Beyond the BSC

Elexon is shaping up for a new energy industry, chief executive Peter Haigh tells Janet Wood

When I meet Peter Haigh, Elexon chief executive, the company has just advertised for a new chairman, because Andrew Pinder has decided not to take on another three-year term. New non-executive directors (Volker Beckers and Alison Chappell) and a new board structure presage many more changes in the organisation to prepare it for a new world of smart energy.

The company’s business plan is about reorganisation, re-procuring IT and setting out to meet the needs of a changed industry. One thing that is not included is a role as the licensee that will oversee the smart meter hub, the Data and Communications Company (DCC). The company’s bid for that role ran out of steam in February.

Haigh insists that all stakeholders were aware from the outset that the role would require new governance for the company, “so it wasn’t as if it was a light bulb moment” when the barriers became insurmountable. Haigh explains: “For us the DCC was a very interesting opportunity. The entity itself was very closely aligned with the structure of Elexon, both from a business perspective – how it was likely to be organised – and the interaction with the existing BSC [Balancing and Settlement Code] systems. In order to make that work, the preferred model was a contractual separation and that has very significant business implications. We were also looking at an employee-owned entity… the timeline was going to prove exceptionally challenging and by its nature a risk. It was at that point we said we are at the right time to withdraw.”

He says the process was nonetheless worthwhile: “We learnt an awful lot with this process because there we were looking at how you might design the entity afresh in 2013… we have been able to apply that learning back into our core business.” And although he admits the bidding was played out “in glorious technicolour”, he says the financial and time commitments for Elexon were small. It was “never about betting the family farm”, he says. “That goes back to knowing your place in life, and to me that’s very important. The DCC was one element, one outcome of our strategy, but by no means the be-all and end-all.”

Haigh says Elexon remains at the centre of smart meter implementation. “We will clearly be working with, and have an impact on, the successful company for the DCC. The data will flow into settlement and at some point in the future the DCC is very likely to take on responsibility for registration, so there will be differences in the systems needed there that we have to pick up.”

Elexon has also been working to prepare for a world where the relationship between consumers and suppliers has fundamentally changed. That has all kinds of implications. “For the first time customers could be paying for what they use – there will be no estimated bills,” he says. “Then there is the impact of that quality data in settlement. Then there is the challenge of ensuring the future settlement systems can not only handle that data… but also focus on cash and the speeding up of settlement to deliver greater value. There is a lot of cash tied up in our industry.” Companies must be in control, but Elexon has to be there to “help not hinder” new initiatives, he says, and he is keen to stress that it can respond to industry innovation.

That is one reason the company has plans to re-­procure its IT. “The current core settlement systems are up for renewal in 2016. Clearly, that’s a very interesting time, given the large number of smart meters being actively bolted to the wall. We’ll all be very much in the transition to the new, and the DCC will be up and running by then.” He says that with the current, bespoke systems, “about half our change budget goes on testing, because they are old, monolithic systems”. Now the company will be looking for flexible, responsive systems that can produce sophisticated, detailed reports for individual members.

Elexon also wants to expand its engagement, using new methods, including social media, to make it easier for new entrants to join its public forums.

With so much changing in the industry, I ask Haigh whether we can expect any change in a structure where several bodies provide administration services – Xoserve, Gemserv and Electralink, as well as Elexon. Haigh admits that when the Department of Energy and Climate Change (Decc) bypassed them all, using Ofgem’s E-Serve arm for feed-in tariff payments, “it was a bit of a wake-up call”, although he was not at Elexon at that time.

Now he thinks Elexon should be able to compete better. He says: “Basically, it’s collecting electricity meter data from the same customer… but it’s being processed by two completely different entities.” And in the case of E-Serve: “Any business that has two quite different functions, an economic regulator and a settlement body, will find that challenging.”

Looking at the raft of industry bodies, he says the energy industry passed on trying to make changes during code governance reviews five years ago. Nevertheless, he admits that “all of us, to varying degrees with other processes wrapped around, are taking meter readings and processing money”.

Although the organisations are different in form and activities, “there should be encouragement for the organisations to sit down and look for synergies”. In the best interests of the industry and of the consumer, he says that if there are synergies they should “figure out who is best to take it on. Ask from an industry perspective – because we are all paid for by the industry – and from a consumer perspective, what is the best way of delivering this service? People have to be adult enough to have that conversation”.

Haigh may be talking from a strong position, because Elexon is celebrating a decision by Decc that it should manage settlement for feed-in tariffs (FITs) with contracts for difference (CfD), and the capacity mechanism, both set out in the Energy Bill.

Elexon is just getting up to speed with the requirements but, says Haigh: “Timescales are clearly challenging. Decc’s intention is to have the [CfD FIT] mechanism in place for Q4 next year, so we are working through the implications of that in terms of settlement.” He has no worries about his company’s role, however. “Whether it’s CfD or capacity mechanism, it’s about taking data from meters, pricing, performing the calculation and transferring monies. It’s complicated, but we are just building a similar engine to what we do already: take metering information, run it through the engine and reconcile as necessary.”

Janet Wood is a freelance journalist

This article first appeared in Utility Week’s print edition of 17th May 2013.

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