Guidance and Publications

Electricity Settlements Company (ESC) Annual Report 2014/15

Posted 15.07.2015

The 2014/15 Annual Report of the Electricity Settlements Company Ltd (ESC) outlines its establishment and key roles. ESC was created to oversee the settlement of capacity agreements in the UK's Capacity Market, ensuring reliable electricity supply and supporting low-carbon energy investments. Governed by a Framework Document with the Secretary of State for Energy and Climate Change as its sole shareholder, ESC operates with a focus on efficiency and transparency, leveraging synergies with its sister company, Low Carbon Contracts Company Ltd (LCCC)

Establishment and Purpose of ESC:

• The Electricity Settlements Company Ltd (ESC) was created to oversee the settlement of capacity agreements within the UK's Capacity Market. This role is pivotal in ensuring that sufficient reliable capacity is available when needed, contributing to the broader goal of maintaining energy security and transitioning to a low carbon economy.

Role in Capacity Market:

• ESC manages the settlement process for the Capacity Market, which includes handling credit cover, verifying meter configurations, and ensuring payments to capacity providers. The Capacity Market itself is designed to provide a steady revenue stream to capacity providers, helping to secure investment in future energy capacity and ensuring electricity supply reliability.

Governance and Operations:

• ESC is governed by a Framework Document with its sole shareholder being the Secretary of State for Energy and Climate Change. It follows the UK Corporate Governance Code and has a senior management team in place to support its operations. Most of ESC's operational activities are carried out by its sister company, Low Carbon Contracts Company Ltd (LCCC), through a cost-sharing arrangement.

Financial and Strategic Outlook:

• ESC's activities are expected to scale up significantly, with the company anticipated to make around £1 billion in capacity payments by 2018/19 based on the capacity agreements awarded by National Grid. The company aims to achieve operational excellence and efficiency, minimizing costs to consumers while ensuring robust and reliable settlement processes.