Our Cost to Serve Efficiency programme is targeted at driving down the cost of the core services that MOSL provides, as well as reducing the indirect costs of participating in the market. It helps us deliver on our commitment of making it ‘easier to do business’ in the market.
This programme helps enable longer term savings in MOSL by delivering change across three areas:
Initiatives under this programme will be smaller scale and targeted on areas that provide a payback within one to two years. Whilst we will look to drive cost benefits as quickly as possible, we recognise that the benefits will primarily impact our core services delivery costs in 2022/23 and beyond.
Each investment will be subject to a robust business case and a gated approval process run by a newly formed governance group. This process will be appropriate for the size of MOSL’s operations, balancing agility in decision making with the need to ensure benefits are valid and delivered.
This programme also addresses indirect costs, recognising that these represent a substantial cost of participating in the market. The programme will drive targeted reductions in these costs by:
Trading parties will benefit from a reduction in the overall costs of operating in the market – either through lower Market Operator (MO) charges or reduced indirect costs. Reducing the cost of trading parties participating in the market is also good for customers as it frees up investment in other areas which can improve customer service. Lower costs also make it easier for new entrants to join the market, enabling innovation, and improves the financial resilience of trading parties.
We have made substantial progress in driving efficiency of our core services through 2020/21 - including through savings from more remote working, the insourcing of legal services and the renegotiation of our contract with CGI. Our plan builds on this during 2021/22 with further efficiencies enabling a reduction in the budget for core service delivery in 2021/22 of 2.6 per cent compared with the 2020/21 budget equivalent.
This improvement programme is focused on delivering the next phase of efficiency improvements so that we can build on this momentum – with the main impact being in 2022/23 and beyond.
For indirect costs, we have enhanced our understanding of some of the key drivers of inefficient cost in trading parties. In particular, from bilateral transaction processes, poor data quality and meter read costs which drain value from the market. During 2021/22 we will continue to develop this understanding, incorporating it into a model which links activity to indirect costs. This can then be used to target activity in our broader range of improvement programmes and track the benefits that they deliver.
