BSC Modification P462: GB industry Workgroup advances proposal to strip subsidy distortion from Balancing Mechanism Bid Prices via BSC Section T amendment

Elexon's P462 modification, raised by NGESO on 27 October 2023, remains in the Assessment Procedure phase with Workgroup meeting 20 held 27 October 2026 and meeting 21 scheduled for 11 November 2026, ahead of an Assessment Phase Consultation running 1 December 2026 to 15 January 2027. The proposed solution would amend the equation in BSC Section T paragraph 3.11 to pay the 'lost support mechanism' amount, removing distortion from Contracts for Difference (CfD) and Renewables Obligation (RO) interactions with Balancing Mechanism Bid Prices. CEPA has delivered a Phase one CBA (April 2026) and a Phase two CBA addendum (October 2026, presented to Workgroup 19 on 13 October 2026).

The modification targets a root-cause distortion in BM Bid Price formation caused by overlapping subsidy schemes (CfD, RO), which the Proposer argues drives dispatch actions outside consumer cost merit order. A settlement-level fix (rather than a transparency-only mechanism) would directly alter cashflows for subsidised generators participating in the Balancing Mechanism and could materially affect consumer costs, BM bid behaviour, and the calculation of support payments across GB.

P462 represents a structurally significant settlement intervention in the GB Balancing Mechanism, distinguishing it from adjacent initiatives like P522 (a shadow-price transparency mechanism) by directly rewriting BSC Section T's charging equation. The multi-year Assessment Procedure—now in its third year with two Terms of Reference extensions (12 months in November 2024, 4 months in December 2025) and two sequential CEPA cost-benefit analyses—signals considerable complexity in quantifying wholesale and consumer impacts, as well as contested methodology (e.g., ROC recycle rate treatment, Maximum Contract Capacity solution approach debated at Workgroup 10-11). The REMA interaction flagged at Workgroup meeting 4 suggests P462's design is being shaped against the backdrop of wider GB electricity market reform, raising sequencing risk. The upcoming Assessment Phase Consultation (Dec 2026-Jan 2027) is the next major stakeholder input gate before a Report Phase Consultation and eventual submission to the Authority targeted for May 2027.

GB Balancing and Settlement Code (BSC), Section T 'Settlement and Trading Charges' paragraph 3.11

Workgroup meeting 21 · 11 Nov 2026

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