Ahead of a wide ranging review of the retail Market Performance Framework, Ofwat has approved a package of priority changes to better incentivise trading party performance and behaviour, and improve data submission.
Two change proposals, CPW078 and CPM020, which Ofwat approved last week, seek to: enhance financial performance incentives; encourage better submission of meter reads and improve data quality; and ensure appropriate use of data submission channels.
The changes introduced include increasing the cap on charges trading parties incur for under performance against Market Performance Standards (MPS), and extending the time parameters for meter read submissions. Ofwat’s code change document explained: “Under the current MPF, the uncapped charges of trading parties have been far higher than their capped charges. This is largely due to the charges driven from MPS 18 [missed cyclical meter reads]. This has resulted in little incentive for trading parties, in particular retailers, to improve their performance in order to avoid additional charges.
“Additionally, trading parties have been charged for the late submission of meter reads but not penalised for meter reads that they take but that they do not subsequently submit into the central system. Finally the five day submission window has caused trading parties to submit estimates rather than actual reads. As estimates are likely to be less accurate than actual meter reads, this can have a negative impact on the quality of consumption data, which has been identified as a principal market friction. This change proposal seeks to improve incentive mechanisms in the market in order to address these issues.”
The changes come into force on 1 April. Ofwat said there will be a much larger impact on retailers than wholesalers, “primarily due to the significant volume of MPS 18 (Missed Cyclical Meter Reads) tasks and charges, as well as the number of Retailers currently exceeding the cap in most months”.