Decision on changes to reduce Collateral Requirements in the Balancing Market

04 July 2022

Decision on changes to reduce Collateral Requirements in the Balancing Market

The SEM Committee is today, 04 July 2022, publishing a decision paper on changes to reduce collateral requirements in the balancing market.

The relevant consultation paper (SEM-22-024) was published on 25 May 2022 and the consultation period ended on 08 June 2022. There were fourteen responses to the consultation and these are published alongside the decision paper.

The collateral requirements on Participants in the balancing market have increased significantly over the course of the last year as increasing electricity prices have meant that Participants have been required to post higher amounts of Credit Cover. 

Combined with the increase in electricity prices themselves, this increased collateral burden may pose challenges to suppliers in particular.

This decision paper sets out that the SEM Committee has decided to reduce the collateral burden on Participants in the balancing market by reducing the Undefined Exposure Period, a parameter that is used to calculate a Participant’s Required Credit Cover. The Undefined Exposure Period is being reduced from 9 days to 7 days.