PSRG 09/01
Reducing the Timescales or Number of
Reconciliation Runs Following the
Transition to Smart Metering
Meeting Name
Profiling and Settlement Review Group
Meeting Date
22 March 2011
Purpose of paper
For Consideration
1.
Introduction
1.1
The ability to reduce the number of Reconciliation Runs, and/or reduce the overall Settlement timescales
are often cited as potential benefits of the transition to Smart metering. ELEXON has therefore put this
paper together to highlight the expected benefits and potential issues of such a reduction. It should be
noted that we do not believe that a full scale reduction in Settlement timescales should take place as part
of transition to Smart metering. Any change in the number or timescales of Reconciliation Runs to be
carried out under the BSC would need to be considered via the standard BSC change procedures. This
paper simply highlights some areas for future discussion.
2.
Background
2.1
BSCP01 'Overview of the Trading Arrangements' sets out the timescales when each of the required
Settlement Runs are carried out. These are as follows:
Interim Information Run (II) - Settlement Date + 5WD (note the results of this run are just for
information and therefore there is no resultant Payment Run).
Initial Settlement Run (SF) - Settlement Date + 16WD (the results of this run are issued to the
Funds Administration Agent (FAA), who issues advice notes to BSC Parties who will pay/receive
monies by 20 - 21WD after the Settlement Date)
1st Reconciliation Run (R1) - Settlement Date + 36 - 40WD
2nd Reconciliation Run (R2) - Settlement Date + 81 - 85WD
3rd Reconciliation Run (R3) - Settlement Date - 151 - 154WD
Final Reconciliation Run (RF) - Settlement Date + 289 - 293WD (approx 14months)
2.2
The majority of Non Half Hourly (NHH) Metering Systems are read on a quarterly or six monthly basis.
Also with manually read Metering Systems there is a reliance on meter readers accessing the property
which will often lead to delays in actual meter readings being received. Therefore the length of the
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Settlement Calendar allows the majority of Metering Systems to be settled using actual data rather than
estimates by the Final Reconciliation.
3.
Statistics
3.1
The percentage of actual data entering Settlements for both Half Hourly (HH) and Non Half Hourly (NHH)
Meters is monitored under the BSC as part of the Performance Assurance Framework.
3.2
Currently the following percentages of meters are settled on actual data at each Settlement Run. 1
Run Type
% of NHH meters settled on actuals
% of HH meters settled on actuals
SF
8.5
99.24
R1
29
99.53
R2
69
99.65
R3
90
99.64
RF
97
99.502
4.
Impact of Smart Metering
4.1
One of the benefits of Smart metering is an improvement in Suppliers’ ability to obtain actual meter
readings; as these will be taken remotely without the need for meter readers to access the property. In
addition, Smart meters will store data on a HH basis, potentially giving Suppliers’ access to more detailed
data. There is therefore an expectation that Suppliers will obtain meter readings on at least a monthly
basis (if not once a day) to allow them to issue accurate monthly invoices to customers. Therefore, it
should also be possible for actual data relating to Smart meters to be entered into Settlement at an
earlier date.
4.2
This paper assumes that NHH meters will still be settled on a NHH basis, using Estimated Annual
Consumption and Annualised Advance data and applying profiles to determine HH metered volumes.
However, it is possible that Suppliers will choose to make use of the HH data available from Smart meters
and opt to settle domestic and small business users on a HH basis. Again this would have an effect on
the accuracy of Settlement data used in earlier Settlement Runs.
5.
Benefits
5.1
The potential benefits associated with reducing the number of Reconciliation Runs are detailed below:
Reduced central costs – There would be a reduction in the cost of running the central systems
such as the Central Data Collection Agent (CDCA), Supplier Volume Allocation Agent (SVAA),
Settlement Administration Agent (SAA) and FAA if the number of Settlement Runs were to be
1
This is the average percentage of the latest 7 days worth of date available as at 24 January 2011.
Please note the percentage of actuals at RF may be lower than previous Settlement Runs where actual data is replaced by higher estimates or
where estimated data is replaced by lower actual data.
2
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reduced. As the Settlement Runs are mainly automated, the actual resource saving would be
minimal3. However there would be a reduction in the disk space required, noting that the financial
saving resulting from this is negligible4. There would also be a reduction in the number of Data
Transfer Network (DTN) flows being issued from central systems 5.
In addition savings would be achieved through a reduction in the level of assurance work required
under the Performance Assurance Framework e.g. the scope of the BSC Audit would be reduced.
There would also be a reduction in the amount of data required for Performance Assurance
Reporting processes, for example the SVAA would not be required to send data relating to the later
Reconciliation Runs.
Reduced industry costs – As with the central costs; the costs to Parties and Party Agents of
carrying out Settlement Runs should be reduced as the number of Settlement Runs reduces. In
order to quantify these savings, the Profiling and Settlement Review Group (PSRG) were asked to
consider this issue – see below.
In addition to the potential cost savings in reducing the number of Reconciliation Runs, an overall
reduction in the Settlement timescales would allow Parties to know their final Settlement position
earlier, therefore reducing the risk of further Settlement liabilities accruing at later Settlement
Runs. Reducing the overall Settlement timescales would also allow a more streamlined market exit
process to be implemented. Currently Parties are not able to withdraw from the BSC until Final
Reconciliation has been carried out in relation to the last Settlement Day. This has caused
problems where Parties have closed their UK operational sites, but have still been required to deal
with invoices from the FAA.
6.
Issues
6.1
It is important to note that in addition to the benefits highlighted above, there are some potential issues
with reducing the timescales or number of Reconciliation Runs:
Costs - the costs of making the required changes to central systems and parties’ systems may be
high. For example the Performance Assurance Reporting processes would need to be amended
with new Performance Standards and Serials applied to the earlier Settlement Runs. Where this
requires changes to the system, such as shortening the snapshot period, then there will be an
associated cost.
Metering Issues – Although the expectation is that actual data will be available to Suppliers within
reduced timescales once Smart meters have been installed; it is still possible that issues with the
meter occur which may take several months to rectify. Also there will be hard to reach sites or
3
A high level assessment of the potential savings to be achieved by removing two reconciliation runs has been determined as approximately
£47k per year.
4
A high level assessment has determined that by removing two reconciliation runs a saving of approximately 150Gb could be made. In
addition, if the last run is completed earlier, it would be possible to archive data earlier which could save a further 100Gb. A reduction in the
disk space required for the DR site would also be achieved.
5
A high level assessment has determined that that by removing two reconciliation runs the volume of data being sent across the DTN would
reduce by approximately 7.5Gb.
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those with communication errors which cannot be read remotely. With a reduced number of field
staff available to read meters it may take several months before such a site is accessed. During
this time estimated data would be entered into Settlement. If Final Reconciliation is brought
forward to R2, for example, it may not be possible to correct the data before it is crystallised in
Settlements. Currently Post Final Dispute Runs are carried out 2 years after the relevant
Settlement Date. The central cost of these runs is disproportionately higher than standard
Settlement Runs as the process is less automated. Therefore it is suggested that even if the
Settlement Calendar is reduced, the ability to carry out a Settlement Run at 14 months is
maintained to deal with any disputes which arise.
7.
PSRG Consideration
7.1
In order to consider this issue further the view of the PSRG has been canvassed.
7.2
Partial Reduction to Settlement Calendar
7.2.1
The PSRG has previously given some consideration to shortening the Settlement timescales for HH
Metering Systems. The idea behind this was for HH Settlement to finish at R2 with only NHH Settlement
continuing through to RF. It was determined that the benefits of this approach were negligible as both
industry and central systems would need to continue carrying out Settlement Runs for the NHH market.
7.2.2
More recently, the PSRG has considered another proposal which would limit the Settlement Calendar so
that Settlement of HH meters and those Smart meters registered with the Data Communication Company
(DCC) would not be required to submit further data after the R2 run. Again, the additional Settlement
Runs would continue for NHH meters which are not registered with the DCC.
7.2.3
The PSRG assumed that the industry and central costs savings for this option would still be negligible.
However, if the DCC takes on the role of Data Aggregator in the future there may be benefits for the DCC
to only participate in two Reconciliation Runs. Further careful consideration would be required if this
option were to be taken forward as it would not be efficient to add Reconciliation Runs back in to the
process at a later stage if issues with the process were detected.
7.3
Full Reduction to Settlement Calendar
7.3.1
The PSRG has also considered the potential reduction in the number of Reconciliation Runs which may be
possible once a majority of Metering Systems have transferred to Smart meters. It is assumed that at
such a time it will be possible to reduce the Settlement Calendar for both HH and NHH meters; with Final
Reconciliation being carried out at either R1 or R2. This assumption is based on our view that Smart
meter reads will be collected on at least a monthly basis (if not daily) and therefore the data entering
Settlements at this time would be far more accurate than currently.
7.3.2
The PSRG were split over whether a reduction in the number of Reconciliation Runs should be considered
following the transition to Smart meters. Some members felt strongly that it should be possible to reduce
the overall Settlement timescales and that it was unacceptable that Final Reconciliation of Settlement
liabilities was currently being carried out after 14 months; and in some cases 24 months as part of the
post final run. However, other members had significant concerns regarding the number of metering
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issues that could occur, particularly unforeseen errors that may occur in relation to the new Smart
metering regime. These members felt that that the ability to correct errors within the standard
Settlement timetable was more efficient than having to use a Dispute process should the timetable be
reduced.
7.3.3
The PSRG were asked to provide estimates of the potential cost savings. However the majority of
members found it difficult to quantify costs at this stage. It was noted that operational cost savings
would be minimal as the majority of processes are automated. There may be a reduction in head count
due to reduced discrepancy levels; however it could alternatively mean that more work is required at an
earlier stage. Some members also stated that there would be a significant cost increases associated with
making the required changes to systems and processes, for example the additional cost of resolving
errors via a disputes process as these would not be corrected within the Settlement timetable.
8.
Conclusions
8.1
In conclusion, there is no clear argument that the transition to Smart metering should automatically
result in a reduction in the overall Settlement timescales. Reducing the number of Reconciliation Runs
would not save significant costs centrally or across the industry. In fact there would be additional costs
involved in changing systems and processes. In addition, carrying out Final Reconciliation at an earlier
stage would prevent metering issues from being resolved within the standard Settlement timescales.
8.2
However, there is a strong view from several industry participants that the current Settlement timetable
is too long. Parties are keen to see the effect of the transition to Smart metering in terms of data
retrieval /failure rates before committing to a significant change to the Settlement processes. Therefore
the long term goal would be to create more efficient processes so that issues are resolved earlier and the
timescales for Final Reconciliation can be reduced.
For more information, please contact:
Sarah Jones
[email protected]
020 7380 4293
Appendix:
Appendix 1 – PSRG Views
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Appendix 1 – PSRG Views
PSRG Consideration
6 responses were received from the following PSRG members:
No
Company
Confidential
1
SmartestEnergy
-
2
TMA
-
3
Scottish Power
-
4
EDF Energy
-
5
Scottish & Southern Electricity
Costs
6
E.oN
-
7
Centrica
-
8
Npower
-
Role of Parties/ Non-Parties represented
Supplier/Consolidator
NHH & HH: DC, DA Agents
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Smartest Energy
I am not in favour of this whole “bring forward the final reconciliation run” movement.
I know of several instances where it has taken several months to sort out HH metering issues for export sites.
Remember that export meters default to zero for estimating purposes. Generally the problems fall into two
categories: 1) metered data is incorrect (but flagged as actual) due to CT/Pulse Multipliers being wrong and it
takes a while before the MOP can confirm the correct values 2) metered data is missing due to a meter failure and
data needs to be constructed and agreed with the DC. In both these instances, data ultimately entered is flagged
as estimated.
We have also seen instances of data failing CoP5 validation and there is then a long wait before a new meter can
be fitted.
Even bringing RF forward to R3 may cause us problems.
Are Smart meters really going to solve these problems? I doubt it. I don’t know much about Smartmeters but I’ll
bet they do occasionally malfunction and there’s no accounting for MOPs getting CTs/multipliers wrong. And for
export sites where the metering is already AMR, Smart meters may not ever be installed anyway.
What is the big deal about reconciling 14 months down the line? The vast majority of HH data is settled at SF. HH
adjustments after this time are usually tiny for the majority of suppliers. Any supplier can still settle with their
customer on the basis of SF or R1 data if they wish but final settlement should be a few months down the line.
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TMA
Please could you confirm that this assumption still applies, and provide any additional thoughts you
may have in relation to the limitation of Reconciliation Runs for Smart meters?
The limitation of Reconciliation Runs for Smart meters makes total sense and is the only way to reap the full
benefits of the Smart development.
Smart meters will enable the collection of actual data for previously NHH settled sites on a regular basis. The
target of R2 as the final reconciliation for Smart meters can be seen as the equivalent of the 99% target at R1 for
HH settlement. That target is now reached and very often exceeded within the market. Competition and the
ambitious performance target created the right environment for improvement. The same can be achieved with
Smart meters.
The assertion that R2 and even R1 is achievable can be supported by our experience over several years with
(unofficial) smart NHH meters `- AMR.
Perspective
For those in the electricity industry, especially those who have been intensively involved, perhaps Controlled
Market Start Up (CMSU) in 1998 and even before then, views may have become subjective. The struggle to get
NHH Settlement performance to the grail of 97% has been so substantial that we may have lost sight of how
singularly lacking in ambition that target is. One valid reading in a year and a bit for most meters? That does not
bear any objective peer comparison with any other modern industry. Grasping the full benefits of the opportunities
for accurate billing, settlement and trading that smart metering offers needs a radical paradigm shift in thinking:
we must abandon the idea of taking incremental baby steps forward – and that to do otherwise would be to miss
the opportunities available.
New role for Elexon
The proposition depends on the availability of good quality metering information and it cannot be stressed enough
that the success of Smart metering depends on the ability to have the correct meter technical details first time.
We believe Elexon may have a pivotal performance assurance role here, for the industry will need to see a step
change in performance to glean the full potential benefits. New technologies exist to support the proposition of
achieving very high levels of accuracy of meter technical details. Having the target of final reconciliation at R2 (as
a first step) would incentivise everything being put in place, by all the parties, to meet that target.
Efficiency
There exists a culture, currently, of NOT having an imperative to achieve accuracy in managing data “first time”.
By having layers and layers of mechanisms for re working – iterative settlement runs, disputes, post final 6
settlement runs and still, after all that, tolerating a relatively high level of estimation we cannot be sanguine that
our industry is as efficient as possible. Eventually it is hard to see who is responsible or accountable for the
outcomes of all this re working, threads of responsibility and accountability are lost. Few seem to hold that
estimated inaccurate bills delivered late should be completely unacceptable. Whilst this culture may suit those who
6
It is an irony that, not satisfied with an enormous array of re working opportunities and iterative settlement calculations, the industry has
invented its very own oxymoron - the term “post final”.
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don’t have to be (or even want to be) accountable it is far from healthy. Perhaps we have, in a quasi self regulated
environment, set our own standards for too long and we need the blast of fresh thinking that smart metering
proffers - a welcome wind of change. Current mechanisms for settlement support and embed inefficiency. The
problem with the culture is that competition is conducted on the basis of just being averagely bad at managing
data. No one needs to strive for excellence.
Getting things right first time would change the culture entirely and would be incentivised by a shorter Settlement
timetable. The use of real meter readings - actual data - and moving away from reliance on history (and EACs in
particular) would remove one of the major causes of exceptions and inaccuracy, especially around the Change of
Supplier process.
Efficiency is a legitimate objective; and it is an existing BSC objective.
Competition
A shorter Settlement timetable paves the way for dismantling the entire profiling process. At the moment profiling
represents a barrier to a connection between wholesale and retail markets - price signals are opaque.7
A long term benefit of smart metering is a wholly more efficient set of mechanisms for trading and settling that
meets the BSC objectives of efficiency and promoting competition.
The idea that one might “buy oranges and sell oranges” without the complexity of profiling; without a dependency
of difficult to maintain EACs and associated histories; without the layering of reworking; without iteration after
iteration of settlement recalculations all sum to a far less complex and less esoteric trading environment, removing
significant barriers to market entry that the industry has developed over time - and that the current regulated
arrangements now implicitly support.
Imagine the confidence organisations could have in cash flow and margin security if trading was settled, finally, in
30 days. Consumers have shown – look at the success of pre paid mobile phones - a huge enthusiasm for exact
cash accuracy in amenities.
Please could you provide a view on whether you believe it would be feasible to carry out Final
Reconciliation at R1? This is based on the assumption that metered data is being collected, at least,
on a monthly basis. Also whether you believe the timescales associated with R2 would be more
appropriate?
If data for Smart Meters were mostly collected monthly a final reconciliation at R2 would be appropriate.
However an initial reduction to final reconciliation at R2 with a later reduction to R1 once the majority of NHH
meters are Smart meters would provide sufficient time for the industry to embed Smart metering processes and
increase the dial frequency if required. The dial frequency could be set to twice monthly or weekly to provide
ample contingency to collect actual data in time for R1. Advances in communication technology mean that very
frequent dialling of, or communication with, meters is no longer cost prohibitive. (Some would argue, and
7
There is no suggestion that dynamic price signals will work, however if electricity is bought and sold on the wholesale and retail markets in the
same units one would expect more complex tariff offerings - it is a surprising feature of the current market that there is so little tariff
innovation. Initiatives with tariffs aimed at incentivising consumer behaviours – for instance, avoiding peak demand - may be not just be
desirable but more or less essential in the future. This seems a far more realisable objective than some Smart Grid aspirations.
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demonstrate their belief in real commercial current practice, that the most economic proposition is to retrieve data
daily.)
Not all dial frequencies are achievable in practice. Realistic dial frequencies in practice will be dependent upon the
meters and their specification, their modems and their specification and configuration, the communication method
and site issues related to communications.
For example, based on several years AMR experience Some meters are cranky when trying to retrieve interval data over a week or so, and indeed some when
trying to retrieve data beyond just a few days.
Some meters interface specifications are inefficient when requesting data for older periods. One example
is that to get last month's data you have to first read backwards through this month’s data, hence doubling
the data transfer required.
Some meters lose their event history (and thus the error statuses) for older periods and with no
indication. That is, the older interval data appears to have no error events and there is no indication to
cast doubt over that appearance.
It's made worse if the meter modems are specified or configured badly, thus requiring slower
communication speeds and therefore longer sessions, or not effectively utilising the flow control and error
checking properties between the meter and its modem or the modem and the retrieval system.
Some meters support only weak error checking methods during communications. When there is problem
with line quality data corruption is not detected, not at all. You might discover a communication if the
meter is re-read, but depending on the data returned and the actual data that's not always true.
Some communications methods perform poorly for longer communication sessions (e.g. when retrieving
data for a longer period or when a meter's protocol is inefficient).
The siting of the meter or modem can determine the efficiency of the communication session. For
example, with cellular communications (GSM and GPRS) some locations on the premise will provide weak
or varying signals, which may allow communications during initial tests but are problematic over a longer
communications session is needed.
To achieve settlement standards based on certain regular and irregular dial frequencies meter retrieval standards
should be set.
We need a BSCP 601 equivalent for Smart, meters (including control of firmware versions), software,
communications, and:
for both the meters and their modems, and their configurations
separately for the different comms methods
for site installation and configuration standards
for the ability to hold and deliver interval data and its statuses (or events on some meters) over a given
length of time.
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And - as a matter of real urgency, there are many, many AMR meters installed already and if Elexon are to have a
key role in performance assurance of Settlements in the Smart world this should have been in place years ago.
Adopting this proposal would support, incentivise and encourage the roll out of Smart meters to such an extent
that it could be seen as irresponsible not to adopt this initiative.
Established performance in the HH market supports this notion. Changes in technology make the voiced objections
that it would be expensive or “too much data” little more than unsupported urban myths.
Peer comparison with almost any other modern industry makes this idea look like a basic essential – what might be
termed a fundamental requirement, a hygiene factor.
Please could you therefore provide details of the following:
1) The operational cost savings associated with reducing the number of Settlement Runs carried out;
Eventually, it will remove the need for profiling and EAC/AA calculation, an industry wide operational cost saving.
(Not to mention a significant sources of error, inaccuracy, exception and issues around, in particular, COS.)
In and of itself it may not be a huge saving, but that is because it is just a first step.
Elexon may be best placed to estimate the cost saving centrally and to industry of ending profiling.
2) The commercial cost savings associated with reducing the timescales over which Settlement is
carried out; and
It is hard to quantify a lot of “soft” cost savings, and this is just a first step. However if Elexon were to look at the
effort Elexon expends on HH and compare to the burdens of NHH may be a good indication of the difference. It is
probable that large organisations will find it very difficult to quantify what they currently spend on Settlements and
the benefits, whilst undoubtedly real and substantial, maybe hard to quantify.
This may not be the right question: assessing just the benefits that may accrue to existing participants is a limited
view, making the market more efficient and less complex and less esoteric would encourage more market entrants
– that may be more in the interests of GB Ltd, of industry and consumers than in the interests of the cost bases of
existing participants.
If all or most meters were measured on intervals rather than registers and profiles a whole new world of
transparency will come about. For example consumption for any interval will be established and the difference
with generation will be down to other factors such as line loss. A whole new and informed focus can be assigned
to these factors in order to drive out waste and hence cost.
3) Any additional costs you believe you would incur in amending your processes?
Minimal one off cost to modify the HH Data Aggregation system no other additional costs.
Scottish Power
Please find some views from within Scottish Power on your questions relating to reducing the Settlement Calendar:
Q1: Please could you confirm that this assumption still applies, and provide any additional thoughts
you may have in relation to the limitation of Reconciliation Runs for Smart meters?
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We agree that it is not sensible to reduce HH settlement timescales until SMART has started, as we will be still
running reconciliation runs for NHH- so there is very little benefit in interim.
We believe that at this stage reducing HH Settlement to R2 has limited value. Clearly consideration would
need to be given as to how HH errors discovered after the R2 run would be resolved? Would we see the
workload of the TDC increase?, As it is surely likely that more disputes will be raised, particularly if
reconciliation runs for NHH are still being carried out. As a group we could decide that we don’t rectify HH
data after R2 - but this could lead to issues with the BSC Market Auditor or litigation from the impacted parties
involved.
Clearly as a result of the rollout of SMART Metering we would endorse a reduction in the number of
reconciliation runs – however this should be as much about the timing of runs as the number - for instance
perhaps we should look to merge R1 and R2 at some Midpoint say SD +2 months? And then look to bring
forward R3 & RF and then merge these also to a greatly reduced timescale.
Reduced Settlement runs will decrease the number of flows transmitted across the Gateway and will reduce
the amount handled within our internal systems, albeit this is currently not a time consuming task to monitor.
There would be less Settlement runs to validate, again most processes are currently automated so not much
time would be saved.
Q2: Please could you provide a view on whether you believe it would be feasible to carry out Final
Reconciliation at R1? This is based on the assumption that metered data is being collected, at least,
on a monthly basis. Also whether you believe the timescales associated with R2 would be more
appropriate Please could you provide a view on whether you believe it would be feasible to carry out
Final Reconciliation at R1? This is based on the assumption that metered data is being collected, at
least, on a monthly basis. Also whether you believe the timescales associated with R2 would be more
appropriate?
We believe that this stage reducing final Settlement to R1 is too ambitious given the timescales and the
likelihood of data issues, therefore R2 would be preferable.
If Settlement was reduced to R2 after the roll out of SMART how would any remaining NHH or unmetered
issues be addressed, e.g. comms problems, faults etc?
The way we validate data would have to be reviewed as the need to resolve queries in far quicker timescales,
this would require us to focus on SLA’s with DCC? Data Collectors?/Aggregators? to agree on procedures that
would support the quicker Settlement timescales. We would also need to focus on relationships with Meter
Operator’s as the timescales for resolving faults would need to be reviewed.
Q3: Please could you therefore provide details of the following:
1. The operational cost savings associated with reducing the number of Settlement Runs carried
out;
2. The commercial cost savings associated with reducing the timescales over which Settlement
is carried out; and
3. Any additional costs you believe you would incur in amending your processes?
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At this stage it is very difficult to put any monetary value around any savings.
NHH - Cost Savings from reduced Settlement runs – not sure how we would quantify this? Certainly a
reduction in head count due to reduced discrepancy levels is an obvious saving although it could be argued
that more work would be required at an earlier stage. Also less technical support required – fewer runs =
fewer flows = fewer technical problems
NHH & HH Commercial Costs (not savings) could include inability to recover overcharged DUOS due to
shorter window. E.g. metering error detected after 12 months would necessitate a dispute rather than an
immediate credit note due to lack of resolution within settlement window
NHH & HH Customer Billing – Supplier may have to carry the costs of any inaccuracy (e.g. fault related)
resulting from reduced settlement window
NHH & HH Commercial Costs - Additional sites entering disputes process would be costly – more frequent
dispute meetings and more sites to discuss. How would this be managed?
Is unmetered consumption an issue? Also Issue 39 has been looking to get unmetered consumption (illegal
abstraction) into Settlements would a shorter window impact any corrections or benefits in these areas, and
others.
Finally we are fully supportive of looking to reduce Settlement timescales in a post SMART world- but we would
request that cautious approach is taken – i.e. we should look to reduce the timings and the no. of reconciliation
runs over a period of at least 2 years – as the key objective ultimately must be to create a more efficient process
whilst protecting the accuracy of the core settlement processes.
EdF Energy
A brief survey across contacts in EDF Energy supported my own view that we see problems rather than benefits in
potentially eliminating later reconciliation runs.
"The PSRG has previously given some consideration to shortening the Settlement timescales for Half Hourly
(HH) Metering Systems. The idea behind this was for HH Settlement to finish at R2 with only Non Half Hourly
(NHH) Settlement continuing through to RF. It was determined that the benefits of this approach were
negligible as both industry and central systems would need to continue carrying out Settlement Runs for the
NHH market.
Reducing the Reconciliation Run cycle continues to be cited as a benefit of the rollout of Smart metering.
Therefore, ELEXON is considering this issue further. One suggestion is to limit the number of reconciliation runs so
that Settlement of HH meters and those Smart meters registered with the Data Communication Company (DCC)
are not required to submit further data after the R2 run. Again, the additional Settlement Runs would continue for
NHH meters which are not registered with the DCC. It is our assumption that the PSRG’s previous conclusion
regarding negligible industry and central system benefits/costs would still apply. However, this option may result
in benefits for the DCC processes if the DCC is set up to only participate in two Reconciliation Runs.
"Please could you confirm that this assumption still applies, and provide any additional thoughts you
may have in relation to the limitation of Reconciliation Runs for Smart meters?"
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We think there would be a dis-benefit in removing later reconciliation runs for Half-Hourly or Non-Half Hourly
meters, at least within the next few years and during the initial transition to smart metering. Although there could
be some storage and processing savings, the benefit of having an opportunity to resolve metering issues in an
automated manner at relatively low cost would be lost. Even if smart meters increase the reliability of meter data
collection and processing, it will be many years before the benefit is delivered, and there is a risk of new types of
data collection issues also requiring later reconciliation. Until firm improvements in meter processing performance
are achieved, we think it would be premature to abandon later reconciliation runs.
Consideration might be given to removing intermediate runs (R1, say), but would probably not resolve data volume
issues for Smart Meters, given requirement for data snapshots for later reconciliation runs.
"In addition to the above; we have also been considering the potential reduction in the number of
Reconciliation runs which may be possible once a majority of Metering Systems have transferred to Smart
meters. It is our assumption that at such a time it will be possible to reduce the Settlement Calendar for both
HH and NHH meters; with Final Reconciliation being carried out at either R1 (Settlement Day + 1 month) or
R2 (Settlement Day + 3 months). This assumption is based on our view that Smart meter reads will be
collected on at least a monthly basis (if not once a day) and therefore the data entering Settlements at this
time will be far more accurate than currently.
“Please could you provide a view on whether you believe it would be feasible to carry out Final
Reconciliation at R1? This is based on the assumption that metered data is being collected, at least,
on a monthly basis. Also whether you believe the timescales associated with R2 would be more
appropriate?"
It would be feasible to carry out Final Reconciliation at R1, or R2, but not desirable. The majority of meters will
not be Smart for many years to come, and we think it is premature to consider removal of later reconciliation runs
now. Smart Meters may deliver improved data processing compared with existing automatically read meters, but
until that can be firmly demonstrated there remains uncertainty. Some of the issues affecting current
automatically read meters will also affect smart meters: Installation difficulties, registration and setup issues, and
faults with the meter itself and communications. (How old are your "smart" phone/PC/Modem/Router/TVBox/DVD
Player and their software compared with your electricity meter? How often do they need someone to do
something to make them work properly?)
My own view is that bringing in revised data in later runs maintains alignment between customer billing and
central settlement, and there are merits in keeping these aligned. Currently, settlement is revised up to 28 months
in the DF run, with meter data changes occurring in most GSP Groups. Rightly or wrongly, I consider there is
general support from Suppliers for this, including EDF Energy, implied by the inability or cost/lack of incentive for
Suppliers and Agents to tackle the issues leading to later revision. Some measurement errors unavoidably take a
long time to detect and/or resolve, and I see no prospect of that changing for many years. I assume the PSRG has
looked at the gross and individual materialities inherent in the current reconciliation runs, as compared with the
incremental cost of the later runs? If post R1/R2 revision of HH data were to be dropped, I think there would be
difficulty preventing systematic errors working in favour of some suppliers and against others, creating potential for
disputes. However, there may be scope to remove intermediate runs, at cost.
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1. The operational cost savings associated with reducing the number of Settlement Runs carried out;
There wouldn't really be much saving, because the existing processes surrounding the Settlement Runs are fairly
automated. In fact, there could be cost in modifying systems and processes to deal with the change.
2. The commercial cost savings associated with reducing the timescales over which Settlement is
carried out; and
Unfortunately we haven't been able to make quantitative estimates of this. If settlement were to be final on data
which was subsequently discovered to be inaccurate, and the customer is billed or refunded on accurate data, then
Suppliers face an additional uncertainty/risk, which could result in slightly higher prices. Whether this would be
outweighed by small savings in settlement costs is uncertain.
3. Any additional costs you believe you would incur in amending your processes?"
We haven't performed an impact assessment. This itself would carry a non-trivial cost, in the same way that
Elexon impact assessments of BSC systems incur cost.
Storage Issues
This is a purely personal "back of the envelope" view.... please let me know if my calculations are wrong.
The reason for proposing to remove later reconciliation runs appears to be concerned with potential data storage
requirements for potential half-hourly data from AMR and Smart Meters. If this is a concern, it is because of
inefficient storage methods.
I point out that if measurement was in Wh per half-hour, then 2 Bytes of 8 bits each can hold the sign and a value
up to 2^15 or about 32,768 Wh per half-hour. Given the average domestic site has a 100 Amp fuse, the power is
limited to about 24 kW (at 240V), and the maximum half-hourly energy about 12,000 Wh. 2 Bytes is easily
enough to hold this and the sign.
365*48 periods a year = 17520 , so a year's worth of data would take up about 35,000 Bytes, roughly 35 KB.
30million customers x 35040 Bytes is about 1e12 Bytes a year, about 1 Terabyte. A disk to store that costs about
£50. The wholesale cost of 1 MWh of energy, or 1/350e6 of annual energy wholesale cost.
The data may be digitally compressible ("zippable"), recognizing that that slightly reduces search/retrieval speed.
Add some index data, advance checks, checksums etc, re-read/estimates, and it might be more, but not orders of
magnitude.
Use XML and you can probably multiply by [100?], but it still seems a perfectly manageable volume, for which
many years data could be held live, with sensible database design.
Compare with data requirement of 1 hour of highly compressed high definition video, about 10GB (about 1.5
TB/week), stored and sent over the internet/cable to millions of customers every day. The problems of metering
seem trivial.
Scottish And Southern Energy
In general, it appears that there are little cost savings in reducing the number of settlement runs with potentially
significant additional cost for most industry participants as it has been stated before. It may also be too early for
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this consultation across the industry on reduced settlement runs, given that Smart is unproven in its settlement
process. In addition, there are still too many unknowns/uncertainties regarding the exact nature of the role of the
DCC and future settlement mechanisms.
It may prove more costly in the long run to reduce the Settlement timetable prematurely and that re-instating
Settlement runs may prove to be cost prohibitive at a later date both from a process and systems perspective. In
addition, the marginal costs of developing the DCC software to cater for all current reconciliation runs will be
minimal, and that the addition of further reconciliation runs may prove more costly if required as part of a change
to systems rather than as part of an initial development. I respond to your specific questions in order:
The operational cost savings associated with reducing the number of Settlement Runs carried out;
From our analysis, it appears to be potentially significant cost implication in shortening the settlement period. We
believe based on our example there would be an additional £xx cost per annum to consider. This includes
decreased accuracy in settlement, increase resource cost of raising disputes, increase cost of raising disputes,
increase ad-hoc cost in HHDA settlement with the potential cost reduction in provision of HHDA services. This is
based on the rational below, some of which are not purely operational in nature.
We are seeing a good number of metering corrections that are being submitted post R1, this would mean that
ad-hoc disputes would need to be raised in order to recover the associated wholesale settlement charges. (we
have used a single settlement date 1st May 09 and extrapolated forward)
It is worth noting that whilst an ad-hoc dispute process would be being followed, the customer would be very
likely to want immediate retail remuneration, therefore there will be an extended cash flow imbalance for the
supplier, as opposed to guaranteed settlement on the following settlement run.
We are not actively partaking in raising ad-hoc disputes to initiate the DF run, therefore any ad-hoc dispute
cost will be additional in full.
DTN Flow traffic reduction will only affect D0040s and D0298s.
The estimated reduction in HHDA service provision charges may be off-set by an ad-hoc resettlement charge
(typical HHDC re-transmission charge in xx per day per MPAN)
System changes will need to be made. The cost of which is currently unknown but likely to be in the region of
xx, due to revisions to embedded functionality and settlement logic.
The accuracy of the GSPGCF will be reduced by stopping HH amendments
If HH stops at R1, then how will the smearing of GSPGCF on HH values work?
In addition, to achieve improved data retrieval performance would involve investment in the existing data retrieval
processes and arrangement, based on current levels of 55,500 there are additional cost of £xx.
The commercial cost savings associated with reducing the timescales over which Settlement is
carried out; and
Based on the current levels, data retrieval to meet 99% at R2 would impose additional cost of around £xx. Any
inaccuracy in settlement at R2 in the traditional NHH market would be locked in at R2 and would be borne by the
suppliers.
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Any additional costs you believe you would incur in amending your processes?
Previous experience of major Settlement change has demonstrated that as an industry we can be overly optimistic
of the quality and robustness of new procedures. The introduction of the long running dispute on Erroneous
AAs/EACs is a prime demonstration that new processes can initially be prone to increased error, this resulted in the
effective extension of the Settlement timetable to 24 months (when taking into account DF runs).
E.oN
Reducing the number of Reconciliation Runs and Settlement timescales
It may be that the cost benefits of curtailing HH at R2 are negligible but in mind this is not the way we should look
at this proposal. It is indefensible that we take 24 months in some GSP Groups to finalise our position; the
introduction of Smart meters should act as a catalyst to move financial certainty to much nearer the point of
consumption and derive any customer journey benefits that derive from that. One might consider the cost benefits
of designing, building and supporting the DCC application to only deal with data to R2; should this outturn
favourably then there is merit in going down that path. It does seem perverse to build an application and support
it with governance only for it to be made redundant in the near future. I suppose until some numbers are put on
the different scenarios we will not be in a position to make a judgement.
Please could you confirm that this assumption still applies, and provide any additional thoughts you
may have in relation to the limitation of Reconciliation Runs for Smart meters?
I cannot confirm or deny the assumption but I can reiterate my support for shortened timescales; if pressed I
would say that the approach should be more radical: R2 is effectively three bites of the cherry and though I think
that is reasonable where it is not is when one considers the calendar linked to that framework. Settlement Day
01/04/10 went to R2 on 26/07/10, 116 calendar days later. Perhaps we should consider reducing this in
preparation for the introduction of DCC. Commercially, major Suppliers require their HHDC to provide them with
data on their entire HH portfolio at D+2 and this is done in accordance with the requirements of the BSC even
though it is ahead of the SVAA Settlement calendar. The point below recognises that data for NHH meters will be
more readily available and likely to lead to attenuated timescales and greater accuracy. It seems appropriate, as
both HH and NHH have to coincide on the settlement calendar, Shortening the timescales will drive the data
collection activity and customer-derived benefits – like being able to ask for an accurate accrued bill amount at any
point in the billing cycle.
Please could you provide a view on whether you believe it would be feasible to carry out Final
Reconciliation at R1? This is based on the assumption that metered data is being collected, at least,
on a monthly basis. Also whether you believe the timescales associated with R2 would be more
appropriate?
I guess many of the points I made above stand. I think R1 is probably stretching it a little but certainly three runs
– SF, R1 and R2 – is right on accelerated timescales.
Please could you therefore provide details of the following:
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1. The operational cost savings associated with reducing the number of Settlement Runs carried out;
as far as Settlement activities go, there would be operational savings but these would be modest; there would be
savings in the Management Accounts area – again modest.
2. The commercial cost savings associated with reducing the timescales over which Settlement is
carried out; and
Logic would dictate that some commercial savings would accrue and these would be the same for all parties –
agent costs.
3. Any additional costs you believe you would incur in amending your processes?
Logic would also dictate that benefits would accrue from not transmitting, processing, storing and purchasing quite
as much data. In my view these savings are like those above – modest.
Centrica
We do not support the reduction is settlement runs whilst we still have a number of issues to resolve under the
current settlement calendar. These include:
1.
We still experience movement between R2 and RF within the existing HH market. We would therefore
question how accurate settlement would be for Smart after R2
2.
If final settlement runs were brought forward the opportunity to correct errors in settlement data would be
reduced. We still find we are having to correct data owing to failures in comms devices and missing dataflows
between agents
3.
We believe the costs of any erroneous EAC passing R2 could be significant removing the opportunity to
resolve
4.
A full impact assessment would need to be carried out to ascertain the costs to agents for any system
changes together with any potential benefits from shortening the settlement calendar
5.
We believe there would need to be a step change in current industry processes relating to managing change
of meter and change of supply processes (resolving disputed reads etc)
6.
The change of supplier process together with the Supplier hub principles would need to be looked at with a
view to reducing complexity and the number of dataflows involved. The implementation of the DCC may
provide an opportunity to do this.
7.
If HH settlement for Smart was not implemented then we would need to look at how settlement processes
would work for NHH Smart and NHH dumb metering
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I think currently we would prefer to keep the calendar as is but as Smart metering is rolled out tighten the criteria
around settlement performance with the potential on suppliers to settle before R2 once experience of any issues
relating to Smart are fully understood.
NPower
Npower believes that shortening settlement timescales for the HH market only will have limited benefit as central
settlement would still need to produce reconciliations. The only cost benefit would be achieved through HHDA cost
savings, which will be negligible. Therefore, we continue to endorse previous assumptions stating this.
The paper issued by ELEXON suggests shortening timescales to have a final reconciliation at R1 (SD+30 days) or
R2 (SD+3 months), based on a yet-undefined "tipping point" in smart metering deployment, where data is
collected at least monthly.
Npower does not support this concept:
•
The paper is ambiguous as to what "data" means; if this refers to HH data downloaded periodically (i.e.
monthly), DECC is yet to respond to consultations and therefore it would be premature to decide how
settlement will run for smart, although we do endorse the consideration of options.
•
There should be a suitable "bedding in" period for the implementation of smart to allow errors to be identified
and corrected. Shortening timescales before the industry has had time to take any learning from the first few
years of implementation would pose critical risk to industry parties
•
Shortening timescales for non-smart (legacy) meters will pose a greater crystallisation risk
•
The timescales quoted makes a presumption of read frequencies, which could become prescriptive to a
Supplier. Even at a monthly timescale, if a problem (e.g. comms drop-out) occurs, the Supplier could fail to
resolve the issue before being required to submit actual reads for final settlement; putting controls in place
are likely to be costly compared with limited benefits.
•
It is generally accepted that mass-meter deployment will uncover a significant quantity of settlement-affecting
issues and errors. Shortening settlement timescales reduces the time to resolve each instance, causing an
increased operating cost as well as significantly increasing the risk of settlement error crystallisation
•
It could be assumed that "problem" sites might not have successful installation of a smart meter until the
latter stages of deployment; again creating a risk of crystallising error in settlement that would otherwise be
resolved under current settlement timescales.
•
BSC parties who are able to achieve early settlement accuracy will see the majority of the benefit, with the
exception of GCF movement. Those who do not should be given reasonable timescales to improve
performance and resolve issues, as per the current process and timescales.
We would support a watching brief style monitoring on performance throughout smart deployment. We strongly
feel that decisions made on this topic would only be appropriate when firm empirical evidence of cross industry
performance exists. We therefore strongly feel that this is not an appropriate time to make such decisions.
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