Industry codes flex for COVID-19

In response to the growing impacts of the pandemic, which has seen electricity demand drop dramatically and industry participants unable to go about many of their usual activities, a series of temporary changes have been introduced across industry codes to mitigate some of the most severe effects.

They have all been conducted using urgent procedures, a process under which the regulator is asked to give consent for a fast timetable for progressing a modification. This can compress the normal governance procedures into a matter of a few days or a couple of weeks, rather than the usual process, which often runs to months.

One set of changes – the more numerous – reflects the disruption to normal business processes, including collecting meter readings and other metering activities, and the impacts of the reduction in demand for gas and electricity from business customers.

On 5 May, Ofgem approved BSC modification P406 that will temporarily halt any charges to suppliers for failure in providing metered data for half-hourly and non-half-hourly metering systems into settlement at the required standards. Charges for failure to install mandatory 100kW metering systems are also waived for now. This was aimed at supporting supplier cash flow and enabling suppliers to concentrate on business-critical activities.

In gas, the regulator approved a suite of three temporary changes to the UNC rules on 11 May, while it continues to consider two others. The implemented modifications will:

  • Allow shippers to submit estimated readings for certain sites, given that much routine cyclic meter reading activity has ceased (UNC722).
  • Allow shippers to use the “isolation flag” to identify sites with large abnormal load reductions, which would temporarily exempt them from gas allocation, nomination and the application of certain charges (UNC723).
  • Waive the application of ratchet charges, which incentivise certain capacity booking behaviour by shippers, for certain sites (UNC724).

Ofgem is still considering UNC721 and UNC725, that would enable shippers to update closed sites’ consumption volumes (Annual Quantity and Supply Offtake Quantity) more frequently, and which would see reductions in energy allocation and transportation charges where the customers have reduced or discontinued activities. Parallel proposals have been approved where applicable for Independent Gas Transporters.

Other rule changes have also been made, or are being considered, to respond to the impact that the steep decline in electricity demand has had on the system operator’s ability to and costs of managing the system. On 7 May, Ofgem approved Grid Code change GC143 that clarifies the Electricity System Operator’s (ESO’s) ability to request distribution network operators to disconnect embedded generation in an emergency after all other options have been exhausted. The modification is time-limited to 25 October, with a view to developing more enduring arrangements in the meantime.

As we highlighted in a recent blog, SSE Generation raised a CUSC modification on 19 May, CMP345 that seeks to transfer £500mn of the additional costs of balancing the electricity system during the pandemic from 2020-21 to 2021-22. The additional balancing services use of system (BSUoS) costs arise from the impact of reduced demand on the way the ESO needs to manage the system. This modification is in development, with a determination by Ofgem expected for 22 June.

The crisis has shown that codes are capable of moving with more speed and flexibility than they are often given credit for, but plenty of issues remain in need of reform. Of particular note is the number of changes the electricity industry has been able to quickly put through without formal code modifications, as compared to the suite of gas proposals. We provide tailored weekly updates of the key regulatory and governance developments that help market participants keep up to speed on the latest developments that could impact them. For further information or to request a free trial, please contact regulation@cornwall-insight.com.

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