Payment Method Levelisation

What is Payment
Method Levelisation?

Historically, British customers on pre-payment meters (PPM) have paid more for their energy than those on direct debit (DD). On the 15th of March 2023, the Chancellor announced that the Energy Price Guarantee (EPG) would be used to align costs for PPM and DD customers. Initially, these costs were aligned by giving PPM customers a unit rate discount.

Why is reconciliation
needed?

This programme levelises tariffs by requiring energy suppliers to charge DD customers more whilst discounting PPM tariffs. However, a reconciliation method is required as the payment method split is not the same for each Supplier’s portfolio. This is so Suppliers with higher-than-average PPM consumers can be credited, whilst those with fewer-than-average can be debited.

What is RECCo’s
role?

RECCo were tasked with developing industry processes under the Retail Energy Code (REC) and designing, building, testing and delivering a functional system that facilitates supplier payments to allow for non-volumetric levelisation. This system went live on the 1st April, 2024. The change to the REC came into place through Change Proposal R0147, which implemented a new REC Schedule for Payment Method Levelisation (PML) Reconciliation, Schedule 31.

What do Suppliers need to do?

Each region must be populated, even if there is no data i.e. populate with zeros and with relevant date format
File name format for single rate electricity: MPID_YYYYMM_S.csv
File name format for multi-rate electricity: MPID_YYYYMM_M.csv
File name format for gas: SSC_YYYYMM.csv
Files using column headers or regions different to the template will not be accepted

Please check your submission before uploading to your SharePoint area to ensure that the Metering Arrangement column is populated correctly with either ‘Single’ or ‘Multi’ and that the correct data is matched up to each region.

Supplier Obligations

In accordance with paragraph 4.1 of Schedule 31 of REC, RECCo is requesting the data in the template detailed here, which it needs to calculate the PML Reconciliation Amounts payable by and to each Domestic Supplier. Additionally, under paragraph 4.2 of this Schedule, each Domestic Supplier shall submit Payment Portfolio Data to RECCo by no later than the PML Reconciliation Reporting Submission Deadline.

In accordance with paragraph 4.4 of Schedule 31 of REC, RECCo shall notify Ofgem and REC Performance Assurance Board to take further compliance or enforcement action where appropriate, including where we see evidence of a pattern of late or poor responses to our requests, those containing incomplete or inaccurate information.

What is the Supplier of Last Resort?

REC Schedule 31 sets out the processes that apply where an energy supplier fails to submit data or make payment under the PML scheme. These same processes also apply in the event of a Supplier of Last Resort (SoLR).

1. Impact on distributed funds when an energy supplier ceases to trade mid-cycle

The PML scheme operates on a net-zero basis. Only funds that are successfully collected within the relevant month are distributed to REC Parties due a credit. Where a Supplier ceases to trade and fails to pay an invoice for a debit owed to the scheme, that unpaid debit will not be included in the total amount available for distribution in that month. As a result, the corresponding credit amounts distributed to other REC Parties will be reduced. If any outstanding funds are recovered at a later date, these will be included in the next available distribution cycle.

2. Responsibility of the replacement energy supplier

The trigger point for the PML scheme is the snapshot taken at 12:00 on the 1st calendar day of each month. A replacement energy supplier assumes responsibility for portfolio submissions from the first snapshot date following their appointment as the replacement energy supplier. They’re only responsible for credits and debits arising from submissions made from that point onwards and do not inherit responsibility for earlier periods.

3. Maintaining reconciliation during the interim period

In the period between a Supplier ceasing to trade and the replacement Supplier commencing submissions, portfolio data for the affected reporting month may not be available. Where this occurs, data from the previous month will be used as a proxy to allow the reconciliation process to continue and to maintain the most accurate position possible.

Although it may be unlikely that the collapsed Supplier will settle the invoice associated with this proxy submission, the data will continue to be included in reconciliation calculations to preserve the overall integrity and accuracy of the scheme.

Invoice Schedule

PML Reconciliation Invoice Schedule

Payment Method Details

This document details the total value of invoices sent to Suppliers and the proportion of that amount collected from Suppliers. For Suppliers due to receive payment from the scheme, it includes the proportion of their calculated credit that RECCo has paid out for the current & previous invoice periods.