REFORM IN IRELAND IMPLEMENTING EUROPEAN MARKET - PAUL MCGOWAN COMMISSIONER, CER

Implementing European Market
      Reform in Ireland
    (and other Regulatory Matters)

          Paul McGowan
        Commissioner, CER

            Energy Ireland
             June, 2013

• CER is Ireland’s independent energy regulator

• CER has broad economic, safety and customer
  protection functions in energy – water to follow

• Details of the CER’s role at www.cer.ie

• CER is currently led by:
  – Dermot Nolan, Chairperson
  – Garrett Blaney, Commissioner
  – Paul McGowan, Commissioner

In a world where energy supply and prices
are highly volatile, the mission of the CER,
acting in the interests of consumers is to
ensure that:
• The lights stay on
• The gas continues to flow
• The prices charged are fair and reasonable
• The environment is protected
• Energy is supplied safely

Agenda

• SEM/Market Integration

• Networks

• Retail

• Safety

SEM Integration Project

• Target Model - Implementation by 2016
• Final Decision on Next Steps published Feb 2013:
  o Key decisions/working assumptions on:
        Central Dispatch,
        Capacity mechanisms and
        RES-E – promotion/priority dispatch

• DCENR and DETI formally accepted the SEM Committee
  recommendations in the Next Steps Paper and have
  published governance arrangements for project

SEM Integration Project

• SEM Committee Next Steps Decision states that:
   o   It is important that the total remuneration from energy payments,
       capacity payments and ancillary services is sufficient to ensure
       security of supply
• Prices
• European Commission is expected to publish a communication
  on state intervention in the internal market in July. Key guidance
  is expected on:
   o   How Capacity Remuneration Mechanisms and RES support
       schemes should be designed
• Will be important for SEM and GB market coupling to consider
  these guidelines

SEM Integration Project
                          - Timelines/Next Steps
June 2013: Consultants on board, Project office

Q2/Q3 2013: PID/Project Governance

Q4 2013: High Level Design Consultation

Q1 2014: High Level Design Proposed Decision

Q2 2014: High Level Design Decision

2014 - 2016: Implementation

SEM Current Market
                     Gas Transportation Capacity
• Previously, the costs related to GTC have not been included in
  SEM bids

• Trading of GTC has since developed

• SEM consultation on the issue was published late 2012 with
  approx. 35 responses from a variety of stakeholder groups

• Responses presented a wide variety of views on this complex
  and challenging issue - RAs have engaged both legal and
  economic advice

• SEM Committee is to publish Provisional Conclusions and Next
  Steps on the issue by 20th June

SEM Current Market
                                        DS3
• DS3: Delivering a secure, sustainable power
  system

• All-island project led by TSOs aiming to ensure
  policies and procedures to support the safe
  operation of the system with instantaneous
  penetration of wind of up to 75%

SEM Current Market
DS3 – System Non-Synchronous
            Penetration (SNSP)
      50% SNSP   75% SNSP

SEM Current Market
     DS3: Wind Curtailment 2020

8%

           75%

SEM Current Market
                                       DS3 – Key Elements
• System Services
    o   TSOs recommendations to SEMC published on 24th May
    o   SEMC Decision in Q4
    – New services required to support the system as levels of wind increase
    – TSOs have proposed a total value of €355 million
       o SEM Committee will consider appropriate value to ensure service
         delivery at lowest cost to consumer

• Rate of Change of Frequency (ROCOF) Grid
  Code Modification:
    o   CER consultation paper in coming weeks following series of
        meetings with generators
    – Increase in Grid Code Standard from 0.5 Hz/sec to 1 Hz/sec:

o   Impact on SNSP level and ability to deliver 2020
    RES–E targets if both elements not delivered

Electricity Networks

• Much wind in west, demand in east

• Rolling out the grid is critical to
  meeting 2020 renewable target

• New N-S line important for SEM

• Over €1 billion planned grid
  investment 2011 to ‘15

• Planning and land access are
  a major challenge

Electricity Networks
• Incentivisation
  – NSIC: Project Specific & Co-ordinated with UR
  – Transmission Generally: Outcome Focused

• Gate 3 update:
  o   Constraints Reports currently issuing by Gate 3 area

  o   Offers must be accepted (or rejected) within 50 business days of
      receipt of constraint report

• EWIC:
  o   Fully operational/Positive impact on SEM SMP

  o   SO – SO countertrading at times of high wind to reduce curtailment

Gas Networks
                                  Capacity Bookings
• Unprecedented decline in capacity bookings
• Interim tariff rise
• CER13/122 Consultation considers removal of flexibility in
  order to increase bookings
• Consultation closes 15th July 2013

Retail

Electricity Market, MWh, Q4 2012   Gas Market, Customer Numbers, Q4 2012

Retail
                           Deregulation & Competition

• Electricity Switching rate: 11.3% - considered active
• Gas Switching rate: 17% - considered very active
• Gas Domestic Market Deregulation
   – Conditions outlined in NDM Review Decision paper CER/13/096

• With strong competition and deregulation, market
  monitoring and customer protection an increasing focus
  for CER

Retail
                                                      Developments
• Revised Supplier Handbook published; formally adopting
  changes to Codes of Practice.
• Accreditation framework for price comparison website
  services launched
   o Two websites now accredited: www.bonkers.ie and www.uswitch.ie.
• Market Innovation
   o Suppliers launched their own Prepayment market models, providing
     greater customer choice
• Disconnections
   o Ongoing concern
   o Monitoring closely
   o Working closely with industry to address issue

NSMP
• Decision on Smart Meter Decision 4th July 2012
   – National rollout of Electricity and Gas smart meters
   – CBA €229m NPV positive over 20 years (1 billion investment)

  What do we hope to achieve by
  implementing the NSMP?
   1. Encourage Energy Efficiency
   2. Facilitate Peak Load
      Management
   3. Support Renewables & Micro-
      Gen
   4. Enhance Competition &
      Improve Customer Experience
   5. Improve Network Services

Downstream Safety

• Gas Safety Framework - legislation enacted in 2012 to
  incorporate new safety functions including:
 o    LPG safety licences for Distribution Network operators
 o    LPG incident reporting
 o    Enhanced enforcement powers

• Safety Supervision:
  o   Will become law that only Registered Electrical Contractors
      can complete domestic electrical works
  o   Three successful prosecutions of unregistered gas installers
  o   Consultation due on registration for Commercial Gas Installers

Upstream Safety
                                 Petroleum Safety Framework
•   A Risk-Based Petroleum Safety Framework (PSF) for
    Designated Petroleum Activities
• Covers petroleum exploration and extraction (i.e. onshore and
  offshore oil and gas including onshore shale gas extraction)
•   Designed to meet best international practice
    o   Engender confidence & assurance amongst the public & industry
    o   Bring greater clarity & transparency to safety regulation of industry

• Will become fully operational on 30th November this year

• New Directive on Offshore Safety – Greater EU Harmonisation

Questions and Answers