The UK’s electricity market is immediate and reactive, therefore its Balancing and Settlement Code has to be backed up by sophisticated metering and billing systems in order to keep all sides informed, with information that will turn a profit and not upset the balance.

David White, business analyst, Trading Arrangements Design, Elexon Ltd, London

The Electricity Pool was the first trading system created after the electricity industry in England and Wales was privatized in 1990. It was designed to manage the wholesale electricity trades between generators (those who generate electricity) and suppliers (those who supply electricity to customers). To ensure that the electricity generated was matched by that used, the role of System Operator was devised so it could be decided which generators would need to run in order to meet demand. When this role was undertaken by the National Grid Company (NGC), all scheduled generators were obliged to sell their electricity to ‘the Pool’, which subsequently sold it on to suppliers to meet the needs of their customers.

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The New Electricity Trading Arrangements (NETA) in England and Wales came into force on 27 March 2001. The arrangements were designed to provide a more conventional market structure, in which generators and suppliers contract directly with each other. Under these arrangements, generators despatch themselves to meet the contracts they have struck with suppliers and traders, rather than being despatched centrally. Traders are players without a physical demand for electricity, or any means of generating electricity, but who wish to profit from the system. In order to pay the System Operator for their balancing services, charges are levied on the electricity transferred on a per kWh basis. These are called Balancing Services Use of System Charges. Similar charges, entitled Transmission Network Use of System Charges, are paid to the transmission company (also currently NGC) for operating the transmission network.

Some key elements of NETA are governed by the Balancing and Settlement Code (BSC), a document that, together with its subsidiary documents, sets out the rules regarding the balancing of electricity and many of the market’s trading arrangements. All those wishing to participate in the supply, generation, distribution and/or trading of electricity are required to sign up as Parties or Trading Parties (depending on their role) to the BSC. The BSC company is responsible for maintaining the documentation and providing support to Parties; this role is undertaken by Elexon.

The British Electricity Trading and Transmission Arrangements (BETTA) came into effect on 1 April 2005. This saw the scope of the BSC expand to cover all of Great Britain. Prior to this, the BSC covered the electricity arrangements in England and Wales. A separate document, the Settlement Agreement for Scotland (SAS), governed the electricity arrangements in Scotland.

Figure 1. The UK’s electricity supply chain post privatization
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The new BSC is based on the arrangements introduced into England and Wales under NETA, although changes have been made to accommodate the additional Scottish transmission, distribution and metering Systems. As in England and Wales, the National Grid Company has been appointed System Operator for Scotland, and therefore operates the transmission systems in Scotland, but does not own them. Elexon continues as the BSC Company.

Great Britain is electrically connected to Northern Ireland and France by interconnectors. These cables, which transport energy in either direction to help balance the various transmission networks, enable electricity to be traded with another country. The BSC sets out the provisions for incorporating electricity transported across the interconnectors into Settlement. Practical problems to be overcome include frequency correction and phase alignment of the incoming electricity to match that of Great Britain.

The BSC makes provision for two processes – the Balancing Mechanism and Imbalance Settlement.

Balancing mechanism

Although the generation, transportation, delivery and usage of electricity is continuous, for the purposes of trading and settlement (i.e. determining the amount of electricity used and generated and arranging payment for any imbalances), electricity is manipulated in half hour intervals. These half hours are termed Settlement Periods.

For each Settlement Period, suppliers assess, ahead of real-time, what their demand will be and contract with generators (or another Trading Party) for that volume of electricity. Contracts can be struck up to an hour before the relevant Settlement Period. During the half hour, generators are expected to deliver, and suppliers are expected to use, the volume of electricity for which they have contracted. To maintain system integrity, the volume of electricity generated must match that consumed.

In any half hour (in real-time), forecasting errors may lead to inaccurate suppliers’ electricity requirements, generators may be unable to generate the contracted amount, or there may be problems transporting electricity. Therefore, there is a requirement for real-time management by the System Operator to ensure that supply always matches demand and to address any transportation and delivery issues. Some of the processes used to ensure that the system is always balanced are collectively known as the Balancing Mechanism.

Generators with spare capacity can make that additional volume available to the System Operator and can set the price they wish to receive. Alternatively, a generator may be willing to reduce the volume generated and will set a price for that reduction.

Suppliers that are flexible enough may indicate that they are willing to reduce their demand to make additional volumes of electricity available to the System Operator and can set the price they wish to receive for that additional volume. Alternatively, flexible suppliers may be willing to increase their demand and can set a price for this use of more electricity. These are called Bids and Offers (see Diagram 2).

Figure 2. A generator’s output over a Settlement Period. The middle trend shows the contract, while the Offer and Bid show what the generator can do for a given price
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The System Operator will, in real-time, and as required, match supply and demand in each Settlement Period by accepting Bids or Offers depending on whether they need to reduce or increase electricity volume to meet demand.

Imbalance and metering

Once the Settlement Period ends, details of the actual amount of electricity used by each supplier and produced by each generator (referred to as the metered volume) are obtained and a comparison is then made between the Trading Parties’ contract position and the metered volume. Where the contracted volumes do not match the metered volumes, the relevant Trading Party pays or is paid an imbalance price. For example a generator that produces too much electricity will be paid for the additional electricity at the relevant imbalance price, and a supplier who consumes too much electricity will pay for the additional electricity at the relevant imbalance price. Two imbalance prices are used, in such a way as to provide an incentive for suppliers and generators to form contracts ahead of real-time.

These Settlement calculations are performed during scheduled Settlement Runs. The calculations are repeated a number of times for each Settlement Period via Reconciliation Runs. This accounts for the fact that metered volumes become more accurate over time as more metering systems are read. These Settlement and Reconciliation Runs are performed according to a predefined and agreed calendar, over fourteen months.

Metering is required at a number of points on the electricity network:

  • Generators’ outputs are metered at the point they connect to the transmission system or distribution system
  • Energy used by suppliers is metered at Grid Supply Points (GSPs), which is where the electricity leaves the high voltage transmission system and enters a low voltage distribution system
  • Energy used by individual customers is metered as it leaves the distribution system and enters their property.

In addition, distributors and the transmission company may have their own metering for operational purposes. Although this is outside the scope of the BSC.

There are two fundamental mechanisms for meter registration and data collection: Central Volume Allocation (CVA) and Supplier Volume Allocation (SVA). The CVA sector predominately includes metering for customers and generators connected directly to the transmission system, plus metering at GSPs. The metered volumes for this market are collected centrally by a single agent: the Central Data Collection Agent (CDCA). The SVA sector is mainly made up of smaller customers and includes domestic and unmetered supplies (e.g. street lamps). It also includes some generators connected to the distribution system. The data for the SVA sector is collected by a supplier’s data collection agent. Suppliers are free to choose their data collector as there is a competitive market in offering these services. In a balanced system, the energy generated will equal that demanded by customers plus any losses e.g. from transmission.

Meter Operator Agents (MOA) are responsible for maintaining the metering systems which record the energy transferred and also co-ordinate with the data collector, ensuring that the technical details of the metering system for which the data collector gathers data are correct. Both generators and suppliers are free to choose their own MOA.

Due to the competition in supply, the energy metered at a GSP is the responsibility of many different suppliers. The BSC sets out rules for allocating this energy to individual suppliers according to the meter readings of their individual customers. While meter readings are taken to bill the individual customers, they are also used (in accordance with the BSC) to calculate charges for the Supplier. The BSC does not cover customer billing and suppliers are free to choose the most appropriate method. The majority bill larger industrial and commercial customers monthly, and smaller commercial and domestic customers quarterly.

Different processes exist for determining the metered volumes for different types of metering system, according to how much electricity is transferred. These can be segregated into the Half Hourly and Non Half Hourly markets.

HH and non HH

Energy is traded on the wholesale market on a half hourly basis and for the larger sites, sophisticated metering is installed to measure energy equally per half hour. The Half Hourly (HH) market comprises all those consumers/producers with sites above 100 kW. Almost 96 000 Metering Systems fit into this category, or approximately 38 per cent of the total GB market in terms of metered energy volumes.

All HH metering systems that account for the electricity being delivered from or to the transmission system are registered in the CVA system. Metered data is collected on a daily basis and submitted for use in Settlement one working day after the relevant Settlement Day.

The HH metering systems that measure energy being consumed by the large industrial and commercial companies are registered in the SVA system and read by HH data collectors which are contracted to the relevant supplier. It is the supplier’s responsibility to decide how often metered data is collected from these sites and submitted into Settlement, although there is an obligation on each supplier to ensure that 99 per cent of energy is settled on actual meter readings by the First Reconciliation Run (approximately seven weeks after the relevant Settlement Day).

Figure 3. Electricity consumption by sector in the UK in 2003 (Source: Department of Trade and Industry)
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The remaining 62 per cent of metered electricity is within the NHH market, which includes most commercial sites and all domestic consumers. More than 26 million metering systems fall into this category.

As Settlement under the BSC is carried out on a HH basis, NHH readings need to be transformed into HH volumes. This is done using a technique referred to as Profiling whereby actual meter readings are taken by approved NHH data collectors contracted to the relevant supplier. Where actual meter readings can not be obtained, customers may submit readings, or estimated readings can be used.

It is the supplier’s responsibility to decide how often metered data is collected from these sites and submitted into Settlement, although there is an obligation on each supplier to ensure that 97 per cent of energy is settled on actual meter readings by the Final Reconciliation Run (approximately fourteen months after the relevant Settlement Day).

NHH meter readings are first converted into ‘Annualized Advance’ values. This means that the meter advance is calculated between the last two meter readings, and this is extended to cover an entire year, depending on when the meter readings were taken. For example, if 500 kWh had been used over three summer months, the Annualized Advance for that meter would be slightly more than 2000 kWh due to the estimated increase in energy used in winter (e.g. heating, lighting). Conversely, if 500 kWh had been used over three winter months, the Annualized Advance would be slightly less than 2000 kWh.

This annual figure is then converted into a HH value by applying a profiling technique. Different profiles are applied to different types of customer e.g. commercial or domestic, in order to reflect the general shape of electricity consumption over a day, month and year. Profiles also take into account the average temperature and time of sunset to allow for the possibility of extra heating and lighting. The relevant profile is then applied to the Annualized Advance for a specific Metering System to give a HH value.

The profiles themselves are derived by using a sample of metering systems that would, under normal circumstances, be given a NHH meter. The electricity consumption on these sites is measured using HH meters from which an average profile of usage for a given area of Great Britain is determined.

The total volume metered at the customer level is reconciled with the total volume metered at the GSP level. These volumes usually differ due to, among other things, transmission losses through the distribution system, the use of estimated meter readings and inaccuracies in the profiling technique. A GSP correction factor is therefore applied to account for this discrepancy. For example, if 2500 MWh are measured at the GSP level, and only 2250 MWh at the customer level, then 250 MWh will be pro-rated across all NHH Suppliers’ metered volumes.

The systems

Some customers pay for their electricity before using it by utilizing a prepayment metering system. These systems the form of a variety of payment technologies such as token meters, key meters and smart cards.

Equipment such as street lamps are not metered, but are accounted for using data derived from an inventory. Equipment must be predictable in its demand (which must be relatively small) to qualify as being unmetered.

An approved calculation method is applied to this inventory to provide a close estimation of the HH consumption from these unmetered supplies. While this results in estimated data entering Settlement, the cost of providing a metering system for every street lamp and similar devices would be unjustifiably large, particularly when the volume of electricity consumed is relatively small.

Great Britain’s electricity market is centred on operating a privatized industry that is fair to all categories of Trading Party. The introduction of BETTA has rationalised a transparent, competitive and reliable system for the whole of Great Britain.