Download ICP_WRC050 Direction to Supply

WHOLESALE-RETAIL CODE CHANGE PROPOSAL/
CHARGING CHANGE PROPOSAL
For use by the Interim Code Panel
Change Proposal Reference
(To be completed by the Interim Code
Panel Secretary)
ICP/WRC050
Version No
2
Change Proposal
Submission:
(delete as appropriate)
Charging Change Proposal
Title:
of Change Proposal/Charging Change
Proposal
Alignment with Direction to Supply Guidance and
Ofwat’s policy for Direction to Supply.
Summary:
of Change Proposal/Charging Change
Proposal
(no more than two sentences)
Ofwat published the draft Guidance on Direction to
Supply on 3 April 2016. Consequential
amendments are required to the WRC to ensure
full alignment between the Guidance and Ofwat’s
policy decision.
Status of the Change Proposal/Charging Change Proposal
(To be completed by the Interim Code Panel Secretary)
First Time Published
(X 06.09.16)
ICP - Assessment
(X 04.10.16)
ICP - Rejected
ICP - Consultation
OFWAT - Further Information
required
OFWAT - Approved
ICP - Recommendation
OFWAT - Rejected
ICP - Further Information
Required
Approved and Implemented in
Code
General Details of the Proposer
Name of Proposer
John Kennedy (Ofwat)
Capacity (for Change Proposals – on
behalf of a Party, as an Interim Code
Panel member, as the customer
On behalf of the Authority.
representative or on behalf of MOSL or
the Authority; for Charging Change
Proposals – on behalf of a Wholesaler).
Contact Email;
Tel/Mob.
The Proposer recommends that this
Change Proposal/Charging Change
Proposal should:
0121 644 7598
Proceed to Assessment
Proceed to Consultation
(delete as appropriate)
Proceed to Recommendation
ICP/WRC050
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Rationale for recommendation and any
reason for urgency
Related Documents
Reference of any associated Interim
Code Panel Change Proposal/
Charging Change Proposal
N/A
Draft Direction to Supply Guidance, version 1
published by Ofwat on 3 August 2016.
Documents Accompanying Form
Code drafting:
 Part 4 - Market Terms
 Part 1 – Objectives, Principles and
Definitions
 Part 5 - CSD 0005
 Part 5 – CSD 0006
 Part 5 – CSD 0101
Change Proposal/ Charging Change Proposal Details
Description of (i) The enhancement, issue or defect which this Change Proposal seeks to
address, or (ii) the modified or new charging method or charging structure required
pursuant to this Charging Change Proposal, as required under the Draft Market
Arrangements Code Section 6.2.1(b).
The retail market will open to competition in April 2017 for retail services for business, charity and
public sector customers. Currently customers can usually secure a supply through their
undertaker. However, undertakers will be allowed to exit the retail market, with the approval of
the Secretary of State when the new market opens. As such, an exit will prevent undertakers
from providing retail services, therefore arrangements will need to be put in place so that
business, charity and public sector customers can always secure a supply in an area affected by
retail exit. These are often referred to as Supplier of the First Resort arrangements. Although it is
expected that in most cases, eligible customers will choose their own retailer in the competitive
market, there may be instances where this is not the case. Where this happens, Ofwat will be
required to direct a retailer to supply the customer.
There are two scenarios, where customers will be required to be allocated to a supplier:
1. New customers in an Exit area who do not choose a supplier, including Gap sites; and
2. Transferred customers who have moved away from a Scheme of Terms and Conditions
and seek a direction from Ofwat.
There is also a requirement for Ofwat to maintain a pool of eligible suppliers and issue Guidance
for the Direction to Supply.
It is proposed that customers are allocated on a sequential basis from a list of eligible suppliers.
This may involve discretion in some limited circumstances e.g. when the next licensee on the list
is only authorised to supply water only but the customer needs water supply and sewerage
services and so the allocation will go to the next licensee on the list who can offer both services.
ICP/WRC050
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The draft Direction to Supply Guidance describes:

how holders of water supply and/or sewerage licences (‘WSSL licensees’) other than
Acquiring licensees can participate in the Direction to Supply arrangements by becoming
part of a list of licensees eligible for this purpose (referred to here as the SoFR Pool).

how WSSL licensees, including Acquiring licensees who are not self-supply licensees,
can be removed from the SoFR Pool.

the approach to allocating licensees to customers.
The WRC will include rules and processes that are a key component of the overall Direction to
Supply arrangements and there are important interactions between the WRC and the Direction to
Supply Guidance. These include:

In order to be an Opted In Retailer for the purposes of the Direction to Supply Allocation
Process, a Retailer must notify the Authority that it wishes to be an Opted In Retailer in
relation to either or both Water Services and Sewerage Services. A template for the
notification is contained in Appendix 1. The Retailer must also notify the Market Operator
that it wishes to be an Opted In Retailer in relation to either or both Water Services and
Sewerage Services, at the same time. The appropriate form of notification to the Market
Operator will be set out in the Wholesale Retail Code;

The Market Operator may temporarily remove a Retailer from the Direction to Supply
Allocation Process if less than eighty percent of the Supply Points allocated to any
Retailer by way of the Direction to Supply Allocation Process in that period have been
made Tradable, in accordance with CSD 0101 (Registration: New Supply Points) of the
Wholesale-Retail Code. The Retailer shall not be allocated any supply points until such
time as the temporary removal is lifted.

In the event that the Market Operator is notified that the Wholesaler has informed an
Opted In Retailer that it may not submit any more Transfer Registration Applications in
respect of any Supply Points in the Contracting Wholesaler’s Area or request any more
New Supply Points in the Contracting Wholesaler’s Area, the Market Operator shall
remove the Retailer from the List of Opted In Retailers by Area for the purposes of the
Direction to Supply Allocation Process in respect of the relevant Area and from the date
notified by the Wholesaler in its notice to the Market Operator.

The Market Operator shall maintain the List of Opted In Retailers by Area according to
the following principles.
(a) Where an Opted In Retailer is removed or temporarily suspended from a sublist, the relative positioning of the remaining Opted In Retailers shall be
unaffected.
(b) Where an Opted In Retailer is added to a sub-list then that Retailer shall be
placed into the existing sub-list in a randomly allotted position.

On receipt of a request from either Undertaker or the customer, the Market Operator shall
allocate each Direction to Supply ‘Supply Point’ on a sequential basis in accordance with
the relevant sub-list of Opted in Retailers subject to the proviso that where a Water
Services Supply Point and an associated Sewerage Services Supply Point exist at an
Eligible Premises, they shall, so far as practical, be allocated to one Opted in Retailer.
This should be done as soon as practicable.
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
The Market Operator will confirm with the Authority the outcome of the allocation process.
If the Authority does not object after a 5 day period, the Market Operator will then inform
the relevant Retailer of the outcome. The Retailer will then in turn notify the customer.

the Direction to Supply Guidance uses a number of defined terms found within the
relevant legislation and within Part 1 of the WRC (“Objectives Definitions and Principles”).
It is important to ensure consistent use of terminology between the Guidance and WRC.
In view of the above interdependencies, this CP identifies a number of amendments to ensure
that the WRC fully reflects the requirements of the Direction to Supply Arrangements and related
Ofwat policy decisions.
Description of the Change Proposal/ Charging Change Proposal, its nature and purpose
and (for Change Proposals only) how it is consistent with the Principles and falls within
the Objectives noted below, as required under the Draft Market Arrangements Code
Section 6.2.1(c).
General (Market Terms and CSD 0005)
All references to Gap Site Allocation Process should be removed and replaced with Direction to
Supply Allocation Process. Certain references to gap sites require to be removed and a broader
reference to direction to supply inserted as well as or in replacement of Gap Sites.
Remove Direction to Supply Allocation Methodology definition in CSD 0005.
Opt-in / Opt-out Processes (Market Terms and CSD 0005)
Under the proposed Direction to Supply arrangements a non-Acquiring licensee can Opt-In. A
non-Acquiring licensee shall be entitled to exercise its voluntary opt-in right at any time.
The non-Acquiring licensee must notify the MO that it wishes to be an Opted In Retailer in
relation to either or both Water Services and Sewerage Services. This would be in accordance
with CSD 0006 (Trading Party Administration and Notification Processes).
Provisions effecting the above points are included.
An obligation should be added on the MO to provide a list of all opted-in retailers to the Authority
upon request and upon any updates.
An additional section has been inserted regarding how an Opted-In Retailer can opt out.
Terminology has been aligned to that used with Direction to Supply Guidance.
Changes to Opted In Retailer status within a Year (Market Terms and CSD 0005)
Section 2.3.7 should be retained. Added New Section 2.3.7-2.3.10 in CSD 0005 to address the
process for opting out.
Temporary suspension (Market Terms and CSD 0005)
No Change required, except for removal of the term gap site and replacement with Direction to
Supply arrangements.
List of Opted In Retailers by Area for Gap Sites (CSD 0005)
ICP/WRC050
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Remove Section 2.5.1. Section 2.5.1 is fit for purpose, except for deletion of the term gap site
and replacement with Direction to Supply arrangements.
Gap Site Allocation Methodology (CSD 0005)
This has been re-titled as the Direction to Supply Allocation Process.
Gap Site Allocation Process (CSD 0005)
Provisions added to oblige the Market Operator to:
 Provide notification to the Authority setting out the outcome of the allocation process.
 If the Authority does not object after a 5 day period, the MO will then inform the relevant
Retailer of the outcome.
 Register Supply Points
Wholesale-retail code part 6: forms associated with the operational terms
Relevant sections cross-referenced to Appendix 2 containing the forms
CSD 0006 and CSD 0101
These CSDs have minor cross-referencing amendments as they refer to CSD 0005.
Principles and Objectives
Principles
Affected (Y/N)
Efficiency
Y
Proportionality
Y
Transparency
N
Simplicity, cost-effectiveness
and security
N
Barriers to entry
N
Non- discrimination
N
Customer participation
Y
Customer contact
N
Seamless markets
N
ICP/WRC050
Version 2
Description
Avoids duplication of
processes across Direction to
Supply Guidance and WRC
Required to ensure alignment
with wider regulatory
framework
Direction to Supply
Arrangements are an
important customer protection
measure
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No limit on upstream
competition
N
Business Terms Objectives
N
Operational Terms Objectives
N
Market Terms Objectives
N
Description of the impact of the Change Proposal/ Charging Change Proposal on the
following items, as required under the Draft Market Arrangements Code Sections
6.2.1(e), (f) and (g).
Configured Item
Impacted (Y/N)
Description
Wholesale-Retail Code, Part 1
(Objectives, Definitions and
Principles)
Y
Update defined terms to align
with Direction to Supply
Wholesale-Retail Code, Part 2
(Business Terms)
N
Wholesale-Retail Code, Part 3
(Operational Terms)
Y
Wholesale-Retail Code, Part 4
(Market Terms)
Y
Wholesale-Retail Code, Part 5
(CSDs)
Y
Wholesale-Retail Code, Part 6
(Operational Forms)
N
Appointment
N
Licence
N
Any other industry code,
agreement or document (e.g.
the Wholesale Contract or the
MOSL Articles) (please specify)
N
Central System
N
Trading Party systems which
interface with Central Systems
and other relevant Trading
Y
ICP/WRC050
Version 2
Remove references to gap
sites and replace with
Direction to Supply as
applicable
CSD 0005
CSD 0006
CSD 0101
Some possible system
impacts to align with
Outstanding service requests
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Party systems/ business
processes.
Scottish Core Industry
Documents
N
Impact Assessment
General Comment
Pre-go live, consideration of the
timing of adoption and
implementation of the change
may be relevant.
All changes must be effective prior to market opening
Cost/Benefit Estimate
Financial Benefit Estimate
(Low: < £10K, Medium: £10K
To £100K, High: > £100K)
Medium - £10K To £100K
Description of any discussions on the topic of the Change Proposal/ Charging Change
Proposal at the User Forum (as relevant) or otherwise relevant discussions with parties,
as required under the Market Arrangements Code Section 6.2.1(h).
Further Comments
ICP/WRC050
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