1. Credit Modification Proposals Update
Phil Lucas

2. State of Play Discussion of draft Proposals at last Workstream
Ofgem subsequently clarified the nature of the Value at Risk mechanism as defined in its Conclusions Document (58/05)
Such clarification has not warranted significant change to National Grid Distribution’s VAR proposal as outlined at Feb and Mar 2007 Workstreams
Only change is in respect of calculation of additional 15 days proxy
Mod 0728 – Ofgem rejected on the basis that movement of obligations did not facilitate the relevant objectives of the code (as defined in the GT licence). Ofgem drew analogy with the Interruptible contacts regime recognising that the quality of this information is good due to the incentives (penalties for failure to interrupt etc) and encouraged consideration of incentivisation of the provision of emergency contact info.
Credit Mod Proposals – 9 in all (5 Transco, 4 User). Covers unsecured credit, third party provided cover, penalties for non payment and non rectification of credit position following downgrade, invoice amount set off, calculation of value at risk (code credit limit)
Primes and Subs – National Grid position communicated externally re: ownership of downstream network. Ofgem acknowledge but ask Transco to evaluate options to enable User to withdraw from Primary Meter with no load.
UKD Representation to Transmission Mods – (AR to add speaker note).
Provision of Interruption information (DNs > UKT)
Extension of sunset clauses (following delay to commencement of enduring regime)
Emergency Cash Out
SPAA – potential transfer of certain Supply Point related activities from UNC to SPAA, concerns over dual governance, I&C suppliers not signed on to SPAA etc.
UNC Development Forum – monthly meetings held (from Aug 2005) to discuss gameplans for UNC change from a UKD perspective.

3. 15 Day Proxy
Draft Proposal worked on the assumption that average days duration for a calendar month is 30 days. (365/12 = 30.4 days)/(366/12 = 30.5)
Thereby multiplying the outstanding amounts by 1.5 added the 15 days proxy
Provided an ‘economic’ implementation option
Mod 0728 – Ofgem rejected on the basis that movement of obligations did not facilitate the relevant objectives of the code (as defined in the GT licence). Ofgem drew analogy with the Interruptible contacts regime recognising that the quality of this information is good due to the incentives (penalties for failure to interrupt etc) and encouraged consideration of incentivisation of the provision of emergency contact info.
Credit Mod Proposals – 9 in all (5 Transco, 4 User). Covers unsecured credit, third party provided cover, penalties for non payment and non rectification of credit position following downgrade, invoice amount set off, calculation of value at risk (code credit limit)
Primes and Subs – National Grid position communicated externally re: ownership of downstream network. Ofgem acknowledge but ask Transco to evaluate options to enable User to withdraw from Primary Meter with no load.
UKD Representation to Transmission Mods – (AR to add speaker note).
Provision of Interruption information (DNs > UKT)
Extension of sunset clauses (following delay to commencement of enduring regime)
Emergency Cash Out
SPAA – potential transfer of certain Supply Point related activities from UNC to SPAA, concerns over dual governance, I&C suppliers not signed on to SPAA etc.
UNC Development Forum – monthly meetings held (from Aug 2005) to discuss gameplans for UNC change from a UKD perspective.

4. 15 Day Proxy
Amended legal text refers to the duration of the billing month concerned
VAR = a+(15*(a/b))
a is the aggregate value of all charges which at that time have been billed to such counterparty (but not necessarily due) but remain unpaid, and
b is the number of calendar days in the relevant income accrual month
Mod 0728 – Ofgem rejected on the basis that movement of obligations did not facilitate the relevant objectives of the code (as defined in the GT licence). Ofgem drew analogy with the Interruptible contacts regime recognising that the quality of this information is good due to the incentives (penalties for failure to interrupt etc) and encouraged consideration of incentivisation of the provision of emergency contact info.
Credit Mod Proposals – 9 in all (5 Transco, 4 User). Covers unsecured credit, third party provided cover, penalties for non payment and non rectification of credit position following downgrade, invoice amount set off, calculation of value at risk (code credit limit)
Primes and Subs – National Grid position communicated externally re: ownership of downstream network. Ofgem acknowledge but ask Transco to evaluate options to enable User to withdraw from Primary Meter with no load.
UKD Representation to Transmission Mods – (AR to add speaker note).
Provision of Interruption information (DNs > UKT)
Extension of sunset clauses (following delay to commencement of enduring regime)
Emergency Cash Out
SPAA – potential transfer of certain Supply Point related activities from UNC to SPAA, concerns over dual governance, I&C suppliers not signed on to SPAA etc.
UNC Development Forum – monthly meetings held (from Aug 2005) to discuss gameplans for UNC change from a UKD perspective.

5. Implications
At certain points in the month invoices may be due from different months
Requires calculation of individual daily implicit rates:
Mod 0728 – Ofgem rejected on the basis that movement of obligations did not facilitate the relevant objectives of the code (as defined in the GT licence). Ofgem drew analogy with the Interruptible contacts regime recognising that the quality of this information is good due to the incentives (penalties for failure to interrupt etc) and encouraged consideration of incentivisation of the provision of emergency contact info.
Credit Mod Proposals – 9 in all (5 Transco, 4 User). Covers unsecured credit, third party provided cover, penalties for non payment and non rectification of credit position following downgrade, invoice amount set off, calculation of value at risk (code credit limit)
Primes and Subs – National Grid position communicated externally re: ownership of downstream network. Ofgem acknowledge but ask Transco to evaluate options to enable User to withdraw from Primary Meter with no load.
UKD Representation to Transmission Mods – (AR to add speaker note).
Provision of Interruption information (DNs > UKT)
Extension of sunset clauses (following delay to commencement of enduring regime)
Emergency Cash Out
SPAA – potential transfer of certain Supply Point related activities from UNC to SPAA, concerns over dual governance, I&C suppliers not signed on to SPAA etc.
UNC Development Forum – monthly meetings held (from Aug 2005) to discuss gameplans for UNC change from a UKD perspective.
Invoice Month
Days in Accrued Month
Invoice Type
Invoice Value
VAR - Principal
VAR – 15 day proxy
VAR - Total
Feb 31
Com
£2,000
((2000/31)*15)
£968
£2,968
Mar 28
CSEP
((2000/28)*15)
£1,071
£3,071
£6,039

6. Next Steps Make relevant changes to Legal Text
VAR – as described
Other cosmetic (non-material) changes
Formally raise proposals in time for discussion at the 17 May 2007 Modification Panel
Mod 0728 – Ofgem rejected on the basis that movement of obligations did not facilitate the relevant objectives of the code (as defined in the GT licence). Ofgem drew analogy with the Interruptible contacts regime recognising that the quality of this information is good due to the incentives (penalties for failure to interrupt etc) and encouraged consideration of incentivisation of the provision of emergency contact info.
Credit Mod Proposals – 9 in all (5 Transco, 4 User). Covers unsecured credit, third party provided cover, penalties for non payment and non rectification of credit position following downgrade, invoice amount set off, calculation of value at risk (code credit limit)
Primes and Subs – National Grid position communicated externally re: ownership of downstream network. Ofgem acknowledge but ask Transco to evaluate options to enable User to withdraw from Primary Meter with no load.
UKD Representation to Transmission Mods – (AR to add speaker note).
Provision of Interruption information (DNs > UKT)
Extension of sunset clauses (following delay to commencement of enduring regime)
Emergency Cash Out
SPAA – potential transfer of certain Supply Point related activities from UNC to SPAA, concerns over dual governance, I&C suppliers not signed on to SPAA etc.
UNC Development Forum – monthly meetings held (from Aug 2005) to discuss gameplans for UNC change from a UKD perspective.