Ofgem rejects centralisation of supplier agent functions

Ofgem has decided against centralising the functions of supplier agents as part of its move towards market-wide half-hourly electricity settlement.

The regulator floated the idea in a working paper released in March 2018. It has now rejected the proposal in line with the position it took in a consultation published the following September.

Supplier agents are appointed by electricity suppliers to carry certain settlement functions in accordance with the Balancing and Settlement Code and can fulfil three different roles: meter operator, data collector and data aggregator.

In its March 2018 working paper, Ofgem said it was considering centralising these functions for several reasons. With data retrieval already being centralised through the rollout of smart meters, the regulator said supplier agents are losing end-to-end responsibility for settlement data, raising questions over whether their remaining responsibilities could be delivered in a more efficient way.

Furthermore, Ofgem said the move to market-wide half-hourly settlement would require significant spending on new systems and processes, including by supplier agents if they were retained. It said it was sensible to consider the case for structural changes before locking in this investment.

The regulator has ultimately decided the benefits of centralisation, from economies of scale for example, do not outweigh the costs. However, it does say there “may well be a case” in future for inputting data into central settlement systems without aggregating it beforehand, thus removing the need for data aggregators in their current form.

Ofgem is currently considering the responses to a call for evidence on its plans to introduce half-hourly electricity settlement for households and small non-domestic customers and is scheduled to make a final decision in the second half of 2019.