Read the highlights from RECCo’s February board meeting below.
Strategy and Forward Work Programme Consultation outcomes
The Board received a report on the RECCo consultation on its draft Strategy and Forward Work Plan, and the accompanying financial projections, for the period 2023-2026.
RECCo’s Strategy and Forward Work Plan (FWP) aims to strike the right balance between embedding stability and seeking improvement to the REC Services and facilitating the delivery of industry programmes such as Market-wide Half Hourly Settlement Programme (MHHS). The proposed work areas will either improve upon existing activities or projects signalled by Ofgem or the government as an anticipated regulatory requirement that we can assist REC Parties in discharging. None or the work areas are speculative.
We received only one response to the FWP consultation which focused on the evolution of switching services and supported our approach to pursuing this through the Codes Roadmap rather than as a RECCo project. We have therefore not made any changes to the deliverables contained within the FWP but have continued to revise the budget forecast for them, as set out below.
Market-wide Half Hourly Settlement Programme
The Executive Team lead provided its bi-monthly progress update on the Market-wide Half Hourly Settlement Programme.
RECCo has a key role in the delivery of the MHHS Programme which will require updates to the REC and REC Systems to reflect the new obligations. RECCo’s MHHS team is embedded into the wider programme and working effectively across several workstreams designed to meet key deliverables and milestones in accordance with the MHHS Programme timetable; currently, all RECCo milestones are on track. The MHHS team is being further enhanced during Q1 2023 with the addition of a Delivery Manager to work closely with our third-party providers to deliver the technical solution. Code drafting activities are now in progress following considerable input to the Design.
Detailed budget requirements have been submitted for the next financial year which show a larger budget than the initial estimates. This is because there has been a material increase in the scope, scale and complexity of REC and REC Service obligations incumbent on RECCo to deliver post the MHHS re-planning exercise.
February Budget Consultation
The REC Board has agreed a 2023-24 Budget for consultation with the Parties to the Code.
This is a good faith estimate of the costs that are anticipated to be incurred in delivering the Strategy and Forward Work Plan. The Budget, published for consultation on 21 February, gives REC Parties the opportunity to scrutinise the Budget with the right of appeal on specific items to Ofgem; a Budget webinar will be held on 1st March, and this will also give REC Parties the opportunity to raise any questions.
An indicative budget of c. £56m was published in RECCo’s Strategy and Forward Work Plan January. Over the last month, RECCo’s Executive Team have engaged successfully with the CSS and Gas Enquiry Service providers to reduce cost without compromising service; they have also revisited the work RECCo programme estimates. As a result of this proactive engagement the proposed budget is now £50.5m, a reduction of about 10%; this is higher than the indicative value presented in last year’s Budget and our forthcoming consultation will provide full transparency of the cost drivers responsible for this increase.
RECCo expects to underspend against its 2022-23 Budget, and in line with past practice will return that underspend to parties in the coming year; this rebate will help to mitigate the increased costs to Parties for 2023/24.
The Executive shared RECCo submissions to several Ofgem consultations since the December Board.
Ofgem’s call for input into the code reform sought views on the scope for further consolidation, the licensing of code managers, and the replacement of code panels with stakeholder advisory forums. We consider that whilst there may be scope for further code consolidation, this is not a quick or straightforward exercise and priority should be given to the areas of governance which will better enable the Future System Operator, and the GB energy industry, to deliver 2030 emissions reduction targets.
Ofgem issued a consultation and has since issued its decision on a Switching Incentive Regime for the DCC’s provision of switching services, as governed under the REC. We are pleased that Ofgem agreed with our response that this is a low-risk activity and as such, should attract a lower margin under the price control. Ofgem has also decided to approve the complementary REC Change Proposal that will place that margin at risk if the DCC does not meet the Service Level Agreements set out in the REC.
RECCo submitted a response to Ofgem’s review of the DCC licence, a summarised version of which is on the website, advocating a more thorough reform of the framework as set out under Ofgem’s Option B; this would address some of the systemic issues inherent in the current model. We also suggested that Ofgem seek to make changes early and on an agile basis, rather than extending the current licence and the implementation of reform beyond the current 2025 timeframe.
The results of the Annual Satisfaction Survey were presented to the Board.
RECCo has successfully concluded the Annual Satisfaction Survey and is grateful to industry Parties for their participation and the feedback provided. The feedback received will enable RECCo to continue to improve the performance of the REC service providers subject to the survey. The full results of the survey will be communicated shortly and made available to all REC parties. RECCo will run its Annual Satisfaction Survey again in 2023 and looks forward to continued engagement from Parties to ensure that REC Services work for the industry and its consumers.
The Board received recommendations on the appointment of a further energy Industry Non-Executive Director and the re-appointment of two of its current Directors.
The Nominations Committee is one of five standing Committees that carry out work on behalf of the Board. In their quarterly meeting, the Committee considered the ongoing Board need for advice and support on networks, currently provided by a Special Adviser. The Committee recommended the Board undertake a process to appoint a Non-Executive Director (NED) with broad experience in the energy sector and specialist experience of the networks community; such an appointment will complement the work of a NED already in place with specialist knowledge of the supplier community. The Board agreed to this recommendation and the Nominations Committee will carry out a recruitment process in the coming months, followed by a consultation with industry Parties ahead of any appointment.
Two current Directors are coming to the end of their first term of office on the Board and both had indicated their willingness to continue in their roles. The Committee recommended that RECCo undertake a consultation process for the Parties, as required by the REC, for their reappointment and the Board agreed. That consultation process will be initiated in next few weeks.