ENSEK | EFR – Avoiding the “naughty step”

With significant focus on the barriers to entry in becoming an energy supply business, we look at some of the further complexities and obligations suppliers are faced with once they enter the market.

Having obtained a supply licence and navigated the established accreditation process, a prominent item on any risk log within a supplier should be to ensure adherence to the numerous licence conditions imposed on them by the regulator and code administrators. Whilst a number of these may be classified as good practice and hygiene factors, there a number of obligations that are fraught with complexity.

Obligations that can result in sanctions from the industry, impacting a supplier’s ability to take on new customers and ultimately to trade should be at the forefront of any risk and compliance strategy.

One such commitment relates to the concept of settlement performance, which directly affects a supplier’s trading imbalance. To protect the integrity of the settlement process, the industry monitors the percentage of energy that is billed to actual readings at key milestones in the 14 month settlement calendar. Failure to meet the required data quality levels results in formal measures from Elexon, requiring the the supplier to outline their approach and plan to remedy the shortfall. Known as a Error and Failure Resolution, or EFR, this process is something that most suppliers in the market will have experienced at some point in time. Addressing below par settlement performance is costly, time consuming and damages reputation.

For many the concept of an EFR plan isn’t even on the radar at the point of market entry, let alone the consideration on how to avoid or remedy this situation.

EFR plans are generally required for anything impacting volume and accuracy in settlement, this covers numerous challenges but there a number of broad principles that can help suppliers stay clear of the naughty step;

1. The ability to identify, prioritise and fix issues that will impact settlement run performance before they actually do
2. Building the correct controls and reporting from go live to ensure transparency of data quality
3. Ensuring accessibility and timeliness of data to facilitate informed operational activity
4. Root cause analysis and granular classification of data quality issues, factoring in geographical, customer and third party factors
5. Successful management of third parties to ensure an effective and optimised meter reading strategy and operational process
6. Clear visibility of site issues including meter exchanges and change of supply events
7. Alignment of readings utilised within the supplier billing system and those utilised for industry settlement
8. An effective and targeted data management policy to ensure visibility of the data you have and the data you need

Having a clear view of what’s impacting the numerous reconciliation runs and movement from daily settlement days will mitigate the chance of being placed on a remediation plan and will also increase a supplier’s ability to address and recover from an adverse position.

We continue to support our clients and partners by leveraging the data available through industry processes to optimise their settlement performance and ensure their compliance with industry obligations.