Presentation on theme: "ARODG - 2 An overview of transmission access arrangements Mark Copley & Colin Sausman 1 st and 2 nd February 2007."— Presentation transcript:
ARODG - 2 An overview of transmission access arrangements Mark Copley & Colin Sausman 1 st and 2 nd February 2007
ARODG 2 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
ARODG 2 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 Government’s 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
ARODG - 2 The Access Reform Options Development Group - Overview Mark Copley
ARODG 2 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
ARODG 2 Assessment Framework Security Restricted Rights Unrestricted rights
ARODG 2 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
ARODG 2 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?
ARODG 2 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.
ARODG 2 Ofgem’s 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
ARODG 2 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.
ARODG 2 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
ARODG 2 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.
ARODG 2 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
ARODG 2 Ofgem’s 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.
ARODG - 2 Mapping developments to problems Mark Copley
ARODG 2 Problems and Developments - Security Access Building Block ProblemPossible Solution SecurityUnpredictable levels of Securities IGUC & Fixed level of security (CAP131) Volatility of securitiesGeneric scheme independent of others High levels of securitySecurities in aggregate lower under generic regime Risk of inefficient investment User commitment for all Unclear governanceMethodology in CUSC
ARODG 2 Restricted & Unrestricted rights Access Building Block ProblemPossible Solution Restricted RightsLimited range of products CAP143 - ITEC Limited trading opportunities NGET developing proposals Unrestricted rightsReservation of capacity by existing parties None proposed Weak incentives to invest TPCR funding & revenue drivers
ARODG 2 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?
ARODG 2 Promoting choice and value for all gas and electricity customers