From Meter Reading to Settlement and Supplier Bill

Current Source Set for the Lifecycle

Four current sources anchor the chain. Elexon's P478 page shows that P478 is the BSC modification for MHHS arrangements and that it was implemented on 22 September 2025 as part of the M8 release.⁶ Elexon's MHHS reporting shows migration beginning on 22 October 2025, with the main transition continuing toward full implementation in 2027.⁴

Ofgem's price-cap update for 1 April to 30 June 2026 gives the worked bill reference. It states that a typical dual-fuel household paying by direct debit would pay £1,641 per year, with average electricity at 24.67 pence per kilowatt-hour and an average electricity standing charge of 57.21 pence per day, including VAT.⁸

Ofgem published the next cap period on 27 May 2026. From 1 July to 30 September 2026, the typical annual cap rises to £1,862, with average electricity at 26.11 pence per kilowatt-hour and a 57.19 pence standing charge. The worked example stays on Q2 because it models an April to June bill.

Government smart-data policy gives the consumer data context. The Data (Use and Access) Act 2025 enables smart-data schemes, and the Smart Data Strategy published in March 2026 describes the long-term framework for secure customer-authorised data sharing.⁷

Those sources support the same practical distinction throughout: settlement is a market process under the BSC; billing is a supplier-customer process under the tariff and price-cap rules. A good reading of the lifecycle keeps that distinction visible from the first meter read to the final payment.

How the BSC Fits Settlement, P478 and the Bill

The Balancing and Settlement Code, usually shortened to BSC, is the rulebook for market settlement. It turns metered volumes into cash positions between suppliers, generators, traders, interconnectors and the Transmission Company. It does not set the household tariff and it does not produce the consumer bill.

P478 is a modification to the BSC, not a settlement run.⁶ Elexon describes it as the change that implements MHHS arrangements in the Code. Ofgem approved it on 26 November 2024, and Elexon records it as implemented on 22 September 2025 as part of the M8 non-standard release.

The settlement runs are separate. They are the calculations that produce and then refine cash positions: Initial Information, Settlement Final, R1, R2, R3 and Final Reconciliation. P478 changes the settlement rulebook and data model so those runs can work with market-wide half-hourly data.

The licence regime gives the BSC its force. Licensed suppliers, generators, network operators and other parties are bound by licence conditions that require compliance with the industry codes.⁵ NESO sits alongside that framework as system operator. Its balancing actions feed settlement prices, and Elexon's BMRS Insights and IRIS services publish the market data that analysts use after each run.²

Stage 1: Meter Measurement

The chain starts with a meter reading. A SMETS2 meter, meaning a second-generation smart meter built under the Smart Energy Code, records active import electricity for each half-hour settlement period. On a normal day there are 48 settlement periods.

The meter stores the reading with the trading date, the settlement period number and the meter identity. That package matters because later systems need to know which meter produced the reading, which half-hour it belongs to, and whether the value has been changed in transit.

The Data Communications Company, or DCC, carries smart-meter messages between authorised industry users and the meter estate. A supplier does not normally talk directly to the meter. It sends a request through the DCC infrastructure, and the meter response comes back through the same controlled route.

Smart data policy adds a consumer-authorised layer around the same basic material. The Data (Use and Access) Act 2025 enables smart-data schemes, and the Smart Data Strategy describes a wider model for secure customer-authorised sharing.⁷ That policy does not replace settlement. It governs how customer data can support services such as switching, advice and price comparison.

Stage 2: Validation and Substitution

A reading cannot be used just because it arrived. The supplier and settlement systems need to check that it belongs to the right Meter Point Administration Number, or MPAN, that the settlement period is valid, that the value is plausible, and that the reading has not broken the meter's cumulative register logic.

When a reading passes those checks, it can move into aggregation. When it fails, the system uses an estimated value until the actual reading arrives or the data problem is resolved. That process is usually described as validation, estimation and substitution.

MHHS changes the quality problem. Before full half-hourly settlement, many domestic accounts relied on profile classes that shaped less frequent readings into half-hourly demand. Under MHHS, actual half-hourly data becomes the settlement basis for the whole market, so the main question shifts from profile accuracy to missing-data handling.⁴

The worked example below assumes a high first-pass validation rate so the arithmetic can be followed. That percentage is an assumption for the example. It is not presented as an official market-wide performance claim.

Stage 3: GSP Aggregation and Losses

A household reading does not settle on its own. Settlement groups many MPANs into a supplier position within a Grid Supply Point Group. A Grid Supply Point is a boundary between transmission and distribution, and the Group is the settlement zone built around that boundary.

Aggregation does two things. First, it adds up the supplier's metered demand within the Group for each settlement period. Second, it applies Line Loss Factor Classes, or LLFCs, so the value reflects energy lost between the grid supply point and the meter.

An LLFC is not a generic percentage. Each distribution network operator publishes classes that reflect voltage level, connection type and network losses. The worked example uses a 5 percent low-voltage uplift as an illustrative assumption because it makes the arithmetic easy to inspect.

After aggregation, the market is no longer settling the single meter read. It is settling the supplier's aggregated position for that half-hour and zone. The original reading still matters for audit and billing, but cash-out works on the aggregated settlement position.

Stage 4: Settlement and Cash-out under the BSC

Settlement compares what each party contracted for with what actually happened. If a supplier bought less energy than its customers used in a settlement period, it is short. If it bought more than its customers used, it is long. The BSC turns that imbalance into a cash position.

Cash-out uses system prices published through Elexon's market data services. System Buy Price and System Sell Price are the prices used to settle imbalance positions for the settlement period. They are market settlement prices, not household tariff rates.²

P478 matters here because it changes the data basis for domestic settlement.⁶ The old domestic model relied heavily on profiled demand. The MHHS model uses half-hourly reads across the market. That makes the cash-out position closer to the time when energy was actually used.

The consumer does not see a BSC settlement line on the bill. The supplier sees the cash position in its settlement account. The consumer sees tariff charges, standing charges and regulated pass-through costs in the supplier bill.

Stage 5: Reconciliation Runs

Settlement is corrected over time because the first view of a trading day is not perfect. Late meter reads arrive, estimates are replaced, disputes are resolved and settlement data is recalculated. Each run gives the market a cleaner position.

Elexon's general settlement guidance describes reconciliation as a sequence spread across the settlement timetable.¹ MHHS keeps the idea but changes the shape of the timetable. Elexon seminar material for migration explains that the enduring post-transition window is designed to shorten because actual half-hourly data arrives earlier.⁴

That is the important idea for both beginners and experts. More actual data at the start should mean smaller later adjustments. The operational risk moves from profile estimation to data availability, validation quality and dispute handling.

Stage 6: Supplier Bill and Price Cap

The supplier bill is the customer-facing result, but it is not the same as settlement. Settlement clears market positions between BSC parties. The bill charges the household under the tariff that applies to that account.

A domestic bill normally combines unit charges, a daily standing charge and VAT. The unit rate already bundles several cost categories, including wholesale energy, network charges, policy costs, supplier operating costs and margin. Those categories are useful for understanding the cap, but they should not be added again on top of a VAT-inclusive tariff rate.

For 1 April to 30 June 2026, Ofgem's published average electricity rate for a standard variable direct-debit customer is 24.67 pence per kilowatt-hour, with a daily standing charge of 57.21 pence. Both include VAT at 5 percent.⁸ Ofgem published the next cap period on 27 May 2026: from 1 July to 30 September 2026, the typical annual cap rises to £1,862, with average electricity at 26.11 pence per kilowatt-hour and a 57.19 pence standing charge.

The worked example uses Q2 rates because it models a monthly bill before 1 July 2026. It also shows an illustrative time-of-use tariff. The time-of-use prices are not Ofgem cap rates; they are a simple example of how a supplier could reshape unit prices across peak, standard and off-peak periods while still needing to comply with the applicable tariff rules.

Stage 7: Payment and Supplier Default Backstops

The household pays the supplier through direct debit, standard credit, prepayment or another agreed method. Direct debit is common because it smooths cash flow: the customer pays a fixed or regularly reviewed amount, while the supplier manages the difference between bill timing and settlement timing.

The supplier pays BSC settlement cash flows through the market settlement process. That timing is different from the customer payment date. A supplier therefore carries working-capital risk between market settlement, customer billing and customer payment.

The BSC credit-cover regime is the first backstop for settlement exposure. Suppliers and other trading parties post collateral so the market can still clear if a party cannot pay its settlement charges.

The supplier-of-last-resort process is the consumer protection backstop. If a supplier fails, Ofgem can appoint another supplier to take over its customers. That protects continuity of supply, while the cost of the transfer can be recovered through the industry and ultimately through customer bills.

MHHS Migration and the Settlement Data Shift

Market-wide Half Hourly Settlement, or MHHS, moves domestic and smaller non-domestic electricity settlement onto half-hourly data. Elexon describes P478 as the BSC modification that implements the required MHHS arrangements in the Code.⁶

The migration is not just a technical format change. It changes what the market treats as evidence. Instead of using broad profile assumptions for much of domestic demand, settlement can use actual half-hourly readings from smart meters once the relevant meter points have migrated.

Elexon's February 2026 update says migration began on schedule in October 2025 and refers to around 33 million meters migrating over an 18-month transition period.⁴ It also describes full completion as aligned to Milestone 15 in May 2027, with cutover to new settlement arrangements at Milestone 16 in July 2027.

The practical effect is a better link between behaviour and market value. If flexible demand moves from an evening peak to overnight periods, the settlement data can show that movement in the half-hour when it occurred. That is why MHHS matters for time-of-use tariffs, flexibility services, network planning and consumer-facing smart-data products.

Worked Household Example for an April to June 2026 Bill

The example uses one all-electric household consuming 1,200 kilowatt-hours in a 30-day month. That is high compared with Ofgem's medium electricity reference of 2,700 kilowatt-hours per year, so the example should be read as a heat-pump and electric-vehicle type household, not as a typical dual-fuel home.

The time-of-use tariff in the example is illustrative. It uses 35 pence per kilowatt-hour at peak, 24 pence at standard times and 12 pence off-peak, with a 12 percent peak, 46 percent standard and 42 percent off-peak load shape. Those prices are used only to make the arithmetic inspectable.

The example keeps the two ledgers separate. The household bill follows tariff arithmetic. Settlement follows BSC cash-out and reconciliation. Mixing those two ledgers is the main source of confusion in energy data explanations.