Process for entry to. the Irish Retail Gas. Market

Transcription

1 Process for entry to the Irish Retail Gas Market

2 Executive Summary This document outlines and provides information on what is required to enter the Irish retail gas market ( the Market ). Undertakings may operate as a shipper, supplier, or both. The first stage of the process involves obtaining a licence to operate in the Market from the Commission for Energy Regulation. To move gas around the system and participate in the market, undertakings must become party to Gaslink s Code of Operations, provide financial security and implement the appropriate IT interfacing systems. Market assurance will be required for all entrants wishing to enter the Market. Assurance provides a process by which participants can be validated to ensure they are ready to operate correctly in the Market through their systems and processes and are compliant with the Market design. Assurance will be commensurate with the market sector they wish to enter, the number of customers they intend to serve and the level of interaction they will have with market facing systems. In this document, a high level outline of the process and individual steps involved is given; from obtaining a licence from the Commission for Energy Regulation to final market accession. Short descriptions of relevant agreements, market sectors and I.T or system requirements are given. Flow diagrams of the process are included in the appendices. This document is intended as a guide only. Target Audience: This document will be of interest to parties wishing to enter the LDM, DM or NDM gas markets.

3 Table of Contents Purpose of this document... 1 Background... 2 Overview of Paper... 4 Step 1: Licence from the Commission Getting a Licence Licence Conditions... 5 Step 2: Shipping gas to end users Code of Operations and the Framework Agreement Inch Agency Agreement Moffat Administration Agreement (MAA) Offtake Profile Notice (OPN) Agency Agreement Financial Security Cover Future Developments... 9 Step 3: Interfacing with Gaslink market facing systems Gas Transportation Management System (GTMS) Gas MaP (Market and Processes) Pre-Payment Metering (PPM) Operational Siteworks Agreement Appendices Appendix 1: Commission s Licence Assessment Criteria Appendix 2: Market Entry Flow Diagrams Appendix 3: Document Sources... 19

4 Process for market entry Purpose of this document This document outlines the process an undertaking must go through to become a participant in the Irish retail gas market ( the Market ); from applying to the Commission for Energy Regulation ( the Commission ) for their licence to final market accession. It is intended equally for all entrants wishing to enter the LDM (Large Daily Metered), DM (Daily Metered) or NDM (Non Daily Metered) market sectors. It will assist parties in understanding the alternate requirements for entering the different market sectors and will point to where more detailed information for specific areas can be found. This document is intended as a guide only and the relevant body should be contacted to obtain what may be the most recent information on what is required for that particular stage of the accession process. The onus is on the shipper/supplier to ensure that they receive and submit all correct documentation to the relevant body, regardless of whether it is detailed in this document. September CER/08/187

5 Process for market entry Background There are three distinct sectors in the Market. These are the Large Daily Metered (LDM), Daily Metered (DM) and Non Daily Metered (NDM) sectors. The LDM sector is made up of power stations and large industrial energy users. The DM sector is made up of industrial and large commercial users. The NDM sector is made up of domestic customers and small-medium enterprises (SMEs). Competition in the Irish gas market for industrial and commercial customers (in the LDM and DM sectors) commenced in July 2004, with several participants active in the sector. The domestic sector of the retail market was opened for competition on the 1 st of July In the LDM sector (>57.5 GWh gas annually) there is no regulated tariff and the largest users in this sector generally ship gas to themselves, purchasing directly from the wholesale market. In the DM sector (<57.5 GWh and >5.55 GWh gas annually) there are approximately 250 customers. BGES customers in this consumption range are subject to the Regulated Tariff Formula (RTF). This tariff is updated monthly and covers the cost of gas, network costs and supply margins for Bord Gáis Energy Supply (BGES). It allows other suppliers to develop competitive products because they know what price customers are charged by BGES. There is full competition in both the LDM and DM market sectors. The NDM sector is made up of residential, commercial and small industrial customers that use less than 5.55 GWh of gas annually. The Fuel Variation Tariff (FVT) applies to any BGES NDM customer whose supply point capacity is greater than 3750kWh and annual quantity is greater than 73,000kWh. It also provides a transparent mechanism for pricing of BGES s tariffs. Like the RTF sector, prices in the FVT sector are more closely aligned to movements in wholesale gas prices than NDM tariffs for smaller businesses and customers. The rest of the NDM sector (approximately 600,000 customers) is made up of small-medium commercial, business and residential customers. As of the 1 st of October 2007, three separate tariffs apply in this sector; medium business, small business and residential. Common Arrangements for Gas (CAG) In November 2004, the Department of Enterprise, Trade and Investment Northern Ireland (DETINI) and the Department of Communications Marine and Natural Resources (DCMNR) together with the Northern Ireland Authority for Utility Regulation ( the Utility Regulator ) and the Commission published a Development Framework for an All Island Energy Market. By creating a single energy market, both jurisdictions will benefit from increased competition, reduced energy costs and improved reliability of supply. The Commission and the Utility Regulator have completed the first phase of the project as set out in the Framework Document - the establishment of an all-island wholesale electricity market, known as the Single Electricity Market (SEM - 1 st November 2007). The Common Arrangements for Gas (CAG) September CER/08/187

6 Process for market entry project is the second part of the All Ireland Energy Market and is currently in the design stage. The Memorandum of Understanding (MOU) between the Utility Regulator and the Commission, published in April 2008, sets out the overall vision of CAG. The vision is to establish arrangements whereby all stakeholders can buy, sell, transport, operate, plan and develop the natural gas market in both jurisdictions effectively on an all-island basis. The Utility Regulator and the Commission, together with the relevant Government Departments, have scoped the work areas required under the CAG and their timescales, sequencing and priority. The CAG work plan has been published on the CER and Utility Regulator websites so that all stakeholders may plan their contributions to the project. September CER/08/187

7 Process for market entry Overview of Paper To become a participant in the Market, a new entrant will go through the process outlined in this paper. This is divided into three distinct steps: 1. Obtaining a licence: The new entrant applies to the Commission for a licence. The Commission will review the application including the history, business plan and financial records of the company before issuing any licence. 2. Shipping gas: The Code of Operations ( the Code ) is the method by which a shipper will gain access the gas transmission and distribution ( the transportation ) system and deliver gas to its customers. It governs the relationship between Gaslink and shippers. The Code is based on an entry/exit system and details arrangements on the transportation system. Any shipper wishing to operate on the transportation system is obliged to become a party to the Code and must sign a Framework Agreement in order to accede to the Code. Shippers entering the market must adhere to the Gaslink Financial Security Policy before booking capacity on the transportation system. 3. Interfacing with market-facing systems: Shippers/suppliers will need to use Gaslink IT systems to send and receive messages regarding their customers and gas flows around the system. The third step outlines the processes participants must use and the supporting I.T systems. Participants will need to provide assurance that they can interface correctly with the industry IT systems. Once all three of these stages are complete, the undertaking is ready to enter the Market. September CER/08/187

8 Step 1: Licence from the Commission 1.1 Getting a Licence Step 1: Licence from the Commission Every prospective entrant wishing to ship and/or supply gas in the Irish retail market must first obtain a licence from the Commission. There are two types of licence 1 a shipping licence and a shipping/supply licence. If an undertaking only wishes to ship gas, they will receive a shipper s licence. For those wishing to supply final customers 2, a shipping/supply licence will be issued. There are certain application criteria that should be fulfilled by a new entrant if they wish to receive a licence to ship or supply gas. These are summarised in appendix 1. To receive a licence from the Commission, a business outline must be submitted. This business outline should detail the structure of the applicant company and relevant details including director s responsibilities, shareholdings, I.T systems, parent undertakings and financial records. The business outline is required to ensure that the Commission can be satisfied that the applicant has the requisite financial, structural and staffing capabilities to operate successfully in the market. There must be no discrepancies between the information submitted to the Commission and that available from the Companies Registration Office. The shipper or shipper/supplier licence fee is 5000, payable once only. The Commission aims to process a licence application and provide a licence to an applicant approximately three months after receipt of a completed application subject to no delays occurring. Shippers/suppliers are obliged to pay a levy to the Commission. The levy is outlined legislatively in SI no. 693 of 2003 and may be found here. A levy order is published by the Commission each year directing how much is to be paid to it by gas shippers, suppliers, and the transporter. 1.2 Licence Conditions A shipping licence contains fewer conditions than a shipping/supply licence due to the fact that they will not be serving smaller customers and will not interact with the market interfacing systems to the same extent as suppliers. In a shipping/supply licence, there are specific conditions a participant intending to supply final customers, particularly domestic customers, must 1 At present there is one licence for both shipping and supply activities, with some conditions applying only to suppliers. This is currently under review and the single licence will be separated in the near future into two separate licences; for shipping and supply activities. For the purpose of this document, it shall be assumed that there are two separate licences, not the current consolidated one. 2 Final customers are domestic & small-medium commercial premises who purchase gas for their own use. September CER/08/187

9 Step 1: Licence from the Commission fulfil. These include, among other things, requirements to provide a code of practice on payment of bills and dealing with customers in difficulty, a code of practice on complaint handling and a code of practice on marketing to domestic customers. There are also guidelines set out for contracts to supply domestic customers and requirements, at the request of the Commission, to allow for the protection of vulnerable customers. The current shipping/supply licence may be found on the Commission s website. September CER/08/187

10 Step 2: Shipping gas to end users Step 2: Shipping gas to end users The second stage of the Market entry process involves becoming a party to the Code and the associated agreements. Gaslink is responsible for the Code and is signatory to the agreements. Shippers/suppliers entering the market must adhere to the Gaslink Financial Security Policy before booking capacity on the transportation system. Gaslink is responsible for the operation, development and maintenance the transportation network in the Republic of Ireland. The tariffs for use of the transportation system can be found here. A transportation networks monthly report, approved by the Commission, is published on Gaslink s website monthly in arrears. Click here. Figure 1 Irish Gas Transportation System (Source: Gaslink.ie, 15/09/08) Shippers must hold capacity at all exit, entry, and/or supply points from or to which they intend to ship gas. At present, there are two entries to the Irish transportation system at Moffat (through interconnection in Scotland with the NTS) and Inch, Co. Cork. The agreements pertaining to these entry points are the Moffat Administration Agreement (MAA) and Inch Agency Agreement. To book capacity, shippers will interface with Gaslink s market-facing systems September CER/08/187

11 Step 2: Shipping gas to end users and receive allocations 3 from Gaslink or the Moffat/Inch Agent 4. If new entry points are developed in the ROI or through the CAG, further agreements will be put in place. Work is currently underway to allow for the new entry point at Bellanaboy, Co. Mayo for the Corrib gas field. 2.1 Code of Operations and the Framework Agreement The Code governs the relationship between the transporter and shippers/suppliers on the transportation network. To operate in the Market, shippers must accede to the Code by signing the Framework Agreement. The Code sets out the rules for transporting and distributing gas. By signing the Framework Agreement with Gaslink, shippers agree that they have reviewed and accepted the terms of the Code and any ancillary agreements. Click here to access the Code of Operations. Click here to access the Framework Agreement. Modifications to the Code are sometimes necessary to meet the needs of the Market. These modifications are approved at monthly Code Modification Forum meetings. These meetings are attended by the Commission, Gaslink, and market participants & stakeholders. 2.2 Inch Agency Agreement The Inch agency agreement is in place regarding gas provided from the Inch entry point in Cork. It covers gas produced from the Kinsale, Southwest Kinsale and Ballycotton gas fields. This must be signed by shippers wishing to book capacity at this entry point. 3 Allocations refer to the amount of gas that is designated for payment by a shipper at a particular entry or exit point after meter read data has been processed. 4 The Moffat Agent handles allocations on behalf of shippers transporting gas through the interconnectors via the National Transmission Systems (NTS) system in the UK, the Inch Agent does likewise for gas flows through the Inch entry point. September CER/08/187

12 Step 2: Shipping gas to end users 2.3 Moffat Administration Agreement (MAA) The Moffat Agency provides an administration function for Gas flows to be reconciled in advance of Gas Day (D) for all gas crossing the flange at Moffat from the Transco system into the Bord Gáis Éireann (UK) (BGE UK) pipeline and for allocating the gas which has flowed. The MAA is the agreement between all shippers that book capacity at Moffat (the Appointers) and BGE UK (the Moffat Agent) who facilitates these transactions on their behalf. At present, over 90% of the gas in the Irish transportation system comes through the East-West Interconnectors and, as such, any shipper wishing to operate in the market at present will have to sign this. Click here to view the Moffat Administration Agreement in full. 2.4 Offtake Profile Notice (OPN) Agency Agreement The OPN Agency Agreement outlines the framework of rules for requests to Transco for hourly flow rates as provided at Moffat on a daily basis. All shippers operating in the Republic of Ireland sign this agreement, enabling them to submit nominations to the OPN Agency, BGE UK. This is to ensure that the correct quantity of gas is delivered to the Bord Gáis Transmission network. Click here to view the OPN Agency Agreement. 2.5 Financial Security Cover Financial Security cover has to be provided by all shippers before system training or testing for market entry can occur. This is required in respect of their capacity bookings for entry capacity, exit capacity and supply point capacity together with commodity cover. This is separate to the financial security cover provided to the Commission for licensing purposes. It is provided to Gaslink as proof of the participant s ability to book capacity and meet payments on schedule. Full details of the Financial Security requirements are detailed in the Financial Security Policy FS01 as defined in the Code of Operations. Click here to access the Financial Security Policy. 2.6 Future Developments With the proposed introduction of LNG at Shannon by 2012/13 and indigenous production at Corrib by winter 2009/10, further agreements may be put in place and would have to be signed by shippers wishing to book capacity at these entry points should they be developed. September CER/08/187

13 Step 3: Interfacing with I.T systems Step 3: Interfacing with Gaslink market facing systems Shippers on the Irish transportation system will interface with Gaslink s IT systems to send and receive messages, instructions and information. Assurance is required to ensure that a shipper/supplier s business processes and IT systems are compatible with the Market design and market interfacing systems. There are different assurance requirements depending on the sector of the Market the participant wishes to operate in. More detailed assurance may be required for participants wishing to enter the NDM sector because of the larger number of customers involved and the increased level of interaction with Gaslink s IT systems. Gaslink are responsible for providing market assurance. 3.1 Gas Transportation Management System (GTMS) The GTMS is the I.T system Gaslink uses for managing capacity bookings and offtakes on the transportation system. This transaction system allows gas shippers/suppliers on the transportation system to interface with Grid Control regarding their daily business requirements using web-based technology. It is designed to manage the commercial aspects of the transportation network and the interactions between Gaslink and shippers. Participants using the transportation system to ship gas must be trained in the use of GTMS and be assured as Gaslink deems appropriate. 3.2 Gas MaP (Market and Processes) Gas MaP is the I.T infrastructure that supports the automated exchange of data between NDM market participants i.e. providing a link between the IT systems of Gaslink, and the systems of the various gas shippers in the Market. Gas MaP is based around a market messaging solution, which ensures that all market participants are treated in an equal manner in relation to the processing of market related business transactions. Gaslink will install and provide full training on the Gas MaP system. The Gas MaP Technical Solution Overview outlines the proposed technical architecture for the data transfer process from which Shippers participating in the Retail Gas Market can implement inter-operable systems. It provides a high level overview of the functionality that is to be designed and delivered by Gas MaP. The document is designed to assist entrants in understanding the high level design of the data transfer process. Click here to access the Technical Solution Overview. A guide to the minimum I.T technical requirements for the implementation of Gas MaP can be found here. Documents outlining the business design principals of the Gas MaP system and all definitions regarding it may be found here. In order to supply the NDM market, new entrants will have to undergo market assurance to ensure their business processes are compliant with the Market September CER/08/187

14 Step 3: Interfacing with I.T systems design and that their IT interfaces operate correctly with Gaslink systems. Suppliers in the NDM sector will deliver and receive many messages regarding their customers through the Gas MaP system. These may relate to meter work, meter readings or change of shipper. The level of assurance required in the NDM sector will depend on the market share of the participant, the category of customers they intend on serving, and the level of interaction they will have with market facing systems. Assurance will be required before the shipper will be allowed to serve customers. 3.3 Pre-Payment Metering (PPM) Pre-Payment Metering (PPM) allows domestic users to purchase gas credit at vending outlets and apply that credit to their meters. In this way the end user avoids receiving a large bill at the end of the billing period and has more control over their bills. The Front Office Service Provider collects data from retail outlets. The Back Office Service Provider sorts this data, attributes it to a supplier and also provides data to Gaslink. Figure 2 PPM system overview (Source: Bordgais.ie, 15/09/08) There are additional system and process requirements for suppliers who will interact with Back office Service Provider s systems. Communications between shipper/supplier s systems and Gaslink are conducted through Gas MaP and there are additional assurance requirements involved as a result of PPM. Undertakings who wish to supply natural gas to domestic customers must be able to provide pre-payment meters in accordance with the Commission s policies. These may be found here in the Commission s August 2006 decision paper regarding PPM policy (CER/06/157). Further information regarding PPM may be found on BGN s website. September CER/08/187

15 Step 3: Interfacing with I.T systems 3.4 Operational Siteworks Agreement NDM shippers are obliged to sign the Operational Siteworks Services Agreement. This outlines the processes and procedures for carrying out siteworks on the transportation system by Gaslink (or Bord Gáis Networks acting on its behalf) at the request of or on behalf of the participant. In the agreement, operational siteworks are defined as including, inter alia, items such as the installation of equipment; supervision of work; commissioning, locking, unlocking and isolation of meters; repair works; and any other work agreed in writing between Gaslink and the shipper. It is intended that this will also apply to participants in the DM sector in the future. Click here to access the Operational Siteworks Agreement. September CER/08/187

16 Market Entry Process Appendices Appendix 1: Commission s Licence Assessment Criteria Ref: Acceptance Criteria: Evidence Required: Detail Received: General G1.1 Identity of Applicant Full identity of applicant provided in application form. G1.2 Adequate detail into the structure of the applicant, covering directors, shareholding and relevant parent undertakings given. G1.3 The Applicant has been checked through the Companies Registration Office. G1.4 No discrepancies between information given in the application and that available from the Companies Registration Office. G1.5 The persons named in the application are not known to be declared bankrupts nor to have criminal records for offences that would preclude them from being considered for an Authorisation, as checked through the Companies Registration Office G2.1 Application Checklist Has an Application Checklist been completed? G2.2 Queries re checklist Were there any queries raised on the application checklist. If so what were the queries and were they satisfactorily answered. G2.3 Has the relevant statement of accounts been provided? If not has an appropriate letter of guarantee been provided? Ref: Acceptance Criteria: Evidence Required: Detail Received: Financial Review F1.1 The Applicant demonstrates sufficient Financial Strength to support the proposed investment That the Applicant is of sufficient scale to undertake the shipping of natural gas. 1. Turnover of company 2. Turnover growth, organic or external 3. Net assets of company September CER/08/187

17 Market Entry Process 4. No adverse impact of project on finances of company in terms of future turnover and net assets F1.2 That the Applicant is profitable and therefore showing no going concerns issues F1.3 That the Applicant is in a position to meet its current obligations (specifically with regard to debt repayment) and future obligations resulting from the proposed investment F1.4 That the Applicant does not show any indications of current or future insolvency, and that its gearing will not be adversely high as a result of the proposed investment F1.5 The Applicant s Business Plan demonstrate that its future profit and/or cash flows will allow the project to be undertaken, based on reasonable assumptions underpinning the projections. F2.1 Sound Project Finance arrangements are in place The Applicant demonstrates that appropriate financing arrangements are in place to support the proposed investment, as demonstrated by: Ref: Acceptance Criteria: Evidence Required: Detail Received: Technical Review T1.1 That no activity granted under the authorisation will adversely affect the safety and security of the security of the system. Historic Technical information; or Acceptable Technical details regarding applicant company T1.2 The Applicant indicates that experienced professionals will be engaged for the provision of IT requirements for customer management service September CER/08/187

18 Market Entry Process Appendix 2: Market Entry Flow Diagrams To supply in the LDM and DM sectors, GTMS is all that is needed to be installed and validated to operate in the market. To supply the NDM sector, Gas MaP & PPM must be installed and validated. Assuming suppliers in the NDM sector will ship to themselves, the GTMS must also be installed and this can be done in tandem with Gas MaP assurance and installation. September CER/08/187

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20 Market Entry Process September CER/08/187

21 Market Entry Process *5 See Footnote 5 5 Gas MaP assurance and installation can be done in parallel with the installation of GTMS. September CER/08/187

22 Market Entry Process Appendix 3: Document Sources Access to the Network The Framework Agreement may be accessed at: The Code of Operations may be accessed at: The Offtake Profile Notice (OPN) Agreement may be found at: The Moffat Administration Agreement (MAA) may be found at: Information The minimum technical requirements for implementation/use of the Gas MaP system may be found at: 4nID=240&5nID=108&6nID=217&7nID=108&8nID=108&9nID=108&10nID=6 18&pID=618&nID=688 The Gas MaP Technical Solution Overview my be found at: ID=108&pID=618&nID=622 Gas MaP supporting business documentation such as definitions and system outline: 4nID=108&5nID=618&pID=618&nID=623 Transportation Networks Monthly Report: Gas Network Transportation and Distribution Tariffs may be found at: A complete guide to the assurance process for Gas MaP Go-Live can be found at: ce%20strategy%20for%20the%20iri.pdf A large amount of additional information for shippers/suppliers can be found on the Gaslink website at: Financial September CER/08/187

23 Market Entry Process The Gaslink Booking Financial Security Cover Policy (CER 05/001) may be found at: SI 693 of 2003 Gas Levy Order may be found at: September CER/08/187