1 Introduction

2 Process Overview

• On the first working day of each week Elexon compares the current CAP value (or if a new CAP value has been formally notified to BSC Parties prior to its implementation, that new CAP value) to a value derived from forward looking electricity prices. This is known as the reference price and its calculation is described in section 3;

• If the difference between the CAP and the reference price exceeds a pre-set trigger value Elexon issues an industry consultation seeking views on the CAP change and if it believes the Credit Committee needs to meet to set the new value of the CAP;

• If at least one industry or Credit Committee member requests it, the Credit Committee will meet after the end of the consultation period to consider the responses and the latest data. If the Committee feels it is appropriate, it will approve a new CAP value;

• If a new CAP value is approved by the Credit Committee, this value comes into effect following an implementation period specified by the Credit Committee, which is currently at least 15 working days;

• If no Party has objected to the proposed new value of CAP included in the consultation, the new CAP will be implemented following the implementation period of at least 15 working days;

• The implementation period may be amended in accordance with Section M 1.4.2(b) of the Code.

3 Use of Forward Price Data

Calculating the Reference Price

4 The Trigger Level

5 The CAP Review Process

• The weekly trigger process is suspended. The suspension lasts until either (1) the point at which a decision is made not to implement a new value of CAP or (2) where a decision is made to implement a new value of CAP, the point at which notice of that new value of CAP is given to BSC Parties. Following this point the weekly trigger process is resumed;

• However, during the suspension, Elexon continues to calculate the derived weekly values (from forward prices) and provides this information to the Credit Committee meeting at which it is asked to make a decision on a CAP value following the industry consultation, noting that such data will not have been available to consultees;

• Elexon will issue a consultation no later than one working day following the trigger event. The consultation will include a proposed new CAP value, based on the estimated reference price on the potential implementation date. It will ask industry whether the Credit Committee should meet to set the CAP to a different value or to implement the proposed value. The consultation will last for five working days, except where the consultation period has been extended with the agreement of the Credit Committee;

• If all respondents and Credit Committee members agree with the proposed value included in the consultation document, there will be no Credit Committee meeting and the new CAP value will be implemented at the proposed date. This date shall not be earlier than the implementation period of 15 working days after it is communicated out to industry. This will be done within one working day from the end of the consultation period. BSC Parties, the FAA and ECVAA will be informed of the new CAP value and the date from which it is effective in accordance with the Code;

• If at least one respondent or Credit Committee member requests it, Elexon will arrange a Credit Committee meeting for the first practical date after the consultation closes but with at least one clear working day between the closure of the consultation and the Credit Committee meeting to allow Elexon time to collate and distribute the responses to Committee members;

• At this meeting the Credit Committee shall consider the consultation responses and the reference price calculated by Elexon since the consultation was initiated and set a new CAP value if it deems it appropriate to do so;

• If the Credit Committee decides not to set a new CAP value then the review shall be closed and the suspension of the trigger process will be lifted;

• Should the Credit Committee set a new CAP value then BSC Parties, the FAA and ECVAA will be informed of the new CAP value and the date from which it is effective in accordance with the Code;

• When a new CAP value is to be implemented, either following the agreement of the consulted on CAP in the industry consultation or following a new value being set by the Credit Committee meeting, Elexon will calculate a new trigger level based on the methodology described in Section 4 of this document;

• Once a new CAP value is notified to BSC Parties the weekly trigger process is resumed on the first working day of the following week. The trigger process uses that newly notified CAP value and the newly calculated trigger level for the comparison with the reference price.

6 The Alternative CAP Review Process

• The Credit Committee will propose a CAP value every two weeks to be consulted upon by industry.

• The Credit Committee may use the Reference Price, forward market prices, previous Energy Imbalance Prices or alternative data sources to inform their proposed CAP value. Consultation responses to previous proposed CAP values may also be considered.

• Following the Credit Committee’s agreement on the proposed CAP value, Elexon shall issue a consultation with the proposed date of implementation. The consultation will last for two working days and the proposed implementation day will be 10 working days after the closure of the consultation.

• Any consultation responses would be considered ex committee, unless a credit committee member requests a Credit Committee meeting to decide a new CAP value for implementation.

• Following the closure of the consultation, a notification will be sent to industry informing them of the CAP value to be implemented in 10 working days time.

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