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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 Summary: of Change Proposal/Charging Change Proposal (no more than two sentences) Ofwat published the draft Guidance on Direction to Supply on 3 April 2016.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 Version 2 Page 1 of 7 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 Version 2 Page 2 of 7 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. ICP/WRC050 Version 2 Page 3 of 7 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 Version 2 Page 4 of 7 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 Page 5 of 7 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 Page 6 of 7 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 Version 2 Page 7 of 7