Redefinition of Schedule Production Cost

Background Appeal Panel reached determination on 2nd July 2018, directed CRU not to make modification to Appellant's Generator Licences. The modifications included provisions to replace BCOP with BMPCOP. CRU in process of initiating Judicial Review proceedings, but outcome of these proceedings will not be known until after 1st October 2018.

Background (contd) SEM Committee consider it inappropriate from level playing field perspective to apply BMPCOP to some but not all market participants. SEM Committee view the continued application of the BCOP in an interim period will ensure consumer interests are protected while maintaining a level playing field. In context of the Market Power Decision Paper (SEM-16-024) generators should formulate Complex Bid Offer Data submitted to the Balancing Market in accordance with the BCOP licence condition. Not intended that BCOP shall apply to Simple Offer Data. However, existing Licence Condition relies on definition of “Schedule Production Cost” in TSC Part A. No equivalent definition in Part B, and Schedule Production Cost will no longer be calculated.

Proposed change It is proposed that a new definition of Schedule Production Cost, not depending on Market Schedule Quantity, be incorporated in Part B of TSC. It is proposed that this new definition of Schedule Production Cost refers to the quantity “being contemplated by paragraph 3 of the Cost Reflective Bidding Licence Condition”. Hence, for whatever quantity as may be considered (rather than the Market Schedule Quantity), the production cost calculated from the Complex Bid Offer Data must be equal to the Short Run Marginal Cost. The definition reflects that only Complex Bid Offer Data, and not Simple Bid Offer Data, is subject to the BCOP.

Proposed change (contd) A new definition of Cost-Reflective Bidding Licence Condition incorporated in Part B of TSC is proposed, simply to identify the BCOP condition in each of the relevant licences. This modification is intended to make the minimum change necessary such that the existing BCOP licence condition and the existing Bidding Code of Practice can continue to have effect in I-SEM.