December 2022 Industry Newsletter

Welcome to the Corona Energy Industry Newsletter.

At Corona Energy we believe in putting the Customer first.  We use our position as one of the largest non-domestic energy suppliers in the UK to voice your needs, views and concerns at key regulatory meetings. This can involve lobbying Ofgem, The Department for Business, Energy and Industrial Strategy (BEIS) and other regulatory bodies and industry parties to ensure you are represented and treated fairly.

As part of our service to you, this monthly newsletter will keep you informed of the latest developments in the world of energy regulation in a way that is informative, easy to read and useful to our Customers.

Monthly Roundup

What has been going on in the last few weeks?

Gas and Electricity

Ofgem’s Microbusiness Strategic Review and the Alternative Dispute Resolution (ADR) Service: The energy Ombudsman’s ADR scheme successfully went live on 01 December 2022. Over one thousand five hundred Third Parties are now signed up to the scheme, and further details can be found here.

Gas

• Reform of Gas Demand Side Response Arrangements: National Grid Gas (NGG)’s Modification UNC 0822 –  Reform of Gas Demand Side Response Arrangements (Urgent)  that would allow meters consuming more than 2 million Therms per annum to receive a payment for committing to reduce their gas usage prior to a National Gas Supply Emergency was approved and implemented on 17 October 2022 with some criticism that their use of the UNC Urgent Modification Process meant that the proposal was not adequately impact assessed. As a result of this lack of assessment, an additional Modification 0833 (Urgent) – Enabling Demand Side Response (DSR) Market Offers to be made by Non-Trading System Transactions was required to close some gaps in the solution. Although NGG was further criticised by both industry parties and by Ofgem in their decision letter relating to the use of the UNC Urgent Modification Process and adding unnecessary time and cost to the development of their solution, Modification 0833 was approved and implemented on 09 December 2022.
• Unidentified Gas (UIG) Modifications: Following the closure of Corona Energy’s Modifications 0781R – Review of the Unidentified Gas process, Modification 0831 – Allocation of LDZ UIG to Shippers Based on a Straight Throughput Method has been raised by SSE seeking to introduce a uniform allocation of UIG, where a set UIG value is applied evenly to all meters. This approach removes volatility and commercial challenges to the Allocation of Unidentified Gas Expert (AUGE) allocation table annually. It will also save money as an AUGE would not be required, and will create more transparent and easy to understand methodology. The Modification is being discussed at Workgroup with some discussions being held around the specifics of the proposed legal text, however there seems to be general support for the concept. We will keep you up to date as the Modification progresses. 

2022 Regulatory Review

2022 has been another busy year for energy regulations. We thought we would take a look back on the biggest regulatory changes and challenges of this past year:

January: We started the year with some turbulent times and a number of Domestic Suppliers had left the market. Corona Energy sponsored Modification 0797 which ensured that any Last Resort Supply Payments (LRSP), which is the cost that industry picks up if a Supplier fails, for Domestic customers would be picked up by the Domestic market only, and any non-Domestic Supplier failure costs would be picked up by the non-Domestic market only. This ensured that the non-Domestic market could continue to function competitively without paying the costs of the struggling Domestic market.

February: As a result of Modification 0797 we saw an update to the forecast Transportation charges from the Gas Transporters. Before Modification 0797 was implemented these costs saw a 40% increase, but with 0797 we saw a reduced increase of just 17%. Additionally, Ofgem began to take more drastic steps to monitor Supplier performance in the form of a consultation on their Supplier Operational Conduct and Financial Resilience principles.

March: Ofgem began to make final decisions on the Microbusiness Strategic Review, with confirmation that the scheme would introduce a number of measures, including the Alternative Dispute Resolution (ADR) scheme for Third Party Intermediaries (TPIs), TPI cost disclosure and the removal of the requirement for Microbusinesses to submit a termination notice. For electricity, we had conformation that the Mandatory Half-Hourly Settlement (MHHS) programme would be delayed as a consequence of the delays to the Switching Programme.

April: As usual in April the Unidentified Gas (UIG) Allocation Tables, which detail the apportionment of the total UIG costs to various types of gas meter, were approved by the Uniform Network Code (UNC) Committee. At this time Corona Energy were sponsoring a review of the UIG process which many Suppliers believed was not fit for purpose.

May: Corona Energy’s 0781R – Review of the Unidentified Gas process continued to progress with a consensus that a uniform allocation of UIG across all meters uniformly would create a more transparent, easy to understand and predictable approach to allow Suppliers to price their contracts more accurately.

June: We continued to encourage our TPI partners to join up to the Energy Ombudsman’s ADR scheme as it was being developed, and we continued to work with the Ombudsman on the high level design. Additionally our 0781R – Review of the Unidentified Gas process review was officially closed with the recommendation that the uniform allocation of UIG would be the most preferential future approach to UIG.

July: After several years of hard work, Ofgem’s Switching Programme was successfully implemented on 18 July 2022 with only minor teething issues. We also saw Gas General Non-Transmission Services Commodity (NCO) charges indicatively increase substantially due to the increasing wholesale gas costs.

August: National  Grid was in the news due to their extended National Gas Supply Emergency (NGSE) test of their preparedness – which is a usual annual process which appears to be somewhat sensationalised. The extension of the test was to ensure that all potential NGSE scenarios were included. We also had news that Ofgem had been approached about the proposed uniform allocation of UIG and they were generally open to the concept in principle.

September: Due to spiralling energy costs thanks to increasing costs to the wholesale market, the Department for Business, Energy and Industrial Strategy (BEIS) announced the Energy Bill Relief Scheme (EBRS) for non-Domestic customers. This scheme means that some customers who meet a set criteria are given a discount to their energy costs by Suppliers, which is underwritten by the UK Treasury.

October: We saw National Grid raise an urgent Modification: UNC 0822 – Reform of Gas Demand Side Response Arrangements (Urgent). This Modification sought to introduce a more flexible Gas Demand-Side Response (DSR) arrangement t hat would allow meters consuming more than 2 million Therms per annum to receive a payment for committing to reduce their gas usage prior to a National Gas Supply Emergency. This agreement is for a day ahead of a gas emergency being announced. This scheme was purely voluntary for Shippers and National Grid’s use of the UNC’s Urgent Modification process was criticised.

November: Following the closure of Corona Energy’s Modifications 0781R – Review of the Unidentified Gas process, Modification 0831 – Allocation of LDZ UIG to Shippers Based on a Straight Throughput Method was raised by SSE seeking to introduce a uniform allocation of UIG, where a set UIG value is applied evenly to all meters. This approach removes volatility and commercial challenges to the Allocation of Unidentified Gas Expert (AUGE) allocation table annually. It will also save money as an AUGE would not be required, and will create more transparent and easy to understand methodology.

Energy Regulation Horizon for 2022/2023

As you may be aware, 2022/2023 is set to be another year of major reform in the world of energy. We have compiled the Top 4 items to watch out for this year.

1. Market-Wide Half Hourly Settlement
   This industry project run by Elexon and Ofgem seeks to utilise the output of smart metering (half-hourly consumption data) to input more accurate data into Settlements in order to reduce reliance on forecasting. The estimated benefit of this project is c.£1.5-£4.5bn. The implementation of Market-Wide Half Hourly Settlement is expected in late 2024.
2. Code Governance Reform
   The framework of the UK’s Energy rulebooks, called Industry Codes, is currently going through huge reform with the development of the Retail Energy Code (REC). The REC seeks to take complex industry processes from various industry codes and bring them together into a single, dual fuel code. This will make a more transparent repository of these key processes.  In this reform, it is likely that Supplier obligations will change which might have an impact on our Customers. We will keep you informed if this is the case.
3. Ofgem’s Targeted Charging Review (TCR)
   Ofgem are currently undertaking a Targeted Charging Review. This looks at how Networks apply their charging methodologies. The review relates to the complex world of Network charging arrangements that are passed through to consumers via their Supplier. Tariffs and groupings have now been finalised by the networks and we will keep you updated of the changes when these are implemented.
4. Demand and Microgeneration Management
   Demand Side Response (DSR) and peer-to-peer trading means that we are heading towards a world where you can purchase your energy from your peers. These are people in your local area of the grid who are generating energy with small turbines or solar panels. Currently, the existing networks and associated regulations in the UK need to be updated to align with new technology and innovation but it is interesting to see what opportunities could be used in the future. If you are interested in DSR, we have articles on Battery Storage and the future of the network on our website.

Finally, from everyone here at Corona Energy we would like to wish all of our Customers, Partners and industry colleagues a Merry Christmas and a Happy New Year!

Disclaimer: The information provided in this newsletter is intended to be a general guide and should not be taken to be legal and/or regulatory advice. At no time will Corona Energy actually or be deemed to be providing advice and no actions taken by Corona Energy shall constitute advice to take any particular action or non-action. Whilst every effort is made to provide accurate and complete information in this newsletter, Corona Energy cannot guarantee that there will not be any errors. Corona Energy makes no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of the newsletters and expressly disclaims liability for errors and omissions in the contents of this newsletter. Neither Corona Energy, nor its employees and contractors make any warranty, expressed or implied or statutory, including but not limited to the warranties of non-infringement of third party rights, title, and the warranties of merchantability and fitness for a particular purpose with respect to content available from the newsletters. Neither does Corona Energy assume any legal liability for any direct, indirect or any other loss or damage of any kind for the accuracy, completeness, or usefulness of any information, product, or process disclosed herein, and do not represent that use of such information, product, or process would not infringe on privately owned rights.

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