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BSC Panel 195

BSC Panel 195. 9 February 2012. Report on Progress of Modification Proposals. Adam Lattimore. 8 March 2012. Modifications Overview. Modifications Overview. P272 Progression. Jonny Amos - Ofgem. 8 March 2012. Context. Progress to date. Q3 2011. Q4 2011. Q1 2012.

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BSC Panel 195

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  1. BSC Panel 195 9 February 2012

  2. Report on Progress of Modification Proposals Adam Lattimore 8 March 2012

  3. Modifications Overview

  4. Modifications Overview

  5. P272 Progression Jonny Amos - Ofgem 8 March 2012

  6. Context Progress to date Q3 2011 Q4 2011 Q1 2012 4 month workgroup assessment 2 month extension On 12 January 2012, the Panel: • rejected the modification workgroup’s recommendation to progress P272 to Report Phase • agreed that P272 should stay in the Assessment Process • noted that Ofgem undertook to report to Panel at the March 2012 meeting to: • detail any additional information and analysis that should be taken into account • detail a timetable that takes account of related work • agreed that the Panel will determine the revised timetable and Terms of Reference =P272 raised =BSC Panel meeting =workgroup meeting

  7. Related work Timetable of related industry work Q2 2012 Q3 2012 Q4 2012 Beyond BSC P280 Oct 2012 Aug 2012 Apr 2012 Apr 2014 July 2012 Apr 2013 Apr 2013 Apr 2012 DCP 103 MIG Issue 22 BSC P272

  8. Related work Promoting smarter energy markets • Ofgem is scoping a strategy to shape market development from the platform of smart metering • We have identified electricity settlement as one area where changes may be required • We welcome the work that industry is taking forward, including through P272 and Elexon’s Profiling and Settlement Review Group • Intention is to respond to consultation in summer 2012

  9. Additional analysis Better understanding the impacts of P272 • Ofgem, Panel and industry need better analysis on the potential impacts of P272 • Our view is that the workgroup should be the vehicle for further analysis, supported by Elexon • The objectives of this analysis are to: • better understand and where possible quantify the benefits under a range of scenarios • better understand and where possible quantify costs to the industry of P272 under a range of scenarios • better understand the impact on Profile Classes 1-4 • help Ofgem understand practical implications for consumers

  10. Additional analysis How Ofgem can help • We can provide a steer to help guide the workgroup’s analysis, covering for example: • potential scenarios for modelling purposes • techniques for managing uncertainty • a potential framework for assessing the costs and benefits • We can also facilitate discussions on consumer issues

  11. Next steps Draft timetable of work Ofgem decision by February 2013 to allow industry time to implement if approved

  12. 195/04 P275 ‘Extending Performance Assurance Assessment Report’ Melinda Anderson 8 March 2012

  13. P275: Issue • Section Z1.6.1 of the Code states the responsibilities of the Performance Assurance Board (PAB) are owed exclusively to Trading Parties • P275 argues that this implies the PAB acts only for Trading Parties • This would mean that PAB would not resolve issues for BSC Parties that are not Trading Parties (e.g. LDSOs) even though they rely on Settlement data and processes for a number of business purposes • This is not the case

  14. P275: Issue P275 Group concluded that: • Z1.6.1 relates to the ultimate responsibility and liability of the PAB, not the scope of PAB activities • In practice the scope of PAB activities is not limited to Trading Parties, but encompasses all Performance Assurance Parties (PAPs) • P275 argues it is unclear that non-Trading Parties can try to resolve issues that do not directly impact Trading Parties via the PAB • Scope of issue much smaller than set out in proposal

  15. P275: Solution P275 solution: • P275 solution is to add a paragraph to Section Z to clarify the relationship between the PAB and all PAPs with respect to Z1.6.1 • Code-only change; scope of Performance Assurance unaffected

  16. P275: Impacts, costs and implementation • The proposed change is a Code only clarification and therefore implementation does not impact BSC Parties • No system or process changes • Minimal ELEXON implementation cost (1 man day of effort which equates to £240) • Implementation Date: 10 Working Days after approval

  17. P275: Applicable BSC Objectives • Group’s majority view is P275 would better facilitate Objective (d)because increased BSC clarity promotes efficiency in the BSC arrangements • One Group member did not agree that P275 would better facilitate Objective (d) because the clarification is unnecessary and therefore doesn’t increase efficiency • The Group unanimously agreed P275 is neutral with respect to Objectives (a), (b), (c) and (e)

  18. P275: Consultation responses Assessment Consultation responses aligned with Group’s views • Objective (d) only relevant Applicable BSC Objective • Majority believed P275 better facilitates Objective (d) because increased BSC clarity promotes efficiency in BSC arrangements • Minority did not believe P275 better facilitates Objective (d) because the clarification is unnecessary • All respondents agreed the legal text delivers the intent of P275

  19. P275: Conclusions • Group has discharged its Terms of Reference • Group recommends that: • P275 is approved • ELEXON believes that as the change is now a Code only clarification it meets the Self Governance Criteria

  20. Self Governance Criteria A Modification Proposal that, if implemented: • Is unlikely to have a material effect on: • Existing or future electricity consumers; • Competition in the generation, distribution or supply of electricity or any commercial activities connected with the generation, distribution, or supply of electricity; • The operation of the national electricity transmission system; • Matters relating to sustainable development, safety or security of supply, or the management of market or network emergencies; and • The Code’s governance procedures or modification procedures, and • Is unlikely to discriminate between different classes of Parties

  21. P275: Recommendations • NOTE Assessment Report; • SUBMITP275 to Report Phase; • AGREEviews on Applicable BSC Objectives (d): • Solution is better than baseline; • AGREEprovisional recommendation to: • Approve P275; • AGREE P275 is Self Governance • AGREE Implementation Date: • 10WD after approval • AGREEdraft BSC legal text; • AGREE that ELEXON issue Report Phase Consultation and Self Governance Statement; and • AGREEDraft Modification Report to April Panel meeting

  22. 195/05 P277 ‘Allow Interconnector BM Units to choose the P/C’ David Kemp 8 March 2012

  23. P277: Issue (1 of 2) • Energy that is transited across GB • Energy entering GB over one Interconnector assigned to different Account to energy leaving GB over another • Not just applicable to transit flows Moyle 100MW out of GB Allocated to C Account Charged SBP IFA 100MW into GB Allocated to P Account Paid SSP

  24. P277: Issue (2 of 2) • Energy generated in GB that is exported • Energy generated assigned to different Account to energy leaving GB over Interconnector • Without ECVN, in net imbalance even though net volume is zero 100MW generated Allocated to P Account Paid SSP Moyle 100MW out of GB Allocated to C Account Charged SBP

  25. P277: Solution • Single BM Unit per Interconnector per User • Lead Party can elect P/C Status of these BM Units • Allows Party to net import over one Interconnector and export over another • Volumes would not net to zero, due to transmission losses • Solution would be mandatory

  26. P277: Impacts and Costs • Costs: • Central costs: approx. £67k • Party costs: • IAs/IEAs: up to £100k • Interconnector Users: up to £35k • Impacts: • Interconnector Users, IAs, IEAs and TC • CRA and SAA • BSC Sections K, Q, R, T and Annex X-1 • BSCPs 15, 31 & 65 and CRA SD

  27. P277: Applicable BSC Objectives (1 of 5) • Workgroup’s majority view is to reject P277 • Views based on Applicable BSC Objectives (c), (d) and (e)

  28. P277: Applicable BSC Objectives(2 of 5) • Workgroup discussed potential advantages Interconnector Users could gain • Removal of ‘notification risk’ • Other Parties are exposed to this risk • Unduly discriminatory – wouldn’t apply to all • Creation of ‘netting benefit’ • Can be done through ECVNs • Only benefit if volatile – I/C volumes generally ‘firm’

  29. P277: Applicable BSC Objectives(3 of 5) • Creation of ‘consolidation benefit’ • Offset unpredictable volatility • Original intent of two-Accounts to avoid this advantage • I/C volumes not usually volatile • Extent of benefit is uncertain, but likely to be small • Workgroup believes P277 is unduly discriminatory due to removal of notification risk for some Parties and not others • Believes this regardless of whether potential consolidation benefits are material

  30. P277: Applicable BSC Objectives(4 of 5) • Workgroup considered wider European picture • Interconnectors seen as Transmission • Trading between countries • Trade across intervening Interconnectors – physical position each side • Transiting through GB – no overall position? • Third Package • Intent to remove barriers to cross-border flows • P277 could aid European harmonisation – spirit of Third Package • No specific requirements around single Accounts • Workgroup believes GB arrangements not a barrier to Market Entry

  31. P277: Applicable BSC Objectives(5 of 5)

  32. P277: Consultation Responses • Respondents views mixed • Reasons for and against are broadly in line with those cited by Workgroup • No new arguments raised • Good number and variety of respondents – no clear pattern of views by Party type

  33. P277: Implementation Date • Workgroup recommends Implementation Date of: • 28 Feb 13 if P277 is approved on or before 28 May 12 • 27 Jun 13 if P277 is approved after 28 May 12 but on or before 27 Sep 12 • Date driven by commissioning of East-West Interconnector • Workgroup consulted on Implementation Date during Assessment • Supported by respondents • Implementation Date will form part of Report consultation

  34. P277: Legal Drafting • Workgroup consulted on legal text during Assessment • One comment received – the suggested amendment was made • Workgroup prepared drafting for BSCPs 15, 31 & 65 and CRA SD during Assessment • Not consulted on during Assessment • Draft Code and CSD changes will form part of Report consultation

  35. P277: Conclusions • Workgroup has discharged its Terms of Reference • Workgroup recommends that: • P277 is rejected

  36. P277: Recommendations (1 of 2) • NOTE Assessment Report; • SUBMIT P277 to Report Phase; • AGREE views on Applicable BSC Objectives (c), (d) and (e); • AGREE provisional recommendation to: • Reject P277;

  37. P277: Recommendations (2 of 2) • AGREE Implementation Date: • 28 Feb 13 or 27 Jun 13; • AGREE draft BSC legal text; • AGREE draft changes to BSCPs 15, 31 & 65 and CRA SD; • NOTE that ELEXON will issue Report Phase Consultation; and • AGREE Draft Modification Report to April Panel meeting.

  38. 195/06 P278 ‘Treatment of Transmission Losses for Interconnector Users’ David Kemp 8 March 2012

  39. P278: Issue • BSC allocates transmission losses to Interconnector BM Units • Anomalous in light of ITC Scheme • Compensates TSOs for National losses caused by cross-border flows • National Grid passes through compensation to generators and Suppliers through TNUoS • Compensation can be positive or negative • Interconnectors should not be subject to additional network charges • GB arrangements need to comply with European legislation

  40. P278: Solution • Set TLM to 1 for Interconnector BM Units • BSC to no longer adjust Interconnector BM Unit Metered Volumes for any GB transmission losses • BSC would still allocate total GB transmission losses proportionally across all other types of BM Unit • Interconnector BM Units account for 2% of losses • Low materiality – volatility of losses can exceed this amount

  41. P278: Impacts and Costs • Costs: • Central costs: approx. £91k • Party costs: • IAs/IEAs: none • Other Parties: up to £20k • Ongoing impact on charges • Impacts: • Direct Impact: Interconnector Users and IEAs • Indirect Impact: Other BSC Trading Parties • SAA and BMRA • BSC Section T • SAA & BMRA SDs

  42. P278: Applicable BSC Objectives(1 of 4) • Workgroup’s majority view is to approve P278 • Views based on Applicable BSC Objectives (a), (c) and (e)

  43. P278: Applicable BSC Objectives(2 of 4) • Concerns around transparency of the ITC • Lack of publicly available information on the detailed ITC mechanism/calculation • Intent of ITC seems inconsistent with actual mechanism • Intent is to compensate for all cross-border flows • Mechanism appears to only considers transit flows • Is the solution cost-reflective? • Is this the right solution? • Some alternatives discussed • Workgroup considered these more complex, and possibly non-compliant

  44. P278: Applicable BSC Objectives(3 of 4) • P278 is discriminatory, but due discrimination as required for compliance with European legislation • Concluded that P278 most proportionate and appropriate solution • Members have concerns about the ITC Scheme, but accept that it is legally binding

  45. P278: Applicable BSC Objectives (4 of 4)

  46. P278: Consultation Responses • Majority of respondents agree with Workgroup • One respondent unsure, cited reasons discussed by Workgroup

  47. P278: Implementation Date • Workgroup recommends Implementation Date of: • 1 Nov 12 if P278 is approved on or before 1 May 12 • 28 Feb 13 if P278 is approved after 1 May 12 but on or before 28 Aug 12 • Date driven by lead time for changes to central BSC Systems • Materiality of losses is low – not necessary to align with Contract Round • Workgroup consulted on Implementation Date during Assessment • Supported by respondents • Implementation Date will form part of Report consultation

  48. P278: Legal Drafting • Workgroup consulted on legal text during Assessment • No comments received • Draft Code changes will form part of Report consultation

  49. P278: Conclusions • Workgroup has discharged its Terms of Reference • Workgroup recommends that: • P278 is approved

  50. P278: Recommendations (1 of 2) • NOTE Assessment Report; • SUBMIT P278 to Report Phase; • AGREE views on Applicable BSC Objectives (a), (c), (d) and (e); • AGREE provisional recommendation to: • Approve P278;

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