Cash out arrangements

Under the current electricity market arrangements in Britain, if a market participant generates or consumes more or less electricity than they have contracted for, they are exposed to the imbalance price, or ‘cash-out’, for the difference.

As cash-out directly affects the incentives on the electricity market participants to invest in secure supplies, the arrangements are central to the delivery of a secure and competitive electricity market.

We have expressed concerns about problems with cash-out prices. We have suggested that this could lead to future electricity security of supply being undervalued and could unnecessarily increase the costs of balancing the system.

To address these concerns, we have launched the Electricity Balancing Significant Code Review (EBSCR) to look at the current cash-out arrangements. The process allows us to complete a holistic review of the cash-out arrangement and consider the need for reform to these arrangements.

At the core of this review is the aim to provide incentives for sufficient investment in capacity to ensure an efficient level of security of supply. In order to achieve this we are working to improve price signals, to make them more reflective of the costs of balancing, and to incentivise participants to balance and improve overall efficiency of the balancing arrangements.

Publications and updates

  • Published: 20th Dec 2007
  • Open letters and correspondence
  • 1 Associated documents
This is an open letter from Ofgem to Elexon requesting views on the likely implementation timescale for P217, in particular on whether there is scope to shorten the process, and noting the linkages with P211 and P212.

  • Published: 20th Dec 2007
  • Closed: 31st Jan 2008
  • Consultations and responses
  • 1 Associated documents
This document presents Ofgem's Impact Assessment for Proposed Modifications P211 and P212 for consultation. Both modifications seek to remove potential distortions in the cash-out arrangements by amending the calculation of energy imbalance prices.

  • Published: 5th Oct 2007
  • Agendas, minutes and presentations
  • 1 Associated documents
This memo summarises the open sessions discussions at the industry Cash-out Review Meeting organised by Ofgem on 26 September 2007.

  • Published: 5th Oct 2007
  • Agendas, minutes and presentations
  • 1 Associated documents
Cash-out Review Meeting 2 - Presentation.

  • Published: 5th Oct 2007
  • Agendas, minutes and presentations
  • 1 Associated documents
Cash-out Review Meeting 2 - Ofgem Balancing Market.

  • Published: 4th Apr 2007
  • Agendas, minutes and presentations
  • 4 Associated documents
Cash-Out Review, Industry Meeting, 30 March 2007 Meeting Note.

  • Published: 22nd Mar 2007
  • Closed: 22nd Mar 2007
  • Consultations and responses
  • 1 Associated documents
On 8th February, Ofgem presented to the BSC Panel its proposed programme for taking forward a review of the electricity cash out arrangements.

  • Published: 20th Oct 2006
  • Other
  • 1 Associated documents
See this decision and notice letter issued on 20 October 2006, approving P205.

  • Published: 23rd Mar 2006
  • Other
  • 1 Associated documents
amend the main energy imbalance price such that only a predefined volume of balancing actions will contribute to the calculation of a volume weighted imbalance price. Ofgem issued this decision letter on 23 March 2006, approving P194.

Pages