1. User Forum 18 October 2018

2. Agenda Item * Description Who Time 1 Registration
Tea and coffee on arrival
Trading parties
09: :00
Live video streaming starts*
10:00 2
Welcome
Housekeeping
Update on actions
Steve Arthur
10: :15 3
Update on market improvement activities
Update on data improvement plan activities
Mike Robertson
10:15 – 10:45 4
Sharing of Best Practice
Long unread meters
New skip code daily process
Long unread meters and Null YVE
Southern Water
YWBS
Affinity Water
10:45 – 11:30
Coffee Break
11:30 – 11:45  5
2 x half hour sessions share thoughts on potential solutions
 Steve Arthur/Mike Robertson / Mark Crowley
11:45 – 13:00
Lunch
13:00 – 13:45
User Forum,October 2018

3. Agenda Item * Description Who Time 6 Market Design
Change Proposal to the Long Unread Meters Report
Change Proposal to volume estimation (YVE/ILE)
Change Proposal – Alternative payment terms.
United Utilities
Thames Water
Yorkshire Water
13:45 – 15:15 7
AOB wrap up and close
Steve Arthur
15:15– 15:30
Live video streaming ends*
15:30
User Forum, October 2018

4. Welcome and Update on Actions
Steve Arthur

5. User Forum Actions ID Status Action Date Raise Owner
Target Completion Date
Comments and Update
UF09_01
Recommend Closure
To review the output of the September User Forum and present a summary at the October User Forum
20th Sept 18
Steve Arthur
18th October 2018
To be discussed later today.
User Forum October 2018

6. Welcome and Update on Actions Market Improvement
Steve Arthur
Market Improvement
Steve Arthur and Mike Robertson
Document title here

7. Market improvement session overview
Update on market improvement activities (including data improvement plans)
Review of key themes emerging from the September meeting
‘Promoting good practice’
Southern Water – Long unread meters
YWBS – New skip code daily process
Affinity Water – Long unread meters and null YVE
‘Developing solutions’ – breakout sessions.
User Forum October 2018

8. Market improvement session overview
Update on market improvement activities (including data improvement plans)
Review of key themes emerging from the September meeting
‘Promoting good practice’
Southern Water – Long unread meters
YWBS – New skip code daily process
Affinity Water – Long unread meters and null YVE
‘Developing solutions’ – breakout sessions.
User Forum October 2018

9. Recap on the September User Forum
The September User Forum meeting included a series of breakout sessions to work through selected charts on the new Wholesaler Settlement, Retailer Settlement and Switching dashboards, with input gathered from attendees in the room and via Skype.
3 x half hour sessions to work through key charts…
… and capture:
In total, more than 125 ideas and pieces of feedback were captured on the day – the following slides group the raw content received into themes.
User Forum October 2018

10. Summary of key themes emerging from discussions
Trading parties highlighted the importance of working together, including stepping outside of the standard market bilateral processes. Examples were shared regarding the sharing of skip and rejection code reasons and the use of ‘forums’ to jointly work through challenges.
The value of focused, collaborative working between wholesalers and retailers
Some trading parties identified that there is more they can do to make the most of the data available to them and to understand how to really interrogate it; further development of dashboards and provision of underpinning data will also support trading parties to prioritise.
The importance of understanding the data
The need for a systematic approach to resolving issues
Trading parties highlighted successes where they have adopted an organised, systematic approach to addressing issues on a meter-by-meter basis, sorting issues into ‘buckets’ of activity and progressing through these in a planned way.
It was highlighted that some issues may require new and novel approaches to properly address them, for example long-unread meters that are confirmed as having significant access issues.
Understanding the need to consider new ways to approach challenges
It is acknowledged that a number of issues relate to the arrangements that trading parties have or are able to get in place with meter read providers, and that active engagement with providers to be part of developing solutions may be required.
The need to engage with meter read providers to address issues
The importance of getting the basics right
Some trading parties highlighted successes where they have gone back to check that they have some of the basics in place, for example validating that all meters are on a read list, and that there may be value in sharing these examples more widely for others to replicate.
User Forum October 2018 10

11. Summary of key themes emerging from discussions
The value of focused, collaborative working between wholesalers and retailers
The importance of understanding the data
The need for a systematic approach to resolving issues
Understanding the need to consider new ways to approach challenges
The need to engage with meter read providers to address issues
The importance of getting the basics right
The ideas that emerged can be mapped to the market improvement steps set out in the MPOP, notably in relation to Raising Awareness, Promoting Good Practice, and Developing Solutions, and respond to each of the types of issue (MP, DQ and MA) identified in the MPOP.
User Forum October 2018 11

12. Linking the output to planned market improvement steps
For info: examples of ideas emerging around raising awareness
Additional insight on specific settlement challenges
Additional insight on specific switching challenges
“Useful to consider incoming and outgoing switch cancellations separately (incoming more likely due to errors, outgoing more likely due to policies)”
“Different approaches to rejecting switches due to outstanding debt – some retailers reject, some don’t”
“Cost of ad hoc reads”
“If YVE = 0, history is lost when the meter is exchanged”
“Erroneous transfers are key challenge”
“Timing of NMM reads, which can lead to negative consumption”
“Challenge on getting ‘out of area’ meter reads”
Settlement
Switching
“Location details only useful if accurate! (Some GIS set by middle of post code area, some location notes not specific enough”
“Different approaches to rejected meter reads – some resubmit immediately, some analyse”
“Importance of accurate customer details to be able to make contact when there are access issues”
Opportunities to further enhance understanding
“Build on the foundation of the dashboards with further data, such as for vacant premises”
“Providing the detailed logic used to generate the dashboards will help Trading Parties to understand specific issues”
“Further analysis to understand reasons for age of last meter read and prioritise activity – can they be assessed in different categories e.g. whether they have been read since market opening etc?”
“Provide more extensive explanation of what the data does and doesn’t tell you”
“Availability of meter read contractors to get reads is a challenge, particularly during peak times e.g. Christmas, Easter, 1st April etc.”
User Forum October 2018 12

13. For info: examples of ideas emerging around promoting best practice
Linking the output to planned market improvement steps
For info: examples of ideas emerging around promoting best practice
Methodology & process tips
“Taking a systematic approach at a detailed meter-by-meter level to address issues”
“Using MVI to update YVE and has been a very valuable tool”
“Go back to basics – e.g. checking all meters are on a read list”
Wholesaler / retailer collaboration
“Working bilaterally ‘offline’ between wholesalers and retailers”
Opportunities for greater standardisation
“Wholesalers sharing analytical insight with retailers”
Settlement
Switching
“Opportunities to share best practice data standards on meter location e.g. footpath not f/p”
“Retailers sharing rejection and skip code data with wholesalers”
“Potential for standard guidance / protocols around management and updating of YVE data?”
“Wholesalers offering ‘forum’ sessions with retailers to work through challenges”
“Opportunity to share good practice on customer names”
Making best use of the available data
“Opportunities for trading parties to make better use of the data available to them”
“Improving granularity of data e.g. on skip codes”
User Forum October 2018

14. For info: examples of ideas emerging around developing solutions
Linking the output to planned market improvement steps
For info: examples of ideas emerging around developing solutions
Considerations for solutions to unread meters
Considerations for solutions to improve estimation
General considerations for data solutions
“Wholesalers assisting retailers to populate YVEs”
“Review approach to estimation methodologies in the codes – materiality was not fully understood when being developed (inc. ILE methodology)”
“Consider a dedicated session (something between OWRG and User Forum) to look specifically at data challenges”
“Where there are access issues for long-unread issues, is there an AMR solution? May need a different approach”
“Review role of MEAC process (and reassurance?) to ensure trading parties processes are fit for purpose”
“Consider a vacancy flag in CMOS for NMM premises?”
Settlement
Switching
“Hold regular (monthly?) joint wholesaler / retailer data meetings, potentially supported by PfMs”
“Enable wholesale meter reads (e.g. as part of leakage activity) to be entered into CMOS?”
“Get smarter about using all opportunities where meters are visited to enhance data completeness and quality”
“Finding a way to fast track issues to wholesalers outside of current bilateral process (e.g. meter cannot be located)”
Considerations for solutions to enhance meter data
Considerations for solutions to enhance switching
“Consider treatment of long-unread vacant premises over a certain age?”
“Review incentives for wholesalers to improve meter location details – are current mechanisms and SLAs driving right behaviours? (inc. temporary to enable fixes to be made?)”
“Consider ability for wholesaler and retailer to add / update meter location notes?”
“Can customer reads be used?”
“Consider blanket block on vacancy”
“Get meter read providers to engage and be part of solution development”
“Review arrangements for how retailers agree to manage debt”
“Add reason for actual read not being available?”
User Forum October 2018 14

15. Emerging ideas – how they might be taken forward
The diagram below captures and categorises ideas put forward at the September User Forum meeting – it does not provide an exhaustive list of improvement activities, nor does it assume that each of these will get taken forward.
13. Review incentives for data improvement
Significant / market level changes
12. Review market approach to estimation
11. Review wholesaler meter reading role
8. Review opportunities for standardisation / guidance
5. Consider how to leverage wider opportunities to improve data
10. Consider specific approach(es) for tackling long unread meters with access issues
3. Adopt a systematic approach to improvement at a meter-by-meter level
Introduction of new initiatives and/or ways of working
4. Engage with meter read providers to jointly consider resolutions to issues
Level of change
Likely lead time
9. Introduce a dedicated ‘data forum’ to support collaboration
2. Make use of MVI for data updates
6. Ensure focused, collaborative approach between wholesalers and retailers
7. Further develop ability to interrogate the available data
Incremental changes to existing activities
8. Complete further iterations of dashboards to expand information available
1. Check all the basics in place – e.g. meters on read lists etc.
Who needs to be involved
Individual trading parties
Multiple trading parties
Cross market
(e.g. MOSL)
Market governance bodies (e.g. Panel, Ofwat)
User Forum October 2018

16. Emerging ideas – how they might be taken forward
Promoting good practice – themes covered in trading party presentations
Developing solutions - themes covered in breakout sessions
13. Review incentives for data improvement
Significant / market level changes
12. Review market approach to estimation
11. Review wholesaler meter reading role
8. Review opportunities for standardisation / guidance
5. Consider how to leverage wider opportunities to improve data
10. Consider specific approach(es) for tackling long unread meters with access issues
3. Adopt a systematic approach to improvement at a meter-by-meter level
Introduction of new initiatives and/or ways of working
4. Engage with meter read providers to jointly consider resolutions to issues
Level of change
Likely lead time
9. Introduce a dedicated ‘data forum’ to support collaboration
2. Make use of MVI for data updates
6. Ensure focused, collaborative approach between wholesalers and retailers
7. Further develop ability to interrogate the available data
Incremental changes to existing activities
8. Complete further iterations of dashboards to expand information available
1. Check all the basics in place – e.g. meters on read lists etc.
Who needs to be involved
Individual trading parties
Multiple trading parties
Cross market
(e.g. MOSL)
Market governance bodies (e.g. Panel, Ofwat)
User Forum October 2018

17. Market improvement session overview
Update on market improvement activities (including data improvement plans)
Review of key themes emerging from the September meeting
‘Promoting good practice’
Southern Water – Long unread meters
YWBS – New skip code daily process
Affinity Water – Long unread meters and null YVE
‘Developing solutions’ – breakout sessions
User Forum October 2018

18. Long Unread Meter Project
Southern Water
Document title here

19. Overview (1/2)
Southern Water have c.14k non-household meters that are long unread. A long unread meter is defined as:
Meter not read for 160 days from the previous read for bi-annual reads
Meter not read for 40 days from the previous read for monthly reads.
The impact of long unread meters:
Wholesaler’s Settlements – no readings YVE/ILE will be used
Retailers using estimated readings therefore leading to potential inaccurate customer billing
Retailers subject to MPS penalties for missing reads
Negative reputational impact if no action is taken to resolve, due to the high priority trading parties have rated this issue
Wholesaler’s water balance reporting.
User Forum October 2018

20. Overview (2/2)
Focusing on meters that haven’t been read since pre-market, we have established c.4,000 meters are returning a skip code of ‘meter not found’.
Carried out a small pilot in June 2018 with 80 per cent of the ‘meter not found’ skips investigated returning a successful meter reading.
User Forum October 2018

21. Approach
Southern Water will work with its retailers and carry out an initial investigation focussing on the 4,000 ‘meter not found’ skips.
Investing £200k, we started in August 2018, the project will deliver the following outcomes:
Confirmation of MSN, make and model
Confirmation of meter location, including X&Y co-ordinates
Confirmation of meter reading
Updating of retailer, wholesaler and CMOS systems - updating CMOS is having a negative impact on Southern Water MPS performance
If the meter is not located then a resolution will be suggested e.g. install new meter, exchange, relocation etc.
This phase of the project is planned for completion in January 2019.
User Forum October 2018

22. Progress to date
Based on the retailers read routes we are targeting investigations two months ahead of the next scheduled read to allow time for:
The investigation to take place
The data to be returned, validated and uploaded into the retailer, wholesaler and CMOS systems.
Below is the scheduled site visit plan highlighting completed site visits to date. We plan to visit all meters in scope of the project by January 2019.
User Forum October 2018

23. Initial findings and next steps
Current results have revealed 43% skip return compared with 20% of the pilot.
1195 site visits completed as of 05/10/2018
43 per cent skips returned resulting in follow on actions needing to be taken by Southern i.e. meter install
250 No Meter Found is the front runner at the moment.
60 Access Block
All c.4,000 meters in scope of the project will have had a site visit by January 2019, with a result providing us with a meter reading or suggested resolution to the ‘meter not found’ skip reason.
We will track our long unread position and re cut the data towards early next year to progress a potential second phase of the project.
User Forum October 2018

24. Questions?
User Forum October 2018

25. Long Unread Meters Yorkshire Water Business Services
Document title here

26. Main challenges Pre-market issues • Damaged meters / AMR’s •
Unable to locate • H&S issues •
Meter exchanges • Vacant properties with no AMR •
Internal meters with no AMR and no access.
User Forum October 2018

27. What we have done Data & Settlement monthly meetings
Working group on data quality issues
Identified and updated all meter exchanges, and asset information
Working group on Long Unread program
Identified which meters are pre-market issues – passed to wholesaler
Identified all meters that require a 2 man lift, and agreed new process
Prioritised workloads on Occupied Monthly, Biannual followed by Vacant properties
Prioritised which AMR’s to replace.
User Forum October 2018

28. What is in progress New daily processes Skip / trouble codes
Location note updates
Test & learn theories
Vacant properties with no AMR
Internal meters with no AMR and no access.
User Forum October 2018

29. Skip codes
User Forum October 2018

30. Trouble Codes
User Forum October 2018

31. YVE value derivation
A retailer perspective…. from the wholesaler perspective
Andrew Bamber (Affinity for Business - Retail)
Matthew Turner (Affinity Water - Wholesale)

32. Affinity Water – wholesale supply area
Overview
Largest water only
three non-contiguous areas: Central, East & South East
30 retailers (20 active)
75k supply points
85 per cent SP’s on measured tariffs
10k vacant
4.5k occupied long unread
0 YVE’s at Go Live.
Actual meter reads in settlement reports R1 R2 R3 R4 RF
2017/18 9%
56%
85%
90% ?
2018/19
18%
63%

33. Affinity for Business – work to date on YVE’s
Settlement calculation (measured supply points)
Actual meter reading (preferred)
YVE (ok)
ILE (not indicative of individual SP consumption).
YVE approach
Focus was on long un-reads (vacant = 5.6k, occupied = 4.5k, total = 10k)
Work to date is not perfect – it’s a starting point which will be refined further
Vacant = 0 YVE (subject to further review, AWL & AFB working together)
Some consumption history either in CMOS or Hi-Affinity: calculated YVE (integer)
No / limited consumption history: developed generic YVE table (rounded numbers to 10)
Manual review (over-rides generic)
YVE already in CMOS – leave as is (subject to further review).

34. Affinity for Business – work to date on YVE’s
Generic YVE
Placeholder
YVE is an integer rounded to 10
Based on meter sizes and other information known
about the type of business activity
Easier to identify on a spreadsheet, will assist in conversion from ‘generic’ to something more indicative with further investigation
Different data sources: need to establish a hierarchy (sample of SP’s actual consumption)
Ofwat Jan 2018 RFI
Data in BEV (Hi-Affinity billing system) – generally higher than Ofwat data (only 6 months?)
New Connection SP’s – no consumption data, limited business activity information
YVE table derived from historical consumption of other SP for the chargeable meter size – in general significantly lower than ILE values in Codes.

35. Breakout Sessions
Steve Arthur and Mike Robertson
Document title here

36. Breakout session Opportunities for more formal guidance or standardisation
Context from the September meeting… some trading parties indicated that there would be value in considering where more formal guidance or standardisation could help to resolve settlement issues, for example in terms of location notes (‘footpath’ not ‘f/p’) or around YVE methodology
What are the most useful changes that could be made in this area to enable efficient settlement?
What level of impact would these have on helping you to resolve issues?
What are the practical steps needed to make these changes?
Who would need to be involved and what would be the likely timeframe?
For discussion
User Forum October 2018 36

37. Breakout session Incentives for data improvement
Context from the September meeting… some trading parties questioned whether the current market arrangements provided (a) sufficient incentive for trading parties to complete data improvement activities and/or (b) actively discouraged trading parties from making improvements
What are the most useful changes that could be made in this area to enable efficient settlement?
What level of impact would these have on helping you to resolve issues?
What are the practical steps needed to make these changes?
Who would need to be involved and what would be the likely timeframe?
For discussion
User Forum October 2018 37

38. Breakout session Tackling long unread meters with access issues
Context from the September meeting… some trading parties questioned whether, in the cases of long-unread meters where it was likely there are significant access issues, some specific or novel approaches may be required to address how the market will capture accurate consumption information
What are the most useful changes that could be made in this area to enable efficient settlement?
What level of impact would these have on helping you to resolve issues?
What are the practical steps needed to make these changes?
Who would need to be involved and what would be the likely timeframe?
For discussion
User Forum October 2018

39. Lunch

40. Market Design: Change Proposals

41. Long Unread Meters Report
United Utilities
12/5/2018

42. Overview
This draft change proposal is being raised by United Utilities
It seeks to add further columns into the long unread meters report
The long unread meters report contains a list of all meters where the elapsed time since the date of the last meter read is:
Greater than 14 months in the case of bi-annually read meters; or
Greater than 3 months in the case of monthly read meters.
The additional columns will enable trading parties to prioritise which meters to target in rectification projects and generally aid in data analysis.
User Forum October 2018

43. Solution
The change seeks to amend the report to display meters where a non-estimated read has not been submitted in the last 3/14 months
For example, with two biannually read meters:
Meter A’s latest read is a visual cyclic read submitted 17 months ago
Meter B’s latest read is an estimated transfer read submitted 3 months ago, with the previous read being a remote reconnection read submitted 21 months ago.
Both these meters will be displayed in the amended report
The following data items are proposed to be added to the report:
Meter’s initial read date
Meter read frequency
Meter read type
Meter read method.
User Forum October 2018

44. Next steps The draft change proposal is currently being finalised.
It will then be impact assessed and a cost will be estimated for its implementation.
Following this, a request for information will be issued to trading parties asking:
Whether parties are in agreement with the changes this proposal seeks to make, as well as the drafting
How parties will be impacted by the amendments made to the report
Whether parties agree with the implementation date of November 2019.
The intention is to present this change proposal to the Panel in December 2018.
User Forum October 2018

45. Improving Settlement Accuracy
Thames Water
Document title here

46. Background
Recent work around deferring the RF highlighted material settlement impacts driven by:
Inaccurate Yearly Volume Estimates (YVE) and Industry Level Estimates (ILE)
High and growing numbers of vacant premises
Backdating changes to YVEs and vacant premises.
Leads to inaccurate billing, impacts on future tariffs for all customers and leakage reporting.
Ofwat has deferred RF until December to review post-RF processes giving us a window to:
Improve settlement accuracy through putting meter reads into CMOS (DIPs)
Improve estimating data through DIPs and related Code change.
User Forum October 2018

47. Estimation (YVE)
Document title here

48. Estimation – background
CMOS
ILE
YVE
Meter reads history
Option 1
Calculates consumptions
Option 3
Settlement for TPs
Option 2
YVE introduced to enable more accurate estimation of volume at market opening
Unexpectedly high levels of unread meters highlights estimating inaccuracies
Unexpected use of retrospective changes to YVEs leading to material settlement volatility (thousands of YVEs retrospectively changed to 1)
Concern that YVEs tend to underestimate and ILEs tend to overestimate.
User Forum October 2018 48

49. Estimation inaccuracy
Yearly Volume Estimate (YVE)
Only 35 per cent of 1.8 million cases with actual meter reads are within 20 per cent of the YVE - so for 65 per cent the YVEs are inaccurate by more than 20 per cent
Industry Level Estimate (ILE)
Retailers concerned that ILE overestimates consumption
User Forum October 2018

50. Estimation – what can we do?
Standard approach
Improve governance
Evidence needed to change YVE
Formal agreement between retailer and wholesaler
Remove backdating
Recalculate ILE limits.
Designing for the future
Remove all YVEs from CMOS
If no meter read will default to ILE
Replace current ILE estimations with actual average consumption split by meter size (from over 3.5 million reads in CMOS).
Benefits/issues
Improves on current estimation
Less volatile settlement
Continued complexity for TPs
Methodologies open to challenge
Reduces likelihood of disputes
Possible CMOS constraints
Benefits/issues
Improves on current estimation
Less volatile estimation
Simpler and more efficient for TPs
No room for disputes
Possible CMOS constraints
Similar to comparable markets – electricity and gas
User Forum October 2018

51. Estimation change - timeline
October
2018
November 2018
December 2018
January 2019
Present at User Forum (18 Oct)
Draft formal change proposal
Present at Panel meeting (27 November)
Validation (expected prior to RF settlement)
Formal Request for Information / consultation on the change proposal
Opportunity is NOW due to Final settlement deferral
Up to end of December 2018/ Possible extension to February 2019
Urgent need to correct as much pre-RF data as possible.
User Forum October 2018

52. Vacancy
Vacancy
User Forum October 2018

53. Vacancy - background
Water and Waste vacant SPIDS
(Source MOSL JUNE ORWG slides)
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
AFFINITY-W
9,624
9,640
9,693
9756
9,819
9,867
ANGLIAN-W
15,454
15,935
16,481
16,673
16,862
18,083
BRISTOL-W
726
736
756
722
728
1,052
NORTHUM-W
27,087
27,056
26,992
26,968
26,793
26,821
PORTSMOUTH-W
1,285
1,321
1349
1,394
1,412
SEVERN-W
57,345
57,687
58,433
59,244
60,045
60,380
SOUTHEAST-W
4,309
4,348
4,421
4464
4,553
4,938
SOUTHERN-W
13,522
13,626
13,755
13,870
14,000
13,976
SOUTHSTAFF-W
4,814
4,834
4,837
4842
4,854
4,862
SOUTHWEST-W
7,513
7,593
7,691
7,725
7,750
7,794
SUTTON-W
1,350
1,349
1,415
1413
1,417
1,419
THAMES-W
74,857
75,284
76,790
78,648
80,027
81,010
UNITED-W
98,263
98,251
98,008
98,264
98,633
98,920
WESSEX-W
4,368
4,396
4,422
4,364
4,372
4,621
YORKSHIRE-W
38,506
38,469
38,796
38,935
38,799
38,944
Totals
359,023
360,525
363,811
367,237
370,046
374,099
Increase of Vacant Premises since April 17 and still increasing
C15 per cent of market vacant (could equate to lost revenue of £350M)
Such an increase is a step change since April 17
TW desktop exercise reviewed 20,000 vacant premises: 25 per cent good evidence of occupancy, 45 per cent unclear and only 30 per cent confirmed vacant.
User Forum October 2018

54. Vacancy - impact
If revenue can’t be recovered post RF then no ability for retailers to bill end customers
Revenue Correction Mechanism will increase wholesale bills across entire customer base
Leakage reporting artificially increased.
To minimise impact, data needs to be more accurate.
Problems
Vacancy flag can be applied retrospectively all the way back to market opening (with no burden of proof)
Challenge process too onerous to be of use – partial process adopted from Scottish codes (i.e. high evidence burden making it expensive and time- consuming to pursue, but with no penalties at conclusion of process).
User Forum October 2018

55. Vacancy – change proposals
Restrict ability to apply flag retrospectively
Timescale aligned better with meter read schedule rather than open ended
Maximum therefore six months retrospective amendment unless agreed bilaterally between retailer and wholesaler.
Rebalance the burden of proof / challenge process
Either add penalty to challenge process (was set at £250 in Scotland); or
Require retailer to collect evidence of vacancy at time of setting flag and make this available
If wholesaler wishes to challenge then produce its own evidence (no requirement for site visit)
Can raise as dispute and evidence packs can be compared (follow trading dispute process).
User Forum October 2018

56. Alternative Payment Terms
Draft Change Proposal Review
Andrew Swain – Finance Director, Three Sixty Water & YWBS

57. Overview of Proposal
Under section 9.2 of the market codes there are currently two default payment terms options for a retailer to agree with wholesaler:
Pre-payment
Post-payment.
This proposal seeks to add a third flexible terms option – Alternative Payment Terms (APT), leaving the two default options unchanged:

58. Proposal Principles
No impact to default payment options in section 9.2
Minimal and controllable wholesaler impact, effectively wholesaler neutral
Minimal and controllable retailer impact, effectively retailer neutral
No impact to existing arrangements – unless by mutual agreement
No impact to future arrangements – unless by mutual agreement
Primary intent, to promote market competition.

59. Primary Driver – Why This, Why Now ?
To promote market competition
Currently we talk to YWBS/ Three Sixty Water customers weekly with regard to more flexible payment terms
We don’t know the form of every suggestion likely to result from the proposal
We do know that lack of opportunity for flexibility reduces creative solutions in competitive terms.

60. Underlying Neutrality – Customers Benefit
APT would not add any additional credit exposure risk to the wholesaler
This would be mitigated through amended default credit support/AEC.
APT would not bring added working capital demand to the wholesaler
This would be mitigated through agreement of payment terms themselves
The proposal is therefore NEUTRAL to the wholesaler.
APT would not add any additional credit exposure risk to the retailer
Though this would probably lead to the need to amend existing credit support/AEC.
APT would not bring added working capital demand to the retailer
This would be mitigated through commercial terms
The proposal is therefore NEUTRAL to the retailer.

61. = Increased competition in the market
Key Benefits
Retail
Ability to respond to demands for flexibility of commercial payment terms from customers
Ability to offer this flexibility with no incremental working capital demands
Potential to improve working capital requirement.
Wholesale
No terms can be reached without mutual agreement
No incremental risk or exposure – neutral position through proposal acceptance
Potential for reduced admin compared to current default invoicing and collection.
= Increased competition in the market

62. Recap Proposal Principles
No impact to default payment options in section 9.2
Minimal and controllable wholesaler impact, effectively wholesaler neutral
Minimal and controllable retailer impact, effectively retailer neutral
No impact to existing arrangements – unless by mutual agreement
No impact to future arrangements – unless by mutual agreement
Primary intent, to promote market competition.

63. What Next?
Your input, view point and examples are valuable to refine and streamline the proposal
Intend to gather these over the coming days through the RFI process
Respond to questions/ concerns, collate your feedback and finalise the proposal
Review by the Panel November/ December (response dependent) for recommendation to OFWAT
Intended implementation on 29 March.
Market codes demand that there is a review Panel, members are 12 voting members, as elected by the trading parties, 3 Wholesale, 3 associated retail, 3 un-associated retailers and 3 independents (a barrister, a gas market specialist and a gas market panel member)

64. Questions ?
Market codes demand that there is a review Panel, members are 12 voting members, as elected by the trading parties, 3 Wholesale, 3 associated retail, 3 un-associated retailers and 3 independents (a barrister, a gas market specialist and a gas market panel member)

65. AOB Wrap Up & Close

66. Thank You!