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Settlement Reform Webinar – Developments and Consultation

Date: 22 July 2020

Location: Online

Time: 10:00

Introduction

On 22 July 2020, Ofgem’s Settlement Reform Team held a webinar to present and seek views

on key aspects of our consultation on the impact of introducing market-wide half-hourly

settlement (MHSS). In the interests of transparency, and recognising the difficulty that some

parties had in following the presentations on the day, we are now publishing a suite of

documents relating to the event. They are:

• the slide pack that we presented on the day

• this document, which provides more detail about the matters covered in the slides

• a Q&A document addressing the questions raised by stakeholders during the event, and

• an audio recording of the event.

We trust that publishing these documents will assist stakeholders in formulating their views on

matters contained in the consultation document and Draft Impact Assessment. The deadline

for responding is 14 September 2020.

Before then, we hope that you will play an active part in our next webinar, which is on 3

September. In drawing up the agenda for that event we have listened carefully to what

stakeholders have told us they want to discuss. We will therefore be focusing on the

implementation timetable, the impact of introducing MHHS for export MPANs, and on the

changes proposed to the settlement timetable. We look forward to discussing these and other

important matters with you on the day.

Overview

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What follows is an outline of the material that we covered in the slides that we presented on

22 July. The running order was as follows:

1. Draft Impact Assessment: costs, benefits (quantified and unquantified) and overall net

impacts

2. Stakeholder discussion about implementation timescale and programme governance

3. Consumer impacts and load shifting assumptions

4. Access to data

5. Target Operating Model

1. Draft Impact Assessment

Key points

The expected net benefit to consumers from MHHS ranges from £1,607m-£4,557m up to

2045. This is based on our preferred option, implementation over 4 years for import and

export MPANs.

The main cost drivers were suppliers’ IT costs and operational costs. Suppliers’ costs varied

considerably, and we are keen to hear from individual companies about the key drivers for

them.

Even the lowest benefit sensitivity scenario (low load shifting scenario - 2h shifting window)

shows substantial positive net welfare benefits above the costs.

We welcome further input from all stakeholders, especially in relation to:

• your own cost drivers and estimated costs

• the effect of Covid-19 on your capacity to start the transition to MHHS and to complete it

within a period of approximately 4 years.

We will seek further opportunities to engage with stakeholders, whether multilaterally or

bilaterally. Please email the team at half-hourlysettlement@ofgem.gov.uk if you’d like to

initiate a conversation with us.

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Slide 7 – developing the economic case for MHHS

The slide summarised the key milestones and activities involved in producing the Draft Impact

Assessment (IA), and noted the key stages of policy development after the current

consultation closes on 14 September. Ofgem remains keen to engage with stakeholders in

order to refine the existing evidence base and we plan to publish the Full Business Case, with

Final IA, as part of our final decision on MHHS in the spring of 2021. Licence amendments and

code changes would follow, as appropriate, thereafter.

Slide 8 – draft IA options under consideration

This slide outlined the three main options that Ofgem has considered: option 1 - keep the

elective HHS arrangements; option 2 (preferred) - MHHS for all MPANS with a transition

period of about 4 years; option 3 - MHHS for import-related MPANs with a transition period of

about 5 years.

Based on the evidence we have seen, we consider that:

• option 1 would not deliver sufficient levels of load shifting to meet our objectives for

the project; and

• option 3 would unnecessarily delay the benefits arising from MHHS for import-related

MPANs, and would preclude any benefits that could arise from MHHS for export-related

MPANs.

We have considered whether a transition to MHHS could be completed more quickly, for

example within a 3-year period. After receiving feedback, we concluded that it would not be

practicable for a number of reasons, including commitment of industry resources to delivering

faster switching.

Balancing the desire to deliver the benefits of MHHS as soon as possible, with the need to

ensure that the new arrangements (including central systems) are robust, we believed - at the

time of our analysis - that a transitional period of approximately 4 years would be appropriate.

This timeframe still represents a challenge, but we consider it likely to be realistic and

achievable with appropriate programme governance. However, the analysis that underpinned

the IA was carried out before the Covid-19 emergency.

Slide 9 – Headline Draft IA net benefits of our preferred option for MHHS

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The slide noted that the expected net benefit to GB consumers ranges from £1,607m-£4,557m

up to 2045.

This figure is in Net Present Value terms (NPV) relative to the counterfactual using 2018 as

the base year. Throughout the draft IA, economic costs and benefits are in 2018 financial year

prices covering the period from 2021 to 2045. The net benefit refers to the modelled benefits

to consumers and the monetised direct costs and is calculated by subtracting the monetised

direct costs from the modelled consumer benefits. The range reflects the different scenarios

we modelled, such as varying levels of load shifting.

It is important to bear in mind that the monetised figures do not represent the full benefits to

consumers. We expect that option 2 will achieve further benefits from greater competition and

product and service innovation, which should improve outcomes for consumers.

Better quality and more frequent settlement data for both imported and exported volumes,

combined with greater administrative efficiency, should encourage non-traditional players with

disruptive business models to enter the market and compete with existing suppliers. This new

entry, together with new price signals, should stimulate an innovative response from those

already in the market.

A faster settlement timetable means suppliers would need less collateral to cover their

potential settlement liabilities. This should reduce barriers to new entry. For example, MHHS is

expected to accelerate the growth of new energy ‘tariff-only’ propositions, third party

managed energy services involving smart controls, bundled ‘asset and tariff’ offerings

managed by the consumer or on their behalf; and offer consumers new ways to offer flexibility

to the energy system such as peer-to-peer trading and grid balancing services.

Slide 10 – Monetised costs of MHHS

This slide set out the estimated monetised costs of our preferred option on different

stakeholder types. The estimates are based on responses to the RFI that we published in

August 2019, and follow-up engagement.

Clearly MHHS would impose significant costs on the industry. We have made extensive efforts

to ensure we understand these costs, and their drivers, as well as possible.

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Where the costs have been difficult to obtain or verify we have adopted a consciously cautious

approach to ensure that we are, as far as possible, mitigating the risk of underestimating

these. In particular, where we have not been able to get a quantitative answer to a question in

the RfI from a particular stakeholder, we have sought to fill in the gaps by estimating the

costs using data from similar stakeholders. Chapter 3 of the Draft IA also describes how

stakeholder costs might differ under option 3 (and we have quantified those costs where

possible).

Slide 11 – Monetised supplier costs of MHHS

Supplier costs amount to nearly ¾ of the total. Based on evidence to date, suppliers’ major

cost drivers are:

• IT costs, especially one-off costs of upgrading IT systems to interact with the new

central settlement systems, and to forecast demand without profile classes

• operational costs, especially for ongoing HH data collection, transfer and processing, and

one-off costs for managing customer contract communications, HH data processing and demand

forecasting.

Some suppliers expected ongoing cost savings from better demand forecasting and lower

balancing costs.

Suppliers’ responses varied considerably. The aggregated data in the IA masks significant

differences, no doubt reflecting the strengths and weaknesses of individual suppliers’ existing

systems and operations. That's one reason why we remain so keen to hear from individual

suppliers, to get your views on the factors that will be most important for you.

We have not received evidence to date about the ongoing costs that could be incurred by

software providers that provide settlement-related services to suppliers. However, we have

sought to estimate this, and some ongoing costs have been included in the total costs. Should

we receive evidence, we will consider it carefully and adjust our cost estimates as appropriate.

Slide 12 - Dealing with uncertainty through estimated cost ranges

Estimating costs over a long time frame is inherently uncertain. One of the ways we have tried

to deal with this was asking stakeholders to qualify their quantitative responses to the RfI

using a +/- uncertainty margin. We used this information to build a cost range and we

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presented this range in slide 12. The central cost of £492.5m is our best estimate of costs on

the evidence received to date. The range of £399.7m to £591.9m illustrates the degree of

uncertainty involved in calculating the costs of MHHS.

We have excluded some reported costs from these ranges because they do not appear

reasonable to us. In particular, we do not propose to include the costs to suppliers of reading

traditional meters every month. This is because we expect the BSC Performance Assurance

Framework will take into account the extent of smart meter penetration and make appropriate

adjustments to targets if necessary. On the other hand, we included in our central estimate

some costs of reading traditional meters every three months and we included a 50%

uncertainty for those costs in the high range. We believe this is a proportionate and

conservative approach.

We also considered the potential costs of offering new HHS products (such as Time of Use

tariffs). Some suppliers told us they would need to update billing systems to be compatible

with offering such products. This investment is not required by MHHS, so we have not included

it in our central estimate of costs or in the cost ranges. We acknowledge that some of these

costs might have to be incurred to realise the full potential of the estimated benefits.

However, it is important to note that even if all these extra costs were included, total

monetised costs would still be lower than the bottom of the range of quantified benefits.

Slide 13 - Monetised benefits of MHHS

This slide is intended to help readers navigate their way through section 4 of the draft IA,

which sets out our estimation of the monetised direct benefits of MHHS. Section 4 of the draft

IA describes how we have used a GB power market model - the Dynamic Dispatch Model

(DDM) - to calculate these benefits. The DDM analysis estimates very significant benefits

from MHHS. Section 4 also estimates potential carbon emissions savings and reports on the

sensitivity analysis using a Distribution Networks Model (DNM) to capture potential benefits at

the distribution network level.

We have sought to capture the benefits of load shifting under certain scenarios for fossil fuel

price and load shifting windows. We have assumed an 8-hour window in which demand in any

half-hour is allowed to shift (either up to 4 hours earlier or up to 4 hours later). We think this

is a good approximation of small users’ ability to offer flexibility across different technologies.

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We tested the implications of this assumption through two sensitivity tests that restrict the

shifting window to 4 hours and 2 hours. This analysis seeks to capture:

• generation and network investment savings through better use of existing assets

• operational savings as load shifting reduces the need to operate generation assets at

peak time

• the carbon emissions saved as the lower demand can be satisfied with less polluting

generation.

Finally, using evidence from the RfI we sought as far as possible to quantify the direct benefits

from:

• more accurate demand forecasting, resulting in a reduction in the residual imbalance

that the Electricity System Operator needs to resolve, and the costs of doing so

• a more accurate and efficient settlement process with better quality data and fewer

errors, reducing suppliers’ exposure and the amount of collateral needed to cover it.

Other significant benefits such as the effect on competition, innovation and customer

outcomes cannot be quantified and/or attributed solely to MHHS. They are covered in section

5 on unquantified benefits.

Slide 14 – System wide benefits from load shifting

This slide sets out the extent of system wide benefits. Even the lowest benefit sensitivity

scenario (low load shifting scenario - 2h shifting window) shows substantial positive net

welfare benefits above the costs, albeit by a significantly lower margin than our central

estimate (Central Fossil Fuel prices – 8h shifting window).

Slide 15 – Net consumer impacts

The table in this slide sets out the net position for consumers after taking account of

monetised costs and benefits under option 2 (our preferred option) relative to the

counterfactual. It makes clear that MHHS under option 2 is expected to have a significant net

benefit for consumers compared with the counterfactual of retaining the existing elective HHS

arrangements.

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Slide 16 – Refining the evidence base

We welcome further input from all stakeholders, especially in relation to:

• your own cost drivers and estimated costs

• the effect of Covid-19 on your capacity to start the transition to MHHS and to complete

it within a period of approximately 4 years.

We will seek further opportunities to engage with stakeholders, whether multilaterally or

bilaterally. Please email the team at half-hourlysettlement@ofgem.gov.uk if you’d like to

initiate a conversation with us.

2. Interactive Sessions

Session 1 on the transition period

Key points

We have proposed that there should be a 4 year transition, comprising a 3 year

implementation period, for code and system changes and qualification for the new TOM; as

well as stakeholders preparing and testing their new systems. There would then be a 1-year

migration period during which all MPANs would be moved to the new settlement system. The

transition period would start in spring/summer 2021.

We would like to hear stakeholders’ views on this timetable, including the impact of COVID-19.

Slide 17 – Transition period

Within our consultation document our preferred option for transition is over a 4 year period,

starting just after we published our Full Business Case (FBC). In the consultation document,

which was written prior to COVID, transition was due to start in January 2021.

The chart on slide 17 shows the addition of a 6-month delay. This is the delay we expect to

the publication of the FBC. With the additional of the 6-month delay it is therefore intended

that transition will start around mid-2021. It is proposed to still take 4 years and so full

transition to MHHS would be mid-2025.

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Our proposed transition consists of a 3-year implementation period, where governance, code

changes, system changes and qualification processes for providers of the new TOM services

would take place. In this 3-year implementation period, we expect suppliers, BSC central

settlement systems and other industry parties (such as supplier agents, the Data

Communications Company (DCC) and registration systems) to prepare and test their IT

systems in readiness to implement the TOM. We have also included a 1-year business

readiness period for suppliers, so they can get their processes and business ready for the new

system.

Following this 3-year implementation period is a 1-year migration period, in which all the

MPANs would move from the current market roles into the new market roles and be settled

under the new TOM. During this time there would be parallel running of the old and new

market roles, so that there would be no big bang implementation and instead migration could

be managed.

At the end of migration (the point by which all MPANs are settled under the new TOM), the

cutover to the new settlement timetable would occur.

Our aim is to balance the desire to deliver the benefits of MHHS as soon as possible, with the

need to ensure that the new arrangements are robust. When we first did our analysis, our

preferred option was to complete the transition to MHHS over approximately a 4-year period.

We consider this timeframe to be realistic and achievable with appropriate programme

governance. However, in the light of the COVID-19 pandemic, we are reviewing the project

timelines, and are looking at the impact on the start date for implementation as well as the

length of the transition period. We still consider that a 4-year transition period is likely to be

realistic, but we do recognise that there may well be factors related to the COVID-19 situation

which could impact this.

This interactive session is aimed at gathering stakeholder views on both the start date and the

length of transition, and if there are any factors that might impact these timings.

Questions:

1. Do you think your organisation will be able to start transitioning towards MHHS, from

when the Full Business Case is published in spring 2021?

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2. Do you think your organisation will be able to complete the transition within a period of

about 4 years?

Summary of answers:

1. Do you think your organisation will be able to start transitioning towards MHHS, from

when the Full Business Case is published in Spring 2021?

Yes – provided clear expectations on suppliers are published

Yes – but depends on details, particularly around supplier agent qualification

Yes – in terms of code changes, but will take longer until resources are available for the

technology modifications.

This is ambitious, given Faster Switching (would want to avoid overlapping system

changes) and the uncertainty over COVID-19.

Not clear what MHHS looks like in detail. The TOM is too high level at the moment and

it will be hard without the full details of the code changes.

Won’t be able to start immediately. Realistic start time for business changes will be +1

year after FBC.

In current climate is difficult to tell. There may be a second wave of COVID. Quite

ambitious to start transition that soon.

2. Do you think your organisation will be able to complete the transition within a period of

about 4 years?

Yes, if the industry gets everything lined up and it is all clear

Yes, although a 1 year migration may be a bit short. Lots of complex meters, and 1 year

would require a high volume of MPANs to be migrated every day. If it is completed, exceptions

may not be cleared in this time. Some areas may be easier to migrate then others.

Yes, but would be reliant on third party service providers and industry parties being ready.

Depends on ELEXON capacity to support qualification process

Not sure how realistic this is considering other previous changes (P272).

There is a lot of other change, such as faster switching and smart meter roll out which is

taking up a lot of resource.

No, we don’t believe other industry parties will be ready in this timeframe.

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Session 2 on Programme Governance

Key points

We expect that we will need a number of roles to oversee the transition to MHHS: Programme

Management Office (PMO), System Integrator (SI), Programme Party Co-ordinator (PPC)

and Assurance.

We are considering three possible options:

1. The delivery could be led by a relevant industry party/body. Ofgem would have a hands

off approach and would not be delivering any of the functions.

2. Ofgem could procure a 3rd party to take on these roles on our behalf and so we would

have direct control on delivery and have ultimate responsibility.

3. A mixture of the above, where an industry body/party takes responsibility for part of

the functions (such as PMO and SI), and Ofgem is responsible for others, for example the

assurance function.

Slide 19 – Programme governance

We realise that delivering MHHS will involve major changes both to market participants’

systems and to the market rules. Therefore, we believe central oversight is required to ensure

that system changes are completed on time and to the requisite quality.

Implementation of the new arrangements will require changes to ELEXON, the Data

Communications Company (DCC) and registration systems, as well as changes to all supplier

and supplier agent systems and potentially the communications systems currently used, to

provide the information required for MHHS to operate. Given the extensive number of parties

involved, we anticipate that it will be necessary for there to be a substantive programme

management function.

We expect that we will need a number of roles to oversee the transition to MHHS. We see

these as being:

Programme Management Office (PMO) to create and manage the overall

programme delivery plan;

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The System Integrator (SI) to oversee, coordinate and manage the integration,

testing and transition to live operations of the new central settlement system and service

components;

Programme Party Coordinator (PPC) to monitor and track progress of all parties.

The PPC will provide the programme parties with information and updates relevant to the

programme, scrutinise the programme parties’ self-assessments and report on party readiness

to the PMO; and an

Assurance function to satisfy Ofgem that these arrangements are operating

effectively.

Ofgem is overall project sponsor, but we don’t necessarily need to lead on these delivery

functions and so we are considering where these roles should sit. Whilst experience of Project

Nexus and the Switching Programme has shown that there are advantages in Ofgem taking an

active sponsorship role and leading on PMO and programme party coordination functions, we

consider that there are equally advantages in industry bodies taking responsibility for these

functions.

When coming to a decision we are keen to hear and understand stakeholders’ thoughts and

views on what key factors should be taken into account when deciding the governance

structure and delivery model.

Question:

Based on previous reform experience, what are the key factors we should take into account

when deciding the governance structure?

Summary of answers:

Based on previous reform experience, what are the key factors we should take into account

when deciding the governance structure?

Cost should be considered.

Clear milestones to ensure progress can be monitored. Achievable milestones with stage and

gates to ensure development is going as planned before moving on. Need enforcement when

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parties don’t meet targets. Need to be clear where obligations and the authority to enforce

these obligations sit.

Ofgem led – but quick and agile. Suppliers are important but should not be in the driving

seat. All DNO’s must be involved to include regional flexibility markets.

Ofgem should remain involved in all decision making.

Needs to be centrally coordinated and closely managed with the Performance Assurance

Framework.

Whoever is leading will need to be impartial. Need to ensure consistency across different

parties.

More industry led, get parties involved who are the ones who have to implement.

If roles go to existing bodies they will need budget to fulfil this properly.

Keep it simple.

3. Consumer impacts and load shifting assumptions

Key points

Some of the factors that are likely to affect load shifting potential (and peak consumption

reduction) in the future include: Types of tariffs offered by suppliers; Availability of

technologies that allow automatic load shifting; Price signals and consumers’ response to

those price signals.

Distributional impacts analysis is often a broad-brush exercise. How different groups of

consumers respond to price signals may determine the distributional impact on them.

We welcome stakeholder views about our load shifting assumptions and about our analysis of

consumer impacts issues more generally – have we captured the right issues, are there gaps

in our analysis, what further evidence can stakeholders provide on potential consumer

impacts?

Slide 22 – Potential consumer impacts: evidence gathering to date

The four themes about which we sought stakeholder views in the Call for Evidence were:

Consumers’ ability and/or willingness to engage with their electricity usage

Consumers’ ability and/or willingness to load shift/offer flexibility

Consumers’ access to, and ability/willingness to, take up technology to offer flexibility

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Consumers’ ability to understand and choose a suitable tariff, eg ToU tariffs

Slide 23 – Potential take up of load shifting and flexibility

Some of the factors likely to affect load shifting potential (and peak consumption reduction) in

the future include:

The types of tariffs offered by suppliers

The availability of technologies that allow automatic load shifting

Price signals and consumers’ response to those price signals

We have estimated a range of values for load shifting (see slide 24) from a review of

research and trials that look at load shifting in response to price signals, looking at two key

parameters shown on this slide for determining the extent of load shifting away from peak

usage.

Slide 24 – Load shifting assumptions in the Draft IA

The values in the table increase in a linear way from 2025 to 2045. They show the range of

estimates for the proportion of customers with a smart tariff (column 1), the percentage of

demand shifted at peak by customers with a smart tariff (column 2), and the resulting

estimate of the range for system load shifting that can be attributable to MHHS (except for

heat pumps demand) (column 3).

Alongside these quantitative assumptions, we have made qualitative assumptions, comparing

the impact of MHHS with the impact of elective HHS, about load shifting potential for different

consumer types who have access to different kinds of technology:

• Domestic and small non-domestic low energy users (no EVs, no heat pumps) – very

low load shifting potential under Elective arrangements, significant potential under MHHS

• Domestic high energy EV users – significant load shifting potential under Elective but

higher still under MHHS. Overall, higher potential than for Domestic low energy users (no EVs,

no heat pumps)

• Domestic high energy heat pump users – we have assumed very high load shifting

potential under elective, with no significant difference to this shift after MHHS implementation

• Small non-domestic EV users - very low load shifting potential under Elective

arrangements, significant potential under MHHS. We have assumed less flexibility from non-

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domestic users than from domestic users on the basis that these vehicles are used for

business operations.

Slide 25 – Distributional impacts on consumers

Distributional impacts analysis is often a broad brush exercise. How different groups of

consumers respond to price signals may determine the distributional impact on them:

• Some consumers who are able to flex may also be relatively affluent and either be indifferent

to sharper price signals or have the means to respond if they want to reduce bills. Arguably,

they’re also more engaged energy consumers

• Some consumers may struggle to respond to price signals but have the means to do so if

needed. Others may be able to respond if helped. A proportion of these consumers may

become more engaged as a result

• Some consumers may have neither the ability nor means to respond to price signals. For

these consumers, addressing possible detriment may involve ensuring that existing protection

mechanisms are appropriate, using them more flexibly to meet future challenges, and adding

to them if new sources of detriment are identified. These consumers may be broadly

disengaged.

Seeking out good quality datasets:

• The Smart Energy Research Lab (SERL) run by various academic institutions, which

aims to gather actual usage data from smart meter consumers who agree to share it for

research purposes, is a potential source

• We are considering how to make effective use of Ofgem’s revised IA guidance and

refreshed consumer archetypes to carry out this analysis. The guidance and archetypes are on

Ofgem’s website.

Other factors relevant to distributional impacts:

• Time – Professor Jacopo Torriti’s work at Reading University assessing peak time

energy usage by activity identifies which family groups may benefit more and which may not

benefit based on existing consumer behaviours, and can help us understand whether and what

interventions may be useful for different consumer types.

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4. Access to data

Key Points

Opt-out granularity: we have decided that domestic consumers will be able to opt-out of

sharing HH data for settlement / forecasting. We have proposed that data from opted-out

customers should be collected at daily granularity for settlement and forecasting under MHHS;

we are also asking whether any special consideration should be made in this regard for some

or all existing smart meter customers.

Customer comms: we have asked whether stakeholders feel there should be a central element

to the communication of settlement / forecasting and associated data sharing choices to

consumers.

Licence amendment and data access framework transition: we have said these rules will be

introduced via amendments to the electricity supply licence. We expect that the licence

amendment process will take a minimum of 3-6 months following publication of the Full

Business Case.

Migration: we expect there to be a period of time between the data access framework

transition date and the migration period, where a number of existing smart meter customers

decide to change tariff / supplier. These customers will then be subject to the new framework

at that point, as if they were new smart meter customers.

Slide 28 – Recent publications

Open letter:

We published the open letter in April 2020. The letter builds on the access to data

decision letter that we published in 2019 (this was our response to our consultation held in

2018).

The letter sets out the timeline going forward for the transition to the new access to

data framework under MHHS and provides clarification on some points.

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Draft IA consultation:

• In terms of the currently open consultation, we have asked three questions on the

MHHS access to data framework. These are explained in the full in the consultation.

Consultation questions 11 and 12 - Opt-out granularity:

We have said that domestic consumers will be able to opt-out of sharing HH data for

settlement / forecasting.

Data can currently be collected at daily resolution by default, but consumers can opt-

out to monthly if they wish

We are proposing that data for opted-out customers should be collected at daily

granularity for settlement and forecasting under MHHS, and have set out the reasons why we

think this is the right approach in the consultation. We are interested to hear stakeholders’

views

We are also asking whether any special consideration should be made in this regard for

some or all existing smart meter customers, for example those who had already opted out to

monthly resolution of data collection on the date that the new MHHS data sharing framework

enters into force.

Consultation question 13 - Customer comms:

Based on discussions with suppliers, we know that communicating settlement and

associated data sharing choices to consumers in order that they can make an informed choice

will be difficult

We also see advantages in all consumers receiving a similar message on settlement

and forecasting, to avoid confusion in the marketplace.

We also however note that some suppliers may prefer from a commercial perspective

to tailor their own messaging

We are therefore asking in the consultation whether stakeholders feel there should be a

central element to the communication of these concepts, to ensure clarity and consistency of

message. If so, we would like to hear what stakeholders feel the role should involve, and who

should fulfil it.

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Slide 29 – Access to data: implementation timeline

The purpose of this timetable, as set out in our recent access to data open letter, is to

illustrate to stakeholders the sequence of events we expect to lead us to the new MHHS data

sharing framework. The timetable is schematic and not to scale. Key events on the timeline

are highlighted in bold in the text below.

We have previously set out the main headline decisions for the access to data framework as

follows:

1. There will be a legal obligation on the party responsible for settlement to process

domestic and microbusiness consumers’ HH data for settlement purposes

2. Domestic consumers will be able to opt-out of this processing

a. As noted, we are currently consulting on what the opt-out resolution should be (it is

currently daily by default but consumers can opt all the way out to monthly). We think it

should be daily, but are interested in hearing stakeholder’s views.

b. We are also consulting on whether any special consideration needs to be made in this

regard for customers who have already accepted their smart meters on the date of the rule

change

3. Non-domestic consumers will not be able to opt-out of HH processing

4. Existing domestic customers with smart meters should have their HH electricity

consumption data processed for settlement purposes only on an opt-in basis, or an opt-out

basis for existing microbusiness customers with smart / advanced meters, consistent with the

framework that was in place when they had their smart / advanced meters installed. At the

point at which a consumer then makes a choice to change electricity contract or supplier, they

will then be subject to the new rules.

Licence amendment and data access framework transition:

These rules would be introduced through amendments to the electricity supply licence.

We expect that the licence amendment process will take a minimum of 3-6 months following

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publication of the Full Business Case, which is planned for spring 2021. You can see the

licence amendment re: data access event on the schematic timeline.

These new rules would only be applicable to customers who accept a new smart meter,

or take a decision to change supplier or tariff, after the point at which the text in the licence

enters into force, which we call the data access framework transition date. This may be a

short period of time after the actual licence amendment itself. The wording in the licence will

determine when this date / event will be.

After the data access framework transition date has passed:

1. new customers accepting smart meters will be subject to the new framework

2. existing smart meter customers who switch tariff or supplier will be subject to the new

framework.

However, it is very important for you to note that consumer data will not be processed

under this framework until MHHS is implemented, which will be some years later. The purpose

of the data access framework transition date being before this is so that customers accepting

smart meters / changing contract in this interim period are subject to the new framework, and

their data can therefore be processed on that basis when MHHS is implemented.

In the meantime and until implementation, supplier licensees are required to abide by

the existing framework and only process HH data from domestic consumers on an opt-in basis

/ microbusinesses on opt-out. This includes for consumers who are being half-hourly settled

under the elective scheme.

Note, we recognise we need to give some more thought to certain practicalities of the

data access framework transition date. For example, on this date there will be many

different customers at different stages of the smart meter installation customer journey. We

need to think about how far along the journey the customer needs to be to be treated as an

‘existing customer’, meaning they will remain on the old framework until they change supplier

/ contract. Possibilities include the installation date, the date at which the original appointment

was booked, or the date on which the consumer was presented with the data sharing guide.

Migration period:

In our draft IA we have set out that our preferred option is for an implementation

timetable, or transition period, of four years. This would comprise an initial

implementation period (green) of three years, followed by a one year migration period

(red). The migration period can only start once all necessary processes for migration are in

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place. The beginning of the period is the migration start date. During this period both systems

will run in parallel, allowing suppliers to migrate their customers over to the new TOM

gradually. At the end of this one year migration period, the migration end date, all

customers should have been moved over to the new TOM. The cutover to the new TOM and

settlement timetable will happen after this point.

We have also said that, if all of the necessary systems and processes are in place

before the migration start date, there may be an early migration period where suppliers can

begin to migrate their customers across to the new TOM.

We expect there to be a period of time between the data access framework

transition date and the migration period. During this time a number of existing smart

meter customers will change tariff / supplier. These customers will then be subject to the new

framework at that point, as if they were new smart meter customers.

To be clear and as noted before, only once we have passed the migration start date (or

the start of any early migration period) can consumers’ data be processed under the new

MHHS data sharing framework.

Interactive session 3 on data access

Question:

What do you see as the main issues for your organisation in implementing the MHHS data

access framework?’

Summary of responses:

We received eight replies in total. The majority centred around the difficulty of supplier

messaging and the risk of subsequent confusion and scepticism amongst consumers. As we

noted at the workshop, we are cognisant of the potential difficulties that suppliers will face in

communicating the concepts of settlement / forecasting and associated data sharing options to

consumers, which led us to ask question in our draft IA consultation around whether there

should be a central element to this. We look forward to receiving stakeholders’ views. We

think that clear communication of these concepts and the individual and system-wide benefits

of sharing the data to consumers will help minimise confusion and result in fewer consumers

opting out.

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5. Target Operating Model (TOM)

Key Points

Our consultation invites views on the DWG recommended TOM; and on our preferred position

that HH electricity consumption data should be sent to central settlement services in non-

aggregated form.

Following the delivery of the DWG preferred TOM, the DWG have been stood down and we

have entered the next phase of the TOM design – the Development Phase. This consists of two

new industry working groups, chaired by ELEXON, who are further developing the TOM design

– AWG & CCDG.

We now publish monthly newsletters which provide updates on the workgroups progress and

allows an opportunity for stakeholders to engage with and feedback on the work prior to

formal consultations.

Slide 32 – DWG Preferred Target Operating Model

The slide shows the high level Target Operating Model (TOM), which was delivered by the

Design Working Group as its preferred TOM. This TOM is currently being consulted upon via

the Ofgem MHHS consultation.

The TOM sets out the design for new market-wide settlement arrangements when most

meters will be smart and advanced meters. It also sets out the services required to deliver

settlement period (ie HH) level data from a meter to a central settlement body

This diagram illustrates the key features of the TOM. In this, there are two types of

metering services, one for smart and non-smart meters and another for advanced meters, as

well as an unmetered supplies operator service. There are three data services that collect data

and supporting information. These services output settlement period level data to the BSC

central settlement services.

Our consultation questions on this are:

1. We propose to introduce MHHS on the basis of the Target Operating Model

recommended by the Design Working Group last year. Do you agree? We welcome your views.

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2. Ofgem’s preferred position is that HH electricity consumption data should be sent to

central settlement services in non-aggregated form. Do you agree? We welcome your views.

Slide 33 – Target Operating Model

Following the delivery of the DWG preferred TOM, the DWG have been stood down and we

have entered the next phase of the TOM design – the Development Phase. This consists of two

new industry working groups, chaired by ELEXON, who are further developing the TOM design.

Code Change and Development Group (CCDG): are developing the more detailed

areas of the TOM, such as the registration, appointments and data arrangements. The CCDG

are also working with representatives from the affected industry codes to identify the changes

required to the different codes to implement the TOM

Architecture Working Group (AWG): are developing the system architecture design

required to enable the TOM. They are looking at the interfaces between services, the data

items, the frequency of exchanges as well as the security requirements.

The output of both of the working groups will be put out for consultation and we welcome

feedback throughout the process from interested parties, on both the detail of the TOM

development and the process by which we are engaging with the wider industry.

Slide 34 – Target Operating Model

We have started publishing monthly newsletters which provide updates on the workgroups

progress and allows an opportunity for stakeholders to engage with and feedback on the work

prior to formal consultations.

We are keen to ensure all parties have the opportunity to stay informed and input into the

work of the two groups. We therefore welcome your feedback on this, and would like to hear

from you though our HHS inbox.

Email: Half-hourlysettlement@ofgem.gov.uk

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Settlement Reform Webinar – Developments and Consultation

ANNEX

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