An overview of transmission access arrangements

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An overview of transmission access arrangements

• Mark Copley Colin Sausman
• 1st and 2nd February 2007

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Purpose

• To take stock of developments in transmission
  access since the ARODG
• To allow parties to air a number of new
  developments
• To consider developments as a package and
  identify what else users think needs to be done
• To consider what role parties think Ofgem/ NGET/
  licensees/ industry should play in this process

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Agenda

• 10.15 Coffee
• 10.30 Welcome Introductions
• 10.40 An overview of the ARODG Mark Copley
• 10.50 Developments since the ARODG Mark
  Copley
• 11.20 The Governments View Phil Baker
• 11.30 - Coffee
• 11.40 Capacity Trading Adam Brown
• 12.15 Lunch
• 12.45 - The GB Queue Mark Copley
• 13.15 Queue Optimisation Phil Collins
• 13.45 Discussion
• 14.15 Way forward and Close

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The Access Reform Options Development Group -
Overview

• Mark Copley

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Purpose

• Convened in early 2006 to
• consider the enduring applicability of
  transmission access arrangements.
• Highlight the potential problems with these
  arrangements
• Develop a range of options for amending those
  arrangements.
• The Group published its report in May along with
  a covering letter

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Assessment Framework

• Security
• Restricted Rights
• Unrestricted rights

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Security

• Problems
• Parties can apply for connection without
  incurring significant cost
• Can create potentially onerous financial burdens,
  which can be both large and volatile
• Creates an uncertain environment for investment
  in generation
• Not the most effective method of focusing
  transmission investment where it is most needed
• Unclear governance arrangements

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Restricted Rights

• The period between the completion of a connection
  to the system and the completion of wider works.
• Problems
• Does the range of products currently available
  make best use of available system capacity?
• Vary compensation, duration, degree of firmness
  etc
• Are there sufficient opportunities for parties
  that value capacity more highly to obtain it?
• How can trading be facilitated?

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Unrestricted Rights

• The rights which are granted once the
  transmission system is compliant with security
  standards
• Problems
• The reservation of capacity inherent in TEC in
  its current form. Is this pro competitive and
  does it allow efficient investment?
• Are the transmission licensees incentives to
  connect generation to the system in a timely
  manner sufficiently strong?
• The Group developed options involving different
  combinations of rights and obligations. Many
  included more certainty about the delivery date
  of capacity.

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Ofgems covering letter

• Highlighted what we saw as desirable facets of an
  access regime
• Greater certainty over connection date and level
  of financial commitment for new generators
• Ongoing protection for consumers against stranded
  assets
• Case for changing the level and allocation of
  security arrangements
• Merit in arrangements which enable the strongest
  projects to identify themselves
• Consider developing access products which
  maximise available capacity and consider how
  access rights can be reallocated

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Developments since ARODG

• Mark Copley

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Interim Generic User Commitment

• Introduced in summer 2006
• Voluntary alternative to Final Sums
• Allows users to choose to fix liabilities, or opt
  for FSL
• Securities ramp up to 10 years worth of TNUoS
  over 4 years.

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CAP131 User commitment for new and existing
users

• Seeks to address several issues raised by ARODG,
  primarily in the securities building block.
• Non-refundable holding fee means holding a
  connection offer is no longer a costless option
• Generic user commitment regime gives certainty
  over securities. Charges ramp up over a 4 year
  period to 6 x the TNUoS tariff.
• User commitment of 2 years required from existing
  players, may increase information available to
  transmission licensees
• Greater certainty over delivery.
• Clear methodology for determining securities

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CAP143 Interim TEC

• Raised by the SSE to create a new product giving
  a restricted access right
• A generator can purchase a new product, Interim
  TEC
• ITEC gives the same rights as TEC in most cases
• BUT, for a given number of periods in the year,
  NGET can constrain the generator for a fixed
  price.
• ITEC seeks to make better use of the existing
  system. The details are currently being developed
  by a CUSC working group.

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CAP142 TEC Trading

• Raised by British Energy to allow trading between
  existing parties
• At working group stage
• NGET also developing proposals for trading
  between existing parties and existing and new
  parties
• But more of that later

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Ofgems TPCR

• Ofgem provided funding for major transmission
  enforcements through the TIRG process in 2003.
• In our recent TPCR we also provided funding for
  significant amounts of system reinforcement.
• In addition, we developed mechanisms which would
  automatically adjust revenues if more generation
  connects.
• Transmission companies have strong incentives to
  connect as much generation as possible during the
  2007-2012 period.

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Mapping developments to problems

• Mark Copley

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Problems and Developments - Security
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Restricted Unrestricted rights
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Questions Discussion points

• Have we correctly characterised the problems?
• Would recent developments have a positive impact?
• Are there any outstanding issues or other issues
  to address?
• If so, how should they be addressed?

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Promoting choice and value for all gas and
electricity customers