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CONTENTS

Settlement Cashflows V6.0

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Settlement Cashflows

Guidance Note

Introduction

This document provides a high level explanation of the Settlement Cashflows under the Balancing and Settlement Code (BSC). Full information on this subject is contained in Section T: Settlement and Trading Charges of the BSC.

Information on the Elexon subsidiary set up for the purpose of clearing the cashflows is contained in Section N: Clearing, Invoicing and Payment of the BSC. The BSC and a Summary of it can be downloaded from the Elexon website.

Cashflows

The BSC defines payments and charges in respect of different activities covered under the BSC. These are generally from or to Imbalance Parties whilst a further cashflow is from or to the Transmission Company. In all cases, the counterparty is a subsidiary of Elexon, set up specifically for the purpose of clearing the cashflows and operated by the Funds Administration Agent (FAA). The payments and charges are as follows:

    • Energy Imbalance Cashflow (CAEIp): payments by Imbalance Parties at System Buy Price (SBPj) for negative energy imbalance volumes, i.e. top-up, and payments to Imbalance Parties at System Sell Price (SSPj) for positive energy imbalance volumes, i.e. spill;

    • Information Imbalance Charge (CIIp): payments by Imbalance Parties at the Information Imbalance Price (IIPj) on the magnitude of any deviations of BM Unit Metered Volumes from Final Physical Notification (FPN) (as modified by any accepted balancing mechanism Offers or Bids). However, ever since the BSC was introduced, the Information Imbalance Price has been set always to be zero;

    • BM Unit Cashflow (CBMp): payments to Imbalance Parties at Offer Price for accepted Offers, and payments by Imbalance Parties at Bid Price for accepted Bids;

    • Non-Delivery Charge (CNDp): payments by Trading Parties either: for non-delivered Offers, in the event that a payment at an Offer Price to a Trading Party exceeds the imbalance price paid on the shortfall resulting from any non-delivery; or for non-delivered Bids in the event that the imbalance price paid to a Trading Party for the spill caused by any non-delivery exceeds the price paid by the Trading Party for the Bid. Payments by Imbalance Parties in relation to non-delivered TERRE bids.

    • Residual Cashflow Reallocation Cashflow (RCRCp): a payment to or from Trading Parties, being the aggregate of all Account Energy Imbalance Cashflows and Information Imbalance Charges pro-rated over a Trading Party’s Credited Energy Volumes. Specifically, payments are pro-rated according to the Credited Energy Volumes for Primary BM Units other than Interconnector BM Units that are in delivering Trading Units, and the Credited Energy Volumes times minus one for Primary BM Units other than Interconnector BM Units that are in offtaking Trading Units1;

    • Replacement Reserve Cashflow (CRRp): a payment to or from Imbalance Parties in respect of the BM Unit as a result of Replacement Reserve activations.

    • Replacement Reserve Instruction Deviation Cashflow (CDRp): a payment to or from Imbalance Parties based upon the difference between the TSO dispatched Replacement Reserve Accepted Offer Volume and the centrally defined EU Standard Product Shape Volume. These volumes are priced at the Balancing Energy Deviation Price. However, as per the P344 solution, the Balancing Energy Deviation Price has been set to zero.

    • System Operator Cashflow (CSOj): typically a payment by the Transmission Company to cover the net cost of Offer Acceptances, Bid Acceptances and Total System RR Cashflow.

    • Supplier Compensation Cashflow (SCCp): a payment to or from Suppliers, that calculates the compensation for Suppliers impacted by Virtual Trading Party activity in the Wholesale Market.

    • Virtual Lead Party Compensation Cashflow (SCVp): a payment to or from Suppliers, this is a Mutualisation of all Suppliers, based on their market share, in order to compensate for Virtual Trading Party activity. Market share will be calculated on a Supplier’s Final Demand.

If the volumes of Accepted Offers and Accepted Bids are roughly equal, and Non-Delivery Charges are negligible, then the aggregate of the Period BM Unit Cashflows typically will be positive, as Offer Prices typically will be greater than Bid Prices. Consequently, the System Operator Cashflow typically will be positive, i.e. from the Transmission Company. However, if the system is long, i.e. generation is outstripping demand, then the volume of Bids accepted will be greater than the volume of Offers accepted, and the total of payments by Imbalance Parties for Bids may exceed the total of payments to Imbalance Parties for Offers. In this case, the System Operator BM Cashflow will be negative, representing a payment to the Transmission Company.

Similarly, if the volume of positive imbalances for all Imbalance Parties is comparable to the volume of negative imbalances, then the aggregate of the Account Energy Imbalance Cashflows will be positive, representing a net payment from Imbalance Parties, as the System Buy Price charged on negative imbalances is normally greater than the System Sell Price paid on positive imbalances. Thus, assuming no or minimal Information Imbalance Charges, the Residual Cashflow Reallocation Cashflows (RCRC) will be to Trading Parties. However, if the system is long, this implies that positive imbalances exceed negative ones, and the direction of the RCRC may reverse.

Note also that the pro-rating of the RCRC means that:

(i) Trading Parties will have to make payments in respect of Exporting BM Units other than Interconnector BM Units if they are part of an offtaking Trading Unit, i.e. part of a Trading Unit with other BM Units that, in aggregate, are Importing, (or similarly for Importing BM Units other than Interconnector BM Units in delivering Trading Units), even though the total RCRC is positive and payments are being made to Trading Parties overall; and

(ii) Accepted Offers and Bids are included in the Credited Energy Volumes that determine the RCRC for each Trading Party, and hence result, not only in a payment or charge at the relevant Offer or Bid Price, but also a change in RCRC.

Need more information?

For more information please contact the BSC Service Desk at bscservicedesk@cgi.com or call 0370 010 6950.

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The copyright and other intellectual property rights in this document are vested in Elexon or appear with the consent of the copyright owner. These materials are made available for you for the purposes of your participation in the electricity industry. If you have an interest in the electricity industry, you may view, download, copy, distribute, modify, transmit, publish, sell or create derivative works (in whatever format) from this document or in other cases use for personal academic or other non-commercial purposes. All copyright and other proprietary notices contained in the document must be retained on any copy you make.

All other rights of the copyright owner not expressly dealt with above are reserved.

No representation, warranty or guarantee is made that the information in this document is accurate or complete. While care is taken in the collection and provision of this information, Elexon Limited shall not be liable for any errors, omissions, misstatements or mistakes in any information or damages resulting from the use of this information or action taken in reliance on it.

1 The sign convention of the BSC is that amounts of energy put on to the System are positive amounts and amounts taken from the System are negative. Hence the (generally) negative values in offtaking Trading Units are multiplied by minus one.