EBCC MEETING
24th November 2014
AGENDA
• 1.0 Introduction• 2.0 Minutes and Actions• 3.0 Operational Update• 4.0 Modifications• 5.0 Significant Code Review Update• 6.0 Bank Ratings• 7.0 Letter concerning Non Registrable Deposit Deed• 8.0 Review since April 2014• 9.0 Risk Register• 10.0 Team Structure• 11.0 AOB• 12.0 Dates of meetings for next 12 months
Operational Update
October 2014
Operational Update
• October 2014– 2 Cash Call issued which were appealed and withdrawn– Cash Collection 100%– Rolling 12 Months 99.98%– No Failure to pay notices issued– No Further Security Request Notices Issued
No Failure to Pay notices issued
Cash Collection
100.00% 100.00% 100.00% 100.00% 100.00%99.75%
100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
97%
98%
98%
99%
99%
100%
100%
% O
f Cas
h C
olle
cted
Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14
Monthly Breakdown Of Cash Collected At Payment Due Date
Target PDD Collected PDD
Cash Collection
98%
99.61%
98%
99.36%
98%
99.26%
98%
99.73%
98%
99.90%
98%
99.98%
95%
96%
97%
98%
99%
100%
% O
f Cas
h Co
llect
ed
2009 2010 2011 2012 2013 2014
Yearly Cash Collection Targets Payment Due Date
Target PDD Collected PDD
Cash Call Issued
Yearly Total Of Cash Calls Issued
56
64
55
14
103
0
20
40
60
80
100
120
2010 2011 2012 2013 2014
No.
Of C
ash
Cal
ls
Value of Cash Call Issued
Yearly Total Value Of Cash Calls Issued
£13,034,000
£42,595,000
£20,582,000£17,998,000
£3,000,000
£0
£5,000,000
£10,000,000
£15,000,000
£20,000,000
£25,000,000
£30,000,000
£35,000,000
£40,000,000
£45,000,000
2010 2011 2012 2013 2014
Valu
e (£
's)
FTPCCN’s – issued & paid
Yearly Total of FTPCCN's Issued & Paid
4
1 1
2
00
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2010 2011 2012 2013 2014
No.
of C
ash
Cal
ls
Modifications
Significant Code Review Update
Security of Supply Significant Code Review
• OFGEM published their final proposal on 12th February 2014.• EBCC response provided to Ofgem on 11th April 2014.• Work is currently underway to put in place operational procedures as
per the mind maps previously discussed on the following slides. • OFGEM published their Notice of implementation on 23rd September
2014.• Project underway. Analysis commences 5/1/14 (23 wk Project)• Implementation to be effective from 05.00 hrs on 1st October 2015.
Mind Maps - SCR
• The following mind maps were put together to address areas where it was identified that additional work is required to operate. We are currently working through items highlighted as red.– Operating Process– Priority of Scoring for EBCC meetings– EBCC Operation– Relaxing Current arrangements EBCC
Operating Process
Delegation of Authority
Shipper information
System accessSuspension of
all services
Emergency MOD
Resource Cost Banking Services
Review sign off of credit payments
Reporting to ofgem/EBCC special arrangements
Review current rules
Succession + capability
MOD 233?
Skill set Exclude EBI availability
Availability
Suspension of holidays WLB of key staff
Daylight Limit
NGD Daily limits
Operating limits
Availability of CEO due to increased values
Contact list
Temporary shared area
Box account for communication
Delegated Authority levels
Operating Process
• Suspension of all Services
– As a committee we need to address the areas currently within the powers of the EBCC
– Review existing timescales and conclude what would be reasonable to suspend / relax? It was agreed by Committee to suspend the FSR process. All other processes would be business as usual.
• System Access
– existing rules for access require 5 day SLA need to agree special arrangements for identified resource – (On hold)
• Cost
– increase cost of resource consider how budget affected / may need to agree recovery via neutrality possible modification? This would need modification and careful drafting.
Operating System continued
• Modification 0233V - Changes to Outstanding Energy Balancing Indebtedness Calculation
- Xoserve have engaged with National Grid to review redrafting of modification.- Ofgem are aware of these proposals and will consider if the reasons for non
implementation have been addressed.
• Banking Services- We have discussed possibilities of increasing current overdraft facilities to
establish if feasible and to what maximum limit. From initial discussions the possibility of extending credit does not look possible, however further analysis is taking place to assess the potential values.
• Shipper Information:-- We will be writing out to all Users to confirm contact details with an ongoing 12
month review. Discussions have been held with our Analytical Team. – Still in progress.
Powers and Duties of EBCC
http://www.gasgovernance.co.uk/sites/default/files/EBCR%20Rules%20V3.20%20v1%20Approved%20
01.08.2014%20Master.pdf
Relaxing current arrangements Business rules
Security
Cash collectionMarket Operator
EBCC Meetings
Cash calls
No changes proposed.
Existing rules apply- due to arrangements drafting + under UK termination process S.1.7.
timing for convention of meeting
Appeal ProcessResource issues
Extend time?
Reduce or suspend appeal notice
No appeal criteria
Still issue
Payment terms extend ?
Timing extend?- 4pm – end of gas day
Agree with EBCC members no validation
FSR
Consider suspension for a period beyond invoices issued and paid
Validate cash call suite
System solution for manual adjustment
Manually update letters/notices as we do currently
Cost of funding change
Communication of delivery
Faxes? Scan, email or file interface
Aggregate exposure
Accepting LOC from lower rated organisations
% of exposure underwriting
Process going forward
Suspending/ excluding peak SAP calc
Priority of Scoring EBCC meetings
• Risk Categorising all parties to establish how to manage volumes of potential EBCC meetings in the event of an Emergency taking into account various sources of information.
• Example on following slide provides a suggested template to identify High, Medium or low risk customers.
• Aspiration to have this in place for all customers before Winter14.
• Reviewed monthly through monthly Operational Meetings and we will give some consideration on reporting requirements.
Priority of ScoringFor EBCC meetingsPortfolio
growth
Communication interactioncommercialintelligence reporting
Downgrade riskfactor risk
Security arrangements
Party underwriting
Payment trends
Over or under delivery trends
FSRs numberof cash calls over previous
period
Level of helpfulness
How they act in market
Ability to pay
Graydons
Moody’s
S + P
Priority Scoring - Low Risk Categorisation
XShipper B
XShipper C
XShipper A
lowMediumHigh
Always responds to communication.
Customer does not respond to communication within agreed time scales.
Yes – All in place prior to or on Renewal Date.
Security in place on Renewal Date
All paid on due date.Energy Balancing Invoices Paid on due Date
NoneCash Call Notices Issued last 12 months
Shipper A
Priority Scoring - Medium Risk Categorisation
XShipper B
XShipper C
XShipper A
lowMediumHigh
SometimesCustomer does not respond to communication within agreed time scales.
No – In place D+2Security in place on Renewal Date
No - 2 Occurrences over last 12 months
Energy Balancing Invoices Paid on due Date
NoneCash Call Notices Issued last 12 months
Shipper B
Priority Scoring - High Risk Categorisation
XShipper B
XShipper C
XShipper A
lowMediumHigh
FrequentlyCustomer does not respond to communication within agreed time scales.
No – Repeated Calls
Security in place on Renewal Date
4 Occurrences over last 12 months
Energy Balancing Invoices Paid on due Date
3 Failure to Pay Cash Calls
Cash Call Notices Issued last 12 months
Shipper C
Profiling Analysis
16151Further Security
Request
140198Cash Calls
3033104Cash Collection
121406Securities
LowMediumHighTotal = 167
Risk Profiling Results
6
104
8 1
40
33
19 5
121
30
140161
0
50
100
150
200N
umbe
r
High Medium Low
Risk Category
Risk Profiling ResultsSecurities
CashCollection
Cash Calls
FurtherSecurityRequest
Risk Profiling Commentary
• Cash Collection - although there are a large number of parties highlighted as highrisk. The risk is based upon a timing issue in responses from shippers and the pro-active approach of the CRM team. This results in the perception of risk rather than actual risk.
• Securities – 100% securities maintained. However, the medium to high categories reflect delayed responses, incomplete or altered security documents returned from parties and queries which further delay the completion of the security process.
• Cash Call – Anticipated relatively low volumes to be reflected within the medium to high categories. This is in most part due to maintaining sufficient security levels, pro-active cash call indebtedness monitoring and combined with advance warnings to parties of high indebtedness levels. Thereby, allowing them to address their indebtedness position.
• Further Security Requests – Driven by the cash call process. Anticipated low volumes within the two higher categories. It follows that the lower the number of cash calls issued the lower the likelihood of further security requests.
EBCC Operation
National Gridinput
Establish who from Xoserve
required Conflict of
interest
INCIDENTROOM
Ofgem’s role
Chair Availability
Quoracy
Gemserve members
appointment
Communication
Agree Adhoc appointment
process
Consider membership ofgem/another party
Priorities on orderOf discussion
Factors
Minutes
ChecklistsRecording
Review timing
Resources
EBCC Operation
• Conflict of Interest• Minutes – We would get additional Resource to support• Quoracy – Would we still require 3?• Ofgem’s role – Ofgem have provided a contact for SCR• National Grid’s role – Awaiting NG to confirm contact
Bank Ratings
Current Position
• Since April 2014 whilst the Banking outlook has been stable, there have been political developments in particular to EU and US sanctions applied against Russia.
• This has affected an existing User and New User wishing to enter the market. Both of these have been discussed at previous EBCC meetings.
• In July 2014 Deutsch Bank were downgraded by Moody's from A2 to A3, 8 Users would have been affected however the aggregate level remained in the same banding.
• In November Rabobank Netherlands were also downgraded by Standard and Poor's from AA- to A+ affecting 4 Users who have been.
• The following chart provides a summary of customers exposures to each rating category.
FI Risk Profile
• 8% of all FIs currently providing Security have been subject to a downgrade change during the previous 6 months by Standard and Poors and Moody’s Ratings Agencies.
• Currently 80% of FIs are in the lowest categories of investment grade rating. This reflects an 1% increase from the last reported figures. This is in part due to a movement within the same rating band.
FI Ratings Sept' 2014 4%0%16%
44%
32%
4%
>AA+/Aa1
>AA/Aa2
>AA-/Aa3
>A+/A1
>A/A2
>A-/A3
Aggregate secured credit by rating band
£5,3
45,0
00
£114
,347
,000
£24,
550,
000 £5
5,71
2,00
0
£56,
580,
000
£3,5
00,0
00
£128
,442
,500
£101
,415
,000
£61,
845,
000
£50,
210,
000
£3,5
00,0
00£25,
605,
000
£91,
622,
000
£148
,853
,000
£99,
025,
000
£0 £3,5
00,0
00
£1,7
75,0
00
£135
,123
,000
£76,
854,
000
£128
,942
,000
£0 £0£0£0
£20,000,000
£40,000,000
£60,000,000
£80,000,000
£100,000,000
£120,000,000
£140,000,000
£160,000,000
A3/
A-
A2/
A
A1/
A+
Aa3
/AA-
Aa2
/AA
>Aa1
/AA+
Apr-13Sep-13Apr-14Sep-14
Spread of FI Exposure
£62,000,000£25,605,000
Current Outlook
• Moodys undertook a rating review in June 2014. Since this review no FI’s are on Watch with Moody’s.
• S&P we previously reported 58% which were on Negative outlook. Since having commenced a significant review across a large number of FIs, this has increased to 77% showing a negative outlook.
S&P
20%
80%
stable
negative
Deposit Deeds
• Value of credit secured via Deposit Deed and LOC – comparison between Sept’2012 to Sept’ 2014
£332
,941
,500
£21,
407,
000
£342
,394
,000
£30,
761,
250
£362
,385
,000
£33,
474,
000
£345
,462
,000
£36,
006,
500
£357
,905
,000
£38,
579,
000
£0£50,000,000
£100,000,000£150,000,000£200,000,000£250,000,000£300,000,000£350,000,000£400,000,000
Sep-12 Apr-13 Sep-13 Apr-14 Sep-14
LOC
Deposit Deed
Summary
• Whilst we have seen a slight increase in the overall value of security during the period Sept’ 12 to Sept’ 14, there is a consistent move to lower rated financial institutions within each rating category.
• We continue to monitor those FI’s which are currently on possible negative outlook with Standard & Poors
Review since April 2014 Update
Review since April 2014
• Cash Collection figures on rolling 12 month performance remain the highest over the past 5 years.
• Cash Collection Monthly figures 100% over the past 12 months on 11 occasions.
• Continued pro-active engagement with Users reaching 70% of indebtedness to minimise Cash Calls. Which has resulted in the lowest quantity of Cash Calls issued over the previous 5 years.
• No Terminations managed - No financial losses• Security Renewals 100%• Energy Balancing Credit Rules were revised 1st August 2014 to provide more
clarity in respect of the calculation for existing users Security Requirements whereby funds held in the Cash Call Account are excluded from the calculation of peak indebtedness over the previous 12 months.
• The Credit Team recently undertook training with the Institute of Credit Management with 100% pass rate.
Focus for 2013/14 addressed at April 2013 meeting
• From the meeting held in April 2014, the following key areas were identified to focus on :-
– Increase the profile of the committee– Emergency Credit Rules – Watching brief on EU Reform
• Members to review if there are any other significant areas that they would like the committee to focus on.
Focus for 2014/15 Update
EBCC Customer Satisfaction (Nov 13)
EBCC Customer Satisfaction (Nov13)
96.67%
96.67%
90.00%
100.00%
93.33%
100.00%
96.67%
90.00%
93.33%
93.33%
100.00%
90.00%
95.00%
84.00% 86.00% 88.00% 90.00% 92.00% 94.00% 96.00% 98.00% 100.00% 102.00%
Accountability
Customer Focused
Delivery of Commitments
Expertise
Flexibility
Professionalism
Partnership
Quality of Deliverables
Skill
Strategic Objectives
Trust
Value Added
Overall Average
EBCC Customer Satisfaction Year on Year Comparison
EBCC Customer Satisfaction Overall Average
85.00%
92.50%
93.33%
95.00%
80.00% 82.00% 84.00% 86.00% 88.00% 90.00% 92.00% 94.00% 96.00%
2010
2011
2012
2013
Nov-13Nov-12Nov-11Nov-10
Focus for 2014/15
• Carried forward from 2013
– Increase the profile of the committee– Significant Code Review– Watching brief on EU Reform
• Focus for 2014/15
– Gemini Consequential change (UK Link Replacement programme)– Feedback from Customer Satisfaction (November 2013)– Exploitation of synergies with Neutrality finance
• Members to review if there are any other significant areas that they would like the committee to focus on.
AOB
EU Third Energy Package
Update
Team Changes
• Effective From 1st December 2014
– Sarah Blewer will be moving to the Credit Risk Team to replace Loraine O’Shaughnessy for 12 months secondment.
• Effective from 1st January 2015– Loraine will be moving over to manage the Energy Balancing
Invoicing Team.– Sandra Dworkin will be the lead on EBCC – James Sweeney will be moving over to Operational Change to
support UK Link.
Risk Register
Update
Register Part 1
Risk Register as at 24/11/13 :
3
Pre Gemini IMS this used to stop PIMS jobs running – since introduction of Gemini IMS this has not happened – once in 5 years. Controls and monitors are now in place to ensure files are received.
APX Gas files containing system prices and trades arrives late.H3
Suggest move
from a 3 to a 5
Has happened in Dec 05 and also recently when during Oracle OS upgrade UAT it was found that accruals not included in a D-1 or D-2 recalculation – twice in last 6 to 7 years – once in 5 years. April 08 data was uploaded incorrectly. Recent issues identified on the 7th of March and 6th April following batch job issues.
Calculation for IMS is found to be incorrect.H2
Suggest move
from a 2 to a 3
Once in 10 years – to date Gemini over 2 years Gemini has had 1 short overnight outage. Also due to Oracle Software Upgrade, Gemini affected between 22nd and 25th October. Loss of Gemini on 14th and 15th May due to Server problems. GRP implementation planned 9th June.
loss of Gemini system - sustained loss for 1 working day or moreH1
Likelihood Likelihood - commentsRisk
Register Part 2
Risk Register as at 24/11/13 :
4
Moody’s are currently have a schedule to review all FI’s current rating in June 2012. Moody’s review of FIs completed over the summer of 2012, S&P now anticipate conducting their own review.
Due to the current European financial climate, there is a risk that the number of FI’s meeting the relevant criteria to provide security could reduce significantly. H10
Suggest move from 3
to 4
Due to SCR Mod 233 this was put on hold to await outcome of SCR consultations. Potential implementation of OFGEM SCR proposal has the potential to increase the likelihood and impact of this issue.
In the absence of being unable to adjust the ABI calculation the industry could be unduly exposed to avoidable financial debt. Should NGD be aware of more up to date information. H9
Likelihood Likelihood - commentsRisk
3This happened once on 13/03/07 – Once in 5 years. Controls in place that would receive notification from CVA.
User’s unable to provide CVA data due to the CVA system / website being downH8
Voluntary Discontinuance
AOB
• Questions/ Any further business?