PAFA – Setting the scene
In 2016 a number of changes were implemented into the gas market that referenced a Performance Assurance Framework. Prior to these changes, the gas market did not have a performance assurance regime in place and there were a number of areas where both Ofgem and industry discussed and noted the benefits of having performance incentives. These areas were to improve gas settlement accuracy, reduce financial and reputational risk to parties and improve the overall accuracy of the industry. The change should also bring benefits to consumers through the change of supplier process, by ensuring that targets for switching times are met and erroneous transfers are minimised. These discussions resulted in the development and introduction of a performance assurance scheme, a landmark for the industry.
Two key modifications to the Uniform Network Code by the Uniform Network Code Committee were created in enable to support these desired changes:
Modification 0506V sought to introduce a risk based Gas Performance Assurance Framework (PAF), to be used to facilitate assurance and incentivisation of settlement accuracy post implementation of Project Nexus (the replacement of the main UKLINK system to improve gas allocation and reconciliation).
Modification 0520A sought to introduce low level reporting arrangements for the key industry inputs which impact accurate settlement allocation to support the new PAF, allowing industry to be aware of the performance of parties in key areas of risk.
An assurance solution
In January 2016 Modification 0506V was implemented. This modification sought to implement a Gas Performance Assurance Framework (PAF) and Governance Arrangements to provide “a demonstrably effective settlement regime for the gas industry where no one party adversely impacts another party as a result of its failure to operate to the defined settlement regime”. Modification 0520A was implemented to support the delivery of 0506V with reporting and monitoring of the market.
The change resulted in the creation of the Performance Assurance Committee (PAC). It meets on a monthly basis to review, consider and develop Performance Assurance related matters and solutions.
On 1 July 2017, Gemserv Ltd was appointed as the Gas Performance Assurance Framework Administrator (PAFA) on behalf on the PAC. The procurement was managed by Xoserve as the Central Data Services Provider (CDSP).
Progress to date
Since our appointment as the PAFA, Gemserv has worked with both Xoserve and the PAC to develop a robust Performance Assurance Framework. We have:
- Agreed the PAF design and approach with the PAC;
- Agreed the publication and communications methods for the PAC and the PAFA;
- Including the security of all confidential and commercially sensitive information;
- Implemented a helpdesk for the industry – email@example.com;
- Created a Risk Register and had initial approval by the PAC;
- Submitted for industry consultation on 16 October 2017;
- Industry consultation will close 5pm 9 November 2017;
- All feedback should be provided to firstname.lastname@example.org; and
- All internal processes and procedures have been set up and proven to work effectively.
In the coming months, we will continue to work with the PAC and Industry to:
- Engage with the industry to provide PAF guidance and education;
- Begin data analysis and reporting of industry performance against the Risk Register; and
- Administer the PAF as so required by the PAC.
What’s coming up?
The PAF operates on an annual basis and each PAF year runs from 1 October to 30 September, to align with existing industry processes. The PAF model will remain static throughout the PAF year to best provide for progression in areas of risk. We will perform a review of the work that the PAFA and the PAC has undertaken under the PAF regime at the end of the PAF year and produce a report and recommendations for any change or improvements.