1. Further Credit Modification Proposals
Chris Warner/Phil Lucas

2. To date… Ofgem rejected the following proposals on 26 January 2007:
0109 – Credit Tools
0111 – Approach and breach of CCL
0112 – Aggregation of positions/PCGs
0114 – Value at risk
Elements of Ofgem recommended best practice not in place
UKD are seeking to achieve this
Raise new Proposals where prior proposals rejected, and
Refinement of Modification 0113 (Payment History and Independent Assessment) provisions

3. 0109 Credit Tools Reasons for rejection
Clarify potential uses of deposit deed and prepayment agreements
Payment before delivery of the service
Payment before the Invoice Due Date
Exclusion of bi-lateral insurance
Where pay out limited, the tool can be rated below full value
Exclusion of PCGs from non UK parent

4. 0111 Approach and breach of Code Credit Limit
Reasons for rejection
Required implementation of 0114 Value at Risk
The proposal sought to measure indebtedness (which includes accruals) against Code Credit Limit to determine availability of sanctions
Best practice is to measure Value at Risk (which excludes accruals) against Code Credit Limit to determine availability of sanctions

5. 0112 Aggregation of positions/PCGs
Reasons for rejection
Required implementation of 0109 Credit Tools
Clarify potential uses of PCG
To replace Users credit rating, or
As an individual security tool. Where used in addition an Unsecured credit limit assigned to the User based on its stand alone credit limit, the additional amount secured by the Parent must not exceed the parent company’s ability to bear risk.

6. 0114 Value at Risk Reasons for rejection
Ambiguity over calculation of Code Credit Limit
Legal text retained link to Code Credit Rules
Value at risk should be ‘real time’ (charges at that time billed to the User but unpaid) and not based on previous month’s invoiced charges

7. Points noted in direction to implement
0113 Payment History and Independent Assessments (implemented from 1 May 2007)
Points noted in direction to implement
Implementation – a User’s payment history (pre 1 May 2007) will be taken into account. National Grid view is that this is an implementation matter and does not merit further Modification.
Payment History – missing ‘small’ payments
New Proposal advocates soft landing where invoice value <=£250.
Only reduces level by 50% but where second occurrence with 12 months 100%
Independent Assessment
New proposal advocates that where Transporter initiates re-assessment (outside of the initial and annual re-assessment) the relevant Transporter bears 100% of such cost
Selection of independent Credit Rating Agency.