17 Dec 2021
December 2021 Industry Newsletter
Welcome to the Corona Energy Industry Newsletter.
At Corona Energy we believe in putting the Customer first. We use our position as one of the largest non-domestic gas suppliers in the UK to voice your needs, views and concerns at key regulatory meetings. This can involve lobbying Ofgem, The Department for Business, Energy and Industrial Strategy (BEIS) and other regulatory bodies and industry parties to ensure you are represented and treated fairly.
As part of our service to you, this monthly newsletter will keep you informed of the latest developments in the world of energy regulation in a way that is informative, easy to read and useful to our Customers.
What has been going on in the last few weeks?
Gas and Electricity
- Various Supplier of Last Resort (SoLR) Events: This month we have sadly seen further domestic and non-domestic Suppliers exit the market, with their customers being assigned to other Suppliers to protect their security of supply. The SoLR process ensures that no Customers lose their energy supply if their Supplier ceases to trade. Further details on the SoLR process can be found here. We have recently seen both the government and Ofgem take a different approach to a Supplier failure, with Bulb Energy Ltd entering administration under a Special Administration Regime (SAR). The SAR means that an administrator has been appointed to continue to run Bulb Energy Ltd as an energy Supplier, with its operations continuing as normal. It is as of yet unclear on how the cost of this will be recovered, but we will keep you updated. Further details of Bulb Energy Ltd’s SAR arrangements can be found here.
- Last Resort Supply Payment (LRSP) Process Changes: When a Supplier fails and enters the SoLR process, there are costs associated, such as domestic customers having their positive balances protected and the administrative cost to the new Supplier of setting up a bulk number of new customers in their systems etc. These costs can be recovered by the new supplier via a process called the Last Resort Supply Payment (LRSP) process. The associated cost is mutualised across the market of existing Suppliers and ultimately passed through to the end user Customer. The process that the claiming Supplier must undertake with Ofgem usually takes well over a year to complete, with some instances taking up to three years. Ofgem are now asking for comments on how this timescale can be significantly reduced. Although we presented our concerns of a large passthrough bill in April 2022 as a result of the large amount of SoLR events in 2021, Ofgem issued a letter on 01 December 2021 confirming that the compressed LRSP timescale will go ahead for any appointed Supplier of Last Resort who has been appointed from 01 September 2021 to 06 December 2021. These Suppliers of Last Resort will then be given a decision on their claim by Ofgem on 17 December 2021 so that it can be mutualised across the industry from April 2022. Further details can be found here.
- Corona Energy Sponsored Modifications: Following approval at the October UNC Panel meeting, Corona Energy’s Modifications 0781R: Review of the Unidentified Gas process and 0782: Creation of Independent AUGE Assurer (IAA) role continue to be developed and refined with the help of Xoserve. These will be discussed at the Distribution Workgroup on 27 January 2022. You can find further details on the Joint Office website by clicking on the modification names above. We will keep you updated as these modifications progress.
- Last Resort Supply Payments Modification: UNC Modification 0687V: Creation of new charge to recover Last Resort Supply Payments seeks to create a new charge, the SoLR Customer Charge, through which Gas Distribution Networks (Transporters) will recover any Last Resort Supply Payments arising from a Supplier of Last Resort event. Specifically, this Modification splits the market so that the cost of Domestic Suppliers failing is recovered from the other Domestic Suppliers operating in the market, and the cost of non-Domestic Suppliers failing is recovered from the other non-Domestic Suppliers operating in the market. After over two years with Ofgem waiting for their determination, this Modification was sent back to Panel to update the legal text because this was now out of date with the various updates to the UNC over the last two years. Following an extraordinary meeting of the UNC Panel on 14 December 2021, it was agreed that this Modification should be re-consulted on, with the consultation closing out on 30 December 2021. Unless any new issues are identified as part of the consultation process, this Modification will be voted upon by the Panel in January, sent to Ofgem for their determination by 20 January 2022 and implemented in April 2022. We will keep you updated with the latest on the progression of this Modification.
- Green Gas Levy (GGL): BEIS have now confirmed the Green Gas Levy rates, which are applicable from 30 November 2021. Unfortunately, these rates were only confirmed on 30 November 2021 so we are only now in a position to confirm these with our customers. The rates are:
- 30 November 2021 to 31 March 2022: 0.484 pence per day or £1.77 per meter per year
- 01 April 2022 – 31 March 2023: 0.576 pence per day or £2.10 per meter per year
- Energy Balancing Arrangements for Shipperless Supplier UNC Modification: National Grid Gas (NGG) raised UNC 0789: Energy Balancing Arrangements During the Operation of a Supplier Undertaking to Transporters. This seeks to introduce new arrangements to incentivise existing Shippers to deliver gas to the total system in light of Shipperless Suppliers operating in the market. Currently, if a Shipperless Supplier is operating, there is a deficit in the amount gas in the total system as they do not have a Shipper to deliver the gas to the system. Following concerns raised by the industry about putting this requirement on Shippers, NGG withdrew UNC 0789 and raised UNC 0791: Contingency Gas Procurement Arrangements when a Supplier acts under a Deed of Undertaking. This Modification allows NGG themselves to make up the deficit in the amount of gas in the total system and pass the cost on to Shippers, therefore ensuring the system remains balanced and removing the risks to Shippers that UNC 0789 presented. This new mod was granted urgency status by Ofgem and is due for consideration at UNC Panel on 12 January 2022. Further details can be found here.
2021 Regulatory Review
2021 has been a busy year for energy regulations. We thought we would take a look back on the biggest regulatory changes and challenges of this past year:
January: We kicked off the year with changes to the Master Registration Agreement (MRA) and the Supply Point Administration Agreement (SPAA) to facilitate their transition to the Retail Energy Code (REC), signalling the start of a busy year for energy code governance reform. We also saw Kwasi Kwarteng replace Alok Sharma as Secretary of State for BEIS with Alok working full time on the COP26 Presidency.
February: We saw Elexon issue a consultation on their proposal to act as the Programme Manager for the Market-Wide Half Hourly Settlement (MHHS) programme under the Balancing and Settlement Code (BSC). We also saw proposed changes to the Electricity Theft Detection Incentive Scheme (ETDIS) and the Gas Theft Detection Incentive Scheme (GTDIS) to align with the implementation date of the REC.
March: Following concerns raised about the new Allocation of Unidentified Gas (AUG) tables and underlying methodologies of how Unidentified Gas (UIG) costs were spread across the industry, Modification UNC 0758: Temporary Extension of AUG Statement Creation Process was raised. Additionally it was announced that Jonathan Brearley had been appointed as CEO of Ofgem.
April: The REC consulted on their ‘consumer-centric’ approach to Performance Assurance, and Ofgem confirmed their plans for their approach to the MHHS programme. This included the expectation that the net benefit of additional data entering into electricity settlement would be in the region of £1.5-4.5bn.
May: Following UNC 0758: Temporary Extension of AUG Statement Creation Process being raised in March 2021, the consultation was issued on 20 May 2021. There was an update to the guidance of Renewable Energy Guarantees of Origin (GoO’s) following Brexit.
June: Ofgem issued their Statutory Consultation for the Microbusiness Strategic Review, detailing a number of proposals to reform the energy market for Microbusiness Customers. Additionally, Ofgem rejected the proposal to align the ETDIS and GTDIS to the REC implementation raised in February, on the basis that this would require theft targets under the schemes to be recalculated retrospectively.
July: A joint BEIS and Ofgem paper on proposals for a new governance framework for the energy industry was published, including proposals for the industry to adopt a new “unified”, “flexible” and “dynamic” approach to regulation.
August: BEIS published a call for evidence on Third Party Intermediaries (TPIs) operating in the energy market. The questions primarily related to how TPIs operate, including questions on transparency, contracting and sales activities, customer service and dispute resolution.
September: After years of preparation, the REC was implemented! There was sadly a number of Domestic Suppliers exiting the market in September as wholesale gas price increases were straining the market. As a result of an increasing reliance on market cost mutualisation, Corona Energy worked with our trade association ICoSS to sponsor Modifications 0781R – Review of the Unidentified Gas process and 0782 – Creation of Independent AUGE Assurer (IAA) role in an attempt to reduce mutualisation costs for our Customers.
October: The impacts of the increase in gas wholesale prices were mounting, with fears that some Gas Shippers may also be forced out of the market. On this basis, National Grid Gas (NGG) raised Modification UNC 0788 (Urgent): Minimising the market impacts of ‘Supplier Undertaking’ operations, which was accepted and implemented by Ofgem in early November 2021, and the more contentious UNC 0789: Energy Balancing Arrangements During the Operation of a Supplier Undertaking to Transporters.
November: Following industry feedback regarding the concerns of UNC 0789: Energy Balancing Arrangements During the Operation of a Supplier Undertaking to Transporters, NGG withdrew their modification ahead of a new Modification being raised using a preferred approach by industry, namely 0791 (Urgent) – Contingency Gas Procurement Arrangements when a Supplier acts under a Deed of Undertaking. We also saw Ofgem seeking views on their proposals to reduce timescales for LRSP claims.
Energy Regulation Horizon for 2022
As you may be aware, 2022 is set to be another year of major reform in the world of energy. We have compiled the Top 4 items to watch out for this year.
- Market-Wide Half Hourly Settlement
This industry project run by Elexon and Ofgem seeks to utilise the output of smart metering (half-hourly consumption data) to input more accurate data into Settlements in order to reduce reliance on forecasting. The estimated benefit of this project is c.£1.5-£4.5bn. The implementation of Market-Wide Half Hourly Settlement is expected in late 2024.
- Code Governance Reform
The framework of the UK’s Energy rulebooks, called Industry Codes, is going through huge reform at the moment with the development of the Retail Energy Code (REC). The REC seeks to take complex industry processes from various industry codes and bring them together into a single, dual fuel code. This will make a more transparent repository of these key processes. In this reform it is likely that Supplier obligations will change which might have an impact on our Customers. We will keep you informed if this is the case.
- Ofgem’s Targeted Charging Review (TCR)
Ofgem are currently undertaking a Targeted Charging Review. This looks at how Networks apply their charging methodologies. This deals with the complex world of Network charging arrangements which are passed through to consumers via their Supplier. Tariffs and groupings have now been finalised by the networks, but the implementation date for these changes has now been pushed back to 2022.
- Demand and Microgeneration Management
Demand Side Response (DSR) and peer-to-peer trading means that we are heading towards a world where you can purchase your energy from your peers. These peers are people in your local area of the grid who are generating with small turbines or solar panels. Whilst this cannot currently be utilised within the UK due to existing networks and associated regulations needing to catch up with innovations, but this will open up many opportunities in the future. If you are interested in DSR, we have articles on Battery Storage and the future of the network on our website.
About the Writer
This newsletter was written by Dan Fittock, Corona Energy’s Regulation and Compliance Manager. If you have any questions about the content of this newsletter you can contact Dan at email@example.com.
Disclaimer: The information provided in this newsletter is intended to be a general guide and should not be taken to be legal and/or regulatory advice. At no time will Corona Energy actually or be deemed to be providing advice and no actions taken by Corona Energy shall constitute advice to take any particular action or non-action. Whilst every effort is made to provide accurate and complete information in this newsletter, Corona Energy cannot guarantee that there will not be any errors. Corona Energy makes no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of the newsletters and expressly disclaims liability for errors and omissions in the contents of this newsletter. Neither Corona Energy, nor its employees and contractors make any warranty, expressed or implied or statutory, including but not limited to the warranties of non-infringement of third party rights, title, and the warranties of merchantability and fitness for a particular purpose with respect to content available from the newsletters. Neither does Corona Energy assume any legal liability for any direct, indirect or any other loss or damage of any kind for the accuracy, completeness, or usefulness of any information, product, or process disclosed herein, and do not represent that use of such information, product, or process would not infringe on privately owned rights.
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