Credit Cover |
Guidance Note |
Why you need Credit Cover and to how to lodge it;
How we calculate your indebtedness; and
How to check your Credit Cover Percentage (CCP).
Why do I need Credit Cover?
Credit Cover is needed because Trading Charges are paid approximately 29 calendar days after a Settlement Day occurs. Over this period a Parties’ Credit Cover ensures it has enough collateral to cover these payments in case of default.
The Credit Cover calculation assesses indebtedness over a 29 calendar day rolling period. The timing is linked to the timing of our Initial Settlement (SF) Run. The SF Run determines the Trading Charges you need to pay or be paid. Charges are also calculated for information at five Working Days in the Interim Information (II) Run, which you can use as an estimate of your SF Trading Charges.
We send you an
Advice Note after we’ve calculated your
Trading Charges using the SF data which must be settled by the payment day, which falls 29 calendar days after the associated
Settlement Day.
How do I lodge Credit Cover?
You can lodge
Credit Cover during Working Hours as cash via bank transfer,
Letter of Credit or an
Approved Insurance Product. If you want to lodge
Credit Cover, contact the
BSC Service Desk or call
0370 010 6950
What if I want to withdraw my Credit Cover?
You can withdraw Credit Cover using the ‘minimum eligible amount’ (MEA) process. This process calculates the minimum level of Credit Cover that would be required to prevent Credit Default. If you wish to reduce your collateral, there is a 10 day waiting period, during which a minimum eligible amount is established.
We calculate the MEA by finding your highest level of indebtedness over the 10 day waiting period. We then calculate how much you could have reduced your Credit Cover by and still had a CCP of 75%; this is the maximum amount you can withdraw. Note that this is not a recommendation on how much you should withdraw; you should assess the withdrawal carefully to ensure you leave a suitable level of Credit Cover in place to cover future Energy Indebtedness.
Details on how to submit an MEA request and the relevant forms can be found in Balancing and
Settlement Code Procedure
BSCP301.
How much Credit Cover do I need to lodge?
We don’t specify an amount of Credit Cover; it’s up to you to decide. You will need to make this decision based on your trading characteristics, we’re happy to help if you’d like further guidance. Some things you may want to consider are:
How much indebtedness could I accrue over 29 days;
How would my indebtedness be affected if I experienced a plant trip/system outage;
Other operational scenarios e.g. contract rounds; and
An additional mark-up (25%) as you must only use up to 80% of the Credit Cover to avoid Credit Default processes.
How is my Indebtedness Calculated?
We check your
Energy Indebtedness (EI) every half-hour. EI is measured in MWh.
Credit Cover, however, is lodged as a cash figure. To convert your
Credit Cover into
Energy Credit Cover we divide it by the
Credit Assessment Price (CAP). CAP is a parameter set by the
Credit Committee, and is compared against current wholesale prices to ensure it reflects the current market value of
electricity.
If a Party has £500,000 of Credit Cover and CAP is set at £100/MWh:
Energy Credit Cover = £500,000 ÷ £100/MWh
Energy Credit Cover = 5000 MWh
You can find the current Credit Assessment Price on the Elexon Portal.
For each Settlement Period, the Energy Indebtedness is the sum over the previous 29 calendar days (including the current Settlement Day) of:
Credit Assessment Energy Indebtedness (CEI));
Metered Energy Indebtedness (MEI); and
Actual Energy Indebtedness (AEI)
These components are calculated for Settlement Periods in time frames outlined in Figures 1, 2 and 3. These diagrams show the three components and the periods they cover.
The components are calculated for every Primary Balancing Mechanism Unit, in MWh, and are aggregated to a Party level to produce a Party’s overall EI figure. Essentially this is an estimate of your imbalance volume over the 29 day period.
. Figure 1: The Credit Calculation for non-Credit Qualifying Primary BM Units.
Figure 2: The Credit Calculation for Credit Qualifying BM Units (not including Interconnector BM Units)
Figure 3: The Credit Calculation for Interconnector BM Units
What’s a Credit Qualifying BM Unit?
If the Primary BM Unit is not an Interconnector BM Unit and is required to submit Final Physical Notifications to the System Operator, it can qualify as a Credit Qualifying BM Unit as long as it has:
What’s a Non-Credit Qualifying BM Unit?
If you have any non-Credit Qualifying Primary BM Units (excluding Interconnectors), you are required to declare your GC and DC as accurately as possible. The GC and DC for each Primary BM Unit is the expected maximum positive and negative metered volume for a single Settlement Period in the BSC Season. If calculated in MWh, these will then be multiplied by two to give the Primary BM Unit’s GC and DC in MW. Declarations are required 10 Working Days prior to the start of a BSC Season.
In addition, Elexon will determine the CALF values for all non-Credit Qualifying BM Units (excluding Interconnectors) before the start of each BSC Season. This is generally the average generation/consumption divided by the maximum generation/consumption over a previous equivalent BSC Season with separate Working Day and Non Working Day calculations. Where the BM Unit has a zero DC and non-zero GC, it will qualify for a Supplier Export CALF (SECALF).
The
Import/
Export Capability is based on the
Credit Assessment Load Factor (CALF) multiplied by the
Demand Capacity or
Generation Capacity of the
Primary BM Unit. We compare this to your contractual position to provide your CEI. GC, DC and CALF values for all
Primary BM Units are on the ‘Market Data section’ of the
Elexon Portal.
Credit Assessment Energy Indebtedness (CEI)
CEI is an estimate of Energy Indebtedness used until we carry out the Interim Information (II) Run after 5 Working Days. For Credit Qualifying BM Units and Interconnectors it is based on the Primary BM Unit’s contractual position at Submission Deadline compared to the latest Physical Notification submitted to NGESO before Gate Closure (Final Physical Notification). For non-Credit Qualifying Primary BM Units it is based on each Primary BM Unit’s contractual position at the Submission Deadline compared to an estimated metered volume based on the Credit Assessment Load Factor (CALF) and the expected maximum demand and consumption over the BSC Season, called Demand Capacity (DC) or Generation Capacity (GC).
CEI for Different Types of Primary BM Unit
The methodology for determining CEI and the length of time for which it applies is based on the type of Primary BM Unit:
The CEI for Credit Qualifying BM Units is based on a comparison of its FPN and the Aggregated Contract Volume. For Credit Qualifying BM Units the CEI is only used for the most recent two Working Days.
The CEI for Interconnector BM Units is based on a comparison of the Interconnector BM Unit’s FPN and the Aggregated Contract Volume. For Interconnector BM Units the CEI is used for the most recent five Working Days.
The CEI for non-Credit Qualifying Primary BM Units is based on a comparison of its Import or Export Capability and the Aggregated Contract Volume. For non-Credit Qualifying Primary BM Units the CEI is used for the most recent five Working Days.
Metered Energy Indebtedness (MEI)
The MEI uses Central Data Collection Agent (CDCA) metered data to replace FPN data for Credit Qualifying BM Units. The MEI data is available for use in the credit calculations after two Working Days. For all other Primary BM Units, including Interconnector BM Units, the MEI doesn’t apply and these days are part of their CEI. The MEI for a Virtual Lead Party that holds a Virtual Balancing Account is zero.
Actual Energy Indebtedness (AEI)
The AEI is an estimate of your Trading Charges for a given Settlement Period expressed in MWh. It is calculated from five Working Days after a Settlement Day using the Interim Information (II) Run data. It replaces the CEI (and MEI) for those particular Settlement Days. Like CEI and MEI, the AEI is a MWh quantity and is calculated by dividing your Trading Charges by the CAP.
How does this apply to a Virtual Lead Party?
A Virtual Lead Party that holds a Virtual Balancing Account will have zero CEI, zero MEI and only the AEI calculation of its Trading Charges in the Credit Cover Percentage calculation.
How does this apply to a Virtual Trading Party?
Parties who register and qualify as a Virtual Trading Party will pay their Trading Charges approximately 29 calendar days after a Settlement Day occurs (like all Trading Parties). Secondary BM Units registered by a Virtual Trading Party shall be treated as non-Credit Qualifying BM Units for the purposes of calculating Credit Cover.
Secondary BM Units registered by Virtual Trading Party shall be required to submit Demand Capacity (DC) and Generation Capacity (GC) where:
GC for a Secondary BM Unit shall be the maximum positive ‘Deviation Volume’ expected in that BSC Season
DC for a Secondary BM Unit shall be the maximum negative ‘Deviation Volume’ expected in that BSC Season
CEI for Virtual Trading Parties
The CEI for non-Credit Qualifying Secondary BM Units is based on a comparison of its Credit Assessment Credited Energy Volume, Credit Assessment Credited Deviation Volume and the Aggregated Contract Volume
MEI for Virtual Trading Parties
The CEI for non-Credit Qualifying Secondary BM Units is based on a comparison of its Metered Credit Assessment Credited Energy Volume, Metered Credit Assessment Credited Deviation Volume and the Aggregated Contract Volume
The Metered Credit Assessment Credited Deviation Volume is equal to the Credit Assessment Credited Deviation Volume.
AEI for Virtual Trading Parties
Actual Energy Indebtedness (AEI) shall remain unchanged (i.e. AEI represents the estimate of your Trading Charges)
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