1. CAP089/090/091 Working Group Report
Ben Graff
Electricity Code Development Manager
National Grid plc

2. Introduction Background Existing CUSC Provisions
The Original Proposal - Step through the 5 main elements
The Working Group Discussions
The 5 Working Group Alternative Amendments
Next Steps

3. Background
CAP089 and CAP090 proposed by National Grid; amalgamated at June Panel
CAP091 proposed by BizzEnergy; merged with CAP089/090 at July Panel
CAP089/090/091 contains 5 distinct elements, discussed at the CAP Working Group over the last 3 months

4. Existing CUSC Provisions
Currently no concept in the CUSC of a maximum unsecured Credit Limit
Have to provide 29 days of BSUoS (Gens)
Have to provide 32 days BSUoS + 10% TNUoS (Suppliers)
But only if below BBB-

5. Original Proposal (5 Elements)
1. Maximum unsecured credit limit of 2% of RAV
2. Credit allowances for companies with an Approved Credit Rating (ACR) of BB- or above – 15% to 100% of maximum unsecured limit
3. Default credit allowance for companies without an ACR based on their Payment Record
4. Option for companies without an ACR to gain a credit allowance based on an Independent Credit Assessment
5 Replacement of 10% TNUoS Value at Risk (VAR) with an amount based on each User’s forecasting performance in the previous year

6. What Elements 1 and 2 Mean in Practice - Credit Rating Route to 2% RAV Unsecured Credit
Up to 2% of RAV
Securing 29 days BSUoS (Gens)
32 days BSUoS (Suppliers)
10% of TNUoS
AAA = 100% (approx £102m)
A = 40% (approx £41m)
BBB+ = 20% (approx £20m)
If credit Rating is below BB-, still need to
secure the relevant BSUoS/TNUoS in full.
- These proposal s not relevant
BBB = 19% (approx £19m)
BBB- = 18% (approx £18m)
If above BB-, entitled to % of unsecured
credit
BB+ = 17% (approx £17m)
Must secure rest via Parent Guarantee
etc
BB = 16% (approx £16m)
BB- = 15% (approx £15m)
Below BB- = 0

7. Element 3 - Default Credit Allowance for Companies without an Approved Credit Rating, based on their payment record
Allowance based on payment record, climbing by 0.4% of maximum unsecured Credit Limit a year (escalating on an evenly graduated basis each month within year)
Potential to achieve 2% of maximum unsecured Credit Limit after 5 years of perfect payment history

8. What Elements 1, 2 and 3 Mean in Practice - Credit Rating + Payment History Routes to 2% RAV
Unsecured Credit
Up to 2% of RAV
Securing 29 days BSUoS (Gens)
32 days BSUoS (Suppliers)
10% of TNUoS
AAA = 100% (approx £102m)
A = 40% (approx £41m)
BBB+ = 20% (approx £20m)
If Credit Rating is below BB-, still need to
secure the relevant BSUoS/TNUoS in full,
but can progressively secure 0.4% a year
through payment history.
BBB = 19% (approx £19m)
BBB- = 18% (approx £18m)
If above BB-, entitled to % of unsecured
credit
BB+ = 17% (approx £17m)
Must secure Credit not secured by Credit Rating/ Payment History via Parent Guarantee
etc
BB = 16% (approx £16m)
BB- = 15% (approx £15m)
2% (approx £2m) – 5 years of perfect payments
0% – no on-time payments

9. Element 4 - Default Credit Allowance for Companies without an Approved Credit Rating, based on Independent Assessment
Independent Assessment can be sought from a Panel of 3 Independent Credit Agencies, appointed by Network Operators
Annual Assessment, paid for by National Grid
Assessment results in a score of 0 – 10
Score of 10 entitles you to 20% of the maximum unsecured Credit Limit (i.e. the 2% of RAV)
Score of 1 entitles you to 31/3% of the maximum unsecured Credit Limit

10. Element 4 – Credit Scoring
Credit assessment Credit allowance as % of Approximate
score maximum credit limit Allowance
£20.4m
£19.4m
£18.4m
£17.3m
£16.3m
£15.3m
/ £13.6m
£10.2m
/ £6.8m
/ £3.4m
£0.0m

11. What Elements 1, 2, 3 and 4 Mean in Practice
Credit Rating Credit Score
100% (approx £102.0m) AAA/AA
40% (approx £40.8m) A
20% (approx £20.4m) BBB+ 10
19% (approx £19.3m) BBB 9
18% (approx £18.4m) BBB- 8
17% (approx £17.3m) BB+ 7
16% (approx £16.3m) BB 6
Unsecured Credit up to 2% of RAV
15% (approx £15.3m) BB- 5
131/3% (approx £13.6m) 4
10% (approx £10.2m) 3
62/3% (approx £6.8m) 2
31/3% (approx £3.4m) 1
2% (approx £2.0m) 5 years of perfect payments
1.6% (approx £1.6m) 4 years of perfect payments
1.2% (approx £1.2m) 3 years of perfect payments
0.8% (approx £0.8m) 2 years of perfect payments
0.4% (approx £0.4m) 1 year of perfect payments
0% (£0m) No on-time payments or Credit Score of 0

12. Element 5 - Replacement of 10% VAR for TNUoS Demand Reconciliation Charges with an amount of within year TNUoS Security based on each User’s forecasting performance in the previous year
The Value at Risk (VAR) is referred to as the “Security Requirement” in the proposed CUSC legal text
The Security Cover required is equal to the Security Requirement less the User’s Allowed Credit (which has been set by elements 1-4 of CAP089/090/091)
Currently the VAR is:
for Generators, 29 days’ of BSUoS Charges; or
for Suppliers, 32 days’ of BSUoS Charges and 10% of TNUoS charges for TNUoS Reconciliation charges
CAP089/090/091 proposes removing the cover for TNUoS Reconciliation charges, and replacing it with cover for within year TNUoS charges
The cover for BSUoS would not be changed

13. Element 5 - Replacement of 10% VAR for TNUoS Demand Reconciliation Charges with an amount of within year TNUoS Security based on each User’s forecasting performance in the previous year (cont’d)
(1) Within year TNUoS charges are determined by Users’ forecasts
(2) These are Initially reconciled using settlement data in May y+1
(3) They are Finally reconciled using settlement data in June y+2
10% currently covers risk between (2) and (3)
CAP089/090/091 proposes replacing this with within year cover to cover the risk between (1) and (2)
The amount of cover required for each User would be based on their forecasting performance in the previous year

14. Working Group Discussions
Calculation of RAV
Frequency of Monitoring of Users Allowed Credit Cover
Scoring v
Who pays for assessments?
Forecasting Performance
Transitional Issues

15. Working Group Alternative Amendments
Forecasting Performance
+2.5%
0-100
User pays 
WGAA4 
VAR
0-10
NG pays
Independent Assessment
Payment Record
ACR
RAV
WGAA5
WGAA3
WGAA2
WGAA1
Original Proposal

16. Views of Working Group
Majority of Working Group believed CAP089/90/91 or one of the Alternatives better facilitated the Applicable Objectives
All Working Group Members Agreed CAP089/90 ready to proceed to wider Consultation