Section G: Contingencies

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Section G: contingencies

Simple Guide

Introduction

Section G of the BSC sets out what happens in certain contingency situations and cross-references Contingency Provisions set out elsewhere in the BSC.

The contingencies covered are certain emergencies and unexpected or unusual events, and include:

(a) failure of the Energy Contract Volume Aggregation Agent (ECVAA) to receive contract notifications (Section P);

(b) manifest errors in the submission or acceptance of Bids and Offers (Section Q);

(c) the inability of the NETSO to receive Physical Notifications (Section Q);

(d) Black Start Periods (Section G);

(e) the exercise of certain emergency powers for civil emergencies and fuel security by the Secretary of State (Section G); and

(f) Network Gas Supply Emergency Acceptances (Section G).

Note that this is not an exclusive list of the provisions of the Code that address abnormalities in the implementation of the Code.

Section G also provides for the determination of Avoidable Costs or Exceptional Costs, which are used in the calculation of compensation claims for certain Contingency Provisions.

Ad-Hoc Trading Charges

A number of contingency provisions within the BSC can result in the need for adjustment payments and charges to be made between Parties. These adjustment payments are made by way of Ad-hoc Trading Charges under the BSC. The amount of any such Ad-hoc Trading Charges are determined from the Initial Settlement Run (or Reconciliation Run if one has been carried out at the time of calculation). Unless decided by the Panel, no adjustment is made in the determination of the Ad-hoc Trading Charges when a subsequent Settlement Run is carried out.

Party Daily Reallocation Proportions

Section G also provides for the calculation of a Party Daily Reallocation Proportion for each Party. This is each Party's pro-rata share of the revenue surplus on any particular day1. It should be noted that it is possible for the proportion to be received by a Party to be negative as well as positive. Again, these are determined from a particular Settlement Run and not recalculated from Reconciliation Runs (unless the Panel decides otherwise).

Review of Emergency Arrangements

If, at any time, the Secretary of State announces his intention to carry out a review of the arrangements that may apply in relation to the exercise of his powers under Sections 34 and 35 of the Electricity Act 1989 and Sections 1 to 4 of the Energy Act 1976 (essentially powers available if circumstances arise such as fuel securities, civil emergencies and events threatening supplies) then Elexon is required to participate in this review if requested to do so by the Secretary of State. Furthermore, following the review, the Panel is required to propose a modification to the BSC (on the recommendation of Elexon, and after consulting with the Secretary of State and the Authority) to support the outcome of the review.

Avoidable Costs

Section G defines Avoidable Costs and sets out how they are determined. Avoidable Costs are used in the calculation of compensation claims arising under three Contingency Provisions in the Code: Black Start Periods, the NETSO outages and Manifest Errors.

They are determined by the Panel (or a "Claims Committee" if established by the Panel) for a BM Unit in relation to either:

(a) changes in Imports and/or Exports of that BM Unit; or

(b) costs incurred due to a black start instruction received from the NETSO.

The Panel determines the net costs of operating the BM Unit that would not have been incurred but for the change in Imports and/or Exports of the BM Unit or the black start instruction, i.e. what additional operating costs were incurred as a result of changing the Import and/or Export of the BM Unit as a consequence of the Contingency Provision.

These are the Avoidable Costs being costs that would have been avoided or not incurred but for the advent of the Contingency Provision. It is possible for Avoidable Costs to be negative if net costs were saved or revenues earned.

In determining the operating costs of the BM Unit, and consequently the costs that would not have been incurred but for the Contingency Provision (i.e. the Avoidable Costs), a number of factors are to be taken into account:

(a) costs include lost revenues, and costs saved include revenues earned;

(b) if the BM Unit comprises premises of a Customer, the relevant costs are those of the Customer (and not the Party, i.e. the Supplier);

(c) costs are not counted unless they are demonstrably:

(i) directly incurred in operating the Plant and Apparatus comprised in the BM Unit;

(ii) reasonably and prudently incurred; and

(iii) costs that would be expected to differ according to whether there were changes in Imports and/or Exports or changes in operation to comply with a black start instruction in the relevant Settlement Period alone;

(d) costs (incurred or saved) include costs of consumption of electricity or fuel;

(e) the costs of losses in respect of damage to property or death or injury to persons; insurance premia; and financing and overhead costs are excluded;

(f) compensation payments made under contract (in particular between a Supplier and their Customer) for loss of supply or otherwise in consequence of the change in Imports and/or Exports are disregarded; and

(g) Trading Charges and BSCCo Charges are disregarded.

Procedures

Avoidable Costs must be determined for each Settlement Period covered by the claim.

The Lead Party of the relevant BM Unit is required to prepare and submit a statement of claim of the estimated Avoidable Costs for each Settlement Period on the relevant BSCP form together with any information supporting the estimates to the Panel.

The Party may be required by the Panel to submit a signed statement by its auditors to confirm that the information submitted has been prepared on a fair, complete and reasonable basis. Whilst the estimate and supporting information are submitted by the Lead Party, it is for the Panel to determine the relevant Avoidable Costs. These are notified to the Lead Party by Elexon.

If requested by the Authority, the Panel is required to discuss any determinations of Avoidable Costs, and take into account any guidance from the Authority. It must also exclude any costs which the Authority directs the Panel to exclude.

The Panel, in accordance with Section B, may establish a Panel Committee to determine these claims.

Black Start

Section G of the Code addresses the contingency of a Black Start Period. The Black Start provisions apply if the NETSO informs Users under the Grid Code that a Total Shutdown or a Partial Shutdown exists and that the NETSO intends to implement a Black Start. Elexon notifies all BSC Parties (and any CM Settlement Services Provider) of the NETSO's notification. Therefore the activation of the Black Start provisions in the BSC is linked to action taken by the NETSO under the Grid Code.

NETSO determines the time and date that the Total Shutdown or Partial Shutdown commenced and notifies Elexon. Elexon determines the corresponding Settlement Period, which represents the start of the Black Start Period, and notifies all Parties (and any CM Settlement Services Provider).

Black Start with market suspension

If there is a Total Shutdown, then there will also be a Market Suspension Period which starts and ends at the same points as the Black Start Period and Elexon will notify all Parties (and any CM Settlement Services Provider) accordingly.

If there is a Partial Shutdown, then a Market Suspension Period will only exist if, at any time during the Partial Shutdown, the Market Suspension Threshold specified in Section G is met. There may therefore be a Market Suspension Period for some, all or none of the Black Start Period. The NETSO monitors the Market Suspension Threshold and will notify Elexon if the threshold is met or if the Total System returns to normal operation under the Grid Code, whichever occurs first.

If the Market Suspension Threshold is met during a Partial Shutdown, then the NETSO will notify Elexon of the time and date at which it was met and Elexon will determine the corresponding Settlement Period which represents the start of the Market Suspension Period. Elexon will notify all Parties (and any CM Settlement Services Provider) of the existence of a Market Suspension Period, which will last for the remaining duration of the Black Start Period.

Where there is a Market Suspension Period, and following the NETSO’s determination of the time that the Total System could return to normal operation under the Grid Code, the Panel (after consultation with the NETSO) will determine the Settlement Period from which the Market Suspension Period provisions are to cease to have effect. The Panel is required to take into account the following and any other matters or processes set out in the relevant BSCP:

(a) the time the Total System could return to normal operation under the Grid Code;

(b) the fact that it is desirable to return to normal operation under the BSC at the same time or as soon as practicable thereafter; and

(c) the amount of time which it is reasonable to allow for Parties to recommence trading operations.

If, at any time up to one hour before the Settlement Period determined by the Panel, the NETSO determines that the Total System could not return to normal operation at that time, then the Panel will revise its determination and Elexon will notify all Parties (and any CM Settlement Services Provider).

The Settlement Period immediately before that determined by the Panel will represent the last Settlement Period of both the Black Start Period and the Market Suspension Period, after which the BSC’s Black Start provisions will cease to apply.

Black Start without market suspension

Where there is no Market Suspension Period during a Partial Shutdown, the NETSO will inform Elexon of the time and date that the Total System returned to normal operation under the Grid Code. Elexon will determine the corresponding Settlement Period, which will represent the last Settlement Period of the Black Start Period, and will notify all Parties (and any CM Settlement Services Provider) accordingly.

Elexon is required to notify all Parties (and any CM Settlement Services Provider) of the Settlement Periods representing the start and end of the Black Start Period, and of the Settlement Periods representing the start and end of any Market Suspension Period.

Variation of Rules

The BSC trading rules are amended for all Settlement Periods during a Market Suspension Period. The changes are that:

(a) the operation of the balancing mechanism is suspended;

(b) contract notifications (to the ECVAA) are suspended;

(c) the normal imbalance pricing calculations are suspended and a contingency imbalance cash-out price applies (the way that this is determined is set out in Section T1.7);

(d) the value of Credit Assessment Energy Indebtedness is set to zero for all Trading Parties;

(e) the value of Metered Energy Indebtedness is set to zero for all Trading Parties; and

(f) the operation of the TERRE Market shall be suspended.

In relation to all Settlement Days that fall wholly or partially within a Market Suspension Period, the value of Actual Energy Indebtedness is set to zero for all Trading Parties.

In order to facilitate a return to normal operation, the Panel may decide (after consultation with the NETSO) that certain data including Bid-Offer Data and Final Physical Notification data and/or Volume Notifications that are submitted during the Market Suspension Period may be disregarded for the purposes of the BSC.

Lead Party Compensation

If a BM Unit is given a black start instruction (as defined in Section G3) by the NETSO under the Grid Code that relates to any Settlement Period(s) within a Black Start Period, then the Lead Party of the BM Unit may submit a claim for compensation to Elexon. 2 Any claim must be submitted within 20 Business Days of the end of the Black Start Period (or longer if the Panel decides).

Where a claim is submitted, the Panel decides what change in Imports and/or Exports of the relevant BM Unit occurred and what other charges occurred in the operation of the BM Unit (if any) in each Settlement Period as a result of complying with black start instructions. The change in Imports and/or Exports is expressed as the net quantity in MWh for each Settlement Period, which is the "black start compensation volume". The Panel determines the Avoidable Costs associated with these changes for each Settlement Period.

The "black start compensation amount" is, in simple terms, the Avoidable Costs determined by the Panel minus the imbalance charges received (or reduction in imbalance charges paid) for the black start compensation volume. Note that because contract notifications are disregarded and a contingency imbalance price is determined during Market Suspension Periods, the Lead Party of the BM Unit will implicitly be paid at the relevant contingency imbalance price(s) for any BM Unit Metered Volume during a Market Suspension Period. For any Settlement Periods which fall within a Black Start Period but not within a Market Suspension Period, the Lead Party (and/or the Subsidiary Party where there is a Metered Volume Reallocation Notification in place) will pay or be paid the relevant imbalance price(s) calculated under the normal imbalance pricing rules. The black start compensation amount calculation therefore takes this into account.

When submitting a claim for compensation, the Lead Party must itself estimate the relevant changes in Imports and/or Exports and the black start compensation amounts associated with each relevant instruction. The Lead Party must also provide other information reasonably requested by the Panel, and comply with the provisions relating to the determination of Avoidable Costs. The NETSO and Distribution System Operators are also required to provide information if requested to do so by the Panel.

The Lead Party is entitled to payment of the black start compensation amount plus interest. This money is recovered from all parties broadly speaking pro-rated on the basis of Credited Energy Volumes for each Party over the seven-day period prior to the start of the Black Start Period (note that the Party Daily Reallocation Proportions are not used for this pro-rating in the case of Black Start).

Civil Emergencies and Fuel Security Periods

These provisions apply if the Secretary of State gives a direction under Section 34(4)(b) of the Electricity Act; or where action is taken under sections 1 to 4 of the Energy Act 1976 (and such action will have a material effect); or if action is taken in accordance with Section 96 of the Electricity Act. These actions and directions essentially represent the exercise of powers available if circumstances arise such as fuel securities, civil emergencies and events threatening supplies.

Once initiated, the BSC provisions apply for so long as the relevant action or direction takes effect (or longer if so decided by the Secretary of State).

Changes to Trading Rules

If the conditions described above prevail and if the Secretary of State decides (after consultation with the Authority and the Panel), then the Secretary of State may activate one or more of the following changes to the trading rules in the BSC:

(a) adopting a contingency imbalance cash-out price (determined in the same way as in a Market Suspension Period);

(b) limiting the prices for Bids and Offers (in accordance with the provisions of Section Q) to historic values (the Secretary of State may decide the limits apply to all BM Units or to specific BM Units, and also determine the historic period if they wish it to differ from the default period set down in Section Q); and

(c) determine a reduced value of Credit Assessment Price (CAP) (setting down the principles and objectives to apply in determining the price). The Panel may determine a difference reduced price in order to achieve the principles and objectives set down by the Secretary of State.

The Secretary of State may activate each of these changes together or separately by giving an appropriate direction to the Panel. If such a direction is given, Elexon is required to copy the direction to all Parties.

Generator Compensation Instructions

This section of the BSC provides for payments to be made following the receipt of a Generator Compensation Instruction. A Generator Compensation Instruction is a compensation amount that has been authorised and delivered to Elexon by a Generator in accordance with the Fuel Security Code (essentially a payment to a generator to be recovered from nominated Suppliers arising under the provisions of the Fuel Security Code).

Claiming for Exceptional Costs

When a Generator has been subject to a direction given by the Secretary of State (either in anticipation of or during a Fuel Security Period), the Lead Party in relation to that BM Unit may claim to the Panel for any 'Exceptional Costs' they have incurred.

The Panel, or the Claims Committee if delegated, assesses all applications for Exceptional Costs and determines the amount of compensation to be paid to the Generator. In making such determinations the Panel shall take into account any guidance given by the Authority.

Timeframes and Claim Submission

An Application to claim Exceptional Costs must be made within sixty days after the end of the Security Period, unless the Panel approves a longer period. If the instruction is in anticipation of a Security Period and no Security Period results the Claimant has sixty days from the date of the direction. If the Security Period continues over a long period a claim for an interim payment can be submitted.

The Lead Party shall provide a written statement with its application of the circumstances which the Exceptional Costs were incurred and the amount of those costs. The Lead Party shall also comply with any request of further information by the Panel, and, if required, submit a statement signed by the Lead Party's Auditors stating that the estimate of the Exceptional Costs has been prepared on a basis that is fair, reasonable and complete.

The procedure for submitting an application for Exceptional Costs (including the claim form, the written statement and any additional information in support) is set out in BSCP201 Black Start and Fuel Security Contingency Provisions and Claims Processes. The Panel, or Claims Committee, may determine any additional procedural requirements in relation to the progress and procedure of applications for compensation from Exceptional Costs incurred.

Cost Recovery

The proportion of Exceptional Costs allowed by the Panel shall be settled as a charge upon Suppliers in accordance with instruction from the Authority.

The BSC establishes the entitlements and liabilities associated with the payments and charges set down in the Generation Compensation Instruction. It also requires Elexon to notify the Funds Administration Agent (FAA) of the relevant payments and charges and for Elexon to keep records of the compensation amounts made and charged.

Network Gas Supply Emergency Acceptances

The Network Gas Supply Emergency Settlement Validation Committee will validate whether Trading Charges relating to Network Gas Supply Emergency Acceptances are consistent with the Network Gas Supply Emergency Adjustment Principles and, where appropriate, will amend data relating to those Network Gas Supply Emergency Acceptances in order to amend such Trading Charges.

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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1 Stated another way, this is the values of Total System Residual Cashflow summed over the Settlement Day.

2 The definition of black start instruction differs according to whether the Settlement Period also fell within a Market Suspension Period.