Performance Assurance Committee to oversee reformed Market Performance Framework

Ofwat has approved the first in a series of planned changes to reform the Market Performance Framework (MPF) – the mechanisms designed to monitor, govern and incentivise trading parties to deliver their obligations in the non-household retail market.

CPM058a and CPW149a, which will be implemented on 26 June, establish new governance arrangements for the MPF, including the creation of a new Performance Assurance Committee (PAC) to replace the existing Market Performance Committee. The PAC’s composition, quoracy and voting rules will boost independent/customer representation. It will consist of an independent chair, two independent members, a CCW representative, three retailer members and three wholesaler members.

Other changes in CPM058a and CPW149a included: 

• A more flexible approach to reviewing the MPF – enabling more timely and targeted change.

• Changes in the approach to reviewing market performance. The current annual Market Performance Report (reporting on the previous year) and Market Performance Operating Plan (for the upcoming year) will be replaced by:

- Market Performance Review Report – providing a retrospective review of the MPF in the relevant period, and recommendations to modify existing, or introduce new, incentives. It will be published by MOSL with input from the PAC at least every five years, or on request by the Strategic Panel. 

- Risk and issues tracker – produced by MOSL on an annual basis. 

- Statement of approach – this will outline the scale and use of market performance intervention tools for the following year. It will be produced by MOSL with input from the PAC on an annual basis.

• Making MOSL subject to an external annual audit by a third party – the Market Operator Auditor. 

• Outgoing retailers will automatically be notified of any alterations to transfer reads by the incoming retailer when a business customer switches, under a code change accepted by Ofwat.

CPW148, which will be implemented on 6 December, will see transfer reads updated in CMOS and notifications automatically sent to the outgoing retailer to inform them of the change. This currently does not happen, and can lead to inaccurate final bills for customers.

Ofwat also suggested the Metering Committee may wish to investigate why so many transfer reads currently need to be replaced as these should be right first time.