annual bsc meeting - elexon · financial results for 2013/14 7 annual bsc meeting 2014 final report...

Annual BSC Meeting

10 July 2014

Health & Safety

Annual BSC Meeting 2014 2

Peter Haigh Chief Executive

Delivering the BSC


■ 27 new BSC Parties

■ 2,567 Settlement Runs

■ 2,023,720 Energy Contract

Volume Notifications received

■ £369m Credit held

■ 18 Modifications

■ 72 Trading Disputes

■ 10 Issues Workgroups

■ 16 consultation responses

■ ISO27001 audit successful

Number of Mods raised by area

Metering (1)

Governance (2)

Settlement (2)

Performance Assurance (1)

Reporting (2)

Adapting to changing times


■ BSC systems and infrastructure

–Business Process Outsourcing

–BMRS

–Business Process and Reporting

■ Europe

■ Electricity Balancing Significant Code Review

■ REMIT

■ Smart world

Nigel Smith Chief Financial Officer

Financial results for 2013/14


■ Final report and accounts for the year show cost of sales of £29.3m

■ This compares to a budget for the year of £36.4m

■ After netting out revenue of £1.7m in relation to EMR, the cost to BSC Parties for

the year was £27.6m

■ Key points to note:

– Savings of £1.5m against budgeted operational costs

– Defraying £1.3m of BSC cost due to EMR activity

– Savings of £1m against our budgeted contracted costs

– No controls deficiencies identified by auditor for the third year running

Financial results for 2013/14


-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

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

Costs of Regular ELEXON Activity Since NETA Go Live

ISIS (Reprocurement) Project

Demand Led

Operational Costs

Contracted

£'000

■ 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’

Questions?

Changing times: The future of

energy settlement

10 July 2014

The ELEXON seminar

Agenda

Changing times: the future of energy settlement 11

■ European energy – is it all about the trilemma? Where is investment coming from?

■ Electricity Market Reform – progress, opportunities and risks

■ Utilising the future smart infrastructure

■ ELEXON’s IS strategy

■ Making ELEXON’s governance fit for the future

European energy – is it all about the trilemma?

Volker Beckers

The trilemma

13

Context

14

■ Over recent years, the EU utilities sector has seen capex cuts, mothballing and

offloading of crucial assets

■ This situation is compounded by the fact that the industry is being held accountable

for rising costs

■ In this context, the market needs to be confident that investments can be delivered

■ Will the CMA lead to an investment hiatus?

■ What does the future hold?

■ Is EMR a blueprint for Europe to follow?


Context

Source: World Energy Trilemma, ‘Time to get real – the case for Sustainable energy investment’, World Energy Council

Climate change: Co2 emissions by country

Source: Handbook of Energy & Economic Statistics in Japan (partially supplemented by UNFCCC data)

Security of supply

17

Capacity

Independence

24/7 availability


The impact of current energy policy

Source: World Energy Trilemma, ‘Time to get real – the case for Sustainable energy investment’, World Energy Council

Affordability

Source: RWE npower Energy Explained

Future challenges

20

Ambitious environmental targets

At least 100GW new-build power capacity

requirement

Phase out and replacement of coal-

fired stations

Replacement/upgrade of over 25GW of gas

and nuclear generators

Substantial increase in demand: electric

vehicles & electrification of heat

Requirement for huge capital investment, but investment is

risky

Questions?

EMR: progress, opportunities and risks

Jonathan Brearley

Recap: why we started EMR and what we aimed for

Without significant

investment:

• higher risk of

blackouts

• over-reliant on gas

imports

• paying more for our

electricity than we need

to

• unlikely to meet our

climate targets

Every generation technology carries its own risks – therefore the key to

ensuring protection for consumers and the planet is to build a diverse mix

The UK Government estimates around £110B investment needed in grids and

generation by 2020

The EMR framework

Where we are today: outline timetable from here

June July Sept Oct Nov Dec

Final DECC

rules and

capacity to be

auctioned

Pre

qualification:

Auction

(currently

start Dec

onwards)

Jan

Capacity

market

August

Budget

allocation and

commencement

of allocation

Notification of

‘winners’ and

contracts sent

out

CfDs

(draft)

Auction/

sealed bids Further design/ budget work

Risks and opportunities/ my assessment

Opportunities Risks

Fundamentals are still there – the

UK needs investment

Political risk – inside and outside

EMR

EMR incentives will be there –

roughly on time and fit for purpose

Political consensus on EMR

Events – Scotland/ Europe

State aid

The fundamentals around cost and operation of our power are changing

– presents both opportunities and risks

Questions?

Utilising the future smart infrastructure

Rob Church

Associate Partner, Smart Metering and Smarter Markets

Moving from the RMR to Smarter Markets

Simplifying Choices

Improving Understanding

Building Trust

Smart Meter Roll-Out

Delivering better outcomes for all consumers through the creation of

smarter energy markets that are efficient, dynamic and competitive.

Consumers are empowered by a market that delivers greater visibility, clearer information, reliable switching and targeted protection

Better quality

information

Easy, fast, reliable

switching

Targeted

protection

Continually building on the smart meter roll-

out to create smarter markets in which all

consumers have confidence and which

support the differing needs of consumers.

2020 and

beyond

SMARTER

ENERGY

MARKETS

Consumers and providers become more efficient in the way they use energy and interact with the market

Consumers save

on energy bills

Improved energy

efficiency A low carbon

economy

SMARTER

ENERGY

MARKETS

Consumers have more control, increased levels of trust and consequently are more engaged in the market

Changing attitudes

to energy use

Alternatives are

accessible.

Providers seize

opportunity

New forms of

engagement

New markets

New attitudes

From Consumer

to Prosumer

Consumers are part of a dynamic market with greater competition, more innovation, better service, new entrants and new offers

31

Overview of the Smarter Markets Programme

Objective DSR: To create a market environment that supports efficient system-wide use of demand-side response. Focus on longer-term market development.

Smarter Markets Programme

Demand-Side Response

Electricity Settlement

Change of Supplier

Consumer Empowerment and Protection

Objective CEP: A work programme to ensure the regulatory arrangements, including during the transition, help consumers realise the benefits of a smarter market

Objective CoS: To reform the change of supplier process so it is faster and more reliable; and move towards next-day switching

Objective ES: To explore whether and how best to introduce half-hourly settlement for all consumers

We are already making progress...

Change of Supplier • Last month we announced proposals

to move to next-day switching by 2018 • This Summer, new requirements for

reliable three week switching will be in place

• This Winter, switching times will be halved to 17 days

Electricity Settlement • We think all consumer should be

settled on a half-hourly basis using smart meter data

• We have formed an expert group to develop options to deliver this

• Minded to approve a modification to settle profile classes 5 to 8 on a half-hourly basis

Consumer Empowerment and Protection • We will set out our work programme

next month. • As a priority we will look at:

• Smart prepayment issues • Billing accuracy • RMR and time-of-use tariffs

Demand Side Response • We have identified the pre-conditions

that need to be met before demand-side response becomes an everyday part of the market

• First phase of work is to identify any regulatory gaps and barriers. Publication of findings later this year

Questions?

ELEXON’s IS strategy

Isobel Squire

What is driving our IS strategy?

ELEXON’s IS strategy 35

Opportunities and challenges

IS Strategy

Aging systems

Contract expiry

To be

ELEXON Staff – Exec – Board

Service Providers

Potential BSC Parties

Nat Grid & Dist Bus

Ofgem & DECC

Existing BSC Parties

Market changes

Customer needs

Technology

Operational efficiency

As is

This slide shows the key business drivers and target audience. In designing the future we need your input.

BPO

BPR

BMRS


External drivers for change

Widespread market change

This slide illustrates the key external drivers for change. The changes that we have seen from the start of NETA have been massive and are not slowing. The BSC Systems have served us well but change is now necessary . A transformed platform will meet future needs

Technological advances

Changing customer needs

ELEXON

Existing Participants

New Participants

Regulator/ Government

National Grid (& Dis Bus)

Service Providers

The Consumer

Focusing on the services we provide to the industry


Manage HR, Finance, Procurement, Internal IT, Facilities, Marketing, Service Provider Management

Industry Reporting & Analysis

Customer Services & Disputes

Manage Invoicing &

Billing

Calculate Prices and

Costs

Determine Imbalance

Collect & Manage

Data

Manage Entry, Exit & Contracts

Lead BSC Panel & Committees Support Regulators and Government

Address long term Market changes

Ex

ecu

te

Su

pp

ort

D

ire

ct

Ma

na

ge

Manage the BSC and Develop BSC Changes

Plan and Budget Business Assure Balancing & Settlement

We have deliberately adopted a services model – allowing us to move away from bespoke BSC language to reflect our desire to build a customer centric model, explore synergies and easily engage.

What are the business drivers for our IS strategy?

ELEXON’s IS Strategy 38

Manage HR, Finance, Procurement, Internal IT, Facilities, Marketing, Service Provider Management

Industry Reporting & Analysis

Customer Services & Disputes

Manage Invoicing &

Billing

Calculate Prices and

Costs

Determine Imbalance

Collect & Manage Data

Manage Entry, Exit & Contracts

Lead BSC Panel & Committees, Support Regulators & Gov Address long term Market changes

Ex

ecu

te

Su

pp

ort

D

ire

ct

Ma

na

ge

Manage the BSC & Develop BSC Changes

Plan and Budget Business Assure Balancing & Settlement

In considering how to take forward the IS estate we have consolidated the key drivers and considered how well the IS estate meets these today and why and how it should address these drivers in the future.

Minimising risk of process failure and data quality issues Operational risk

Economy & Efficiency of operating the service Value for money

Maximising speed and minimising cost of introducing new services and functionality

Flexibility

Maximising accessibility to data and simplifying processes

Customer experience

Enabling us to explore new ideas Market leadership

Target 2020 – ELEXON: greater agility, enabled by IS


ELEXON will be a customer focussed organisation that is flexible to the evolving Electricity Market by delivering change quickly and cost effectively. ELEXON will deliver a set of services tailored to meet customer needs, enable market competition and manage the risk in the Settlement of Electricity as a priority. ELEXON will use the latest technology where appropriate, collaborate with other organisations to study future impacts and develop solutions to industry wide problems.

These statements summarise the fully IS enabled business that we believe we should and can achieve by 2020. Delivery will be across the period. The statements are grounded in our mission and vision. We need your input in shaping this journey.

ELEXON’s vision

To be a leader in the efficient transformation of energy markets - by providing shared solutions to address common industry problems.

ELEXON’s mission

To deliver the BSC effectively, efficiently and economically, to the benefit of our customers.

Mission, vision, future state

Business drivers

Processes and services

Planning the roadmap

Questions?

Making ELEXON’s governance fit for the

future

Michael Gibbons Jonathan Brearley

Background

ELEXON’s governance 42

April 2013

Independent review of ELEXON’s governance jointly commissioned by the Board and Panel

July 2013

Knight Report published

October 2013

Initial response from Ofgem

Urged the Panel and ELEXON Board to work with industry

Since then…

The ELEXON Board has spent time reviewing the Knight report

The Board’s view

ELEXON’s governance 43

■ Four key problems that need to be resolved

Non-compliance with the UK Corporate

Governance Code

Lack of clarity in the relationship

between the BSCCo Board and the Panel

Inefficient decision making

Lack of accountability

Next steps

44

The Board wants

to understand the

views of key

stakeholders

Engagement with BSC Parties

Meetings to develop an appropriate

governance model

Straw man to use as the basis for a Modification

ELEXON’s governance

Questions?

Thank you for coming

Refreshments will be served in reception

annual bsc meeting - elexon · financial results for 2013/14 7 annual bsc meeting 2014 final report...

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