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Securing Market with Registration of Charges: Code Modification Update

This document provides information on the development and discussion surrounding the modification to register security in Collateral Reserve Accounts. The Modifications Committee's decision, legal advice received, and recommendations from the Working Group meetings are detailed. Participants' feedback and the future steps to be taken are also outlined.

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Securing Market with Registration of Charges: Code Modification Update

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  1. Mod_02_13Registration of ChargesWG Update 03 April 2014

  2. Background • Code requires credit cover to be provided as security for Participants’ obligations under the Code • Reason for Modification – Security not registered in respect of many Collateral Reserve Accounts. Difficulties endured with Non-UK and Ireland registered participants. • Original proposal submitted by SEMO to remove requirement to register security in respect of Collateral Reserve Accounts discussed at Meeting 47 on 12th February 2013 • Mods Committee requested legal advice on the repercussions of the proposed amendment

  3. Development of Mod • SEMO sought independent legal advice and brought to the Mods Committee for consideration. • External Counsel advised that the provisions currently set out in Section 6.21 may not be enforceable, therefore three options were proposed: • 1. Do nothing • 2. Stricter enforcement and additional security around existing and future registration of charges • 3. Title transfer • At Meeting 50, the Committee voted to pursue Option 2 (Amended Deed of Charge & stricter enforcement including provision for suspension in case of non-compliance) • Legal drafting was provided by external legal counsel to reflect the necessary changes to the Code to provide for the above (Mod_02_13v2, published in advance of Meeting 52)

  4. Development of Mod • At Meeting 52 on December 6th 2013, Participants sought extra time to review legal drafting • Participants were given until January 6th 2014 to provide comment • Responses received were referred to EirGrid legal and external counsel • Responses and comment from legal circulated February 5th 2014 • At Meeting 53 on February 6th the Committee agreed that a WG be convened to further deliberate the proposal

  5. Working Group was held on 13 March • Presentations were given by Viridian and Pinsent Masons (PM) • Viridian presentation at the WG: The existing trust arrangements within the Code without a charge, is the best solution; presentation queried the requirement for a charge • PM presentation at the WG: Emphasised why it is necessary to register a charge utilising existing case law; advised that an updated deed of charge reflective of the existing trust arrangements is the most effective way of securing the market • Viridian comments following the WG: Remove Code charge and rely fully upon the SEM CRA Trust • Following the WG: Other Participant comments were received from AES, BGE, RAs following the WG, in addition to a high-level note from PM in response to Viridian’s feedback (circulated yesterday)

  6. Actions & Recommendation Agreed at WG • Participants to review Pinsent Mason’s WG presentation and Viridian’s WG presentation and revert to Secretariat with feedback and comments on the slides as soon as possible, and no later than Tuesday 25th March-Closed; feedback received and circulated • Pinsent Masons to review  Viridian’s WG presentation and  submit  comments  to Secretariat for circulation, no later than Tuesday 25th March-Closed; feedback received and circulated • Recommendation: • The WG recommend that following review of the submissions of Participants and PM comments in relation to the presentations at the WG, the Modifications Committee ought to decide whether it is appropriate to direct PM to proceed with an updated Deed of Charge, or, whether the WG should convene again

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