Current system regime – options for change

1. Current system regime – options for change Gareth Evans

2. Impacts of process • Shipper feel unable to rely on costs, so difficult to justify internally, except by scale. • Similarly long implementation lead times cannot be reconciled. • Business solution development hampered by apparent disconnect between public discussion and system development. • Process seen to be overly rigid at times, and slowing down industry change. • Excessive time spent debating appropriateness of cost allocation.

3. Impacts of process • User pays means shippers will pay for changes if progressed inside, or outside of the UNC. • Shippers have much greater control over costs and processes outside of the UNC as working outside of monopoly environment. • Resulted in movement of services to 3rd parties (NRPS, AUGE, AMR datahub), rather than with xoserve. • Risk of fossilisation of xoserve systems/processes. • Increase in complexity in governance (creation of 3rd party vehicles, increasing reliance on UNCC/Panel for oversight).

4. Principles for Change • Two guiding reasons why process felt to be inadequate: • Costs cannot be verified by Shippers. • Lack of oversight over xoserve activities means Shippers prefer alternative routes. • Two principles need to be furthered to improve framework: • Transparency • Rigour • Following are a series of possible options that would further these two principles.

5. Oversight Committee • Creation of committee to handle detailed change management activities. • Expect to be a working committee that would evaluate changes when raised and actively work to identify costs, in particular efficiencies. • Would have access to information so it can challenge solutions and build assumptions. • Composition (fixed or variable depending on change?) • Shippers • Transporters • Xoserve • Adds another layer to the change management process.

6. Board Structure Changes • Placement of Shipper representatives on xoserve’s board. • Can be executive or non-executive members. • Would expect to have same powers/responsibilities as other board members. • Gives Shippers access as well as a say in xoserve activities. • Does not alter xoserve day-to-day activities. • Would require changes outside of the UNC.

7. Tender of processes • Xoserve tenders for some/all services, as opposed to providing them internally . • Gives flexibility on service provision. • Brings commercial pressures to bear. • In itself does not increase transparency on process, would increase confidence that costs are efficiently incurred. • Would require licence changes.

8. Legal/complete Separation • Xoserve is legally/completely separated from transporters • Three ways of doing this. • Creation of wholly owned-transporter entity with separate board and framework (Elexon Model) • Creation of separate licence entity, appointed by tender by regulator (proposed DCC model). • Creation of organisation equally owned by all Transporter/Shipper licence holders (SPAA/MRA model). • Gives maximum transparency as ownership is effectively industry-wide. • Cannot be progressed in the UNC.