Minutes of the Meeting of the Interim Code Panel

Interim Code Panel ICP27 – 14 February 2017 Minutes of the meeting of the Interim Code Panel Held at Ofwat, 21 Bloomsbury Street, London on 14 February 2017 at 10:30am Status of the Minutes: DRAFT FINAL MEMBERS PRESENT ICP Secretary (non- Nigel Sisman (NS) Acting Chairman Martin Silcock (MS) voting) Elsa Wye (EW) Independent Mike Brindle (MB) Howard Smith (HS) Nicola Smith (NSm) John Vinson (JV) Steve Hobbs (SH) CC Water Trevor Nelson (TN) Amanda Rooney (AR) Ofwat Mark Holloway (MH)

IN ATTENDENCE Kulwinder Johal (KJ) MOSL Adam Richardson (ARi) MOSL Rebecca Mottram (RM) MOSL Dan Mason (DM) Ofwat

APOLOGIES Ben Jeffs (BJ) MOSL

Action: ICP_A0xxx

1/7 Minutes of Previous Meetings/Actions arising (NS)

The Minutes from 17 January 2017 were accepted pending the following KJ (167) amendments:  Update wording on WRC065 to include the experience in Scotland on removing validation for meter rollover.  Update the minutes to update the word final to next on ‘ICP meeting is on 14th February 2017’. KJ (168) The Action Log 02.02.2017 Version 34 was reviewed as part of the ICP Transition update session. The assessment was completed in the context that any item requiring further work would be transferred to a new Panel Action Log that would subsequently be managed by the enduring Panel. The ICP assessment therefore concluded:

 ICP_A0149 – WRC061 – to transfer the action to the Panel Action Log and that the Secretariat would set up and chair the Working Group;  ICP_A0161 – WRC039 – action closed following recommendation made at the meeting;  ICP_A0162, 63 and 64 – to transfer the actions to the Panel Action Log and for the Secretariat to set up and chair a combined Working Group to for all three;  ICP_A0165 – MAC005 – that the Secretariat would arrange further

Interim Code Panel – 14 February 2017 1 / 10 assessment of MAC005 and then revert to Panel.  ICP_A0166 – WRC066-69 – to continue assessment and then revert to Panel.

Update on Codes publication - Ofwat advised that following a review of the responses from the statutory consultation, the final Codes will be published on 17 February 2017. This will include clean and track change versions of the Codes, and have incorporated the following changes:

 Housekeeping changes deemed necessary;  Five WCR Change Proposals approved in November 2016; and  MAC updates as proposed by Ofwat.

Ofwat confirmed no further changes would be incorporated into the Codes at this time including any recommended at the February ICP. Ofwat also confirmed the signing day for the MAC Framework Agreement is 8 March 2017 and there would also be an opportunity for Market Participants to sign the Wholesale Contracts.

Members were informed that two of the three Associated Retailer Panel Members spaces were now filled, with the aspiration the third would be in place ready for market opening following a further round of nominations for this place shortly. 2/7 Ofwat also advised the Open Water Programme would remain in place for six months’ post market opening. Panel Members questioned the role and decision making capacity of the programme and how this would work alongside Panel governance. It was agreed this should be discussed at the first Panel meeting on 28 February 2017.

ICP MAC005 - Data Protection updates (KJ) Decision: Sent for Assessment

This Change Proposal seeks to add an obligation to the MAC to ensure adherence to a Data Management Protocol (DMP) and incorporate the DMP as a Schedule to the MAC. This approach is to ensure that Trading Parties and the Market Operator comply with Data Protection Act 1998 (DPA) in an efficient manner through the responsibilities defined in the Data Management Protocol (DMP) from 1st April 2017. The DMP provisions, however, could be argued to go beyond those required from a DPA perspective and cover more general data security issues.

The DMP as currently drafted appeared to reflect the concerns of those that had been involved on behalf of the industry to ensure a degree of mutual reassurance generally over control and security over data held within CMOS. Whilst recognising the background and history of how this issue had been tackled to date, the ICP nonetheless felt that with

Interim Code Panel – 14 February 2017 2 / 10 hindsight some of the more prescriptive aspects of the DMP might be challenged. There are currently Compliance Agreements in place with each Market Participant until 31 March 2017.

The latest industry consultation was held for 2 weeks and 9 Market Participants responded. The consultation responses varied with 4 responses supporting the proposed changes being implemented, 2 responses broadly supportive with a concern on the restriction to use the data for marketing purposes and 3 responses advocating the change in its current form was too prescriptive.

To structure the consideration Members considered:

 Whether a change was needed for the live market (noting that the bi-lateral Compliance Agreements will expire prior to live market leaving only the current MAC conditions to address DPA and wider data protection issues);  Should change be necessary, the form and level of detail appropriate in the DMP; and  If change is necessary, a DMP (or variant) should be included in the MAC.

Key points raised by Members were:

 It was noted that full compliance with the DMP was challenging for many Market Participants (MPs) and therefore the currently used DMP allowed for exceptions, where MPs could declare provisions in which they are not fully compliant but not be assessed as in breach of the contract;  For the pre-go live DMP, MPs submitted approximately 20-30 exceptions, which had been summarised and published by MOSL. Some of these exceptions were time limited i.e. before market go- live;  There were no patterns in the level of exceptions submitted by different types of MPs in respect of provisions which could be viewed as a barrier to entry;  Most of the exceptions related to the IT Security provisions in Annex 1 rather than the provisions associated with efficient discharge of provisions associated with DPA;  An important aspect of the change relates to the need for mutual assurance between MPs and MOSL, all acting as data controllers, particularly in respect of the DPA component of the change proposal;  Members discussed if Scotland had similar arrangements to the DMP, it was noted compliance with the DPA was considered sufficient and that whilst the use of a DMP was considered best practice in many industries the approach had not been used in

Interim Code Panel – 14 February 2017 3 / 10 Scottish water market. A member noted that some concerns had been raised about the Scottish approach;  Members discussed that professional advice had been sought and guidance was provided by the Interim Services Commissioner, and it would be correct to take account of that advice and guidance;  A question was raised on how compliance would be monitored if the DMP was in the Codes;  In the energy market, the codes do not prescribe arrangements as detailed in the DMP, however, for example, the Smart Energy Code contains some security and privacy requirements;  The change presents two issues: o How compliance will be ensured particularly given the provisions go well beyond the requirements of the DPA; and o the prescriptive rules in the DMP being too intrusive and overly burdensome acting as a barrier to entry;  Compliance with the DMP presents additional costs for the market and therefore there is a need to justify this particularly from a perspective of proportionality;  There are risks to not approve the change, which include: o Reputational impact to the market if any Data Protection breaches occur and personal data is mishandled; o No mutual assurance in place between MPs; and o Companies taking differing views on how to comply with the DPA. After considerable discussion the ICP concluded that some enhancement of the data protection rules was desirable for go live given that the current bi-lateral Compliance Agreements will expire. Members agreed if MAC005 was not approved for go-live there would need to be another mechanism in place to provide mutual assurance between data controllers about efficient compliance with DPA. Whilst the DMP was considered a solution concerns remained that the DMP formulation might be too prescriptive, cumbersome and expensive for some MPs. Members noted that some MPS might be unable to comply with all aspects of the proposal by go live in areas that are not critical from a DPA perspective.

The ICP therefore explored a number of alternative approaches including:

 Do nothing – MPs comply with DPA (as a matter of applicable law) and accept the risks and costs of any inefficiencies;  Considering a cut-down more focussed DMP application, for example removing elements such as Annex 1;  Accepting MAC005 as currently proposed; or  Developing a temporary solution by extending the existing Compliance Agreements whilst a revised change proposal to provide an enduring and proportionate MAC solution is developed.

Interim Code Panel – 14 February 2017 4 / 10 After further deliberation ICP reaffirmed that “do nothing” was not appropriate and that its current view, based on the previous work that supported the MAC005 development, was that an enhanced framework to ensure the necessary mutual assurance for efficient discharge of DPA is necessary.

ICP stressed that consideration of a reduced scope MAC005 including a revised DMP was desirable but noted that precipitate action would involve 3/7 undue risk and that it was unlikely that a revised proposal could be developed, assessed, consulted and approved by ICP and endorsed by Ofwat in time for go live.

Whilst ICP recognised that MAC005 would address mutual assurance that MPs seek in respect of DPA it noted the concerns from the recent consultation about proportionality and therefore considered that a reduced scope MAC005 would best support the efficient functioning of the market.

Members therefore suggested the most appropriate option at this time might be to extend the Compliance Agreements perhaps for up to 1 year. During this time a Working Group should be established to reassess the desired scope of the change proposal and develop an appropriate level of detail in the DMP. Membership of the Working Group should include Data Protection experts and business people. Members considered the risks of Market Participants not signing the extended Compliance Agreements, noting that there might be some reluctance.

Members voted unanimously to send the Change Proposal for Assessment based on the concerns raised by ICP Members and the consultation responses that the change proposal needs to be refined to ensure it is proportionate. ICP encouraged MPs and MOSL to extend the bi-lateral Compliance Agreements (including the exceptions provisions) until such time as an enduring solution can be defined and implemented via the MAC. 4/7 ICP MAC004 - Data ProtectionChange Proposal Form updates (KJ) Decision: Recommended This Change Proposal seeks to update the WRC and MAC proposal forms set out in Schedule 7 of the MAC replacing them with the enhanced documentation that has been a feature of the change process applied by ICP since January 2016. These forms have been actively used in the ICP process by Market Participants, MOSL and Ofwat.

Key points raised by members:  The new forms are being used currently, and are assessed as contributing to a more efficient and effective change process during ICP’s tenure;  Ofwat highlighted it was unlikely the change would not be approved Interim Code Panel – 14 February 2017 5 / 10 if recommended;  Members agreed there is merit in developing some supporting guidance notes on how to use the forms;  Members agreed an amendment to the status on both forms to state ‘Implemented in Code’ rather than ‘Approved and Implemented in Code’ in the Status of the Change Proposal part of the forms;  If the ICP recommend the change to Ofwat, implementation in the 5/7 Codes will be after market opening.

Members voted unanimously to recommend the Change Proposal for implementation on the basis of improving the principles of Proportionality and Efficiency and encouraged Ofwat to make a decision upon the recommendation as soon as reasonably practical to enable timely implementation.

ICP WRC039 - Self-Supply (KJ) Decision: Recommended

This Change Proposal seeks to amend the Operational Terms to cover the process for Self-Supply Licensees in respect of disconnection. The change contains updated drafting following comments from ICP in December 2016. The amendments have been refined, and reviewed, by the Working Group.

Key points raised by members:  The Working Group comprised 5 Members: four Wholesalers and one Retailer;  The main concerns on drafting related to the forms, which have been refined to address issues raised by ICP;  The self-supply disconnection process has been drafted in line with the other disconnection processes; and  If the ICP recommend the change to Ofwat, implementation in the Codes will be after market opening.

Members voted unanimously to recommend the Change Proposal for implementation on the basis of improving the principles of Efficiency, Transparency and Non-discrimination. ICP encouraged Ofwat to make a decision upon the recommendation as soon as reasonably practical to enable timely implementation.

Transition views from ICP Members on the enduring Panel (AR) Prior to the ICP meeting, five questions were circulated to Members in relation to their transition views on the enduring Panel. These were:

Interim Code Panel – 14 February 2017 6 / 10  What are the key features of an effective and efficient Panel?  With respect to the Panel, what aspects of ICP working would you like to see continue or stop?  What new working practices / behaviors do you feel the Panel should exhibit compared to the ICP?  What would make the Panel set-up a success?  How will you know if the Panel is set up successfully?

Key points discussed included:

 The desirability of an appropriate induction process for new Panel Members;  Clarity on the new role and responsibilities of the Panel, and how this differs from the role of the ICP, such as: o Having a more strategic focus; o Additional duties and functions, including monitoring market performance, trading disputes, Market Audit; o Additional work Panel Members may need to complete prior to meetings; and o How the Panel delegates and monitors its delegation to the Committees and Working Groups?  Clarity on the role of Trading Parties into the Panel;  Members acting independently of their companies, for the interests of the 6/7 market;  Improve the Panel’s relationship with Scotland and have representatives from WICS join Panel Meetings;  Improve the change service offered, so that when a change comes to the Panel for recommendation it is in its final state, improvements might include for example: o More proactive and supportive secretariat, supporting the Proposer when drafting a Change Proposal; o Develop supporting guidance for process and specifically form completion to assist Proposers when drafting Change Proposals; o Thorough Impact Assessments carried out, including, where appropriate, by the Working Groups; o Improving information in the Cost Benefit Analysis, particularly in respect of the cost classification boundaries and the accuracy of cost projections; o Grouping Change Proposals together so that they are discussed at Working Groups based on commonality, e.g.: Technical Working Group; o Improve legal drafting and supporting documents; and o Align the implementation and releases of CMOS and Codes changes.  For consistency, there might be merit in a Panel Member attending Interim Code Panel – 14 February 2017 7 / 10 Working Groups and Committees;  Provide greater clarity on who has responded to consultations, i.e.: in what capacity i.e. Wholesaler or Retailer.  Change Report be developed for the Panel which encompasses the following information: o What stage of the process each change is in; o The releases each change will be implementation in – for both Code and system changes; and o Change radar for horizon scanning and pipeline changes;  Panel and Committee expenses policy to be developed;  Need for consistency with Panel Alternates;  Improve the house keeping of meetings, such as not cancelling meetings the day before, use of video conferencing facilities rather than telephone;  Engagement should increase - Consultation responses are still lower than might reasonably be expected so may need to consider using other routes beyond Secretariat email to encourage participation; and  12 Members rather than 8 - could be a challenge.

ICP Transition Update (KJ)

As the ICP transitions to the Panel, a number of activities need to be closed down and transferred from the ICP’s records since August 2015. This includes the closedown of the ICP Action Log, Change Proposal Log and the Change Radar and the transfer of any outstanding business to the enduring Panel logs and/or processes. Action Log: Members agreed to:

 Finalise the actions on the 02.02.2017 Version 34 Action Log and transfer the active Change Proposals to the Panel; and  Transfer the enhancements to the Panel Action Log for review after market opening. Change Proposal Log: Members agreed to: 7/7  Transfer the five recommended Change Proposals (WRC051, WRC053, WRC055, WRC059 and WRC062) to ‘Closed’ as they will be included in the updated Codes to be published on 17 February 2017;  Archive the ‘Closed’ Change Proposals; and  Transfer the ‘Open’ Change Proposals to the Panel Change Proposal Log. Members discussed it would be useful to have a summary of all the changes approved and which CMOS release they have or will be included in. This is already available on the MOSL website.

Interim Code Panel – 14 February 2017 8 / 10 Panel Members agreed to transition the change number through to the enduring Panel as this would help MPs with the history of changes.

In flight changes: An update of all the changes in flight were discussed: Wholesale Retail Code: • 5 Change Proposals recommended in November will be included in the updated Codes on 17 February 2017: WRC051, WRC053, WRC055, WRC059 and WRC062; • 9 Change Proposals have recently been in Assessment: WRC039, WRC061, WRC063, WRC064, WRC065, WRC066, WRC067, WRC068, WRC06: o WRC039 – Recommended by ICP following today’s ICP027 meeting consideration; o WRC061 – to be resubmitted to the Panel for consideration after 1 April 2017; o WRC063 – 65 – Working Groups to be established – CMOS impact; o WRC066 – 69 – Feedback to be sought via Operations and Release Group; • 2 Change Proposals not yet progressed (WRC054, WRC056): o WRC054 and WRC056 to be resubmitted to the Panel in April 2017. Market Arrangements Code: • 1 Change Proposal in Assessment (MAC004) – Recommended following today’s ICP027 meeting consideration; and • 1 Change Proposal in Consultation (MAC005) – Sent for Assessment following today’s ICP027 meeting discussion. Pipeline of Changes: It was highlighted that since the publication of the slides, some additional changes have been received, so there are now 25 pipeline changes. Members discussed that it would be useful for a new change radar to be developed for all potential changes on the horizon, for inclusion in the Panel Change Report. Members agreed that the final set of ICP logs should be published with these minutes once minutes and logs have been agreed by the ICP.

AOB (NS) Subject to the meeting minutes and revised logs being approved, it was agreed that ICP027 would be the final ICP meeting.

The ICP Members thanked Tim Davis for his efforts as ICP Chairman, alongside the other ICP Members who will not be transitioning to the

Interim Code Panel – 14 February 2017 9 / 10 enduring Panel.

Interim Code Panel – 14 February 2017 10 / 10