Independent system operator (ISO) Licencing and certification

Transcription

1 Independent system operator (ISO) Licencing and certification Rolands Irklis Chairman of Public Utilities Commission, Latvia Please feel free to add your logo here! www. erranet.org

2 Content Please feel free to add your logo here! Reasoning of unbundling ISO model definition ISO model in details Tasks of ISO Tasks of system owner Tasks of the regulator Challenges related with ISO model Certification process Certification and licensing Latvian case study Monitoring 2

3 Reasoning of unbundling Unbundling should remove conflict of interest in effective way «Any system for unbundling should be effective in removing any conflict of interests between producers, suppliers and transmission system operators, in order to create incentives for the necessary investments and guarantee the access of new market entrants under a transparent and efficient regulatory regime and should not create an overly onerous regulatory regime for national regulatory authorities.» Directive 2009/72/EC 3

4 Unbundling in EU 4

5 ISO Model definition The vertically integrated company still owns the assets of transmission network, but the technical and commercial operations of the network is carried out by an independent system operator. The system operator itself have to be ownership unbundled!!! Independent system operator Vertically integrated company O w n e r s h i p System owner 5

6 ISO Model in details ISO must demonstrate that it has at its disposal the required technical, financial and human resources to carry out its tasks ISO must be independent from supply and/or production interests ISO is in charge of investment planning Network owner legally and functionally unbundled Regulatory oversight and monitoring ensured 6

7 Tasks of ISO All tasks of transmission system operator according to Electricity directive including: Operation, maintenance and development of transmission system; Granting and managing third party access; Collection of access charges, congestion charges and ITC mechanism. 7

8 Independence of system owner Legal unbundling which ensures: Management separation Independent salary system Effective decision-making rights Compliance programme and officer Independence rules of ITO can be used as reference 8

9 Tasks of system owner Cooperation with ISO for the fulfilment of its tasks Have to provide coverage of liability related to the network assets Is obliged to finance the investments decided by the ISO Does not have any rights to intervene or overtake the tasks assigned to the ISO 9

10 Specific duties of the national regulator Monitoring the transmission system owner s (SO) and the ISO s compliance Monitoring the relations and communications between the ISO and the SO (this includes the approval of any contracts between the ISO and the SO) Acting as a dispute settlement authority between the ISO and the SO Approval of the investment planning and the multi-annual network development plan to be presented annually by the ISO Ensuring that network access tariffs collected by the ISO include remuneration for the SO Exercising the powers to carry out inspections (including unannounced inspections) at the premises of the SO and the independent system operator Monitoring the use of congestion charges collected by the ISO in accordance with the rules of the Electricity and Gas Regulations 10

11 Way towards unbundling ISO Vertically integrated company have to be splited in three companies VIC Transmission Production Supply VIC Production Supply ISO System owner 11

12 Disposal of assets The system owner has to give the assets at disposal of ISO. Usually through a leasing agreement. The basic requirements of the costs related to the leasing can be part of tariff methodologies. For example the leasing costs can represent depreciation of the assets and regulated WACC. 12

13 Disposal of the personnel The personnel which is responsible for operation; planning; maintenance; management have to be at the disposal of TSO 13

14 Certification procedure Application from TSO according to TSO`s initiative or upon NRA`s or EC`s request NRA have to adopt draft decision within 4 months Draft decision have to be submitted to the EC EC issue an opinion on NRA`s draft decision within 2 months or 4 months (if additional opinion required from ACER) NRA adopts final decision within 2 months after EC`s opinion 14

15 More than 100 EC opinions on Certification 15

16 European Commission assessments Most frequent EC`s concerns: The unclear exercise of control and rights; The low level of resources available to manage the financing, maintenance and development of the TSO; The unclear definition of the ITO Task; The lack of independence of the management, the board members and the Supervisory Body and the issue of conflict of interest after the end of term of office; The lack of separation between the competent ministers within the State (powers of the Department for Energy over the TSO; powers of the Department for Energy conferred by law over dispatching) for state owned companies; The lack of clarity when it comes to services provided to ITO by VIU contracts for services between the VIU and the ITO - IT consultants and contractors are not clear enough and should often be revised; The exercise of control and rights with the VIU often does not ensure proper unbundling and issues such as generation interests of an Investment fund (Mitsubishi); Interests of minority shareholders; shareholding in subsidiary of VIU. 16

17 Options for the decision Following decisions are possible regarding certification: Negative decision refusal of certification Positive decision certification of TSO Positive conditional decision some problems are detected, but are not serious enough to refuse certification. TSO is certified and obliged to reach full compliance during until specified deadline. 17

18 Challenges related with the ISO Complicated investment decision process Limited ability to borrow money for new investments Additional costs related with the transmission system owner The profitable part (assets and WACC) belongs to transmission system owner 18

19 Certification vs licencing Which comes first 19

20 Certification vs licencing Licencing Certification During the licencing regulator have to get confidence that TSO has technical and financial capability to perform tasks assigned to the TSO Licence usually is given for certain period of time It provides specific obligation to the TSO During certification regulator have to get confidence that TSO has been unbundled effectively and there is no conflict of interest between TSO and electricity producers/suppliers. No specific term for certification, but new certification can be initiated if there are reason for that 20

21 Case of certification of Latvian TSO 21

22 Timeline of Latvian TSO certification Acticvity Amendments in the Law on Electricity Market July, 2011 Time Rules of Certification adopted by the Regulator November, 2011 Certification aplication March 12 May 14, 2012 Ten additional requests of information from TSO and system owner June October, 2012 Notification of draft decision to EC October 8,2012 EC`s opinion December 5, 2012 Final decision on Certification January 30,

23 Decision on Certification of Latvian TSO Positive decision on certification of Latvian TSO JSC «Augstsprieguma tīkls» with following conditions: TSO has to overtake, within 24 months, the maintenance of fixed assets of the transmission system or had to conclude an agreement for performance of specific works with such a company which is neither directly nor indirectly associated with activities of electricity generation, trade and distribution TSO has to overtake, within 24 months, the development, construction and reconstruction of the transmission network or had to conclude an agreement for performance of specific works with such a company which is neither directly nor indirectly associated with activities of electricity generation, trade and distribution 23

24 Ownership/unbundling structure Asset rental 24

25 Monitoring the compliance NRAs have to monitor monitor the unbundling requirements considering that new facts or circumstances might emerge and change the initial assessment. Source: CEER 25

26 Monitored issues Source: CEER 26

27 THANK YOU FOR YOUR ATTENTION! Your Name your address W Web: website address