About electricity settlement reform
Settlement reconciles differences between a supplier’s contractual purchases of electricity and the demand of its customers. Generators and suppliers trade electricity in the wholesale market in half-hourly periods. Currently, most customers are settled on a ‘non-half-hourly’ basis using estimates of when they use electricity, based on a profile of the average consumer usage and their own meter reads (taken over weeks and months).
Smart meters can record the amount of energy consumed or exported within every half hour of the day. This provides an opportunity to make the settlement process more accurate and timely, and act as an enabler for new products and services, for example supporting use of electric vehicles or making use of smart appliances. These can deliver positive outcomes for consumers through lower bills, reduced environmental impacts, enhanced security of supply and a better quality of service.
Market-wide settlement reform is a key enabler of the move to a smarter, more flexible energy system and has a fundamental role in delivering the smart systems and flexibility plan. Our analysis predicts that market-wide half-hourly settlement (MHHS) will bring net benefits for consumers in GB of between £1.6bn and £4.5bn over the period 2021-2045.
Suppliers can already choose to settle consumers half-hourly through our elective half-hourly settlement work.