RECCo’s Finance and Commercial Director, Brian O’Shea, provides a roundup of the 2021/22 Financial Year and details of the rebate REC funding parties can expect.
RECCo has now completed its 2021/22 Financial Year ending on 31 March 2022. Over the coming months our financial statements will be subject to an independent statutory audit. The statutory audit will confirm the actual costs incurred and the value of the expected rebate due to REC funding parties. A rebate arises where the value of actual costs incurred is less than the value of approved Budget costs recovered from REC funding parties. The value of rebate due will be communicated to REC funding parties in July 2022 alongside publication of our audited financial statements. RECCo is committed to delivering value-for-money and ensuring the financial burden on REC Parties is minimised wherever possible. Our current financial analysis shows an expected underspend against the budget for the 2021/22 year.
We achieved this through our procurement strategy and contract management, continual scrutiny of our costs, and proactive and dynamic forward work planning. Costs are only incurred if evidence and data demonstrate they will support achievement of the REC Objectives. If a cost can be deferred without a material detrimental impact to achievement of the REC Objectives, then such costs are deferred. The 2021/22 financial year has been a very challenging year for our industry and RECCo recognises it has a role to play in reducing the financial burden on REC funding parties and ultimately the end consumer. To that end, in 2021 RECCo determined that several projects could either be deferred to later in that financial year or into the next financial year.
We also introduced further stage-gates to continually assess the benefits of further development on certain projects. Key examples include the deferral of the commencement of the consolidation of the metering codes of practice and a re-phasing and scope reduction of the theft project. RECCo also re-phased and reappraised its human capital requirements. We brought recruitment inhouse and reduced our use of contractors. We also increased and strengthened our project governance structures; this enabled an enhanced level of scrutiny and accountability for project initiations and monitoring and reporting of delivery. All proposed changes were scrutinised to ensure they delivered viable solutions and value for money.
This resulted in a c.30% less spend than the budget change allowance. We also assessed our method of delivery of our CSS Party Under Integration obligations under Ofgem’s Switching Programme resulting in a 50% reduction in the proposed costs from our service providers. We recognise that the delay in deployment of certain REC Portal functionality has had consequential impacts to our stakeholders and we have worked hard with our service providers to ensure they delivered a fit-for-purpose rectification plan. We agreed a commercial settlement which held RECCo cost harmless for the delays and the additional costs of implementing work-arounds. We implemented robust service management processes from Retail Code Consolidation and RECCo service providers were required to deliver their full service levels from go-live; where services did not meet the required SLA, service credits were recovered, reducing overall costs for REC Parties. During 2021 RECCo’s role was expanded, specifically the requirement to administer Ofgem’s Market Stabilisation Charge. The costs to enable the delivery of the charge from 14 April 2022 were funded through costs savings elsewhere in the budget. Through continued costs scrutiny, and our commitment to bottom-up budgeting, we did not utilise any of the budgeted contingency allowance.
The reasons for the rebate are multi-factorial but nonetheless arise from RECCo adopting a commercial approach to its operations, delivering on our commitment to seek value-for- money and only incurring costs where it shows they support the delivery of the REC Objectives. We look forward to building on this for 2022/23.
If you have any questions on this article contact Brian at finance@retailenergycode.co.uk.
