Business Retail Market: Dealing with un-invoiced Wholesaler charges in the event of an unplanned Retailer exit
| Date | 24 November 2022 |
24 November 2022
Business Retail Market: Dealing with
un-invoiced Wholesaler charges in
the event of an unplanned Retailer
exit
Dealing with un-invoiced Wholesaler charges in the event of an unplanned Retailer exit
1
About this document
In our September 2021 consultation, we set out proposals to deal with un-invoiced Wholesale
charges in the event of an unplanned Retailer exit. We noted that, in an event where a
Retailer fails and exits the market, unrecovered charges that a Wholesaler has invoiced for
are treated as bad debt. The price control arrangements allow a Wholesaler to recoup from
customers a portion of such bad debt costs via the PR19 Totex cost sharing mechanism. We
concluded, however, that there is not currently a similar provision for dealing with charges
for usage that remain un-invoiced by Wholesalers when a Retailer fails.
Our consultation outlined the following policy aim:
"In the event of a Retailer’s unplanned exit from the business retail market, a Wholesaler
should be able to recover relevant un-invoiced revenues for services that the Wholesaler has
provided to that Retailer - but were not due for invoicing or had not been invoiced - at the
point of Retailer failure."
We proposed that in the event of a Retailer failure during the 2020-25 period, we would allow
Wholesalers, subject to supporting evidence, to make an adjustment through the PR19
reconciliation mechanism known as the Revenue Forecasting Incentive (RFI).
To meet this aim, we proposed to:
• Amend licence conditions to make updates to the RFI formula and include a new un-
invoiced revenue (UIRt) definition.
• Permit the in-period recovery of un-invoiced revenue, subject to each company's
specific cost sharing rate. This would reflect the existing cost sharing arrangement for
the recovery of bad debt costs.
• Update the PR19 reconciliation rulebook to provide clarity and guidance to
Wholesalers; and
• Modify the Wholesale Retail Code (WRC) to enable Wholesalers to draw down on credit
collateral in relation to un-invoiced amounts for services that the Wholesaler has
provided to the exiting Retailer.
The remainder of this document sets out our decision in relation to our September 2021
proposals and clarifies how Wholesalers will be able to recover un-invoiced revenue in the
event of a Retailer failure during the remainder of the 2020-25 price control period.
Looking further ahead, we intend to introduce a mechanism during PR24 to allow for in-
period adjustments relating to un-invoiced revenue, similar to the approach outlined in the
September 2021 consultation. Condition B allows us to set a new RFI formula for the 2025-
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