Mod2419 Amendments to Unsecured Bad Debt and Suspension

Mod_24_19 Amendments to Unsecured Bad Debt and Suspension Provisions Related to Supplier of Last Resort 05 th December 2019

Summary Information ØThis proposal aims to provide for a scenario where a Supplier of Last Resort (So. LR) is invoked but the Metered Volumes which are to be transferred are not all transferred to the So. LR on time for Initial Settlement; ØWhere this occurs these volumes will remain against the original defaulting Supplier for a period while the retail market operators apply their respective Change of Supplier processes; ØAs a result there will be an uncollateralised Default against the original Supplier which would be treated as an Unsecured Bad Debt (UBD) and therefore socialised among Generator Units based on their Metered Quantity; ØThese monies will be paid in due course by the So. LR when resettlement billing occurs after the volumes have been transferred; Ø This proposal seeks to retain the existing UBD/short-pay mechanism and make additional provisions for the scenario where a transfer to So. LR has occurred.

Summary Information ØThis Proposal seeks to provide for accounting of such monies to transfer to the So. LR, so that it is no longer a Default against the Defaulting Supplier but rather remains an UBD, by the Code definition only, which becomes a debt owing by So. LR and also the So. LR is not therefore considered to be a Defaulting Participant for these monies so that those implications do not apply; ØThe Proposal seeks to: ØProvide for resettlement interest as opposed to the more onerous default interest to apply to such monies where such a transfer occurs; ØRemove obligation on the Market Operator (MO) to withhold/deduct/offset any amounts due to the So. LR in this scenario as it is not a Defaulting Participant; ØRequire the MO to carry out additional Settlement Reruns where such an UBD is not recovered by the final timetabled Settlement Rerun; ØEnsure that socialisation of UBD is retained where a transfer to So. LR occurs and also that this is repaid once recovered.

Justification and Objectives Furthered ØThis proposal is intended to ensure clarity in the process for the treatment of monies owing which are subject to transfer to an So. LR but the associated Metered Quantities won’t be transferred on time for Initial Settlement; ØThe current process under the Code would treat this as though it remains a Shortfall against the original Defaulting Participant resulting in Default Interest applying and obliging the MO to pursue recovery and would also not allow for additional settlement reruns to recover from So. LR; ØThe intention is to retain the short pay treatment while amending the accounting of the debt and its recovery and interest treatments; ØThis proposal aims to further the Code objective related to efficient operation of the SEM in a financially secure manner by ensuring that appropriate provisions are in place to cater for any lag between an So. LR even being called and Metered Quantities being transferred.

Legal Drafting Extracts G. 2. 6. 3 G. 2. 7. 2 A a G. 2. 7. 2 B Default Interest shall accrue from the Payment Due Date on the amount of any Shortfall and Unsecured Bad Debt in accordance with the Code, excepting where such a Shortfall or Unsecured Bad Debt relates monies which are subject to transfer to, and are therefore a debt owing by, the Supplier of Last Resort, as set out in paragraph G. 2. 7. 2 A, in which case Settlement Rerun Interest shall apply as set out in Agreed Procedure 15 section 2. 6. 1. . Where an Unsecured Bad Debt relates to monies due, which are subject to transfer to the Supplier of Last Resort, it shall no longer be a Shortfall but shall become an Unsecured Bad Debt which is a debt owing by the Supplier of Last Resort to the Market Operator as trustee and agent for all Participants beneficially interested therein as provided for in the Code, pro-rated according to their individual respective proportionate entitlements in the Unsecured Bad Debt concerned and on the trusts provided for in paragraph G. 1. 6. 1. The Market Operator shall be entitled, as trustee and agent for all Participants beneficially interested therein as aforesaid, to carry out Settlement Rerun in order to recover the amount of the Unsecured Bad Debt (as applicable). The Market Operator shall procure that additional Settlement Reruns for the relevant period shall be performed, if required to recover monies relating to an Unsecured Bad Debt which is subject to transfer to the Supplier of Last Resort, where these have not been recovered by the final Timetabled Settlement Rerun.