P498 Balancing and Settlement Code (BSC) changes

Details of outcome

We have decided to approve changes proposed via Balancing and Settlement Code modification P498. The changes will mitigate the impact of exempt suppliers transitioning from an interim process to an enduring solution by allowing Exempt Supply Notification Agents (ESNAs) to submit data for settlement periods prior to the ESNAs’ qualification becoming effective. 

Start date

Following Ofgem’s decision, Elexon will release an updated version of the BSC – the changes will take effect 10 working days after this release. 

Code modification description

BSC P498 introduces changes to mitigate unforeseen implications of industry transitioning from an interim process to an enduring system. While the vast majority of consumers are served by licensed suppliers, some get their supply from entities that don’t have to hold a licence: licence-exempt suppliers. These suppliers don’t pay levies to fund government programmes (such as Contracts for Difference and Capacity Mechanism), but the settlement system can’t tell the difference between licensed and licence-exempt supply volumes. BSC P442 was approved in May 2024, introducing new procedures and a new Exempt Supply Notification Agent (ESNA) function to ensure relevant volumes are efficiently identified and costs correctly allocated.

P498 was raised by Energis Electricity Ltd on 21 August, asking that the modification being treated as “urgent” (Ofgem agreed to this urgency request). Energis was concerned that the planned closure of the interim reporting process (from 1 January 2026) in the absence of a competitive market for ESNA services, would be detrimental to schemes operating under the interim mechanism. P498 proposed to allow qualified ESNAs to submit data for settlement prior to their qualification becoming effective, allowing time for more ESNAs to enter the market and compete for service delivery. The modification also proposed to remove the requirement for schemes approved under the interim process to migrate to the enduring P442 process, instead allowing these to continue until the relevant contracts naturally expire.

While the industry Workgroup agreed that change was needed to enable more choice in ESNA service provision, there was disagreement that the interim and enduring processes should co-exist indefinitely. Instead, an alternative proposal was raised that maintains the temporary nature of the interim process, allowing the BSC Panel to review competition in the ESNA market and determine when conditions are satisfactory to close the interim facility.