Electricity settlement and the changes under MHHS

Electricity settlement is something most people will never come across, but it determines how much electricity we need to generate, as a country, to keep the lights on.

It’s important to have an understanding of what settlement is, the impact on suppliers and what changes are happening under Market-wide Half Hourly Settlement (MHHS).

Here we’ll cover:

• Basics of electricity settlement
• Difference between Non Half Hourly & Half Hourly 
• How settlement performance will change under MHHS 

Basics of Electricity Settlement

What is settlement?

Accurate electricity data from well-maintained meters is vital to providing accurate settlement. 

The electricity settlement process determines whether a supplier has purchased too much or too little from a generator and then calculates payments between them accordingly. 

Right now, because most consumers do not have meters capable of recording HH consumption, this is settled using estimates 

Every supplier must reach a set percentage of actual consumption data by a set number of days after collection. 

Purchase of electricity is based on forecasts and may need to be topped up if more has been used than predicted or may be reimbursed if less was used. 

The Settlement Process

Without settlement, no one would know how much power to generate or when it’s needed most.

This is the industry standard process that places incentives on suppliers to buy energy to meet their customers’ demands in each half hour of the day (settlement period).

Right now, because most consumers do not have meters capable of recording HH consumption, this is settled using estimates.

This supply and projected consumption is contracted between the generator and supplier based on these estimates.

Every supplier must reach a set percentage of actual consumption data by a set number of days after collection.

MHHS will allow suppliers to have access to HH data within much shorter timescales to make more accurate decisions.

The Balancing & Settlement Code (BSC)

Suppliers are reliant on the appointed agents – Meter Operators (MOP) Data Collectors (DC) & Data Aggregators (DA) – to provide actual data within the settlement timelines to achieve the BSC standards.

Elexon manages the electricity settlement process, monitoring the volumes to check generation and consumption align with contractual agreements

All industry players must adhere to the BSC which defines rules of settlement and identifies any imbalance in the settlement process.

Using actual meter readings to calculate any discrepancies and impose financial penalties on suppliers if usage is outside the contractual agreement.

Suppliers are also held to performance standards to allow them to keep trading.

Performance Standards

A supplier is reliant on Data & Meter agents to provide the actual consumption data and keep meters working.

The supplier cannot fit and maintain all the meters, supply the electricity and collate all the data by themselves so they need to appoint three agents:

• Meter agents (MOPs): maintain and install the meters 

• Data agents (DCs): retrieve, collect and validate actual data

• Data Aggregators (DAs): to aggregate this data and submit it for settlement 

Elexon monitors a supplier’s performance at “settlement runs” based on standards that need to be met for a supplier to keep trading.

These standards are defined by the percentage of actual consumption data received within a set time-period.

• If a supplier’s performance falls below the Elexon standard, they will be warned and asked to submit an improvement plan, which will be closely monitored. 
• If a supplier continues to underperform, they will be escalated to the Performance Assurance Board (PAB) and the Balancing & Settlement Code panel.  

How Settlement changes under Market-wide Half Hourly Settlement

The main difference to settlement under MHHS is the New Performance Standard which means Data & Metering services need to provide more data faster to suppliers.

Elexon will have new, stricter settlement performance standards for suppliers under MHHS.

They will need to have 99% of actual data in 5-7 days.

That’s a huge leap from the previous 14 months for NHH data.

Therefore all Data & Meter agents qualifying for MHHS roles will need to up their game to ensure that accurate and complete data is available on time, so suppliers can avoid the penalties.

Summary

Electricity settlement is a process which calculates payments between a supplier and generators, its managed by Elexon and relies on accurate data provided by DAta & Metering agents, like us.

Non Half Hourly (NHH) settlement relies on estimated profiles and is not accurate enough, so the industry is moving to Market-wide Half Hourly Settlement. (MHHS).

The impact of MHHS on electricity settlement will be significant.  

• Great for businesses – more HH data to target waste, find opportunities for sustainable solutions & save energy costs
• Suppliers need to meet stricter performance standards
• Suppliers will have access to HH data within much shorter timescales to make more accurate purchasing decisions  
• Data & Metering agents qualifying for MHHS roles need to provide more data, faster.