Modification Proposal Form

MODIFICATION PROPOSAL FORM

Proposal Submitted Date Proposal received by Type of Proposal Number: by: Secretariat: SEMO 22 March 2011 Standard Mod_13_11

Contact Details for Modification Proposal Originator

Name: Telephone number: e-mail address: Aodhagan Downey 01-2370124 [email protected] Modification Proposal Title:

Inclusion of Other Systems Charges in the Imperfections Charge

Trading and Settlement Code and/or Agreed Procedure change? TSC

Section(s) affected by Modification Proposal: 4.155, Glossary

Version Number of the Code/Agreed Procedure used in Modification 8.0 drafting:

Modification Proposal Description (Clearly show proposed code change using tracked changes & include any necessary explanatory information)

4.155 The purpose of the Imperfections Charge is to recover the anticipated net payments to Generator Units in respect of Constraint Payments, Uninstructed Imbalances (less Testing Charges for Generator Units) Dispatch Balancing Costs (less Other System Charges), Make Whole Payments, and any net imbalance between Energy Payments and Energy Charges and Capacity Payments and Capacity Charges over the Year, with adjustments for previous Years as appropriate.

Glossary

Dispatch means the total net payments to Generator Units in respect of Balancing Costs Constraint Payments, Uninstructed Imbalance Payments and Testing Charges

Other System means charges levied by the System Operators on Generator Units Charges including generator performance incentives, short notice declaration charges; trip charges and other charges approved by a relevant Competent Authority

Modification Proposal Justification (Clearly state the reason for the Modification & how it furthers the Code Objectives)

As part of the AS Harmonisation Project, the SEM Committee decision paper, “Harmonised All-Island Ancillary Services Rates and Other System Charges” (SEM-10-001) stated the following in relation to netting Other System Charges from Dispatch Balancing Costs (DBC) when calculating the Imperfections Charge:

“In the case of the other charges (i.e. Trips, SNDs and GPIs), the TUoS statement of charges will be used as a facilitating vehicle to impose and publish the charges annually. It is appropriate to net off these charges from the DBC. The DBC are partially incurred by generators having poor performance and behaviour. They are recovered in the SEM through an imperfections tariff levied on suppliers by the Single Electricity Market Operator (SEMO), which in turn is regulated by the RAs. For the avoidance of doubt the non-AS charges reduce the imperfections tariff and not the DBC themselves.”

This Modification Proposal inserts the necessary terms into the TSC to allow for this netting process to occur, including:

Dispatch Balancing Costs – This term replaces the explicit listing of Constraint Payments, Uninstructed Imbalance Payments and Testing Charges in 4.155 and replaces them with this commonly used collective term.

Other System Charges – This term introduces the “other charges” referred to in the above statement, namely generator performance incentives, trip charges and short notice declaration charges. The term “Other Systems Charges” is the collective description used by the System Operators to describe these charges so this is used here for consistency.

The definition of these terms ensures that it is clear that the Other Systems Charges reduce the Imperfections Charges and not the DBC themselves, as is stated in the RA decision paper. It also ensures that Make Whole Payments and imbalances are also seen as separate from DBC.

In addition to being able to recover Other System Charges, a provision to allow for the recovery (or return) of net imbalances between Capacity Payments and Capacity Charges is included. While Capacity Payments and Capacity Charges are designed to balance, small residual amounts do arise for a number of reasons and a mechanism for dealing with these amounts is not set out in the TSC. The inclusion of these in the net imbalance part of 4.155 resolves this.

It also allows SEMO to recover (or return) other indirect imbalances from market interest, foreign exchange and Settlement Reallocations. These items arise entirely from Energy, Imperfections/Constraints and Capacity Payments and Charges and no other source and are therefore not listed explicitly in 4.155 above; however, for the avoidance of doubt, it is intended that it will be possible to recover any net imbalances arising from these items in the Imperfections Charge.

The reason the indirect imbalances can not be recovered (or returned) currently through the Imperfections Charge is due the fact that it is not possible to determine what components of any imbalance in Market Interest, Foreign Exchange and Settlement Reallocation relate to Capacity Payments and Charges. As net imbalances between Capacity Payments and Charges are not recoverable through the Imperfections Charge, it is not possible to recover these other imbalances either in the Imperfection Charge.

By including net imbalances between Capacity Payments and Charges, all the components from which these additional imbalances arise from can be recovered through the Imperfections Charge, enabling SEMO to recover (or return) these amounts.

These changes further the following Code objectives:

1.3.2 to facilitate the efficient, economic and coordinated operation, administration and development of the Single Electricity Market in a financially secure manner;

1.3.5 to provide transparency in the operation of the Single Electricity Market;

Implication of not implementing the Modification (Clearly state the possible outcomes should the Modification not be made , or how the Code Objectives would not be met)

Not implementing this Modification Proposal would mean that the RAs preferred mechanism for returning these monies to Supplier Units and ultimately to customers, as set out in SEM-10-001 would not be possible.

In addition there would be no mechanism for dealing with net imbalances between Capacity Payments and Capacity Charges and other net imbalances that arise from Energy, Constraints/Imperfections and Capacity Payments and Charges.

Please return this form to Secretariat by e-mail to [email protected]

Notes on completing Modification Proposal Form: 1. If a person submits a Modification Proposal on behalf of another person, that person who proposes the material of the change should be identified on the Modification Proposal Form as the Modification Proposal Originator. 2. Any person raising a Modification Proposal shall ensure that their proposal is clear and substantiated with the appropriate detail including the way in which it furthers the Code Objectives to enable it to be fully considered by the Modifications Committee. 3. Each Modification Proposal will include a draft text of the proposed Modification to the Code. 4. For the purposes of this Modification Proposal Form, the following terms shall have the following meanings:

Code: means the Trading and Settlement Code for the Single Electricity Market Modification Proposal: means the proposal to modify the Code as set out in the attached form Derivative Work: means any text or work which incorporates or contains all or part of the Modification Proposal or any adaptation, abridgement, expansion or other modification of the Modification Proposal

The terms “Market Operator”, “Modifications Committee” and “Regulatory Authorities” shall have the meanings assigned to those terms in the Code.

In consideration for the right to submit, and have the Modification Proposal assessed in accordance with the terms of Section 2 of the Code (and Agreed Procedure 12), which I have read and understand, I agree as follows:

1. I hereby grant a worldwide, perpetual, royalty-free, non-exclusive licence:

1.1 to the Market Operator and the Regulatory Authorities to publish and/or distribute the Modification Proposal for free and unrestricted access;

1.2 to the Regulatory Authorities, the Modifications Committee and each member of the Modifications Committee to amend, adapt, combine, abridge, expand or otherwise modify the Modification Proposal at their sole discretion for the purpose of developing the Modification Proposal in accordance with the Code;

1.3 to the Market Operator and the Regulatory Authorities to incorporate the Modification Proposal into the Code;

1.4 to all Parties to the Code and the Regulatory Authorities to use, reproduce and distribute the Modification Proposal, whether as part of the Code or otherwise, for any purpose arising out of or in connection with the Code.

2. The licences set out in clause 1 shall equally apply to any Derivative Works.

3. I hereby waive in favour of the Parties to the Code and the Regulatory Authorities any and all moral rights I may have arising out of or in connection with the Modification Proposal or any Derivative Works.

4. I hereby warrant that, except where expressly indicated otherwise, I am the owner of the copyright and any other intellectual property and proprietary rights in the Modification Proposal and, where not the owner, I have the requisite permissions to grant the rights set out in this form.

5. I hereby acknowledge that the Modification Proposal may be rejected by the Modifications Committee and/or the Regulatory Authorities and that there is no guarantee that my Modification Proposal will be incorporated into the Code.