Elexon's Pricing Guide

  • Created by: ellieedf
  • Created on: 10-03-20 10:24

Why Does the T System Need to be Balanced?

  • Electricity cannot be stored
  • Suppliers may not always accurately predict demand
  • Generators may not always be able to tightly control generation (e.g. intermittent generation or plant tripping)
  • Problems can arise with transmission lines
  • The BSC does not require Parties to meet their contracts (althought they will be subject to imbalance charges)
  • The market trades in half an hour settlement periods but the system must be balanced every instant.
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PNs, Notifications and Gate Closure

Generators/Suppliers must submit PNs for each BMU to the SO for each settlement period. One hour before each settlement period is gate closure and the PNs are frozen to Final PNs.

Parties must also submit Energy Contract Volume Notifications (ECVNs) to the BSC Systems for each settlement period. The ECVNS notify the BSC Systems of Parties' contracted volumes and can be submitted up to the start of a settlement period (the submission deadline). 

We are the Energy Contract Volume Notification Agent (ECVNA) for the trades we do directly with EDFT and when we do balancing trades between the production and consumption accounts. 

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How Does the SO balance the T System?

Ideally the SO would choose the cheapest way to balance the system but the technical limitations of the Power Stations and of the Transmission System have to be taken into account.

The SO uses the:

  • Balancing Mechanism
  • Balancing Services and Adjustment Data (BSAD)
  • Ancillary and Commercial Services - reactive power, frequency response, black start, reserve services.

BM operates after Gate Closure whereas BSAD can be taken at any point. 

We do not normally consider the ancillary services when we calculate energy imbalance prices as they are 'system balancing'.

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The BM - bid and offer pairs

The BM operates after gate closure to real time and is managed by the SO. 

An offer is a proposal to increase generation/reduce demand.

A bid is a propsal to reduce generation/increase demand.

For each BM unit, a Party can submit up to ten Bid-Offer Pairs.

A bid-offer pair includes:

  • An offer price (£/Mwh)
  • A bid price (£/Mwh)
  • The Settlement Period for which the bid/offer applies
  • The upper and lower power levels between which the Bid/Offer applies (for example, Bid-Offer +1 applies from FPN to 50MW above the FPN, Bid-Offer +2 applies from 50MW above the FPN to 100MW above the FPN).

Bids and Offers are submitted in pairs because this provides an undo mechanism for Acceptances.

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The BM - bid and offer pairs

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The BM - Bid Offer Acceptances (BOA)

For each BOA, the SO contacts the BMU directly and instructs it to deviate from its FPN via a set of 'spot points'. Each spot point represents the change in output away from FPN at a particular time.

For example

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The BM - Short Term Operating Reserve (STOR)

The SO can enter into contracts with providers of balancing capacity to deliver when called upon. The SO procures STOR ahead of time via a competitive tender process.

Under STOR contracts, availability payments are made to the balancing service provider in return for the capacity being made available to the SO during specific times (STOR availability windows). When STOR is called upon, the SO pays for it at a pre-agreed price (its Utilisation Price). Some STOR is dispatched in the BM (BM STOR) while some is dispatched seperately (Non-BM STOR).

Because the Utilisation Price has been pre-agreed (sometimes months before), it might be very different than the price the SO may have paid has it called upon a regular BM action. Therefore, Utilisation Prices may not reflect the prevailing market prices at the time of use. To correct this, we use a pricing mechanism to determine a Reserve Scarcity Price (RSVP) and a process that means units will get paid the better of the RSVP or their utilisation price.

RSVP = LOLP x VoLL (currently £6000/MWh)

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The BM - Demand Control

The SO can use Demand Control actions as a last resort to balance the system, in the rare event that there is insufficient capacity in the market to meet demand. 

It will issue a Demand Control Insruction, this instructs the Distribution Network Operators to reduce demand on their Distribution Systems, either through reducing voltage and/or disconnecting consumers.

If they are used they will be included in the imbalance price calculation at a price of Value of Lost Load (VoLL - currently at £6000/MWh).

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Balancing Services Adjustment Data (BSAD)

Balancing actions taken outside of the BM are submitted to the BSC Systems as BSAD.

BSAD is split into two components:

  • Balancing Services Adjustment Actions (BSAA) - forward contracts (energy related products, pre-gate closure balancing transactions (PGBTs), system to system services), maximum generation, system to generator operational intertripping, emergency de-energisation instructions, Demand Side Balancing Reserve and Non-BM STOR.
  • Buy Price Price Adjustment (BPA) / Sell Price Price Adjustment (SPA) - The BPA is added when the net imbalance of the Transmission System is short. The SPA is added when the net imbalance of the Transmission System is long. The BPA/SPA is a reflection of the costs to the SO of regulating reserve and BM start-up. It does not have a volume. It simply adjusts the volume-weighted average price.
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Imbalance Prices

There are two energy imbalance prices:

  • System Buy Price (SBP)
  • System Sell Price (SSP)

However there is a single price calculation - so SBP will equal SSP in each settlement period.


If a Party has under(over)-generated compared to its contracted volume, it will have to buy the shortfall of energy at SBP (SSP).

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What Do We Use to Calculate the Imbalance Price?

  • Submitting balancing actions
  • Determining the STOR action price
  • System Operator Flagging (SO-Flagging)
  • Emergency Instruction Flagging
  • Continuous Acceptance Duration Limit (CADL) Flagging
  • Ranked Sets
  • De Minimis Tagging
  • Arbitrage Tagging
  • Classification
  • NIV Tagging
  • Replacement Price
  • PAR Tagging
  • Transmission Loss Multiplier
  • Final Energy imbalance price calculation
  • Default rules
  • Actions not included in the calculation of the energy imbalance price.
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How are balancing actions submitted?

Each settlement period, the SO sends the following balancing data the the BSC Systems:

  • The FPNs submitted by Parties for their BMUs.
  • The Bid-Offer Data submitted by Parties for the BMUs.
  • Bid-Offer Acceptance data
  • BSAD - BSAA and then BPA/SPA. Where the SO takes a balancing action outside the Balancing Mechanism, it submits it to the BSC Systems as a BSAA. Each BSAA has a: cost, volume, SO-Flag (either set to True or False) and a STOR Provider Flag (either set to True or False). Once BSC Systems recieve the BSAA, they convert the cost to a Price by dividing the cost by the volume:
  • /
  • /
  • /
  • /
  • Demand Control Instructions
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Determining STOR Action Prices

To stop the use of STOR affecting the imbalace pricing, we use a pricing mechanism to calculate the RSVP. The RSVP is designed to respond to capacity margins so that it rises as the system gets tighter. 


LoLP = a value between 0 and 1 that represents a measure of scarcity in available generation capacity

All actions from STOR providers are included in the calculation of Imbalance Prices but if the STOR action was taken during a STOR availablity window it could be re-priced.

STOR actions taken during the STOR availability windows are included in the calculation of imbalance prices as individual actions, with a price which greater of the utilisation price or the RSVP price.

Re-priced STOR actions are then treated like other BOAs for the next steps. Actions from outside the STOR availability window are not re-priced.

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Determining STOR Action Prices - Example

In the following example, the De-Rated Margin at Gate Closure is 1,238MW. This corresponded to a LOLP of 0.0334. this produces an RSVP of £200.40 £/MWh (0.0334*£6000). As these actions took place during a STOR Availability Window, they are re-priced where the RSVP is greater than the utilisation price.

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System Operator Flagging (SO- Flagging)

SO-Flagging is the process that identifies BOAs and BSAAs that are potentially taken for system balancing reasons.

For BOAs the SO flags when it believes the BOA may be impacted by a transmission constraint.

For BSAAs, the SO flags when:1) it believes the balancing aciton was impacted by a transmission constraint, 2) any balancing service over an interconnector which is used to avoid adverse effects arising on the GB transmission service or 3) any balancing service over an interconnector which is used by another country's SO to resolve a system operation issue.

An SO-Flagged balancing action is a First Stage Flagged balancing action.

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Emergency Flagging

The SO issues Emergency Instructions to Power Stations in circumstances when there is a specific requirement to isolate a unit. E.g. a fire or a breakdown of a piece of Transmission System equipment

Emergency Instructions are inserted into the energy imbalance price calculations as BOAs. The SO is able to flag the Emergency Instructions if it was issued for system balancing reasons. This is called 'Emergency Flagged'. It is a First Stage Flagged balancing action.

An unflagged Emergency Instruction is called an 'Emergency Acceptance'. 

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Continuous Acceptance Duration Limit Flagging

The SO may need to accept short-duration actions to cater for sudden increase/decrease in generation or demand. These actions are potentially system balancing because they are taken in order to balance the transmission system in real time and may not be required to balance the energy over the half hour settlement period.

CADL is a time limit for BOAs. CADL is currently equal to 10 minutes as of the 1st April 2019 where it was reduced from 15 minutes.

If a BOA is part of a series of acceptances on the same BMU which is less than the CADL it will be flagged. A CADL Flagged BOA is a First Stage Flagged action.

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Ranked Sets

Once the BSC Systems have recieved all the balancing actions, they are ranked in price order in two seperate Ranked Sets.

  • The Sell Ranked Set includes all the sell balancing actions which reduce generation/increase demand.
  • The Buy Ranked Set includes all the buy balancing actions which increase generation/decrease demand.

The cheapest balancing action for the SO is ranked first and the most expensive balancing action for the SO is ranked last.

  • For a buy balancing action, the higher the price the more expensive the action.
  • For a sell balancing action, the lower the price the more expensive the action. This is because the price is what a Party will pay per MWh to reduce their generation.
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Ranked Sets - Example

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De Minimis Tagging

De Minimis Tagging removes all balancing actions (BOAs and BSAAs) with a volume less than the De Minimis Acceptance Threshold (DMAT). 

DMAT = 0.1MWh

It removes potentially 'false' actions created due to the finite accuracy of the systems used to calculate Bid and Offer volumes. 

Example - the 0.01Mwh Offer is removed by De Minimis Tagging.

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Abitrage Tagging

Abitrage occurs when the price of a buy balancing action (an offer or a buy BSAA) is either the same price or lower than the price of a sell balancing action (a bid or a sell BSAA).

It is considered arbitrage because the SO can purchase the buy balancing action in the same instant it sells the sell balancing action and make immediate profit for no change of energy.

In cases of arbitrage, equivilant volumes of sell balancing actions and buy balancing actions are excluded from the energy imbalance price calculation.

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Classification determines which first stage flagged balancing actions retain their price and which become unpriced - the main way that the BSC Systems decide if a balancing action is an energy balancing action or system balancing action.

Before classification, a balancing action will either be a:

  • First Stage Unflagged balancing action - an energy balancing action; or
  • First Stage Flagged balancing action - a potentially system balancing action

During classification, each First Stage Flagged balancing action is compared to the most expensive First Stage Unflagged balancing action in the same ranked set.

  • If a First Stage flagged balancing action has a more expensive price than the most expensive First Stage Unflagged balancing action it is considered a system balancing action and so becomes unpriced.
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Classification - Example

The 10MWh buy balancing action retains its price of £40/MWh as it is less expensive than the most expensive Unflagged balancing action (the £120/MWh). The 30MWh sell blanacing action priced at £7/MWh also retains its price. All other First stage Flagged balancing actions become unpriced.

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Following classification, a balancing action will either be a:

  • Second Stage Unflagged balancing action - an energy balancing action which keeps its original price; or
  • Second Stage Flagged balancing action - a system balancing action which becomes unpriced
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NIV Tagging

Nets off the Buy and Sell Ranked Sets. The most expensive balancing actions are netted off first and are referred to as NIV Tagged. The NIV Tagging will leave either a net volume of Buy balancing actions or Sell balancing actions. This is the NIV for a settlement period.

When the Transmission System is short, and the SO balances the system by accepting a greater volume of buy balancing actions than sell balancing actions, the NIV will be positive.

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NIV Tagging - Example

The Sell Ranked Set is NIV Tagged along with the unpriced 35MWh BSAA and 10MWh of the unpriced 30MWh Offer.

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Replacement Price

There are situations where not all of the volume of the NIV is priced - it must be assigned a Replacement Price.

The Replacement Price is calculated from a volume-weighted average of the most expensively priced 1MWh of unflagged actions. This is the Replacement Price Average Reference Volume (RPAR)

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Replacement Price - Example

The unpriced 20MWh Offer requires a Replacement Price. We use the most expensive 1MWh of priced balancing actions. The Replacement Price is £120/MWh.

Once the Replacement Price has been assigned, the NIV stack may have to be re-ranked to keep the actions in the price order.

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Price Average Reference Volume (PAR) Tagging

The energy imbalance price is calculated based on the volume-weighted average of a defined volume of the most expensive actions remaining. This defined volume is the Price Average Reference Volume (PAR) and is 1MWh. PAR Tagging is applied such that:

  • Where the system is short, the imbalance price is calculated as a volume-weighted average of not more than 1MWh of the most expensive actions in the NIV (up to 1 MWh of the highest priced buy balancing actions)
  • Where the system is long, the imbalance price is calculated as a volume-weighted average of not more than 1MWh of the most expensive actions in the NIV (up to 1MWh of the lowest priced sell balancing actions)

The purpose of the PAR Tagging mechanism is to more closely align the energy imbalance price with the price of the marginal energy balancing action.

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(PAR) Tagging - Example

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The other part of BSAD used for the energy imbalance price calculation is the BPA/SPA.

The BPA is used when the Transmission system is short (and the NIV is positive)

The SPA is used when the Transmission system is long (and the NIV negative)

The BPA is a reflection of the costs to the SO of regulating reserve and BM start-up. The SPA is made up of option fees for negative reserve and forward contracts.

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Transmission Loss Multipliers (TLMs)

Transmission losses - when some energy is lost over the transmission system. Worked out by the difference between the total metered generation and total metered consumption.

For each settement period there are two TLMs calculated for each Zone, a Delivering TLM and an Offtaking TLM. The Delivering TLM applies to all non interconnector BMUs that are part of a Delivering Trading Unit (net exporter). This scales down the metered volumes. The Offtaking TLM applied to all non interconnector BMUs that are part of an Offtaking Trading Unit (net importer). This scales up the consumption of these units. 

14 zones in total:

  • a GSP group
  • any part of an offshore transmission system which connects directly to that GSP Group
  • any part of an offshore transmission system which connects to the onshore AC transmission system within the GSP Group.

The BOAs used to calculate the energy imbalance price are adjusted for transmission losses.

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Final Energy Imbalaance Price Calculation

We take a volume-weighted average of the balancing actions, adjust them for transmission losses and add on the BPA/SPA. 

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Default Rules

What happens when there is not enough priced volume?

Replacement Price - When there is no priced volume in the RPAR volume, the replacement price will be calculated using the Market Price

NIV - Where there are no actions left in the NIV, the energy imbalance price is set to the Market Price.

PAR - Where the volume of priced (and re-priced) balancing actions is less than the PAR volume, the energy imbalance price will be a volume-weighted average of the priced system actions (whatever the volumes)

LOLP and the RSVP - If the SO doesnt have a Gate Closure De-rated Margin Value to produce a Final LoLP Value, then it uses the next available De-rated Margin Value (e.g. two hours ahead forecast) to calculare a Final LoLP Value. Where there is no De-rated Margin Value available to produce a Final LoLP Value, then LoLP will be null. This means that RSVP will be nil.

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Actions Not Included

Applicable Balancing Services Volume Adjustment Data (ABSVD)

Volume adjustments to BMUs that are instructed by the SO to provide automatic frequency reponse and other non-BM balancing actions which are not accounted for elsewhere. These volumes are identified post-event by the SO using a set of matrices of frequency response for each individual BMU that provides the service. The volume calculated is removed from the Party's Energy Account and entered into the SO account.

ABSVAD is not included in the calculation of the energy imbalance price, as it is currently not possible to calculate the volume adjustments within the timescales for reporting the energy imbalance price (15 mins after the end of the settlement period).

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