settlement reform (market-wide half hourly settlement
TRANSCRIPT
Settlement Reform
(Market-wide Half Hourly Settlement - MHHS)
Stakeholder Event
16th September 2019
AGENDA
10:00 - 10:30 Registration
10:30 - 10:40 Introductions and Welcome
10:40 - 11:00 MHHS project and timeline update
11:00 - 12:15 The current status of the TOM, next steps + Q & A
12:15 - 13:00 Lunch
13:00 - 14:15 Business Case update + Q&A
14:15 - 14:30 Break
14:30 - 15:45 Access to data update, including discussion + Q & A
15:45 - 16:00 Consumer impacts Call for Evidence responses update
16:00 Wrap up and close
3
MHHS Project & Timeline Update
Anna Stacey
MHHS implementation
Suppliers face actual
cost of customer’s
consumption
Enables and incentivises
innovation and new business models:
DSR tariffsEVs, battery storage…Decentralised energy
Consumers respond to signals and incentives
Significant demand
shift across grid
Reduced generation
capacity needs
Improved settlement:Shorter time frameSmaller collateral More accurate settlement dataElimination of load profilingImproved forecasting (medium term)
Reduced balancing
system costs
Reduced barriers to
market entry
Cheaper bills
Short term
Medium term
Long termCheaper security of
supply
Avoided network reinforcement
Increased competition
Incentives
Will lead to
Likely to lead to
Enables
Less carbon intense electricity
generation
Settlement Reform: Benefits
Vulnerable consumers
Future Retail Regulation
Half-hourly settlement
(HHS)Switching
Programme
Price Cap
Smart Metering
enables
Future supply market
arrangements
Targeted Charging Review
Network Access & Forward
Looking Charges
RIIO2
Smart Systems & Flexibility
plan
HHS is an enabler for flexibility and demand side response by providing data and incentives
HHS sits alongside a package of retail market change programmes
HHS enables innovation and new business models
Strategic interactions
Post Price-cap effective competition
Target Operating
Model
Business Case
Access to Data
Consumer Impacts
Settlement Reform: what it involves
Recent milestones
• Agent functions decision (May)
• Response to feedback on Outline Business Case (June)
• Access to data decision (June)
• Responses to consumer call for evidence (July)
• Future enabling the TOM (July)
• Request for Information (August)
Settlement Reform: Project Timeline
9
TOM Update
ELEXON – Kevin SpencerOfgem - Saskia Barker
Market-wide Half Hourly Settlement:
Stakeholder Event
16 September 2019
ELEXON
DWG Preferred TOM and Transition Approach
Public
The Existing Market Model and
TOM Overview
Existing Market Model
readings
NHHMOA
Meter Technical Details
NHHDC
NHHDA
EAC/AA
BSC CENTRAL SYSTEMS
Suppliers HHMOA
Aggregate Volumes
HHDC
HHDA
Meter Technical Details
LDSO
HH reads
HH reads
Aggr. Vol.
HH reads
DUoSReport
Reg. data
Reg. data
DCC readings
readings
Config. Data
readings
Reg. Data
RegistrationData
SMRA
HH reads
Non Smart Meter
Smart Meter
Advanced Meter
MAs
Target Operating Model: Overview
High Level Transition Approach
State 0 – current SVA market arrangements
NHHDA
Smart & Non-Smart Meters
NHHDC
NHH HH
Advanced Capable Meters
Unmetered Supplies
BSC Central Systems (SVAA)
Smart Meters Advanced MetersUnmetered
Supplies
HHDA
HHDC
MA
State 1 – Pre-transition
NHHDA
NHHDC
Smart & Non-Smart Meters
Advanced Meters
BSC Central Systems (SVAA)
HHDA
HHDC
HHDA
HHDC
NHHDA
NHHDC
HHDA
HHDC
NHHDA
NHHDC
Unmetered Supplies
MAAdvanced capable Meters (RCAMY,
RCAMR or NCAMR)
Advanced Meters (H)
Elective HH settled SMETS Meters
SMETS and Legacy Meters
State 2 – Qualification of new TOM Services
NHHDA
NHHDC
Smart & Non-Smart Meters
Advanced Meters
BSC Central Systems (VAS)
HHDA
HHDC
HHDA
HHDC
NHHDA
NHHDC
HHDA
HHDC
NHHDA
NHHDC
Unmetered Supplies
Advanced capable Meters (RCAMY,
RCAMR or NCAMR)
Advanced Meters (H)
Elective HH settled SMETS
Meters
SMETS and Legacy Meters
SDS
MA
MDR
PSS
State 3 – Migration/adoption of metering systems
NHHDA
NHHDC
Smart & Non-Smart Meters
Advanced Meters
BSC Central Systems (LSS + VAS)
HHDA
HHDC
HHDA
HHDC
NHHDA
NHHDC
HHDA
HHDC
NHHDA
NHHDC
Unmetered Supplies
SDS
Advanced capable Meters (RCAMY,
RCAMR or NCAMR)
Advanced Meters (H)
Elective HH settled SMETS
Meters
SMETS and Legacy Meters
LSS
MA
MDR
PSS
State 4 – Parallel running with new TOM and existing services
NHHDA
NHHDC
Smart & Non-Smart Meters
Advanced Meters
BSC Central Systems (LSS + MDS + VAS)
HHDA
HHDC
HHDA
HHDC
ADS
HHDA
HHDC
UMSDS
Unmetered Supplies
SDS
Elective HH settled SMETS
Meters
SMETS and Legacy Meters
MA
MDR
PSS ARP
State 5 – Cutover to TOM with new settlement timetable
Smart and Non-Smart Advanced
BSC Central Systems (LSS + MDS + VAS)
ADS UMSDS
Unmetered
SDS
MDRMRS
PSS ARP
Load Shape data
Transition Approach: Critical Path
Critical Path
When UMSDS can interface
with BSC Central Systems
When the SDS can
access load shaping data
When the SDS can be appointed to
MPANs
When all NHH Settlement Runs are completed
Data Services
When Data Services can
interface with
Registration
When UMSDS and ARP SP level
data is re-directed to BSC Central Systems
When the SDS can interface with the BSC
Central Systems
When the SDS can
obtain meter reads via
MDR
When the MSS and MSA can interface
with the Registration
When all NHH Settlement Runs are completed
When all Settlement Runs for formerly NHH settled Advanced MPANs have
been completed
When the ARP can interface
with the BSC Central Systems
Performance Assurance
Assumptions and Principles
PAF: Assumptions and Principles
The DWG have set out the following Assumptions and Principle to be used by respondents to the consultation
when considering the impacts of performance serials:
Assumptions:
■ Performance serials will not be the same as currently for either NHH or HH
■ Performance serials could be configurable/adaptable and set by the PAB
■ Performance serials will not be based on Actuals and Estimates as currently defined.
PAF Principles:
■ The performance serials should incentivise moving to HHS;
■ The performance serials should maintain appropriate pressure on current Settlement performance;
■ Parties should not be penalised for poor performance due to systemic events outside their control (for
example, any Data and Communications Company service issues);
■ Parties should not be penalised for customer choice (for example, a customer choosing not to have a
smart Meter or to opt-out of sharing their smart Meter data); and
■ Performance serials could be flexed by Market Segment, Measurement Class and/or Meter type.
TOM Settlement Timetable and
Disputes
Settlement Timetable: Recap
Run Timing
Interim Information (II) Run 4 WD
Initial Settlement (SF) Run 5-7 WD (depending on DCC read capability)
Interim Reconciliation Run 33 WD
Final Reconciliation (RF) Run 4 months
Disputes Final (DF) Run 20 months
Transition to the new Settlement Timetable
The DWG proposes the following approach:
■ The simplest approach to implementing the revised Settlement timetable is to wait
until all MPANs are being settled under the TOM;
■ Shortening the SF Run is dependent on the Load Shaping Service being ready;
■ Settlement Runs could be reduced at different times – for example, the RF Run
timing could be reduced before the SF Run timing;
■ Different market segments could ‘cut off’ at the current R2 Run at different times,
with Settlement no longer accepting/processing data for the given segment after R2;
■ The DF Run cannot realistically be shortened until all Meter data is being directed to
BSC Central Settlement Services, due to the impact on Data Aggregators;
■ Transition to the reduced Settlement timetable would ideally occur after changes to
the BSC Central Settlement Services have gone live; and
■ A decision on how and when to reduce the Settlement timetable could be taken
nearer the time, based on market monitoring against trigger points.
DWG proposals for Disputes
■ Responses to the TOM consultation were uneasy about having the Dispute window
cut–off at 12 months due to the as yet unknown impact of the shorter RF window.
■ The DWG considered it sensible if the dispute window was set to a multiple of the
RF window which is proposed at 4 months.
■ This left the following options for the Dispute timings from the Settlement date:
–16 Months;
–20 Months; and
–24 Months
■ The DWG is proposing 20 months from the Settlement Date as the best balance
between the desire to shorten the timetable and the impact of material disputes.
■ The DWG also agreed that keeping 20 months of Settlement data in case of disputes
would not be an issue under the TOM.
Dispute Materiality Thresholds
■ The DWG recommends that the qualifying materiality for Trading Disputes should be set
significantly higher than today. The PAB had suggested that the Dispute window could have
‘ratcheted’ Materiality as time progresses for raising disputes.
■ An example of such an approach could be ‘stepped’ increases in the materiality threshold for
each 4 month ‘band’ following the RF window:
■ PAB or TDC could set and adjust the threshold based on experience under the new TOM, and
an appropriate deadline for each band would be needed to allow time for dispute analysis.
■ Extra Settlement Determinations (ESDs) could be carried out after the 20 Months, but these
would be financial calculations rather than a re-run of the Settlement process.
Next Steps for the TOM work
TOM Development Phase Proposals
• Further work on the TOM is required -
• DWG final report identified outstanding areas for further work including:
• Group Correction
• Data item rationalisation
• The preferred TOM is architecture neutral
• Proposed next phase of work: developing the details of the TOM, including system architecture design
Development Phase Governance: New structure
• Standing down the DWG – Final report delivered
• Move into the next phase with the creation of 2 new industry groups: CCDG & AWG
• Seeking your views on our proposals soon
SRO – Decision Maker
Design Advisory Board
Ofgem TOM TeamStakeholder Engagement
Architecture Working Group
Code Change and Development
Group
OfgemTOM Board
OfgemProject Board
Development Phase Governance: CCDG
• Code Change and Development Group (CCDG)
• Will identify the required changes to industry codes including the BSC
• Develop outstanding details of the TOM
• Members from industry – we will put out a call for applicants at the same time as we publish the governance proposals for comment
• Will agree a work plan for Ofgem to approve. Expected to last 12-18 months
Development Phase Governance: AWG
• Architecture Working Group (AWG)
• Will develop system architecture design and interface specifications
• Will specify industry interfaces
• Members from industry – we will put out a call for applicants at the same time as we publish the governance proposals
• Will agree work plan for Ofgem to approve. Certain milestones will need to be met before Full Business Case publication.
TOM Development Phase Governance
• Design Advisory Board will continue to give expert advice
• Scope expanding to include impact assessment and access to data
• Set of Development Principles – Build on existing TOM design principles; subject to any further steer from Ofgem
• Potential central database of HH data
• Data & communication standards
• Security Standards
• Use of HH data for Load Shaping & other BSC services
• Transition
• Data Service Qualification
TOM next steps
37
• Publish the governance documents for feedback & call for applicants
• Includes terms of reference and development principles
• Confirm governance following comments
• Publish list of members of CCDG and AWG
• Workgroups begin in November
• Meetings will be monthly
TOM Development Phase Governance
Any Questions?
39
Business Case updateAndy MacFaul /Josep Garcia-Sole
• A 3-stage assessment of the case. We have published Strategic and Outline Business Cases
• The final stage, the Full Business Case, will include an economic impact assessment (IA) of costs/benefits
•We will consult on a draft version of the IA, which will be informed by the current Request for Information (RFI)
Business Case progress to date
• RFI, covering letter and Q&A are on the website
• Targeted requests to larger suppliers and other stakeholders including DCC, Elexon, DNOs, ESO
• Enable comparison of Business as Usual and MHHS
– IT and operational costs
– innovation and competition effects
– forecasting and balancing impacts
– import and export MPANs
– implementation over varying timescales
Scope of the RFI
1. What will be the most significant cost drivers for your organisation?
2. How long will you need to get IT-ready?
3. How will MHHS affect your demand forecasting?
4. What impact will there be on innovation and how will consumers respond over time?
Potential impacts of market-wide half-hourly settlement
Implementation period
Migration/adoption and
parallel running
Migration/Adoption can occur in the implementation period as and when the systems and processes are ready. Some market
segments may move before others
Cutover to the TOM and new settlement timetable
2, 3 or 4 years 1 year
Q3
202
0
Figure A: Transition timeline to the new TOM
43
Access to Data Update
Ali MacMillan
Access to data decisions (June 2019) - Reminder
44
1. Domestic consumers - Legal obligation to process HH consumption data for settlement purposes, unless the consumer opts out
2. Microbusinesses – Legal obligation to process HH consumption data for settlement purposes (no opt-out)
3. Enhanced privacy - Ruled out
4. Existing customers – Subject to the existing rules until they decide to change electricity contract
5. Forecasting - Suppliers are also permitted to use HH data collected for settlement purposes for forecasting purposes
6. Export data – Right to opt-out should not be available for export data
7. Future review – Following implementation, we will be reviewing the evidence to understand if the framework is appropriate in order to realise the benefits of MHHS. We will set out our expected review date when publishing our final decision on MHHS
We also said we thought that, when a domestic consumer opts out of sharing their data for settlement and forecasting purposes, it should be to daily granularity
Access to data rule changes – hypothetical timeline
45
• June 2019 – Access to data decision document published
• Q3 2020 – Final decision on MHHS in the FBC, subject to Impact Assessment
• Late 2020 / Early 2021 – Licence amendment to reflect new access to data framework:
• Smart meters installed on basis of opt-out for domestic consumers
• Existing customers that decide to switch (tariff / supplier) subject to new rules
• Opt-out preferences recorded by the supplier, though the data is not yet collected
• Regular data sharing discussion with the consumer ‘at appropriate intervals’ (SLC 47.15(b))
• Opt-out consumers reminded of their right to opt-out
• Opt-in consumers reminded of their right to opt-in (actively encouraged)
• 2022 – 2024 – Implementation of MHHS
• Data now collected (subject to consumer data sharing preferences)
• Consumers regularly reminded of their preferences, as above
46
• We now have a minimum of 12 months on the existing rules
• One issue is that smart meters are still being installed on opt-in
• However, will be a period of time between the licence change and implementation date (~2-4 years) for customers to move over onto opt-out (via deciding to switch / changing tariff) / suppliers to encourage them to opt-in
• Issue for MHHS will be disengaged consumers – ie those consumers who do not have privacy concerns, yet are stuck on opt-in as they have not decided to switch / change tariff since accepting their smart meter
• Size of this ‘lost opportunity’ pot depends on a number of factors including:
• Progress of the smart meter rollout when the new rules apply
• Customer switching rates (and ‘non-switching’ rates)
• Supplier messaging
Access to data rule changes – customer breakdown
Access to data rule changes – customer breakdown
47
Three categories of domestic electricity customers on the date of the licence amendment…. Don’t want a smart meter Smart Meter not installed yet Smart meter already installed
Of the number who have their smart meter installed already…
1) Change tariff / supplier before implementation date: some will change tariff or supplier, move to opt-out, and do not opt-out (NOO) some will change tariff or supplier, move to opt-out, and exercise their right to opt-out (OO)
2) Do not change tariff / supplier before implementation: some will not change tariff or supplier, remain on opt-in, but do opt-in (OI) some will not change tariff or supplier, remain on opt-in, and do not opt-in (NOI)
Of the number in the NOI category….
some would be minded to opt-out anyway (WOO) some would not be minded to opt-out - (WNOO) LOST OPPORTUNITY
Access to data – remaining policy questions
48
• Are there any areas that you, as MHHS stakeholders, would like us to consider, or require further clarity on?
• Split into groups and note your ideas on the flipchart. Suggest thinking about the following categories:
- Customer communications / messaging / mechanics of opt-out process- Regulatory framework- Domestic customers- Existing customers - Microbusinesses- Future review- Other
Examples:- At what stage in the customer journey does a ‘new’ customer become an ‘existing’ customer? - What happens when an existing customer with privacy concerns changes tariff / supplier and moves
to opt-out, but is not comfortable with sharing daily data?- Is there a role for Ofgem in communicating the benefits of sharing data for settlement / forecasting?- What data will we use to inform our future review?
As ever, please feel free to contact us, either individually or through the MHHS inbox, if you would like to discuss further
49
Consumer Impacts Update
Abid Sheikh
Settlement Reform: Work streams
Consumer work:
• We published a Call for Evidence (CfE) on potential impacts on consumers following MHHS – 5 Feb 2019 (closed 29 March).
• Views and evidence sought on:
• Consumer ability and/or willingness to engage with their electricity usage
• Consumer ability to load shift/offer flexibility
• Consumer access to, and ability/willingness to, adopt innovative technology to offer flexibility
• Consumer ability to understand and choose a suitable tariff for them from potential new offerings in the market including those associated with offering flexibility/innovative technology
Consumer CfE: key points in responses -domestic consumers
Tailored customer communications, however provided, work best –simple, clear, easy to understand messaging
Data sharing a precursor to effective customer communication and offer of ‘smart’ benefits, otherwise limits engagement
Make benefits tangible – defined and relatable cost savings - to encourage engagement and load shifting
Suggestions for protections include: ‘Buy and try’ – give consumers long cooling off periods, no exit fees on flexibility tariffs & services -protect from risk of mis-selling and being on an unsuitable tariff
Vulnerable consumers seen as more at risk due to affordability/ability to access new technology concerns. Need more targeted support
Ofgem encouraged to do further distributional analysisConsumers will prefer future tariffs/options matching their lifestyles,
few will prefer flexible, dynamic ToU tariffs – automation with manual override?
Main messages
Responses from a range of stakeholders – summary and responses published (8 July 2019)
Consumer CfE: key points in responses –small non-domestic consumers
Same issues, broadly, as for domestic consumers
In addition:
Small non-domestic consumers are ‘time poor’, rely on trusted parties (TPIs) and buy on price
Would like a role for Ofgem in regulating TPIs to level the playing field with licensed suppliers
Saving energy more attractive than flexibility – sell the wider benefits (environment)
Need an economic case for flexibility – business benefits from investment, community schemes (shared costs)
Diversity of consumers (sector and size) will impact ability to flex, use technology
All of above affects take-up of ToU tariffs
Main messages
