Category: Utility Supply

There are two elements to consider when defining your electricity contracting plan.

1. The form of trading, duration of contract or hedging window and purchasing strategy all impact on the commodity price achieved.
2. The supplier chosen and options defined for billing impact your non-commodity charges.

Historically a majority of manufacturers have placed fixed price contracts, for generally a short-term trading window.  Since market volatility increased these may not be the most advantageous approach to take.  A fixed price supply contract is based on suppliers assessing a suitable price on a single day of the year, then adding risk premium to cover them for potential market movement.  Many of these are placed in September for October start dates, which is typically a higher point in the market cycle – it’s very unlikely that a day in September turns out to have been the best day in the year to contract a price.

In the below graph, only 2017 and 2019 would have secured reasonable price if procured in September.  Ideally, you would have placed a long-term contract in May 2020, and extended in February 2024.  A good consultancy would have been pushing you to extend your contract horizon at those times, regardless of your purchasing method.  Contract duration should always be informed by the market and how good current pricing is!

There are a number of ways to go to market for electricity.  For small consumers, they are often stuck with fixed price, day priced contracts and can only vary duration.  Most manufacturers though, have the option to access the wholesale commodity market.  This opens up flexible contracting with a supplier – where you decide when to purchase and how much to purchase.  For some that sounds labour-intensive but you can put in place strategies and utilise a TPI to trade on your behalf based on rules you set that reflect your risk profile.  Historically many of these flexible contracts used a calendar-based trading system (a set % had to be purchased by a set date).  These worked well in a low volatility market, by averaging the cost across the year.  Now, the average is not a good price and they have typically been replaced by price and risk based trading strategies.

A footnote here to PPA procurement, which provides typically index-linked fixed pricing for a 10 year period via a complex and costly contracting arrangement.

Moving away from Commodity, the type of Non-Commodity charging is especially important for manufacturers.  With taxes and levies making up the majority of your electricity invoice, you shouldn’t just let the supplier dictate how you pay these without considering it.  Often when you go to market a supplier will suggest you fix your non-commodity charges.  It enables them and you to predict your costs simply with only your usage as a variable, and it removes a risk of rebilling for prior financial years, sounds great right?  It can be, if a charge increases it might save you from the impact of that for half a year.  But if things change dramatically, suppliers have the right to review these charges anyway, and for manufacturers there are reasons not to fix.

As large consumers you may have access to discounts on these charges, via some of the schemes we administer, and this is significantly harder to validate if your supplier has fixed your charges, or is not fully itemising them on your invoicing.  If you go to a supplier to implement Eii exemptions, and you have fixed all your charges, you have zero visibility of what they should be removing.  You also have zero way to validate that they have removed a suitable value from your costs.  For manufacturers, we recommend a pass-through style contract, and be aware that some suppliers have “pass-through” contracts which are only partially so.  You need to ask specifically for an example of the invoicing on the contract you are signing to be sure it is fully pass-through.

If you need support with your electricity contracting, our preference is to act as your advisor rather than an intermediary, but please do reach out to ask for our help!

In our previous article we gave you some information on what MPANs are and the MPAN Core which you will use mostly when referring to your electricity supplies.  Here, we’re going to give you some more detail on what we can learn about your site from the top row of your MPAN.

The top line has historically been broken into three segments:

• 00: a two-digit number that identifies the meter’s Profile Class, this was originally used to designate the approximate pattern of usage expected by the meter.
• 111: the middle segment displays the Meter Time Switch Code (MTC), which tells suppliers whether the supply is single-rate, day/night (Economy 7 or 10), or seasonal time of day.
• 222: this displays the Line Loss Factor Class (LLFC), which is used by the supplier to help calculate distribution and transmission charges.

MPANs have changed a little recently due to something called the Market-wide Half-Hourly Settlement (MHHS).  It moves all electricity meters to 30-minute settlement intervals.  The MHHS design removed the use of both Profile Classes (except for legacy non-smart meters) and MTCs.  The legacy 3-digit Meter Timeswitch Code (MTC) is replaced by the 4-digit Standard Settlement Configuration (SSC). The other fields keep their position and length; the 3-character LLFC keeps its value but is renamed the DUoS Tariff ID.

Now the top line remains broken into these new three segments, together these give the settlement class of the MPAN for billing to the supplier for the consumer’s usage:

• 00: a two digit number that typically will read 00 as most metering is now designated HH, however 02 and 04 profile classes have been retained.
• 1111: Standard Settlement Configuration (SSC). Non-half-hourly supplies are now being designated as HH and switched to smart metering.  NHH supplies however have four-digit codes called the Standard Settlement Configuration, which specifies the number of registers a meter has, and the times that each register is recording electricity usage.  This area of the MPAN will read 0000 for any MPANs where SSC Id is not applicable.
• 222: DUoS Tariff Id (DUoS), this is a direct replacement of the Line Loss Factor Class, and identifies the DUoS charge category applicable for the MPAN.

So from the MPAN top line, your consultant or supplier can identify what DUoS charges you should be receiving and whether your physical meter was HH coded or time switched non half-hourly.

A Meter Point Administration Number is a code which identifies your supply or export point.  It acts as an address for your electricity flow.  Although the name suggests that an MPAN refers to a particular meter, an MPAN can actually have several meters associated with it, or even no meters in the case of unmetered supplies.

The MPAN system was introduced in 1998 to aid creation of a competitive environment for electricity supply companies, and makes it easier for consumers to switch supplier as well as simplifying administration.  On your invoicing, it typically is presented in a layout similar to the below:

In most cases, you’ll only be working with your MPAN Core and discussing that.  The core is the final 13 digits of the MPAN, the bottom line, and uniquely identifies an exit point. It consists of:

• a two-digit Distributor ID,
• an eight-digit unique identifier,
• then two digits and a single check digit.

The two-digit Distributor ID is a code which tells us which DNO or IDNO your MPAN is supplied by.  District Network Operators initially formed out of regional electricity companies’ distribution arms.  There are fourteen of these with distinct operational regions as shown on the map below.  Independent Distribution Network Operators, these operate in the same market as DNOs but are not regionally-bound in their operation.  DNOs or IDNOs are responsible for allocating MPANs to supply point locations, they create your MPAN for you.

Distribution network operator – Wikipedia

The final digit in the MPAN is the check digit, and validates the previous 12 to ensure that the MPAN is valid using a modulus 11 test. The check digit is calculated thus:

1. Multiply the first digit by 3
2. Multiply the second digit by the next prime number (5)
3. Repeat this for each digit (missing 11 out on the list of prime numbers for the purposes of this algorithm)
4. Add up all these products
5. The check digit is modulo 11, modulo 10.

In our next article we will go into detail on what we can learn from the top row of your MPAN.