work of the Workgroup and that Modification Proposal shall be deemed to have been so withdrawn (F2.1.12A). A Word on Proposer Ownership

87 Pre-Mod advice Concern over governance issues it might create Shaping of mod Ultimately rejected Case Studies P264 Two-thirds majority requirement for Panel recommendations on licence originated Modifications

88 Pre-Mod advice Explanation of how issue currently addressed Proposer seeking clarification We would have recommended rejection Ultimately withdrawn Case Studies P264 Two-thirds majority requirement for Panel recommendations on licence originated Modifications P267 Consideration of wider industry developments & duration of changes when agreeing progression timetables

89 Pre Mod advice Consideration of implications Shaping of mod Advice it should be taken forward as an issue Case Studies P264 Two-thirds majority requirement for Panel recommendations on licence originated Modifications P267 Consideration of wider industry developments & duration of changes when agreeing progression timetables P274 Cessation of Compensatory Adjustments

90 Pre-Mod advice Explanation of custom and practice Proposer seeking clarification We agreed that the BSC was not clear Ultimately a simpler change than proposer anticipated to cement existing custom and practice Case Studies P264 Two-thirds majority requirement for Panel recommendations on licence originated Modifications P267 Consideration of wider industry developments & duration of changes when agreeing progression timetables P274 Cessation of Compensatory Adjustments P275 Extending the Performance Assurance Framework

91 If there’s no Defect in the BSC the Modification is invalid and should be rejected? Recent Modifications: Concerns Arising »It should be rejected if the defect or issue is wholly outside the scope of balancing and imbalance settlement (but this may be difficult to demonstrate).

92 Should the cost of assessing Modifications be a factor when determining if or how they should be progressed? Recent Modifications: Concerns Arising »No. The Panel must progress all Modification Proposals brought before it on an equitable basis without undue discrimination, taking account of the complexity and urgency of the proposal.

93 Recent Modifications: Concerns Arising Complex Modifications with many potential solutions should be considered as Standing Issues instead? »ELEXON encourages this when discussing issues and ideas regarding prospective Modification Proposals with Parties. But it is ultimately up to the Proposer whether to raise a Modification or Standing Issue. »The BSC Panel may send Modifications with ill-defined solutions into a “Definition” phase.

94 Recent Modifications: Concerns Arising Does proposer ownership mean the proposer should dictate the process and progression timescales for Modifications? »No. The Proposer can only dictate the Proposed Solution. The Panel is the guardian of the Process.

The changing landscape: the impact of the European Union Steve Wilkin 12 April 2012

96 Bid-Offer Acceptances & BMRS? Bid-Offer Acceptances & Settlement Payments The Future: EU Initiatives REMIT (Regulation on Energy Market Integrity & Transparency) MiFID II Exemption (Markets in Financial Instruments Directive) Balancing, Settlement, Market Coupling, & Data Exchange Network Codes (particularly Balancing) Third Package (Single European Market) Comitology Guidelines (Data Transparency) EMIR, MAD, etc (European Market Infrastructure Regulation, Market Abuse Directive, etc) Single Energy Market by 2014Fallout from financial crash in 2008 Key players with formal roles:

Commission decides what areas need to be covered and drives process: Framework Guidelines drafted by ACER (and approved by Commission) Network Codes drafted by ENTSO-E (and approved by Commission) Commission presents to Ministers for approval (‘comitology’) Then legally binding Process Followed to develop Network Codes 3 year plan for electricity Network Codes: odes_en.htm

The European Electricity Target Model (diagram from ENTSO-E) Congestion Management and Capacity Allocation (CACM) Network Code Balancing Network Code

CACM Network Code: ENTSO-E live consultation on draft Network Code – closes 23 May: congestion-management congestion-management Potential BSC impacts: timing of Gate Closure; market splitting Plan to have legal Network Code finalised by end 2013 Potential BSC impacts & some current events (1)

Balancing Framework Guidelines: ACER Consultation from end April? (ACER Home page: Potential BSC impacts: Balancing Mechanism and payments; imbalance settlement and pricing Plan to have legal Network Code finalised by end 2014 Ofgem consultation on implementing the EU Target Model in GB: odel%20open%20letter.pdf&refer=Europe odel%20open%20letter.pdf&refer=Europe Workshop 30 April and consultation closes 22 May Potential BSC impacts & some current events (2)

Industry and UK Influence (also trade associations, stakeholder events, consultations) JESG NGET, Ofgem, industry and ELEXON Network Code Drafting Comitology (political agreement) DECC/Ofgem Stakeholder Group DECC, Ofgem, NGET, industry and ELEXON Framework Guidelines

Any Other Business 12 April 2012

Next Meeting: 10 May 2012