Energy trading platform Elexon has been appointed to administer payments to suppliers, authorised under the Truss administration’s Energy Price Guarantee (EPG).
Elexon manages the Balancing and Settlement Code, one of 11 protocols which provide the commercial arrangements underpinning the energy sector. Today’s approval required an amendment to clause P446 of the BSC.
Under the scheme, the trading platform administrator will manage payments mandated to domestic customers of electricity. The EPG will reduce the retail unit cost of electricity and gas, so that a typical UK household pays on average around £2,500 a year on their energy bill for the two years from 1 October 2022.
Participating suppliers will receive their first payments later this month, under a three-way deal contracted with Elexon and D-BEIS.
The government’s re-direction of up to £150 billion of UK public money to energy suppliers, including some integrated into super-profitable extraction enterprises, has drawn fierce criticism from green groups, opposition politicians, and campaigners against fuel poverty.
It comes as the European Commission is encouraging its 27 member states to follow the example of governments in Paris, Berlin and elsewhere, by imposing windfall taxes on the current abnormally inflated profits of fossil-fuel exploiters.
Elexon will rely on data from its Supplier Volume Allocation Agent (SVAA) system, to arrive at estimates of the volume of electricity used by retail household customers.
Replicating processes established under its existing funds settlement regime, the platform will reconcile remittances of subsidy payments over a 14-month period, once it has received operational meter readings from suppliers
Elexon’s payments will be netted against movements in consumption based on reported meter readings.
“We are using the data to apply a pence/kWh rate against each supplier’s total household consumption, and work out the payments owed to each supplier”, Elexon clarified in a statement.
“We pass this information to HM Treasury which will transfer the sums required for subsidy payments to Elexon. A similar scheme will be operated for household gas”.
Elexon chief executive Simon McCalla said: “Wholesale energy prices have hit record levels this year resulting in an unprecedented impact on the energy market and households. We are pleased to be working alongside Government to support the EPG”.
“As a not-for-profit organisation we are here to support the industry and households during this difficult time. A lot of work has been completed very quickly to establish the payments scheme and develop the modification.
“I would like to thank everyone who has been involved, especially colleagues across Elexon”, added McCalla, pictured.
The modification allows an extension to Elexon’s powers, freeing it up to run the scheme, which lies, in legal and accounting terms, outside its settlement function. Scheme payments will be accounted for separately from other BSC costs and trading charges.
BSC stakeholders are not responsible for funding payments under the scheme. The amended rule P446 allows for Elexon’s administrative and operational costs in undertaking the role of scheme administrator to be included as BSC costs.
Ofgem approved the Modification on 22 September for implementation the following day.
Further details are on the P446 webpage.
