PART 4Adjustment of discount or supply quantity in certain cases
CHAPTER 1Arrangements in respect of customer’s financial exposure to wholesale price
Interpretation of this Chapter
46.—(1) For the purposes of this Chapter—
“arrangement benefit” has the meaning given in regulation 49(1)(a);
“balancing services” means a customer varying its consumption of energy in order to provide a service—
to a person holding a transmission licence, in connection with the balancing of flows of electricity onto and off a transmission system, or
to a gas transporter, in connection with the balancing of flows of gas into and out of a pipe-line system;
“Chapter 1 arrangement” means an arrangement of the kind described in regulation 47(1)(b);
“contract financial exposure” has the meaning given in regulation 47(1)(b);
a “declaration period” is the period between the initial declaration date and the first periodic declaration date, or between a later periodic declaration date and the next periodic declaration date;
“effective financial exposure” has the meaning given in regulation 47(1)(b);
the “initial declaration date” in respect of a supply contract is—
the scheme introduction date, if on that date the customer has made a Chapter 1 arrangement and is party to the supply contract;
in any other case, the date on which the customer—
enters into the supply contract, having already made a Chapter 1 arrangement, or
makes a Chapter 1 arrangement, being already a party to the supply contract;
“periodic declaration dates” are dates chosen by the supplier, falling at intervals of not more than 31 days, of which the first must be not more than 31 days after the initial declaration date and the last must be the last day of the second scheme period.
(2) In paragraph (1)(b)—
“gas transporter” and “pipe-line system” have the meanings given to them in the Gas (Northern Ireland) Order1996(1);
“transmission licence” and “transmission system” have the meanings given to them in the Electricity Act (Northern Ireland) Order 1992(2).
Application of this Chapter
47.—(1) This Chapter applies in respect of a supply contract where—
(a)it may reasonably be expected that—
(i)the quantity of energy supplied to the customer at the premises to which the supply contract relates in the 12-month period starting on 1st April 2023 will exceed 0.5 gigawatt hours, or
(ii)the maximum rate at which energy is supplied under the contract at any time will exceed 0.5 megawatts, and
(b)the customer has made arrangements, otherwise than in a supply contract, by virtue of which the customer’s overall financial exposure to the wholesale price of energy supplied to it in any period within a scheme period (the “effective financial exposure”) differs from its financial exposure in that period to the contracted wholesale price under the supply contract (the “contract financial exposure”).
(2) The ways in which a customer may make an arrangement of the kind described in paragraph (1)(b) include entering into—
(a)financial instruments in respect of the wholesale price of energy;
(b)arrangements under which the customer obtains a benefit from the provision of balancing services;
(c)in connection with the electricity scheme, arrangements under which the customer obtains a benefit by exporting electricity to an electricity system.
Customer declaration where this Chapter applies
48.—(1) A customer must, as soon as practicable and in any event within the period of 21 days beginning with the initial declaration date—
(a)determine whether this Chapter applies in respect of a supply contract to which it is party;
(b)if it so determines, send to the supplier a declaration to that effect.
(2) A supplier must in accordance with paragraph (3)—
(a)determine whether either of the circumstances in regulation 47(1)(a) applies;
(b)if so, give the customer notice of that determination, drawing this Chapter to the attention of the customer, unless the customer has already sent a declaration under paragraph (1)(b).
(3) A supplier must comply with paragraph (2)—
(a)when it enters into a supply contract, or
(b)in the case of a supply contract entered into before the scheme introduction date, within the period of 45 days beginning with the scheme introduction date.
Adjustment of discount
49.—(1) In respect of any period and supply contract in respect of which Chapter 1 arrangements apply—
(a)subject to paragraph (d), the “arrangement benefit” is the amount calculated as—
Where—
CFE is the contract financial exposure
EFE is the effective financial exposure;
(b)the “unit arrangement benefit” (expressed in p/kWh) is the arrangement benefit (expressed in pence) divided by the supply quantity in respect of that period;
(c)the reference wholesale price applicable to the supply contract in that period is determined as—
Where—
RWP’ is the price that would otherwise be determined (under regulation 9 or in accordance with regulation 10) as the reference wholesale price;
UAB is the unit arrangement benefit;
(d)in relation to a variable price contract, if the term {CFE – EFE} in paragraph (a) is negative, the arrangement benefit in respect of that period is zero.
(2) Where this Chapter applies in respect of a supply contract—
(a)the supplier must, as soon as practicable after receiving the customer’s declaration under regulation 48(1)(b), give notice to the customer of each periodic declaration date and the declaration period for each such date;
(b)the customer must, as soon as practicable and in any event within the period of 14 days beginning with each periodic declaration date, determine and send to the supplier a declaration of the amount of the arrangement benefit in respect of the relevant declaration period, unless the arrangement benefit is less than £100 per day of the declaration period;
(c)the supplier must, on the basis of the arrangement benefit declared in each such declaration—
(i)calculate the unit arrangement benefit for the declaration period;
(ii)calculate the reference wholesale price under paragraph (1)(c);
(iii)calculate the base discount under regulation 28 on the basis of that wholesale reference price;
(iv)determine or redetermine its charges for energy supplied in the declaration period on the basis of that discount.
(3) Where this Chapter applies and the customer is party to more than one supply contract, the effect of the Chapter 1 arrangements is to be determined in respect of the supply contracts collectively and the arrangement benefit is to be allocated between the supply contracts on an appropriate basis.
(4) The contract parties may agree a basis on which—
(a)an estimate of the arrangement benefit will be used in determining charges for a billing period before the steps in paragraph (2) are completed, and
(b)a subsequent reconciliation will be made when those steps are completed.
Rules in relation to this Chapter
50.—(1) The Secretary of State may make rules about Chapter 1 arrangements.
(2) Rules made under paragraph (1) may in particular make provision about—
(a)the kinds of arrangements which fall, or factors which indicate whether arrangements fall, within regulation 47(1)(b);
(b)the basis on which contract financial exposure or effective financial exposure is to be determined;
(c)the basis on which arrangement benefit is to be allocated between supply contracts under regulation 49(3);
(d)the form and content of any declaration to be made by the customer.