annual bsc meeting - elexon · financial results for 2013/14 7 annual bsc meeting 2014 final report...
TRANSCRIPT
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Annual BSC Meeting
10 July 2014
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Health & Safety
Annual BSC Meeting 2014 2
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Peter Haigh Chief Executive
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Delivering the BSC
Annual BSC Meeting 2014 4
■ 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)
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Adapting to changing times
Annual BSC Meeting 2014 5
■ BSC systems and infrastructure
–Business Process Outsourcing
–BMRS
–Business Process and Reporting
■ Europe
■ Electricity Balancing Significant Code Review
■ REMIT
■ Smart world
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Nigel Smith Chief Financial Officer
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Financial results for 2013/14
Annual BSC Meeting 2014 7
■ 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
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Financial results for 2013/14
Annual BSC Meeting 2014 8
-
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’
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Questions?
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Changing times: The future of
energy settlement
10 July 2014
The ELEXON seminar
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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
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European energy – is it all about the trilemma?
Volker Beckers
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The trilemma
13
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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?
European energy – is it all about the trilemma?
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Context
Source: World Energy Trilemma, ‘Time to get real – the case for Sustainable energy investment’, World Energy Council
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Climate change: Co2 emissions by country
Source: Handbook of Energy & Economic Statistics in Japan (partially supplemented by UNFCCC data)
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Security of supply
17
Capacity
Independence
24/7 availability
European energy – is it all about the trilemma?
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The impact of current energy policy
Source: World Energy Trilemma, ‘Time to get real – the case for Sustainable energy investment’, World Energy Council
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Affordability
Source: RWE npower Energy Explained
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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
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Questions?
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EMR: progress, opportunities and risks
Jonathan Brearley
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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
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The EMR framework
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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
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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
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Questions?
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Utilising the future smart infrastructure
Rob Church
Associate Partner, Smart Metering and Smarter Markets
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Moving from the RMR to Smarter Markets
Simplifying Choices
Improving Understanding
Building Trust
Smart Meter Roll-Out
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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
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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
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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
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Questions?
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ELEXON’s IS strategy
Isobel Squire
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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
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ELEXON’s IS strategy 36
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
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Focusing on the services we provide to the industry
ELEXON’s IS strategy 37
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.
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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
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Target 2020 – ELEXON: greater agility, enabled by IS
ELEXON’s IS strategy 39
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
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Questions?
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Making ELEXON’s governance fit for the
future
Michael Gibbons Jonathan Brearley
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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
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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
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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
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Questions?
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Thank you for coming
Refreshments will be served in reception