ANNUAL REPORT 2014 COMMISSION FOR ENERGY REGULATION // ANNUAL REPORT 2014
Note to Ministers
To: Mr Alex White, T.D., Minister for Communications, Energy and Natural Resources In accordance with paragraph 25 (b) of Schedule 1 to the Electricity Regulation Act, 1999, as amended by Section 10 Energy (Miscellaneous Provisions) Act, 2006, we are pleased to present to you the Annual Report of the Commission for Energy Regulation, in respect of the period from 1st January 2014 to 31st December 2014.
Cc: Mr Alan Kelly, T.D. Minister for the Environment, Community and Local Government
Garrett Blaney Chairperson
Paul McGowan Commissioner
Aoife MacEvilly Commissioner
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Table of Contents
Foreword by the Commissioners 4
Public Interest Statement 6
Executive Summary 10
Energy Efficiency 2014 14
Statement of Best Practice 15
Background to the Annual Report 16
Key Task 1: Water Project 17
Key Task 2: SEM European Integration Project 21
Key Task 3: Gas European Integration Project 26
Key Task 4: Water Project 28
Key Task 5: Electricity Networks Revenue Review Project 30
Key Task 6: Electricity Networks & Renewables Issues 32
Key Task 7: Electricity & Gas Security of Supply 38
Key Task 8: Retail Market Monitoring & Customer Protection 39
Key Task 9: Downstream Energy Safety Regime 44
Key Task 10: New Petroleum Safety Regime 50
Key Performance Indicators 52
Financial Statements 57
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Foreword by the Commissioners
The Commission for Energy Regulation (“the CER”) is deregulation of the domestic gas market so that the Ireland’s independent energy and water regulator. Since growing number of suppliers are free to set their own its establishment as the independent electricity regulator prices in all markets. in 1999, the CER’s remit has expanded significantly to Facilitating renewable electricity through the publication encompass a range of economic, customer protection of the DS3 System Services procurement framework and safety responsibilities in energy. The CER has also which is designed to increase flexibility in the electricity been given a new role as the economic regulator of the system while ensuring a better balance of risks and costs Irish public water and wastewater sector which took between producers and consumers and allow Ireland effect in early 2014. The CER has an important public to achieve 2020 targets for generating electricity from interest mandate, as highlighted in our Public Interest renewable sources. Statement. We also have a challenging and complex work Underpinning efficient investment in electricity networks plan, reflecting the significant changes underway within through the 4th Price Control which commenced in 2014. the energy and water sectors. Below we provide a brief summary of key developments and achievements in 2014. Enhancing EU integration and competition through the development of new gas network codes and market arrangements. Energy Ensuring that “the lights stay on” and “the gas continues Our aim is to protect the interests of energy customers, to flow” through active engagement with industry and maintain security of supply, and to promote competition stakeholders at a national and European level. covering the generation and supply of electricity and supply of natural gas. As part of this role, the CER jointly Customer Complaints regulates the all-island wholesale Single Electricity Market The CER has an important function in customer protection (SEM) with its counterpart in Northern Ireland, the Utility by resolving complaints that customers have with Regulator. The SEM is governed by the SEM Committee, energy companies through its Customer Care team. Key a decision-making body consisting of the CER, the Utility achievements in 2014 include: Regulator and an independent member. Significantly improved timelines for addressing complex The energy sector is undergoing a period of rapid change complaints, including a reduced backlog. as we deliver on our renewable objectives, embrace new smart technologies, work towards integrating our market The expansion of the function to include complaints with the EU single energy market and further develop relating to water services, which has now been put on a competitive retail markets to deliver value and choice for statutory footing. consumers. Key achievement in 2014 include: Water Developing competitive wholesale markets through the In 2014 the CER formally assumed the role of economic publication of the I-SEM high level design. Following regulator for the Irish water and wastewater sector, consultation and impact assessment on alternative covering the services provided by Irish Water. The water approaches, this establishes the basis for new energy sector has undergone significant transformation with trading arrangements and a capacity remuneration the establishment of Irish Water as a commercial State mechanism which aim to enhance competition, deliver company to deliver services and investment on a national more for consumers and better integrate the all-island basis, and the introduction of domestic water charges. Our market with the EU energy market. primary aim is to protect the interests of customers of Irish Improving retail markets through the publication of the Water. Key achievements in 2014 include: National Smart Metering Programme high level design. Upgrading to the next generation of energy meters will Establishing a water regulation division within CER and put consumers in control, providing more information developing the team, structures and work programmes and options to reduce energy usage and save on bills. to ensure best practice economic regulation of Irish Developing competitive retail markets through the Water and a strong focus on the public interest.
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Since 1999, the CER’s remit has expanded significantly to encompass a range of economic, customer protection and safety responsibilities in energy.
Ensuring consumer protection through the publication of Protecting the public interest through the new the Customer handbook and Codes of Practice. Petroleum Safety Framework, including assessing Underpinning necessary investment in the water and safety cases, issuing Safety Permits and implementing wastewater infrastructure to enhance the quality of compliance assurance activities such as audits and services to consumers through the publication of the inspections. Irish Water Interim Revenue Review and approval of Irish Water’s Water Charges Plan for 2015/2016. CER Operations The achievements outlined above were made possible Energy Safety Regulation by the work and dedication of the CER staff, on whose In energy safety, the core focus of the CER is to protect knowledge and expertise we rely, along with their lives across a range of areas in the energy sector. This commitment to ensuring beneficial outcomes for includes safety regulation of electrical contractors and consumers and the general public. In 2014, the CER gas installers (covering both natural gas and Liquefied published its Strategic Plan which sets out our mission, Petroleum Gas (LPG)). In addition, the CER is the safety vision and values as well as our strategic goals for the regulator of the downstream natural gas industry (covering period 2014 to 2018. storage, transportation and supply) and LPG piped A key over-arching goal is to ensure that “Regulation is distribution systems. It is also the safety regulator of Best International Practice” and we continue to strive to upstream petroleum extraction and exploration activities; improve our operational and strategic capacity through this includes oil and gas activity both onshore and offshore. HR management, integrated business planning, adopting Key achievements in 2014 include: best practice in regulation and stakeholder engagement. Enhancing the safety of LPG customers through a This is especially important as the CER is tasked with new new LPG safety regime by finalising Safety Licences, statutory functions and develops new areas of expertise publishing LPG Incident Reporting Regulations and and delivery models. With the increasing complexity, scope positioning the CER to exercise its enhanced statutory and pace of change of our work programme, the CER is enforcement powers. committed to investing in our staff, as our key asset. This will be a focus in 2015 and beyond. Protecting consumers by prosecuting unregistered gas installers and electrical contractors and commencing the consultation process on the extension of the Registered Gas installer regulatory scheme to include non-domestic gas works. Increasing public awareness of safety issues regarding electrical and gas issues through public awareness campaigns highlighting these issues, in collaboration with other stakeholders. Chairperson Commissioner Commissioner Garrett Blaney Paul McGowan Aoife MacEvilly
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Public Interest Statement
Ireland’s Energy Regulator In fulfilling our mission and our statutory functions, it is vital that the CER develops and adheres to key values for In 2014, the CER commenced a review of its Strategic Plan the organisation so that all stakeholders, and particularly and priorities for the period 2014-2018. That work is now the public, trust us and have faith that we will serve them completed and the priorities in this area are reflected in this properly as an independent regulator. In regulating we report for 2014. stress that: The CER is the independent body in Ireland with a mission We are committed to public service – we will always act of ‘regulating water, energy and safety in the public in the public interest; interest’. Our vision is as follows: We act with integrity in everything we do; The short and long run interests of the public are protected We are professional in our dealings with stakeholders; by ensuring: We are accessible to stakeholders – we listen to what energy is supplied safely; people have to say; the lights stay on; We are proportionate and objective – we take balanced decisions; the gas continues to flow; We are transparent – we are open to scrutiny and are a reliable supply of clean water and efficient treatment committed to explaining our decisions; of wastewater; We are accountable for our decisions and for the way we consumer prices for energy and water are fair and spend our resources; and reasonable; and We value and develop our staff – they are our chief regulation is to best international practice. resource.
For detailed information on our work please see our website at www.cer.ie
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Duties & Functions The following is an overview of the key legislation underpinning CER’s duties and functions: The CER is Ireland’s independent energy and water regulator. The CER was established in 1999. Since then The CER was established under the provisions of the its powers and functions have expanded and it now has a Electricity Regulation Act, 1999, and has taken on wide range of economic, customer protection and safety significant additional responsibilities since then under responsibilities in energy. The CER has also commenced its various pieces of legislation. Responsibility for the new role as the economic regulator of the Irish public water regulation of the natural gas market was conferred upon and wastewater sector which took effect in early 2014. The the CER under the Gas (Interim) Regulation Act, 2002. Commission is financed by means of a levy on industry. An overview of the CER’s current (as at June 2015) key The Energy (Miscellaneous Provisions) Act 2006 added functions is as follows: to the role and functions of the CER, including providing for additional responsibilities in natural gas and electrical Economic Regulation of Energy: Our aim is to protect the safety. interests of energy customers, maintain security of supply, and to promote competition covering the generation and The Electricity Regulation Amendment (SEM) Act, 2007 supply of electricity and supply of natural gas. As part of outlined the CER’s functions in relation to the Single this role, the CER jointly regulates the all-island wholesale Electricity Market (SEM) for the island of Ireland. The SEM Single Electricity Market (SEM) with its counterpart is governed through the SEM Committee consisting of the in Northern Ireland, the Utility Regulator. The SEM is CER, the Utility Regulator in Belfast and an Independent governed by a decision-making body known as the SEM Member. Committee, consisting of the CER, the Utility Regulator In 2010, the CER’s statutory safety responsibilities and an independent member. expanded significantly with the enactment of the Economic Regulation of Water: The CER has recently Petroleum (Exploration & Extraction) Safety Act, 2010. assumed the role of economic regulator for the public Further legislation has seen the Registered Gas Installer water and wastewater sector, covering the services scheme expand to include Liquefied Petroleum Gas (LPG) provided by Irish Water. Our primary aim is to protect the installers and piped LPG distribution systems that supply interests of customers of Irish Water. This role focuses on domestic customers. water and wastewater charges and customer protection. The Water Services Act (WSA) was enacted in March Customer Complaints (Energy & Water): The CER has 2013. The Act empowered the CER to commence an important related function in customer protection by preparation for the role of Economic Regulator for public resolving complaints that customers have with energy water and waste water services as provided by Irish Water companies through its Customer Care team expanding to to domestic and business customers. deal with Irish Water customers, in line with legislation. The Water Services (No. 2) Act 2013 was enacted on 25 Energy Safety Regulation: In energy safety, the core focus December 2013. With effect from 1st January 2014, the of the CER is to protect lives across a range of areas in the Act provides for the transfer of Water Services functions energy sector. This includes safety regulation of electrical from Local Authorities to Irish Water and the CER contractors and gas installers (covering both natural gas assumed the role of economic regulator for the sector and Liquefied Petroleum Gas (LPG). In addition, the CER soon thereafter. is the safety regulator of the downstream natural gas The Water Services Act 2014 was enacted on 28th industry (covering storage, transportation and supply) and December 2014 and made provision for the CER to LPG piped distribution systems. It is also safety regulator establish a Public Water Forum and a dispute resolution of upstream petroleum safety extraction and exploration service for customers. activities; this includes oil and gas activity both onshore and offshore.
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Public Interest Statement continued
CER Organisation 2014 The CER is headed by up to three Commissioners at any one time. In 2014 the Commissioners were (Chairperson) Garret Blaney, Paul McGowan and Aoife MacEvilly (who was appointed Commissioner on 6th October 2014). The Commissioners are assisted in their duties by a staff of about 90, including 4 directors. The chart below summarises the organisational structure from last year. There were a number of organisational changes during 2014 including the appointment of Laura Brien as Director of Energy Markets in February, replacing Eugene Coughlan who retired in late 2013. Commissioner Dermot Nolan also left the CER during 2014 and was replaced by Commissioner Aoife MacEvilly.
Garrett Blaney Paul McGowan Aoife MacEvilly Chairperson Commisioner Commisioner
Cathy Mannion, Director of Water, National Smart Denis Cagney, Metering Program & Laura Brien, Director Director of Energy Sheenagh Rooney, Director Customer Care Team of Energy Markets Networks and Legal of Safety & Operations
Water Retail, Electricity & Networks – Technical Human Resources Safety Supervision Smart Metering Gas Markets Networks – Finance Gas Safety Energy Customers Renewables Commercial Project & Business Framework Customer Team Wholesale Network Access Support Office Petroleum Safety Generation Framework CEER/ACER Indepent System I.T. WAREG Independent System Operator EUOAG Operator Market Licencing/Contents NSOAF Modelling Emergency Trading & Settlement Procedures Code CEER/Acer Joint Reg Arrangement CER Legal PSO CEER/ACER
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Information Provision Key Task 6 (Electricity Networks Renewables Review Project) contributes to the gas continuing to flow, the lights The CER is committed to providing a high quality, user- staying on and customers paying fair and reasonable friendly and easily accessible service to our customers in prices for their electricity/gas. all of our areas of responsibility, as set out in our customer charter which is available on www.cer.ie. An upgrade of the Key Task 7 (Electricity and Gas Security of Supply) CER website was completed in early 2014 with the launch contributes to the lights staying on and the electricity of the enhanced website. prices being fair and reasonable for customers.
In making decisions on policy matters, the CER regularly Key Task 8 (Retail Market Monitoring and Customer carries out formal consultations with stakeholders over its Protection) contributes to electricity/gas prices being fair website www.cer.ie and the associated website for all- and reasonable for customers. island energy regulatory issues, at www.allislandproject. org. Responses to these consultations are considered in Key Task 9 (Downstream Energy Safety Regime) the formulation of decision papers. The CER also regularly contributes to energy being supplied safely. communicates and meets with industry and customer Key Task 10 (New Petroleum Safety Regime) stakeholders. contributes to energy being supplied safely.
This process of formal consultation was in evidence during The CER also delivers energy information to the general 2014 when the CER made public policy consultations and public and provides a dispute resolution service for decisions to achieve its mission (shown above) in the public electricity and gas customers, through the CER websites interest. This is detailed in the “10 Key Tasks” in this Annual at www.cer.ie and www.energycustomers.ie and through Report which focuses on the most important strategic face-to-face meetings and published documents. tasks that the CER set for itself for 2010 in order to achieve its mission. For example: CER 2014 Work Plan Key Task 1 (Water Project) contributes to a reliable supply In its work programme for 2014, published on the CER’s of clean water and efficient treatment of wastewater and website on the 12th June 20141, the CER identified also contributes to ensuring that customer prices for water the above 10 key strategic tasks for commencement, are fair and reasonable. progression, or delivery during 2014, all of which would Key Task 2 (SEM European Integration Project) contributes help the CER to fulfil its mission statement. These tasks to achieving all elements of the mission statement. are summarised in the Executive Summary and are also discussed in detail in the main section of this Report. Key Task 3 (Gas European Integration Project) contributes to achieving all elements of the mission statement.
Key Task 4 (Smart Metering Project) contributes to electricity/gas prices being fair and reasonable for customers and to the environment being protected.
Key Task 5 (Electricity Networks Revenue Review Project) contributes to the gas continuing to flow, the lights staying on and customers paying fair and reasonable prices for their electricity/gas.
1 www.cer.ie/docs/000181/CER14133%20CER%202014%20Work%20Report%20to%20Minister.pdf 9 COMMISSION FOR ENERGY REGULATION // ANNUAL REPORT 2014
Executive Summary
This Executive Summary provides an overview of the complaints, including in the case of Irish Water. In that CER’s key work items and achievements in 2014. While the context, in September 2014, in the absence of a statutory Executive Summary is designed to provide an update on mandate, the CER introduced a Voluntary Working Practice the CER’s progress in achieving its strategic goals during in relation to the resolution of complaints that customers the year, many of the CER’s work items are ongoing and will have with Irish Water. Under this arrangement, the CER, continue into and in some cases beyond 2015. Such work is further to investigating unresolved complaints, could apply outlined in the ‘Looking Ahead’ section. charter payments in accordance with the CER’s Water Customers Handbook, and direct Irish Water to pay refunds As part of the CER’s business planning process a large or compensate customers to a maximum amount of €100. number of work items were identified for commencement, continuation and/ or delivery during 2014. Of these, 10 At the end of 2014, the Water Services Act 2014 formed were selected as the CER’s “10 Key Tasks for 2014”. These the legislative basis for the revised Government policy on key tasks are distributed across the CER’s responsibilities water charges. Further details on changes that were made and were viewed as being the CER’s most important in 2015 following the Water Services Act 2014 can be found strategic tasks for the year in order to achieve its mission. in the Looking Ahead section in this Annual Report. While the main focus of the CER’s work during 2014 was on these “10 Key Tasks”, each of the work items contributed to Key Task 2 - SEM European Integration Project the CER’s overall strategic objectives. The European Commission has a stated goal of The following sections of this Executive Summary focus harmonising the wholesale electricity power markets in primarily on the work carried out by the CER in meeting Europe. This is known as the EU Target Model and its aim these 10 key strategic tasks, and related matters, in 2014. is to create a pan-European market with closer connecting They are summarised below. of power markets to improve the efficient use of energy across national borders. In this context, the CER set out Key Task 1 - Water in its 2014 Work Plan how this objective will be furthered such that the current market in Ireland, known as the Single The CER’s function was expanded in the area of water to Electricity Market (SEM), can meet the requirements of the create the economic regulatory framework following the EU Target Model by 2017; this redesign of SEM is known as enactment of the Water Services Acts 2013. As part of the the Integrated Single Electricity Market (I-SEM). framework, during 2014 the CER has published significant consultations and decisions on the revenue allowed to Specifically, the 2014 Work Plan committed to publishing Irish Water for the period to the end of 2016, principles a consultation paper outlining a number of market design underlying Irish Water’s customer tariffs and the charges options for this redesign which was to be followed by a to those customers for that period. This work culminated in Proposed Decision and then a Decision which sets out the the publication of the CER approved Water Charges Plan in detailed decision on the new High Level Design (HLD) for October 2014. the SEM. This HLD was to be published with an associated impact statement of the detailed decision. In line with the In addition, the CER consulted upon Irish Water’s Customer Work Plan, the SEM Committee successfully published this Handbook which sets out what is required of Irish Water consultation paper in February 2014. in relation to the level of service provided to customers and also sets out customer protection measures to be Following extensive stakeholder engagement, the SEM implemented by Irish Water. The CER published a decision Committee published a Draft Decision in June which regarding the Handbook in July of 2014 and subsequently set out the preferred option. Again, further to extensive approved Irish Water’s Codes of Practice, Customer consultation with stakeholders, the SEM Committee Charter and Terms and Conditions for supply of water and published the HLD Decision in this regard along with wastewater services to customers. the associated Impact Assessment which informed the Decision. The Impact Assessment consisted of a qualitative Based on the CER’s experience in energy, the CER analysis of the options against nine criteria and also a considers that it is necessary for customers of regulated cost-benefit analysis of the four options consulted on and utilities to have an avenue for the resolution of outstanding
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of the Capacity Remuneration Mechanism (the Capacity The High Level Design decision outlines a smart metering Remuneration Mechanism is being implemented as part solution in which minimal functionality is performed on the of the SEM redesign to ensure that sufficient generation smart meter; with supplier back office systems perform the capacity is available to deliver secure supplies for majority of data processing. Real-time consumption data electricity consumers during times of scarcity). is provided directly into the home from the meter allowing customers visibility of their energy usage. Consumers will Key Task 3 – Gas European Integration Project be given greater insight into their energy consumption and costs through a variety of information channels. The Regulation (EC) 715/2009 sets out the process for the October decision also outlined the introduction of Time of harmonisation of gas market rules across the EU. The Use (ToU) tariffs. The introduction of ToU pricing is a key CER, like other National Regulatory Authority (NRAs), are component of the NSMP and will contribute significantly required to ensure compliance of the Transmission System to realising the benefits and opportunities created by the Operators (TSOs) with the rules and guidelines contained rollout of smart meters. ToU tariffs will offer consumers the within this Regulation. In 2014, the CER supported the ability to use electricity at cheaper times. TSO in its activities across a range of issues to support preparation for implementing the Network Codes in a timely manner and at an efficient cost. During 2014, a key Key Task 5 – Electricity Networks Revenue aspect of the CER’s work on the European gas market Review Project integration project involved liaising with colleagues in In 2014, the CER commenced its five-yearly review of Northern Ireland and Great Britain to ensure the timely and electricity network revenues and charges under the Price coordinated implementation of the Network Codes in the Review 4 (PR4) project. The review includes an examination three jurisdictions. of operating costs, capital expenditures, cost of capital and depreciation rates for the network companies, which Key Task 4 – Smart Metering Project together feed in to the allowed network charges. This will lead to a full public consultation process in 2015 with the The National Smart Metering Project (NSMP) is a final PR4 determination in Q3 2015. The CER has engaged programme of strategic national importance which Jacobs/SKM as expert technical consultants to assist in will underpin Irish energy policy. During 2014, the CER the CER’s review and began the preliminary work in this continued its work with stakeholders and the public on project in preparation for the public consultation in 2015. developing the smart metering High Level Design. This The review will also prepare a framework for reporting and work involved final consultations on the smart metering assessment of expenditure on the National Smart Metering High Level Design and re running of the cost benefit Programme if that is approved during the PR4 period. analysis. The CER’s final decision on the High Level Design was published in October 2014.
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Executive Summary continued
Key Task 6 – Electricity Networks Key Task 7 – Electricity & Gas Security and Renewable Issues of Supply In 2014, the CER continued to lead a number of About one quarter of all the energy used in the EU is workstreams which together contribute towards the natural gas and many EU countries import nearly all their achievement of the 2020 renewable targets. The CER’s supplies. Until the Corrib Gas field comes onstream, Ireland monitoring of the delivery of Gate 3 continued with a very imports approximately 96% of its natural gas from Great positive Gate 3 uptake of over 80% of renewable offers. Britain. Power generation from natural gas is a key part of the electricity generation mix, and provides back-up to The CER approved a policy allowing wind developers variable renewable generation. While Great Britain has a to install additional capacity over and above their MEC diverse natural gas supply mix, supply disruptions caused (Maximum Export Capacity); this allows for efficient use by by infrastructure failure or political disputes elsewhere in, windfarms of their connection due to the variable nature or outside, the EU can endanger supplies. For instance, of wind. The CER also commenced deliberations on the the gas dispute between Russia and Ukraine in 2009 appropriate way to treat network harmonics due to new disrupted supplies to some EU countries. In accordance connections as well as a new policy on a ruleset to govern with Regulation (EU) 994/2010, the CER as Ireland’s the delivery of Gate 3 subgroups, in order to facilitate those designated Competent Authority submitted a National Risk developers who are ready to move to the construction Assessment, Preventive Action Plan and Emergency Plan phase ahead of other members of the subgroup. Decisions to the EU Commission in 2014. Additionally, to facilitate on these policies will be published in 2015. regional co-operation between the UK and Ireland on In May 2014, the CER approved the Grid Code modification gas security of supply, the CER in conjunction with the on ROCOF (Rate of Change of Frequency). This provided UK Competent Authority (i.e. DECC) submitted a joint for a new standard of 1 Hz/ second which all generators Risk Assessment and a joint Preventive Action Plan to the must comply with. This will be an important aspect of European Commission in 2014. With reference to electricity the delivery of the 2020 targets as achievement of this security of supply, the CER submitted Ireland’s 2014 standard will allow EirGrid to operate the system with Electricity Security of Supply Report to EU Commission, higher levels of wind. A 36-month implementation project, and also hosted a gas – electricity interactions workshop. led by the CER has now commenced.
In addition, the CER as a member of the SEM Committee Key Task 8 – Retail Market Monitoring delivered an important decision on the procurement & Consumer Protection framework for DS3 System Services in December 2014. This The CER continued to promote competition in the retail sets out the framework mechanisms by which the System markets and oversaw the price deregulation of Bord Operator (EirGrid) will procure the required system services Gáis Energy in the domestic gas market in July 2014. All in order to support high levels of wind on the system. This electricity and gas suppliers can now set their own prices. decision is a key stepping stone towards delivery of the The CER will use the analysis conducted to ascertain the renewable targets both in Ireland and Northern Ireland. appropriate actions required including policy development, to address the conclusions from its monitoring exercise. The monitoring exercise will assist the CER to take the actions required for the benefit of consumers. The CER will publish information and findings on various aspects of its 36 monitoring activities. The CER published a decision on a 80% MONTHS new Market Monitoring Framework which set out all the key pieces of data that the CER will collect from energy Gate 3 continued with A 36-month market stakeholders on an ongoing basis. The CER will use a very positive Gate 3 implementation project, the analysis conducted to ascertain the appropriate actions uptake of over 80% of led by the CER has now required including policy development, to address the renewable offers commenced conclusions from its monitoring exercise. The monitoring
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exercise will assist the CER to take the actions required for With regard to the regulation of Gas Installers, the the benefit of consumers. The CER will publish information CER published a consultation paper in August 2014 to and findings on various aspects of its monitoring activities. determine stakeholders’ views in respect of the extension of the Registered Gas Installer (RGI) regulatory scheme, The CER also continued its work in ensuring that energy which currently only captures domestic Gas Works, to customers enjoy a high level of protection. In addition include non-domestic gas works. The CER also published to its audits of domestic suppliers compliance with the two decision papers in 2014, following a consultation requirements set out in the Supplier Handbook, the CER, process, which set out how the CER intends to regulate industry and the Department of Communications, Energy Registered Electrical Contractors (REC) and Registered Gas and Natural Resources, undertook a review to determine Installer (RGI), from January 2016. if more could be done to further reduce disconnections of energy customers. Following on from this, the CER Separately in 2014, seven successful prosecutions were moved to monthly publication of disconnections data, and undertaken by the CER against individuals carrying out Gas a voluntary agreement was introduced by most energy Works whilst not being registered, describing themselves as suppliers in May 2014 which saw them committing to never an RGI or acting in a manner likely to suggest that they were disconnect an engaging customer. an RGI. Similarly, the CER has undertaken three successful prosecutions against individuals carrying out Restricted Electrical Works whilst not being registered, describing themselves as a Registered Electrical Contractor (REC) or acting in a manner likely to suggest that they were a REC.
Key Task 10 – New Petroleum Safety Regime Following the commencement of the remaining provisions In May 2014 saw most of the Petroleum (Exploration and Extraction) Safety Act energy suppliers committing 2010 in December 2013, Petroleum Undertakings wishing to never disconnect an to undertake designated petroleum activities require engaging customer. a Safety Permit from the CER. On this basis, the CER commenced the assessment of safety permit applications received from Petroleum Undertakings for well work activity and production activities. The CER went on to Key Task 9 – Downstream Energy issue its first safety permit for well work in April 2014 and Safety Regime in August 2014 it issued a safety permit for production – During 2014 the CER continued to discharge its existing both to Shell Exploration and Production Ireland Limited legislative safety obligations with respect to electricity, for the Corrib gas field. The assessment of the PSE natural gas and Liquefied Petroleum Gas (LPG) and Kinsale Limited/PSE Seven Heads Limited safety permit continued to incorporate the new safety functions, granted applications commenced in 2014 and is ongoing. to the CER in 2012, into the existing safety framework. The CER continued to actively engage with European Following consultations, the CER published an updated safety regulators through the North Seas Offshore Gas Safety Framework High Level Approach Document Authorities Forum (NSOAF) and the European Union which updated the Gas Safety Framework in line with Offshore Authorities Group. The latter group (the ‘EUOAG’) legislative developments in the safety regulation of LPG, was set up in 2013 under Directive 2013/30/EU on provided an outline of the CER’s new enforcement powers, the Safety of Offshore Oil and Gas Operations. During and an update on the regulation of the storage of natural 2015, the CER will be working with the Department of gas following on from the introduction of the operation of Communications, Energy and Natural Resources (DCENR) the Petroleum Safety Framework. on the implementation of the Safety of Offshore Oil and Gas Operations Directive (2013/30/EU).
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Energy Efficiency 2014
The CER, as a public sector agency, is fully committed to playing its part in the achievement of energy efficiency “CER is fully committed (reduction) targets – currently 33% - across the public sector by 2020. Since 2011 the CER has appointed an to playing its part in the Energy Manager and an Energy Management Team. The CER’s Energy Policy was updated in April 2014. achievement of energy The CER is participating in SEAI’s Public Sector Programme efficiency targets” “The Public Sector Energy Partnership”. The CER is an active member of Sustainable Energy Ireland (SEAI’s) Energy Consumption in the Public Sector Programme. Energy Consumption (TPER) The CER’s objective for 2014 in this area continues to be exemplary performance in energy management and 2014 Energy Consumption = 368,849 kWh energy efficiency in the public sector. Energy Consumption Since Baseline
Energy Performance Indicators 2014 500,000
kWh kWh 2014 EnPI = 4,144 FTE Employees Target EnPI = 6,616 FTE Employees 450,000
300,000 Actual Target Glidepath
10,000 150,000 7,500 0 5,000 2010 2011 2012 2013 2014
2,500 Transport Thermal Electricity 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Energy Consumption - 2014 (TPER)
15.2% better than 2013 Level 2 EPI 2014
Electricity = 4,144 kWh 58.0% better than baseline FTE Employees 9.0% less than 2013
Thermal = 0 kWh 38.0% less than baseline 59.6% better than 2020 target No Consumption 100% Transport = 0 kWh 36,628 kWh less than 2013 50.6% better than target ‘glidepath’ No Consumption
226,110 kWh less than baseline With regards to awareness, the CER ran an Energy Efficiency Competition between the different floors in the Electricity office with weekly updates to encourage energy efficiency. It also promoted awareness through the implementation of signage and the installation of energy monitors. Energy Usage The initial results from the SEAI monitoring and reporting The CER’s office accounts for 100% of its energy usage. system demonstrate the CER has made strong progress During 2014, a total of 165.85 MWh of energy was in terms of achieving our energy efficiency target; those consumed, consisting solely of electricity. This represents initial results indicate that we achieved 1st place in a decrease of 15.85 MWh on 2013. 2014 compared to the baseline year of 2009 for both savings compared to all public bodies and office based organisations. Our challenge now is to maintain and improve upon this performance.
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Statement of Best Practice
We wish to state that the CER continues and will continue Development of an annual Work Programme to be to adopt best practice in the area of corporate governance submitted to the Minister by 30 November each year. in carrying out its functions and duties. In this regard, the The Work Programme for 2014 was published on CER is required to comply with the “Code of Practice for the CER’s website on 12th June 2014; Key tasks were the Governance of State Bodies” which was published by published in November 2013. the Department of Finance in October 2001 and updated Implementation of a Risk Management Policy, which is in May 2009. The CER is committed to complying with the monitored by the CER; revised Code. Establishment of a Risk Committee; The CER is in compliance with the revised Code issued Implementation of a policy on foreign travel; and in May 2009 save for a few generic elements which are Adoption of a policy for confidential disclosures not relevant to an independent regulatory authority. The regarding possible irregularities in financial reporting. CER has agreed with the Department of Communications, The Commissioners met formally on 53 occasions in 2014, Energy and Natural Resources on the extent to which and the number of Special meetings was 9. Chairperson requirements are adapted to the CER. Garrett Blaney attended 41 Commission meetings and 6 Procedures that the CER currently has in place in this Special meetings, Commissioner Paul McGowan attended regard include: 43 Commission meetings and 7 Special meetings and A code of conduct for Commissioners and employees; Commissioner Aoife MacEvilly attended 10 Commission meetings and 1 Special meetings. Ex-Chairperson Dermot Ensuring compliance with Irish and EU tendering and Nolan attended 5 Commission meeting and 1 Special procurement requirements; Meeting. CER Corporate Procurement Plan; Procedures for the disposal of assets; Ethics in Public Office Compliance with Government Policy on the We hereby confirm that we are not directly engaged in, remuneration of Commissioners and members of staff; concerned in or interested in any electricity generating • Provision of details of Members of the Commission’s business or in any electricity or natural gas transmission, emoluments and details of the Chairperson’s distribution or supply business or in any energy business, remuneration package within Financial Statements whether as participator, investor, consultant or otherwise. published with the Annual Report; In addition, in respect of the period covered by this report, Submission of interim unaudited accounts to the there are no registerable interests, as specified in the Department of Communications, Energy and Natural Ethics in Public Office Acts 1995 and 2001 and the Gas Resources every six months; (Interim) (Regulation) Act, 2002, of our own, or, to our actual Appointment of external expertise to perform the internal knowledge, of a spouse or child, which could materially audit function. The report of the CER Audit Committee influence us in, or in relation to, the performance of the is included in the Financial Statements section of this functions of our position. Annual Report; Submission, to the Department of Communications, Energy and Natural Resources, of a statement confirming compliance with taxation laws and confirming that all tax liabilities are paid on or before the due date; Garrett Blaney, Paul McGowan, Chairperson Commissioner Submission of “Report on Compliance with the Code of Practice for the Governance of State Bodies” to the Minister for Communications, Energy and Natural Resources with the Annual Report and Financial Statements; Completion of Strategic Plan - a new Strategic Plan Aoife MacEvilly, covering the period 2014 to 2018 was completed in 2014. Commissioner
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Background to the Annual Report
Report Structure This Annual Report provides an overview of the CER’s key work items and achievements in 2014. While the Annual Report is designed to provide an update on the CER’s progress in achieving its strategic goals during the year, many of the CER’s work items are ongoing and will continue into and in some cases beyond 2015. Such work is generally mentioned here for completeness.
As part of the CER’s business planning process a large number of work items were identified for commencement, continuation or delivery during 2014. Of these, 10 were selected as the CER’s “10 Key Tasks for 2014”. These key tasks are distributed across the CER’s responsibilities and were viewed as being the CER’s most important strategic tasks for the year 2014 in order to achieve its mission. While the main focus of the CER’s work during 2014 was on these “10 Key Tasks”, each of the work items contributed to the CER’s overall strategic objectives.
The following section of this Annual Report focus primarily on the work carried out by the CER in meeting these 10 key strategic tasks, and related matters, in 2014. They are discussed in the same order as listed below.
Key Task 1 Water Project Key Task 2 SEM European Integration Project Key Task 3 Gas European Integration Project Key Task 4 Water Project Key Task 5 Electricity Networks Revenue Review Project Key Task 6 Electricity Networks & Renewables Issues Key Task 7 Electricity & Gas Security of Supply Key Task 8 Retail Market Monitoring & Customer Protection Key Task 9 Downstream Energy Safety Regime Key Task 10 New Petroleum Safety Regime
The Report then informs on the outcomes against the “Key Performance Indicators” (KPIs) which were agreed with the Department of Communications, Energy and Natural Resources as part of Department of the Taoiseach’s “Better Regulation” drive.
Finally, the audited Financial Statements for the year ended 31st December 2014 are provided at the end of this Annual Report.
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Key Task 1 Water Project
Background Information the Minister for the Environment, Community and Local Government on the proposed economic regulatory The Water Services Act 2013 was enacted in March framework for water in March 2014. 2013and empowered CER to commence preparation for In its advice to the Minister, the CER recommended that the role of Economic Regulator for public water and waste an economic regulatory framework for the public water water services as provided by Irish Water to domestic and services sector in Ireland be put in place similar to that in business customers. The Water Services (No. 2) Act 2013 the electricity and gas sectors which is based on four key was enacted on 25th December 2013. With effect from principles – stability, predictability, sustainability and cost 1st January 2014, the Act provides for the transfer of Water efficiency. The CER stated that it would, in regulating the Services functions from Local Authorities to Irish Water water sector, apply the same values as it has done to the and the CER assumed the role of economic regulator electricity and gas sectors, namely: fair and transparent for the sector soon thereafter. Further legislation in late regulation, acting with integrity and respect, consulting 2014 reflected policy decisions taken by Government in with stakeholders and customers, being accountable to November including the decision to delay the introduction the Oireachtas, customers and stakeholders, and making of domestic charges until January 2015, to cap those informed decisions. charges and to provide for the establishment of a customer consultative forum. In addition, this legislation provides a The full text of the CER Advice to the Minister (Ref: statutory footing for the CER to provide a dispute resolution CER/14/076) is available on the CER website. service for customers of Irish Water who have unresolved 3. Water Charges Plan complaints. In 2014, Irish Water was required to submit a Water Charges In 2013, when the CER developed its 2014 work Plan (WCP) and supporting information to the CER to programme, it identified a number of key tasks to be provide details on its services, costs incurred in providing delivered subject to the enactment of legislation to provide these services and its proposed charges. for the necessary remit to do so and on the basis that domestic water charging would commence in quarter four The first revenue review period covers an interim period of 2014. from 1st October 2014 to the end of 2016. The full text of the CER Advice to the Minister (Ref: CER/14/076) is 2014 Activities available on the CER website. Alongside the CER’s Water Charges Plan Decision Paper (Ref: CER/14/746) the CER 1. CER Water Division Establishment published individual Response to Comments and Decision The CER completed the establishment of a water division Papers on each of: within the organisation in 2014 in order to carry out the functions set out in governing legislation. In addition to the Domestic Water and Wastewater Charges (Ref: core division, the Customer Care Team within the CER deals CER/14/452); with unresolved complaints from customers of Irish Water. Non-Domestic Water and Wastewater Charges, New Connection Charges (Ref: CER/14/453); 2. Advice to Minister Irish Water’s Interim Revenue Review (Ref: CER/14/454) In advance of the commencement of domestic water The Interim Revenue Review involved an examination charges, the Department of the Environment, Community of Irish Water’s costs for the 1st October 2014 to 31st and Local Government (DECLG) requested advice from the December 2016 period. The CER decided to impose a cut CER on the appropriate economic regulatory framework for of 8.2% to ensure that only efficient costs are recovered the Irish public water sector. from customers. This resulted in an allowed revenue for Irish The CER prepared proposals on a regulatory framework Water of €2,078 million to cover the costs of providing water and published a paper for consultation entitled “Economic and wastewater services for that period. Other supporting Regulatory Framework for the public Irish water services information is also available on the CER’s website. sector” in October 2013. Having considered comments The CER commenced a review and public consultation from respondents the CER then presented its advice to on Irish Water’s WCP in July 2014 to which it received
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Key Task 1
Water project continued
345 responses and queries. The CER reviewed and Subsequent to the publication of these documents, the considered each response in reaching its decision on the Water Services Act 2014 was enacted in December 2014. WCP which was then published on 30th September 2014 This meant that certain aspects of the approved WCP, (Ref: CER/14/746). In its decision paper, the CER covered including the level of charges for water and wastewater a broad range of matters for the 1st October 2014 to 31st services, needed to be modified. December 2016 period including the revenue control, A number of other changes to the WCP outside of those metered and unmetered domestic tariffs, household required under the Water Services Act 2014 were also allowances, children allowances, non-domestic tariffs, approved and these are detailed in the CER’s WCP the capping of domestic charges for an initial period, Decision Paper (Ref: CER/15/005) for the period 1st connection charges, charges for essential medical use October 2014 to 31st December 2016. The revised Irish customers, discounts for water that is unfit for human Water WCP (Ref: CER/15/001) and associated documents consumption, rebate policy, charges for non-primary were published in March 2015. residences, customer codes of practice, procedure for customer validation with Irish Water and charges for 4. Customer Handbook and Codes of Practice additional services provided by Irish Water. In April and May 2014, the CER consulted on the proposed The WCP Decision Paper also provided a summary of requirements for Irish Water’s Customer Handbook, Codes the work which the CER planned to undertake over the of Practice, Customer Charter and Terms & Conditions for duration of the interim review period. supply of water and wastewater services. The Customer Handbook sets out requirements to Irish Water in terms Alongside the CER’s Water Charges Plan Decision Paper of required levels of customer service and customer (Ref: CER/14/746) the CER published individual Response protection measures to be implemented in Irish Water’s to Comments and Decision Papers on each of: business operations. The document contains specific sections for domestic and non-domestic customers Domestic Water and Wastewater Charges (Ref: where applicable. These requirements are combined into CER/14/452); one Customer Handbook with separate sections for both Non-Domestic Water and Wastewater Charges, New domestic and non–domestic Irish Water customers. Connection Charges (Ref: CER/14/453); Irish Water’s Interim Revenue Review (Ref: CER/14/454) In July 2014, the CER published its Decision on the Customer Handbook (CER14/363) and the associated Other supporting information is also available on the CER’s Customer Handbook (CER14/364). In August 2014, the CER website www.cer.ie also published a Response Paper (CER14/365) setting out comments received.
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While the Voluntary Working Practice was not legally binding, it gave the CER a role in assisting customers with an unresolved complaint with Irish Water.
In September 2014, the CER approved Irish Water’s The primary decisions made for non-domestic customers Customer Charter, Codes of Practice, Terms and Conditions under the Water Charges Plan Decision Paper (Ref: for domestic customers. The CER also approved the Codes CER/14/746) were as follows: of Practice for non-domestic customers in September 2014. All these documents came into force Current non-domestic charges as set by the Local on the 1st October 2014. Authorities as of 31st December 2013, would remain in place remain until the CER is presented with the In December 2014, the Water Services Act 2014 was necessary information so that it is in a position to enacted and this led to changes being required to the consider the manner and method by which charges are Customer Handbook. Those revisions were made to the calculated. At that time, the CER will consider proposals Handbook and it was published on the CER website on 9th from Irish Water to establish an enduring non-domestic January 2015 (CER15/010). As a result of the amendments tariff framework. to the Handbook, Irish Water modified the affected Codes of Practice, Terms and Conditions of Supply and The domestic component of mixed use customers Customer Charter. should be billed as unmetered domestic customers based on the number of adults in the dwelling and 5. Non-Domestic Tariffs subject to all applicable Irish Water domestic allowances. The CER undertook a review and public consultation on Where water is unfit for human consumption for more Irish Water’s proposals regarding non-domestic water and than 24 hours, Irish Water should apply a 40% discount wastewater charges. to the customers’ water services charge and that Large The CER published the following papers regarding non- Water Users may be treated on a case-by-case basis. domestic water charges in 2014: 6. Connection Policy Interim and Enduring Non-Domestic Water Tariff In May 2014, the CER published an Information Note Proposals Consultation Paper - (Ref: CER/14/084) (April (CER/14/109) on the scheduled consultation of Irish 2014) Water’s connection charging policy for both domestic and non-domestic customers wishing to connect to the Interim and Enduring Non-Domestic Water and Wastewater Tariff Proposals: Responses to Comments public water and wastewater network. This Information and the CER Views (Ref: CER/14/368) (July 2014) Paper acknowledged the need for a robust consultation on new proposals for calculating connection charges, as Water Charges Plan Consultation Paper (Ref: well as the need to fully understand the current charging CER/14/366a) (July 2014) arrangements and the range of issues that need to be Water Charges Plan Decision Paper (Ref: CER/14/746) considered in developing a new national connection (September 2014) charging policy. As a result the CER decided to defer the Non-Domestic Water and Wastewater Charges, New date for consulting on the introduction of a new connection Connection Charges – Response to Comments and charging policy governed by Irish Water. Decision Paper (Ref: CER/14/453) (September 2014) In the interim, under the direction of the CER, Irish Water All the responses received from stakeholders were will continue to apply connection charges on customers considered and ultimately informed the decisions made, who require a connection at the rates applied by Local regarding non-domestic tariffs, by the CER on the Water Authorities as of the 31st December 2013, including an Charges Plan in September 2014. amount equivalent to the water and wastewater related
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Key Task 1
Water project continued
development levies which the Local Authorities were Irish Water customers with an unresolved dispute with formerly entitled to charge. It is the CER’s intention to Irish Water. This development was welcomed by the CER, undertake a comprehensive consultation on connection as it provided a more appropriate framework for resolving charges to ensure customers are presented with the customer disputes. necessary information to make informed responses and input This new statutory responsibility mirrors the role the CER into the development of a new connection charging policy. has in dispute resolution for electricity and gas customers. 7. Dispute Resolution and Complaints Irish Water customers who have registered and have an The CER has an important function in customer protection unresolved dispute with the utility can log a complaint with by resolving complaints that customers have with Irish the CCT. Following investigation the CER has the power Water through its Customer Care Team (CCT). The delivery to direct Irish Water to pay compensation and resolve a of a dispute resolution service for customers with an complaint in a set fashion. unresolved complaints against Irish Water evolved over the 8. Other Activities: course of 2014, from an initial voluntary framework to one In addition to the above, the CER also worked with other based on a statutory requirement. European water regulatory authorities to establish WAREG (the Network of European Water Service Regulators). Voluntary Working Practice for Dispute WAREG was born from the recognition by a number Resolution Services of European water regulatory authorities that there are Through our experiences in the energy sector, the CER was specific issues, challenges and conditions within the water cognisant of the necessity for customers to have a body to sector which create the need for a dedicated instrument handle their outstanding complaints against a regulated utility. for cooperation between European regulators. Experience in energy has shown the benefits of this cooperation, In September 2014, due to the absence of a statutory of exchange of information regarding the differing mandate, the CER signed a Voluntary Working Practice in experiences of regulatory authorities and of exchange of relation to dispute resolution services. While the Voluntary best practices. Working Practice was not legally binding, it gave the CER a role in assisting customers with an unresolved complaint In this context, WAREG was established in 2014 to: with Irish Water. The CCT after investigation was allowed a. exchange common practices, information, joint analysis to apply charter payments in accordance with the CER’s and comparison of existing water sector regulatory Water Customers Handbook, direct Irish Water to pay models and performance of water utilities; refunds or compensate customers to a maximum amount b. organise specialised training, technical assistance, of €100. exchange of know-how and experience; The arrangement outlined above came into effect on c. promote best-practice and stable regulation of the the 1st October 2014 and customers could log a formal water sector at European level for water and waste water complaint about Irish Water with the CER from that date services, aimed at supporting the sustainability of the onwards. The CCT received five complex complaints services, adequate infrastructure investment, proper through this arrangement in Q4 2014. service quality standards and consumer protection; d. prepare common positions about regulatory issues and Statutory Complaints Resolution Service speak with a stronger voice at EU level; and The voluntary arrangement was put in place in the absence e. conduct an open dialogue with other relevant regional of a statutory role for the CER or another body. However, and international organisations and national institutions, the Water Services Act 2014 gave statutory responsibility with particular focus on European issues in the field of to the CER to provide a complaints resolution service to water services.
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Key Task 2 SEM European Integration Project
The following items were identified as key tasks in the all- island Single Electricity Market (SEM) for 2014: GENERATORS
Publish a Consultation paper setting out four market design options for the SEM redesign (I-SEM); Generators Generators Publish a draft decision paper setting out a preferred submit bids receive SMP option for the I-SEM; Publish a Decision paper setting out the chosen option of the High Level Design of I-SEM with an Impact Wholesale POOL Assessment that will inform the SEM Committee’s Market Decision. Engage in an inclusive consultation process with all stakeholders on the options for the High Level design, Suppliers take Suppliers including the draft decision which ultimately culminates power at SMP pay SMP in publication of the Decision paper in Q4 2014; Subsequent to the SEM Committee Decision on the I-SEM High Level Design, the Detailed Design Phase SUPPLIERS of the I-SEM project shall commence. The publication of the I-SEM project plan will be published in late 2014 or early 2015 setting out the milestones for the timing Retail of I-SEM consultations, along with provisional dates for Market Customers Customers public workshops and working groups. consume power pay supplier Procure international market design experts to advise the RAs (Regulatory Authorities – CER or NIAUR) on the Energy Trading Arrangements Design Consultation CUSTOMERS Phase of the I-SEM project which commences after the publication of the High Level Decision by the SEM Committee in Q3 2014; Progress annual work streams such as Directed Contracts and generator charges/losses; and The SEM includes a centralised all-island gross mandatory Complete Capacity Payments Review. pool (or spot) market. In this pool, electricity is bought and sold through a market clearing mechanism, whereby The end of this section of the report also covers generators bid in their marginal cost and receive the wholesale/generation issues relevant to Ireland only, i.e. System Marginal Price (SMP) for each trading period for security of supply, generation licensing and the PSO (Public their scheduled dispatch quantities, with the cheapest Service Obligation). possible generator run to meet demand across the island. Suppliers (to electricity customers) that purchase energy SEM Background from the pool, pay the SMP for each trading period along The SEM is the wholesale electricity market for the island with capacity costs and system charges. This is illustrated of Ireland which was opened on 1st November 2007. below, with the detailed rules set out in the Trading and Comprising two separate jurisdictional electricity markets, Settlement Code. the SEM is one of the first markets of its kind in Europe. It is The SEM is regulated jointly by the CER and its counterpart designed to provide for the least-cost source of electricity in Belfast, the Northern Ireland Authority for Utility generation to meet customer demand at any one time Regulation (Utility Regulator), and together referred to as across the island, while also maximising long-term the Regulatory Authorities or RAs. The decision-making sustainability and reliability. body which governs the market is the SEM Committee,
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Key Task 2
SEM European Integration Project continued
consisting of the CER, the Utility Regulator as well as an Independent Member (who also has a deputy), with each entity having one vote.
During 2013 the Regulatory Authorities continued to monitor and oversee the SEM and the suite of regulatory rules governing it, actively supervising the SEM and representing the interests of all-island consumers. Key SEM updates for 2013 are shown below.
European Market Integration At the February 2011 European Council meeting, Member States committed to deliver a fully-functioning, interconnected and integrated internal energy market by 2014. The Communication on the Internal Energy Market published by the European Commission on 15th November 2012 highlighted the benefits of a truly integrated European market and identified the need for further action in a number of areas including consumer protection, enforcing the existing rules and investing in the Northern Ireland in a manner that is consistent with national modernisation of energy infrastructure. and EU policy objectives. In addition, the RAs hosted a number of industry workshops and engaged with a wide The EU “Target Model” for electricity evolved out of the range of stakeholders including Government Departments, EU’s Third Energy Package in 2009, which is a set of System Operators, Ofgem and ACER to discuss the issues legislative measures that aim to create a single competitive involved in integrating SEM into the European market. European energy market. The Agency for the Cooperation of Energy Regulators (ACER), established under the The SEM Committee published a proposed decision paper third Package of EU energy legislation, has identified a on the next steps in the process of market integration in number of key elements to the design of the Target Model November 2012 and a final decision paper in February to facilitate market integration. These include methods 2013. The main conclusions of this decision paper include: for calculating interconnector capacity available across The establishment of a set of high-level principles which borders and determining appropriate market zones. These will govern the design and implementation of the new also include methodologies for allocating cross border market; capacity in different timeframes namely forwards, day ahead and intraday. The establishment of project governance arrangements with strengthened stakeholder engagement to ensure that consumer groups and market participants are SEM Market Integration Project (I-SEM) adequately involved in the project; Due to its centralised structure and gross mandatory pool A commitment to maintaining the current structure of the design, the SEM will require significant modifications in SEM until 2017 and to carrying out an impact assessment order to implement the Target Model. In recognition of this, on the new market design in line with best practice; and, the SEM market was granted a three year derogation, i.e. an A working assumption that the new market will continue additional three years to implement the Target Model (from to be based on transparent, centralised trading 2014 to 2017) was granted. arrangements with least-cost dispatch; and In January 2012, the SEM Committee published a The total remuneration from energy payments, capacity Consultation Paper seeking views on options for the payments and ancillary services will be sufficient to implementation of the Target Model in Ireland and ensure security of supply.
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Committee published its Decision in this regard along with the associated Impact Assessment which informed the Decision. The Impact Assessment included a) a cost-benefit analysis of the different options for the HLD of energy trading arrangements and the Capacity Remuneration Mechanism and b) a Qualitative assessment of different HLD options against the nine assessment criteria set out for the I-SEM HLD, supported by quantitative assessment. The I-SEM Project then moved to detailed design phase. This phase of the project has 5 key RA workstreams, namely the Energy Trading Arrangements, Capacity Remuneration Mechanism, Market Power, Governance & Licencing, and Forwards & Liquidity. The Energy Trading Arrangements commenced in earnest with two consultations published in early 2015. The I-SEM project plan was also published in early 2015 setting the key milestones to achieving market go-live in 2017.
Framework Guidelines and Network Codes Following the publication of the Next Steps decision paper The detailed rules of the Target Model are developed by the Regulatory Authorities (RAs) initiated the project to the Agency for Cooperation of Energy Regulators (ACER) develop a new SEM High Level Design. The RAs procured and the European Network of Transmission System consultancy support to advise the RAs on this project Operators for Electricity (ENTSOE) and are finalised by the in September 2013. As part of the development of the European Commission. Consultation Paper, the RAs established a High Level Design (HLD) Review Group consisting of experts from ACER initiates the process by developing Framework across the energy industry and consumer groups. The HLD Guidelines. Based on these Framework Guidelines, Review Group met on four occasions from October 2013 ENTSOE develops detailed Network Codes. This is all to January 2014 and discussed various elements of the done in consultation with interested stakeholders. The European Target Model and how SEM could be changed to final Network Codes will be made into binding Regulations meet its requirements. following a comitology process. More information on this process and the individual Framework Guidelines and In early February 2014 the SEM Committee published a Network Codes is available on the ACER and ENTSOE consultation paper on the ‘High Level Design for Ireland websites. and Northern Ireland from 2016’. This consultation paper contains four distinct options for energy trading arrangements, including a qualitative assessment of There are nine proposed Network Codes on: each option against the High Level Design criteria. The Capacity Allocation and Congestion Management; consultation paper also contained a description of possible Requirements for Generators; approaches to the explicit remuneration of capacity that Electricity Balancing; can be used to support any of the four proposed options for the high-level energy trading arrangements. Forward Capacity Allocation; Demand Connection; The SEM Committee published a Proposed Decision on Operational Security; the I-SEM High Level Design in June 2014. Subsequently, the RAs held a stakeholder’s forum with industry to Operational Planning and Scheduling; discuss the proposed option. Again further to this Load Frequency Control and Reserves; and extensive consultation with stakeholders, the SEM High Voltage Direct Current.
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Key Task 2
SEM European Integration Project continued
ACER finalised the last Framework Guideline in 2012 and the communication, the EC assessed the main features therefore the focus during 2013 & 2014 was on providing of public interventions to correct market failures and Reasoned Opinions on ENTSOE Network Codes, and considers how they can be designed or respectively entering these codes, once finalised into Comitology adapted in order to increase their effectiveness. A key process which ultimately culminates in adoption by message in the EC document was that well-designed, Member States if voted in. targeted and proportionate public intervention allows the competent public authorities to achieve public policy On 5 December 2014, the Regulation on Capacity objectives without distorting markets beyond what is Allocation and Congestion Management (CACM) was necessary. adopted by Member States in Comitology. CACM will now go through scrutiny from the European Parliament and Also in later 2013, the EC (DG Competition) published Council. The definitive adoption of CACM is expected in a Consultation Paper entitled “Draft Guidelines on early 2015. environmental and Energy State aid for 2014-2020” in late 2013. The paper was open for consultation until 14 Two more network codes have entered the comitology February 2014. The draft guidelines consultation sought process namely the Requirements for Generators and to set out the conditions under which state aid measures Demand Connection Codes. Of the remaining six codes, may be declared compatible with the internal market. four have ACER recommendations to proceed with The EC published the final Guidelines on environmental publishing and hence will enter the Comitology process as and energy state aid in June 2014 and these became the next step. The remaining two, ACER has published its applicable from 1 July 2014. Key features of these Opinion in March 2014 on the Electricity Balancing Code guidelines include, gradual introduction of market based and ENTSO-E published a new draft of the Emergency and mechanisms, promoting competitiveness of European Restoration Code in January 2015 following stakeholders industry, supporting cross-border energy infrastructure to comments received during the consultation process further the Single European Energy Market and permitting aid to secure adequate electricity generation when there is EC Consideration of Generation a real risk of insufficient electricity generation capacity. Adequacy in the EU In late 2012, the European Commission (DG Energy) France-UK-Ireland (FUI) published a Consultation Paper on generation adequacy In order to enable an efficient transition to the single in the EU in the context of their communication on the European market, a number of regional initiatives were Internal Energy Market. launched in 2006. These initiatives bring together In particular, it had become apparent that there are plans Regulators, TSOs, the European Commission, Member in some Member States to take steps to secure new State Governments, industry and stakeholders to develop generation capacity to ensure security of supply. One and implement common policies for the trading of key message of that Communication is the importance electricity across borders in each region. Ireland is part of of allowing the market to work and ensuring that any the France-UK-Ireland (FUI) region. interventions are well designed and effective. The The SEM Committee continued to progress work related to consultation paper put forward for consideration, potential increasing electricity market integration with neighbouring criteria on assessing capacity remuneration mechanisms jurisdictions in the FUI region throughout 2014. In particular and other related interventions. there was liaison between regulators on progress with The EC subsequently published a Communication in implementation of the European Target Model and November 2013 entitled “Delivering the internal electricity ensuring coordination between developments in energy market and making the most of public intervention”. In and capacity market designs.
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Key Task 3 Gas European Integration Project
During 2014, the primary focus of the Gas European The CER also approved the issuing of a number of reports Integration project was on preparing for the and consultations by Gaslink to Industry: implementation of Congestion Management Procedures, Financial Security; Capacity Allocation Mechanism, Balancing, and Interoperability on the Irish system. As noted earlier, Congestion Management Procedure; and while implementation of the Network Codes lies with CAM Implementation. the TSO, Gaslink, responsibility for compliance lies with Gaslink commenced the development of a consultation the CER. On this basis, a great deal of the CER’s work document (business rules) proposing amendments to relates to supporting, monitoring and assessing the TSO’s current market rules to comply with CAM requirements implementation plans. in May 2014. Following Industry consultation during the Gaslink established the Network Code Implementation period from June through to September, the CER approved Project in 2014 to implement the EU Network Codes as the business rules in October 2014 and directed Gaslink applicable to the Irish Gas Market. The first key deliverable to progress the development of detailed legal drafting. of the project was to develop a Project Initiation Document This was a major step in the implementation of the CAM (PID), which outlined the high level scope, deliverables, Network Code in the Irish gas market. schedule, risk, and issues, explained the governance An aspect of the CAM Business rules related to the structures, the stakeholder management requirements changing of the gas day from 06:00 to 05:59, to 05:00 to and the budget estimates. The CER approved the PID 04:59. With an implementation date of October 2014, this and made a budget allowance of approximately €6 change may have a significant impact on both gas and million in 2014. The majority of this related to the major IT electricity markets. In the summer of 2014, the CER Gas system changes which stem from the new processes for Division hosted a Gas-Electricity interactions Workshop. purchasing capacity under the new CAM rules, but are Such events are considered of great importance to ensure also affected by new requirements in relation to Balancing, that the implications of changes to either electricity or gas Congestion Management and new rules on Nominations markets are fully understood across the energy industry. stemming from the Interoperability and Data Exchange Network Code which was finalised in late 2014. Balancing Network Code Implementation As the body with responsibility for compliance with the Gaslink commenced the code modification process in EU Regulations setting out the requirements of the August 2014, issued business rules in September 2014, Network Codes, a key element of the CER’s work on the and has engaged in a series of consultations (including EU Network Code project is monitoring and ensuring full written consultations, dedicated workshops and general implementation by the TSO. On this basis, over-seeing discussion at Code Modification Forum meetings) through industry consultation, reviewing and approving business to December 2014. rules which transpose the Network Codes into the Gaslink Code of Operations is a key part of the CER’s work. The initial scope of this modification included the following elements: In 2014, the CER approved, and gave permission to Gaslink to start legal drafting, of the following Code Modifications: Information Provision; Nominations; CAM Business Rules; Allocations; and Nomination Business Rules; and Daily Imbalance Charges. Gas Day Change.
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Interoperability and Data Exchange The Interoperability and Data Exchange Network Code was finalised in late 2014. This code could be considered a ‘nuts and bolts’ Network Code, as it relates to the physical interaction between adjacent networks rather than market rules. The gas day has changed The goal of the network is to harmonise rules across the from 06:00 to 05:59, EU for the operation of gas transmission systems. The to 05:00 to 04:59 Network Code applies at Interconnection Points and covers mandatory provisions relating to flow control, matching and allocation of nominations, the application of common data exchange (IT) solutions, gas quality and odorisation. The CER worked closely with DCENR on the finalisation of £6m the Network Code and inputted to the Irish position on a number of issues. The CER approved the Project Initiation Document (PID), and Tariffs made a budget allowance of approximately €6 million The CER has been very active at an ACER level in relation to the development of the Tariffs Network Code. In 2014, the CER was part of a number of drafting teams for the preparation of ACER’s Reasoned Opinion on ENTSOG’s draft Network Code. The Network Code aims to harmonise the methodologies used by European NRAs when calculating Entry and Exit tariffs. The Network Code requires high levels of transparency in the setting of TSO revenues.
The CER has been particularly active in relation to the Tariff Network Code as the CER is in the process of early- implementation of the Code. In 2014, the CER held a number of consultations on the selection of an appropriate cost allocation methodology for GNI’s regulated revenues. Early implementation is spurred by changing flow patterns on the GNI system.
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Key Task 4 Smart Metering Project
Background The CER, working closely with the Department of Communications Energy and Natural Resources, The National Smart Metering Programme (NSMP) is a established the NSMP in 2007. The NSMP is a programme plan for upgrading how electricity and gas retail markets of strategic national importance which will underpin Irish operate, in order to improve levels of service for all energy policy through the realisation of the five strategic customers. Smart Meters are the next generation of energy objectives of the programme, namely to: meter. Similar to the migration from analogue to digital in communication services, smart meters will replace 1. Encourage Energy Efficiency; the traditional electricity and gas meters. Smart meters 2. Facilitate Peak Load Management; can provide more frequent information to consumers on 3. Support Renewable and Micro Generation; how they use energy and therefore eliminate the need to use estimates due to a meter reader not getting access 4. Enhance Competition and Improve Consumer to the meter. Smart meters work by communicating with Experience; and the consumer and their energy provider, giving a view of 5. Improve Network Services. actual energy usage. This provision of actual consumption information can deliver benefits such as: The CER is taking a consumer centric approach to the NSMP and the rollout of smart meters with a key focus 1. empowering consumers to reduce their electricity bill on the development of consumer policy and services in by enabling them to shift some electricity usage from the areas of Time of Use Tariffs, PAYG services, Customer (more expensive) peak consumption times; and Protection and Information. The programme will also 2. informing consumers of their actual usage in electricity take account of the particular requirements of different and gas therefore allowing them to avoid unnecessary customer groups including vulnerable customers and consumption and cost, and helping the environment those in financial hardship. through reducing overall energy production.
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The NSMP comprises 5 phases as set out below:
2008 2013 2015 2018 2020
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Trials and High Level Detailed Design Build & Test Deployment CBAs Design & Procurement
The aim of the NSMP is a national rollout of smart meters As part of deciding on the High Level Design the CER to all residential consumers and the vast majority of SMEs. commissioned Pricewaterhouse Coopers (PwC) to carry This programme is in line with the target in European out an updated Cost Benefit Analysis (CBA). The process legislation which requires that 80% of residential electricity involved cost and benefit submissions from the network smart meters have been installed by the end of 2020, companies and suppliers with specific reference to the subject to a positive Cost Benefit Analysis (CBA), allowing High Level Design. The CBA which was completed during consumers gain better insights into their electricity 2014, and which is based on revised cost estimates and consumption. quantifiable benefits only, concluded a figure of €-54m, which should be interpreted as broadly neutral in a Following the publication of the proposed decision on the programme where spend may be in the order of one billion High Level Design in December 2013, the CER published euro. Significant other benefits that will accrue from the its decision on the High Level Design in October 2014. programme have yet to be quantified and included in the The decision outlines a smart metering solution as one CBA (e.g. Smart Grid). It is also worth noting that smart in which minimal functionality is performed on the smart metering will support key aspects of the DCENR energy meter with supplier back office systems perform the policy. CER is fully committed to the NSMP and consider majority of data processing and hold ‘Master’ versions of that the CBA supports the continuation of the programme key data sets. Real-time consumption data is provided into detailed design (Phase 3). Costs and benefits will be directly into the home from the meter allowing customers further reviewed at critical programme milestones. visibility of their energy usage. Consumers will be given greater insight into their energy consumption and costs through the provision of smart bills, an in home energy display and a downloadable file. Energy customers will be moved onto Time of Use tariffs. The introduction of ToU pricing is a key component of the NSMP and will contribute significantly to realising the benefits and opportunities created by the rollout of smart meters. ToU tariffs will offer consumers the ability to use electricity at cheaper times.
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Key Task 5 Electricity Networks Revenue Review Project
This task involves the completion of the five-yearly reviews The nature of such regulation is that every five years the of electricity transmission and distribution businesses, CER sets the amount of money that the utilities can collect covering the amount of revenue that the utilities (ESBN from electricity customers for the following five years. The and EirGrid) can recover from their customers over the CER has made three price determinations so far, for the 2016 to 2020 period (PR4) in the form of (Distribution Use periods: 2000 to 2005; 2006 to 2010; and 2010 to 2015. of System) DUoS and (Transmission Use of System) TUoS The revenue is set at a level that would allow a well-run charges. The review involves an assessment of the utilities’ business to fund its activities. Funding for the utility is investment plans and operational costs for PR4, and an viewed from two perspectives. The first is the network assessment of their performance over the previous five utility having enough money to pay for their operations, years i.e. the PR3 period. maintenance and capital investments. The second is having a network utility stable enough income to enable This key task has as its primary aims: them to access international capital markets to borrow the funds necessary to carry out their capital investments. Deliver continuing efficiencies in the electricity networks; The utilities’ revenues are set through a combination of Minimise the costs to Irish electricity consumers over the examining the specific underlying activities and costs of long term; the relevant utility and also benchmarking against best Deliver the needed investment for a safe, secure and reliable electricity system for the Irish economy and consumers; and The CER and its consultants Support achievement of Government’s 40% renewable have engaged in a lengthy energy target by 2020. information gathering, Background analysis and consultation The CER’s responsibilities involve regulating the level of process with the network revenue which the monopoly electricity network operators and owners can recover from customers to cover their utilities to determine levels costs. ESB Networks owns the entire network; it also of efficiency operates the lower voltage distribution network, while EirGrid operates the higher voltage transmission network. Electricity transmission and distribution systems are natural monopolies. If unregulated, these monopolies could be international companies in this field. Through this review inefficient and impose prices that were too high. So, as set the utilities are given an incentive to operate efficiently, out in legislation, the CER regulates the network utilities’ to make cost reductions, and to provide high levels of activities and income. This is in order to protect the interest customer service. The allowed revenue is collected from of electricity consumers, while ensuring that the utilities suppliers via Transmission and Distribution Use of System can fulfil their obligations and deliver secure electricity charges - TUoS and DUoS - which are then recovered from supplies. final customers. These form approximately 7% and 25% of the final electricity bill respectively.
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This five-year revenue review approach is good Commencing in mid-2014, the CER and its consultants international practice, and is used by many other energy have engaged in a lengthy information gathering, analysis regulators as well as in a number of other regulated and consultation process with the network utilities in order sectors. It ensures that consumers are protected, while to determine the levels of efficiency in the companies and offering the regulated businesses a clear and stable the appropriate allowances for the next five years. The financial environment. This allows the network utilities to analysis involves reviews of multiple submissions by the make the necessary investments to ensure modern and utilities on both their historic and forecast costs, meetings efficient transmission and distribution systems and high and discussions with the utilities on their submissions, site levels of customer service. visits to network installations, and the benchmarking of selected elements of the utilities’ costs and performance During the PR4 review the CER will also review the utilities’ against comparable utilities in other jurisdictions. In the requests for adjustment to PR3 revenues, for the period case of this revenue review, it has been benchmarked of 2014/15, in accordance with the standard regulatory against distribution and transmission companies in the UK. authority practice.
The CER aims to complete its review of the PR4 revenue for the electricity transmission and distribution network utilities in September 2015. The review involves an assessment of the utilities’ investment plans and operational costs for PR4, and an assessment of their performance in the PR3 period i.e. over the previous five years.
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Key Task 6 Electricity Networks Revenue Review Project
The CER has a wide range of functions related to the of Ireland’s 2020 renewables targets (40% of electricity operation of the electricity networks in Ireland, fair and consumption from renewable sources) whilst transitioning non-discriminatory access to these networks and meeting Ireland’s electricity sector to a low carbon model. the Government policy in relation to the achievement of The table overleaf shows the offer acceptance status of the 2020 renewables targets. In 2014 the focus of the Gate 3 by late 2014, indicating a significant positive uptake. CER’s work in these areas was on continuing to prepare Ireland’s electricity network for delivering on the 40% target In addition to monitoring the ongoing delivery of Gate 3, the for renewable energy in 2020, in the context of a secure CER ensured that work has continued in relation to policy supply at a fair price. which underpins Gate 3 or that will facilitate successful Gate 3 outcomes. The CER approved a policy allowing The CER continued its oversight of the connection and wind developers to install additional capacity over and delivery; of Gate 3 generation, following finalisation of Gate above their MEC (Maximum Export Capacity); this allows 3 connection contracts in 2013. In addition the CER also for efficient use by windfarms of their connection due to worked with the Utility Regulator in Northern Level and the variable nature of wind. The CER also commenced system operators on the island to deliver progress on the deliberations on the appropriate way to treat network DS3 programme, designed to ensure that the electricity harmonics due to new connections as well as a new policy system can continue to operate in a safe and secure on a ruleset to govern the delivery of Gate 3 subgroups, in manner with high levels of non-synchronous generation order to facilitate those developers who are ready to move (chiefly wind). to construction phase. Decisions on these policies will be The CER also continued to review the development and published in 2015. application of the Transmission and Distribution Grid Codes, in particular taking account of developments in Demand DS3 – Delivering a secure, sustainable Side Participation (DSP), DS3 and European Network Codes power system for Grid Connection and System Operation. The DS3 programme was established by the Transmission System Operators (TSOs) on the island in 2012 in order to Connection and Access Policy put in place the key policies, procedures and system tools Section 34(2)(c) of the Electricity Regulation Act 1999 (as to facilitate an increase in the level of non-synchronous amended) provides that Directions given by the CER to electricity which will be allowed on the system at any point the System Operators may provide for ‘the terms and in time. This metric is referred to as SNSP – System non- conditions upon which an offer for connection to the synchronous penetration - currently the TSOs only allow up transmission or distribution system is made.’ to 50% instantaneous penetration of renewables. Through successful delivery of DS3, it is aimed to increase this to 75%. Accordingly the CER is responsible for developing electricity network connection and access policy in Ireland. The DS3 programme is made up of 11 different CER’s focus throughout 2014 on this area was to ensure the workstreams focusing on system performance, system successful delivery of the Gate 3 connection policy. Gate policies and system tools. 3 refers to the “third round” of policy under the wider Group Processing Approach. The CER’s Gate 3 determination was issued in late 2008 (CER/08/260) for renewable generator and in late 2009 (CER/09/191) for conventional generators. The Gate 3 determinations provided for the issuance of circa. 3,900 MW of renewable offers to primarily wind generators; since then the CER has remained focused on ensuring that these offers are issued in an efficient manner and that associated policy allows for developers to accept their offers and proceed to build. Successful delivery of Gate 3 will play a significant role in the achievement
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Offer Acceptance
Area DSO offers TSO Offers
Projects Contracted (yet to connect) Projects Contracted (yet Lapsed/ Lapsed/ energised/ energised/ to connect) Rejected Rejected connected Renewable Conventional connected
A 16 2 1 0 0 0
B 12 1 1 7 0 1 0
C 3 1 1 0 0
D 8 0 0 0 0
E 27 1 1 5 1 1 0
F 5 1 0 1 0
G 9 0 0 1 0
H1 16 1 1 1 0 1
H2 5 3 0 1 0 0
I 1 0 0 0 0
J 1 2 0 2 2
K 1 1 1 0 0 0
Total 104 2 9 19 4 6 3
Total MW 1723.43MW 15.8MW 104.87MW 1379.38MW 512.4MW 577MW 199.2MW accepted
Throughout 2014, the CER’s focus was on two of the DS3 Limited as its technical project manager to oversee this workstreams – DS3 System services which falls under the project, which formally commenced in November 2014. authority of the SEM Committee as an “SEM matter” and The table below outlines the sequence for carrying out RoCoF (Rate of Change of Frequency) which remains a these studies. CER matter. DSO Implementation Project In parallel to the Generator studies Project ESB Networks, Rate of Change of Frequency (ROCOF) the DSO, is progressing a project to ensure that the In May 2014, the CER approved the Grid Code modification distribution system can operate safely if the TSO operates on ROCOF (Rate of Change of Frequency). This provided the system to the new 1Hz/s Grid Code standard. The DSO for a new standard of 1 Hz/ second over 500 milliseconds is working closely with the TSO on RoCoF, and other issues, which all generators must comply with. This will be an though the DS3 Programme. important aspect of the delivery of the 2020 targets Alternative/ complementary solution as achievement of this standard will allow EirGrid to operate the system with higher levels of wind. A 36 In parallel to the above projects the TSO is studying options month implementation project, led by the CER has now that may be able to compliment, or perhaps act as a partial commenced. alternative, to the new RoCoF standard. This project is due to conclude alongside the 18 month deadline for the priority generators. Therefore at this milestone the CER will The CER’s ROCOF decision has three have further clarity on the ability of the generation portfolio, important strands (Implementation Project): and the distribution system to meet the new standard. At Generator Studies this juncture, the CER will assess the RoCoF project and the suitability of the options resulting from the complimentary This involves electrical and mechanical studies by each solutions project and indeed the viability of moving to the generator to determine whether the generators can new RoCoF standard ahead of the 36 month deadline. comply with the new ROCOF standard of 1 Hz per second over 500 milliseconds. The CER appointed TNEI Services
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Key Task 6
Electricity Networks Revenue Review Project continued
An all-island workshop was held by the TSOs on 21st of a more detailed analysis of a subset of the options November 2014, where submissions from industry were considered in Phase 1. Phase 1 is due to be completed in requested. These submissions were included in the TSO Quarter 2 2015 with Phase 2 estimated to be completed by analysis for Phase 1 of this project. Phase 2 will comprise the end of 2015.
Category Ireland Units
Station Unit ID Capacity (MW) Owner
1. High Priority (18 months) Turlough Hill TH1 73 ESB TH2 73 ESB TH3 73 ESB TH4 73 ESB Moneypoint MP1 285 ESB MP2 285 ESB MP3 285 ESB Sealrock SK3 81 AAL SK4 81 AAL Dublin Bay DB1 399 SynerGen Aghada CCGT AD2 431 ESB Whitegate CCGT WG1 444 Centrica Meath WZE IW1 15 Indaver
2. Mid Priority (24 months) Huntstown HNC 337 Viridian HN2 395 Viridian Poolbeg CCGT PBC 463 ESB Tynagh TYC 384 TPL Aghada AD1 258 ESB
3. Low Priority (36 months) Edenderry- OGGT’s ED3 58 EPL ED5 58 EPL Tawnaghmore TP1 52 SSE TP3 52 SSE Rhode RP1 52 SSE RP2 52 SSE Aghada-OCGTs AT1 90 ESB AT2 90 ESB AT4 90 ESB Tarbert TB1 54 SSE TB2 54 SSE TB3 241 SSE TB4 243 SSE Lough Ree LR4 91 ESB West Offaly WO4 137 ESB Edenderry ED1 118 EPL Ardnacrusha AA1-4 86 ESB Erne ER1-4 65 ESB Lee LE1-3 27 ESB Liffey LI 1,2,4,5 38 ESB Marina MIRC 88 ESB North Wall NW5 104 ESB
4. Exempted (Closing) Great Island GI1 54 SSE GI2 49 SSE GI3 109 SSE 5. NEW (Currently undergoing compliance assessment) Great Island CCGT GI4 431 SSE
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DS3 System Services Ancillary Services The SEM Committee published its decision on the procurement framework for DS3 System Services in Ancillary Services/ December 2014. System Services are services procured System Services by the System operator to assist in the secure and reliable operation of the electricity system e.g. reserve Capacity Payments products, reactive power. Following consultation, the SEM Fixed Costs Committee has designed a procurement framework which will allow for the efficient procurement of the required system services by 2020. Capacity Payments
With the increased penetration of renewable energy on the system, there is likely to be a re-balancing of the revenue streams in the wholesale market, with greater revenues Variable Costs coming from the provision of system services (see diagram below). The SEM Committee’s decision takes account of these likely changes whilst also remaining consistent with Energy Payments ongoing developments in the wholesale market (I-SEM). Energy Payments
Energy
Today Tomorrow
System Capacity Services Volumes A consultation on the methodology for system services volume requirements will be carried out by the TSOs in 2015. This will include consideration of different scenarios for estimating required volumes. Following this Procurement framework consultation and a decision by the SEM Committee on the The SEM Committee’s decision on the procurement methodology for estimating volumes, the TSOs will publish framework for DS3 System services includes the following estimated volumes for each service. key features: Interim Tariffs Expenditure Cap An interim set of tariffs will be established for all services An expenditure cap of €235m per annum will apply from to be in place not later than October 2016 to apply until 2020. The expenditure cap will rise incrementally from its October 2017. This will allow for the early implementation of current level (€60m/annum) in the years leading up to system services and an increased level of wind penetration, 2020. This incremental rise will be linked to the delivered assist the development and operation of the enduring volumes of system services. design and will provide information on the existing capability of the system.
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Key Task 6
Electricity Networks Revenue Review Project continued
Regulated Tariffs The full procurement framework is outlined in the Enduring tariffs for each service will be set for five years, diagram below on one-year contracts issued to all providers. These tariffs Grid Code will apply to all services where it is determined that there is insufficient competition for a competitive auction. The CER has continued through 2014 to oversee the transmission and distribution grid codes, including making Auction decisions on Grid Code and Distribution Code modifications An auction will be run in 2017 providing for long-term and derogation applications. In particular, work in this area contracts, for those services where there is sufficient focused on taking account of developments in Demand competition. Side Participation (DSP), DS3 and European Network Codes for Grid Connection and System Operation. Pre-Qualification Process All providers will be required to enter a pre-qualification process. This process will select the projects eligible to SYSTEM SERVICES PROCUREMENT FRAMEWORK compete for system services contracts and will allow for an assessment of the competitive conditions for each service. Tariffs The published tariffs and one-year contracts will apply to
services where there is insufficient competition. Contracts Published Volumes for the other services will be awarded through the auction.
Payment Basis Prequalification Process TSO Procurement Strategy All payments will be made on the basis of whether the service is technically realisable from that provider by the Validation of Projects and Competitive Assessment TSO in a given trading period. Services under Tariffs Services for Auction Scalars Scalars will apply to the unit prices (set in either the auction 1 Year Contracts Issued 1-15 Year Contracts Issued or by the tariff, as the case may be). The scalars to apply are:
a performance scalar to incentivise reliability and reduce Payments made on Availability Basis payments to unreliable providers; Performance Scalar Scarcity Scalar a volume scalar to protect the consumer from overpayment; Product Scalar Volume Scalar a scarcity scalar to incentivise availability from wproviders of most value to the system; and product scalars to incentivise enhanced delivery of services from providers. Generator System Services Revenues Contractual Arrangements
Long-term contracts will be issued through the auction for new investment and one-year contracts for existing capability. Contract length will be between 1-15 years or, on a case-by-case basis with SEM Committee approval, a maximum of 20 years. Take-or-pay contracts will also be issued through the auction to ensure a stable minimum level of revenue for investors. Provision will be made for investment requiring a lead-time to delivery.
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Key Task 7 Electricity & Gas Security of Supply
In accordance with Regulation (EU) 994/2010, the CER, as The CER is confident that the current monitoring Ireland’s designated Competent Authority, submitted the arrangements are sufficient to identify credible threats following documentation to the EU Commission in 2014: to Ireland’s electricity security of supply, and that no such threats are likely. The CER is also satisfied that the National Risk Assessment; market framework in place is appropriate to encourage National Preventative Action Plan (CER/14/785); and new investment where and when necessary and thereby National Gas Supply Emergency Plan (CER/14/784). enhance security of supply. Given the vital importance of Ireland’s electricity security of supply, the CER will continue Additionally, to facilitate regional co-operation between to assess the appropriateness of the current framework the UK and Ireland on gas security of supply, the CER in and identify where any improvements can be made. conjunction with the UK Competent Authority (i.e. DECC) submitted a joint Risk Assessment and a joint Preventive As part of the CER’s role in ensuring security of supply for Action Plan to the European Commission in 2014. electricity and gas, the CER hosted a Gas and Electricity Interactions workshop (July 2014). The purpose of the In Q4 2014 the CER also submitted an Annual Report, as workshop was to identify issues that needed to be required under SI 336 2013 (EU Security of Natural Gas addressed in the medium and long term to ensure the Supply Regulations) to the Minister for Communications, efficient operation of the gas and electricity networks, Energy and Natural Resources regarding the measures and to ensure that there is no security of supply issues the CER has taken to ensure Ireland’s compliance with emanating from the interaction between the gas and Regulation (EU) 994/2010. electricity markets.
As Ireland’s Competent Authority for the implementation During 2014, the CER also hosted numerous Gas Electricity of Regulation (EU) 994/2010, the CER also closely Emergency Planning (GEEP) group meetings. Some of monitors feedback from the EU Commission. Such the GEEPs notable achievements in 2014 included the feedback includes 2014 EU Commission “Report on development of Ireland’s Stress Test Report, which was the implementation of Regulation (EU) 994/2010 and submitted to the EU Commission in August 2014. its contribution to solidarity and preparedness for gas disruptions in the EU”. The purpose of the Stress Test was to assess the impact of disruption of gas supplies from Russia and the Ukraine over The CER welcomes the EU Commission’s report, as it a 1 month and six month period on Ireland’s gas supplies. provides effective guidance for Competent Authorities Taking account of the UK’s Stress Test analysis, Ireland’s when developing future Risk Assessments, Preventive Stress Test Report did not envisage any interruption to gas Action Plans and Emergency Plans. supplies at Moffat (Scotland) (assuming average winter With reference to the electricity security of supply, the CER conditions) in the event of an interruption of gas supplies submitted Ireland’s 2014 Electricity Security of Supply to from Russia or Ukraine. EU Commission, as required under SI 60 2005 (European Additionally, in 2014, the GEEP played a key role in Communities Internal Market in Electricity Regulation). responding to detailed International Energy Agency (IEA) While identifying the key stakeholders involved in Ireland’s questionnaires ahead of the IEA’s visit to Ireland. The electricity security of supply framework, this report also purpose of the visit was for the IEA to prepare a report on assesses Ireland’s: Ireland’s emergency arrangements in electricity, gas and balance between electricity supply and demand; oil sectors. The CER notes that the IEA issued its report for Ireland in July 2014, and it provided recommendations long term security of electricity supply; to Ireland’s administrative bodies (including the CER). The
operational network security; CER will work closely with DCENR in addressing the IEA’s electricity network investment; and recommendations. electricity interconnections and regional market integration.
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Key Task 8 Retail Market Monitoring & Customer Protection
Retail Markets In July 2014, the CER made a decision to remove price regulation in the domestic gas market. This meant that Background since July, Bord Gáis Energy has been free to set its own Increased competition and deregulation in retail markets prices in the domestic market. All other suppliers continue requires a more comprehensive framework to monitor to set their own prices. All energy markets are now price the state of competition and assess if consumers are deregulated in Ireland. benefitting from it, as required by the 3rd Package, which has been transposed into Irish legislation. The Energia entered the gas and electricity domestic markets 3rd Package refers to a package of EU legislation on in January 2014. In electricity the market for supplier-led European electricity and gas markets, which places a lifestyle choice prepayment where the customer pays renewed emphasis on customer protection. National for a prepayment device that is installed by the supplier regulators (including the CER) are required to monitor retail expanded with Electric Ireland now offering such product1. markets across a range of indicators, to take action where This development increases the choice that is available necessary, to prevent distortion or restriction of competition to customers and has a positive knock-on effect on in the supply of electricity and gas to final customers, competition in the market. and to ensure that final customers are benefiting from In electricity, Electric Ireland is the largest supplier in competition in the supply of electricity. terms of customers and MWhs across all segments. While The CER issued a Market Monitoring Framework Decision Electric Ireland’s market share (MWhs) has increased (CER/14/344) during 2014 on a new retail market across all segments, it remains below the threshold at monitoring framework in order to meet these new which it was price deregulated. Its market share in the requirements and respond to the increased competition domestic electricity market is 56.3%. Energia has lost resulting from the deregulation of the electricity and gas market share in all business segments compared to Q4 markets. The CER is currently working with stakeholders 2013 but has gained relatively significantly in its first year of in relation to the implementation of this framework. This operation in the domestic market segment. monitoring framework will be crucial in ensuing that In gas, Bord Gáis Energy remains the largest supplier in consumers continue to benefit from competition. terms of customers and consumption in domestic, IC and Retail Market Monitoring FVT markets. In the RTF market, Energia is the largest Throughout the course of 2014, the CER has continued supplier. The domestic gas market was the only market to apply its existing market monitoring framework segment still subject to price regulation in early 2014. As all which covers a number of key indicators such as market criteria to deregulate the gas market were deemed to be share, switching rates, disconnections, prices, suppliers’ met, the domestic gas market was price deregulated on 1st compliance with Codes of Practices and supply licences, July 2014. and direct customer experiences (via annual survey and The following charts show the market shares of the key complaints). A number of reports were published over the energy suppliers in the electricity and the gas domestic course of the year providing stakeholders with market markets at the end of 2014: indicators in the above areas. These market monitoring activities in conjunction with the general customer Domestic Electricity Market protection measures will ensure that consumers benefit Figure Customer numbers share, domestic Electricity through the efficient functioning of the retail markets and in market, Q4 2014 Figure Consumption (MWh) share, doing so fulfil the key retail aims of the 3rd Package. domestic Electricity market, Q4 2014
Retail Market Shares Domestic Gas Market There were a number of developments during 2014 that Figure Customer Numbers, Domestic Gas Market, Q4 2014 have had positive implications on the level of competition Figure Consumption, GWh, Domestic Gas Market, Q4 2014 and transparency in the electricity and gas markets.
1 PrePayPower and Pinergy also operate in this space.
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Key Task 8 Retail Market Monitoring & Customer Protection continued
Domestic Electricity Market
Customer numbers share, domestic Consumption (MWh) share, domestic Electricity market, Q4 2014 Electricity market, Q4 2014
Electric Ireland
SSE Airtricity
Bord Gáis Energy
Pre Pay Power
Energia
Others
Customer Numbers, Domestic Consumption, GWh, Domestic Gas Market, Q4 2014 Gas Market, Q4 2014
SSE Airtricity
Bord Gáis Energy
Electric Ireland
Flogas
Energia
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Customer Switching to monthly publication of disconnections data in March Switching between suppliers is an important metric of 2014. The CER’s work in the area of compliance and in competition and consumer engagement in the retail undertaking audits of compliance continues alongside markets. the monitoring of disconnections. In May 2014, a voluntary agreement was introduced by most energy suppliers Switching is continuing in both the electricity and gas which saw them committing to never disconnect an markets and switching rates are above 10% in both markets engaging customer. In December 2014, the CER extended (of approximately 14% and 17% respectively). The total the requirement that suppliers can only pass on 50% of number of switches completed in the electricity market the charge for a disconnection or reconnection for reason in 2014 was 312,477. This represented an increase of +17% of non-payment to a customer experiencing financial since 2013. The total number of switches completed in the hardship. gas market in 2014 was 106,108, representing a decline since 2013 of -6.2%. Energia, the newest supplier in the While the number of PAYG meters installed for financial domestic markets, experienced the highest net gain in hardship declined in 2014, disconnections of customers customers in both electricity and gas in 2014. Bord Gáis also declined significantly. Estimated data shows that Energy experienced the highest net loss of customers in approximately 44% of the domestic sites in electricity and the gas market and SSE Airtricity had the largest net loss gas that were disconnected were suspected of being in electricity. vacant. There are various reasons for this decline including the work that was undertaken by all stakeholders in early Customer Debt and Disconnections 2014 that reviewed the market processes, the move to It is the CER’s statutory obligation to ensure a high standard monthly reporting of disconnections by CER and also the of protection for final customers in the electricity and voluntary agreement introduced by most energy suppliers gas markets. In compliance with the Code of Practice on which saw them committing to never disconnect an Disconnections, suppliers must ensure that disconnection engaging customer. is always the last resort. The Supplier Handbook stipulates minimum assistance that must be provided to customers The CER continues to promote the early intervention by in genuine financial hardship in managing their bills and suppliers to encourage customer engagement and uptake suppliers are required to treat disconnection as a last of payment plans and PAYG meters and to continue to resort. As part of these provisions, suppliers must offer ensure that the disconnection of a customer is treated as customer payment plans that take the customer’s ability a ‘last resort’. The CER continues to work with industry to to pay into account and no supplier may disconnect a determine what further actions can be taken to limit the domestic customer without offering them a free PAYG level of disconnections and to ensure that the measures meter. In 2014, the CER audited suppliers’ compliance currently in place continue to support customers in with these provisions. In 2014, the CER audited suppliers’ genuine difficulty. compliance with the Code of Practice on Disconnections Retail Prices and the Code of Practice on Marketing and Sign Up. The Energy prices are made up of a number of different results of the audit were published in an Information Note components including network costs, wholesale costs, CER/15/087. supply and retail costs and other factors that are driven While suppliers are adhering to the minimum standards by Government policy such as PSO levy, VAT rate and the set out in the code of practice, in early 2014 the CER, carbon tax. in conjunction with industry and the Department of All suppliers are required to publish details of the tariff Communications, Energy and Natural Resources, reviewed plans that are available to domestic customers. the market processes to ascertain if more could be done in further reducing disconnections (e.g. by increasing The electricity and gas markets in Ireland are fully price uptake of PAYG). While this work was ongoing the CER deregulated, therefore the CER no longer regulates imposed a moratorium on the disconnections, which was electricity or gas prices in the domestic or business lifted on 20th February 2014. While the CER monitors markets. Prior to price deregulation, the incumbent disconnections on an ongoing basis, the CER moved electricity supplier, ESB Customer Supply (now Electric
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Key Task 8 Retail Market Monitoring & Customer Protection continued
Ireland), and the incumbent gas supplier, Bord Gáis Energy, (hedging) to provide greater retail price stability. It can take had to apply to the CER if they were proposing changes over 6 months for changes in fixed price contracts to feed to tariffs. All suppliers, including incumbent suppliers, can through to retail prices. now set their own prices. Overall, latest data shows that domestic Irish gas prices There are a large number of tariff plans available to are above the EU average for the dominant consumption domestic and business customers that are provided by band in Ireland. Irish gas prices for business customer in electricity and gas suppliers in Ireland. These plans offer the dominant consumption band in Ireland are lower than customers different tariffs comprised of standing and unit the EU average. For the dominant consumption bands in charges (and in some instances daily service charges). Ireland, Irish domestic and business electricity prices are Suppliers can also offer different rates depending on above the EU average. payment or billing method (e.g. paperless, online, direct In 2011 the CER published its decision on the accreditation debit etc.). All suppliers are required to publish details of framework for price comparison websites. Under the the tariff plans that are available to domestic customers. accreditation framework, a website providing an energy Suppliers of businesses often provide bespoke plans to price comparison service is only accredited by the CER if it their business customers and information on such plans is meets defined standards for accuracy, transparency, and generally not published by suppliers. Customers switching reliability. An accredited site will also be audited at least from a standard plan to a discounted plan continue to annually by the CER to ensure that it continues to provide a make the highest savings. high standard of service. In addition to these annual audits In 2014, four suppliers operated in both the domestic electricity and gas markets (SSE Airtricity, Bord Gáis Energy, Electric Ireland and Energia), and all actively promote bundled dual fuel offers with price discounts for domestic customers that avail of both services from the same supplier.
2014 saw a significant change in terms of the options available to customers. Such options ranged from: exclusive deals, limited term sign-up offers, cashback/ credit offers, fixed price plans, energy efficiency services, loyalty programmes, etc. These developments had a positive impact on competition in the markets with an increase in the number of options available to customers and an increase in electricity switching.
With regard to changes in domestic electricity and gas prices, at the beginning of 2014 a number of suppliers introduced price increases ranging between 1.7% and 3.5%. In November 2014, Electric Ireland was the first supplier to announce an electricity price reduction (-2%, to reflect reducing wholesale prices). In early 2015, all other suppliers also introduced price reductions in gas (ranging from -2.5% to -4%) and electricity (ranging from -2% to -4%). These changes in price were primarily driven by significant reductions in wholesale prices over the past year. While the wholesale price reduction was higher than the actual reductions announced by suppliers, this is explained by the fact that suppliers buy ahead at fixed price contracts
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the CER conducts regular spot checks. The accreditation 5% of domestic electricity consumers and 4% of system provided by the CER gives energy customers the domestic gas consumers stated that they were now or confidence to use price comparison websites, assisting were sometimes in arrears. An additional 16% in gas and them in comparing tariff offers and getting the best tariff 14% in electricity stated that they part pay their bill but deal. There are now two accredited price comparison typically have fully paid the bill before the next bill is websites: www.bonkers.ie and www.switcher.ie . issued; and A key reason given by consumers as important in their Consumer Survey decision to switch suppliers was the desire to save To help inform policy in the area of customer protection money. Reluctance to switch is driven primarily by inertia, the CER has conducted, since 2010, an annual survey of but there is evidence of trust related barriers such as customers’ attitudes and experiences of the retail market. trust in prices being as low as advertised. The consumer survey for 2014 was published in June and some of the findings highlighted were: The CER conducted a similar survey in early 2015 and will publish a report in June 2015. This will be the sixth year the Satisfaction with the service was high for domestic CER has undertaken a consumer survey and it continues and SME customers provided by supply businesses. to provide valuable insights to the CER and helps form Satisfaction with the service provided by domestic consumer protection policy. suppliers was between 75% and 84% but declines across all suppliers were recorded. SME supplier satisfaction was between 73% to 93%;
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Key Task 9 Downstream Energy Safety Regime
Gas Installers and Electrical Contractors elements of the scheme which are functioning well to date and outline improvements or changes in some areas Under the Energy (Miscellaneous Provisions) Act 2006 where warranted. The Decision Papers further set out the CER was given statutory responsibility for regulating the CER’s decisions on numerous issues relating to how the activities of gas installers and electrical contractors electrical contractors and gas installers will be regulated with respect to safety. In order to fulfil its functions the with respect to safety from January 2016 onwards. These CER designated Safety Supervisory Bodies (SSBs) to carry papers are available on www.cer.ie and a summary of some out the day to day management of the gas and electrical of the main decisions in relation to the electrical and gas regulatory schemes for Registered Gas Installers (RGIs) and schemes are set out below: Registered Electrical Contractors (RECs). The Register of Gas Installers of Ireland (RGII) was nominated in respect of Electrical Scheme Decision: gas installers, while the Register of Electrical Contractors The CER decided to appoint one Electrical SSB for the of Ireland (RECI) and the Electrical Contractors Safety and designation period commencing January 2016; Standards Association of Ireland (ECSSAI) were nominated The CER decided that it does not intend to allow the in respect of electrical contractors. These bodies were Electrical SSB to participate in training or assessments appointed in 2009 for a period of seven years. of RECs for the designation period commencing January The CER produced two Criteria Documents that set 2016; out how the RGI and REC schemes are to be operated, The CER decided that an electronic certification system including the responsibilities of the SSBs, RGI and REC. covering all certificate types is to be developed; In order to provide assurance to the CER that the SSBs The CER decided that there will be one customer facing are fulfilling their obligations under the relevant Criteria brand, Safe Electric to be used by the Electrical SSB. Document, the SSBs report against a series of safety metrics on a quarterly basis. This allows the CER to identify Gas Scheme Decision trends across the gas and electrical schemes. Throughout The CER will not require the designated body which 2014 the CER also carried out a schedule of audits and is appointed from January 2016 to provide a GSO but inspections on the Gas and Electrical SSBs. the GSO will be appointed from within the CER’s own In order to align with the conclusion of the current resources. designation term, a review of both the electrical and gas The CER decided that there will be a requirement that schemes was undertaken by the CER during 2014. The RGIs display the RGI logo on their vehicles (if the vehicle purpose of this consultation was to ensure that that the display other details relating to their work) CER’s approach to the regulation of electrical contractors The CER decided that an electronic certification system and gas installers with respect to safety evolves and will be in place and maintained by the Gas SSB post develops over time and that the CER remains effective in 2016. setting an appropriate level of electrical and gas safety No change will take place to the five year assessment in Ireland. Consultation Papers2 published in June 2014 requirement on RGIs. posed various questions relating to the schemes as A competitive process will take place during 2015 in order they currently stand in order to seek views on how they to appoint an Electrical Safety Supervisory Body and a may be improved into the future. Following on from this, Gas Safety Supervisory Body for the period commencing Proposed Decision Papers3 were published in October and January 2016. Decision Papers4 which set out the CER’s final decisions were published in December 2014. The decisions retain
2. Regulation of Electrical Contractors with respect to Safety from 2016 Consultation Paper (CER/14/130) and Regulation of the Gas Installer Industry with respect to Safety from 2016 Consultation Paper (CER/14/131) 3. Regulation of Electrical Contractors with respect to Safety from 2016 Proposed Decision Paper (CER/14/757) and Regulation of the Gas Installer Industry with respect to Safety from 2016 Proposed Decision Paper (CER/14/759) 4. Regulation of Electrical Contractors with respect to Safety from 2016 Decision Paper (CER/14/790) and Regulation of the Gas Installer Industry with respect to Safety from 2016 Decision Paper (CER/14/791)
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Statistics for Gas Installers and Electrical Contractors The CER has undertaken three successful prosecutions in In 2014, the CER continued to monitor the performance this area in 2014, in Cavan and Dublin. of the gas and electrical schemes and worked towards The CER continues to engage with industry on initiatives improvements in these areas. which could promote greater use of RGIs and RECs. The quarterly reports show that there was 3,084 RGIs Domestic Gas Assessment in Ireland in Q4 of 2014. The number of RGIs remained relatively stable from Q4 2013 and throughout 2014. The In order to ensure that competencies are kept up-to- sale of certificates remains strong with those relating to the date every five years, all RGIs will be required to pass servicing of appliances constituting in excess of 90% of the an assessment that has been accredited to the ISO/IEC total number of certificates sold. 17024 standard. Throughout 2014 the CER has continued overseeing the interaction between industry stakeholders, Figures for the electrical scheme, which is branded as certification bodies, training providers and accreditation the Safe Electric scheme, relate to both RECI and ECSSAI. bodies to facilitate the implementation of the scheme. These show that the number of RECs increased during 2014 to 4,065. The number of certificates sold during Non Domestic Gas Works Consultation 2014 continued to increase with certificate sales up 7.5% The CER published a consultation paper5 in September compared to 2013. The number of Minor type certificates 2014 regarding the extension of the RGI regulatory scheme sold during 2014 remained relatively stable compared to to include non-domestic gas works. The CER will publish 2013. Sale of domestic type certificates (<50kVA type cert) a proposed decision and decision paper during 2015, in continued to steadily improve during 2014 increasing by 14%. respect of this matter.
Gas Safety Framework Gas Safety Prosecutions The CER has statutory responsibilities relating to the safety It is a legal requirement that only RGIs may carry out Gas of gas customers and the general public with regards to Works, as defined in S.I. 225 of 2009 and S.I. 299 of 2011. It the supply, storage, transmission, distribution and use of gas. is also a criminal offence for an individual or a company to The CER discharges these responsibilities through the describe oneself as an RGI or in a manner likely to suggest ongoing operation of its Gas Safety Regulatory Framework, that they are a RGI when not registered. which was initially published in October 2007. During 2014, Seven successful prosecutions were undertaken by the an updated version of this document was published6. This CER in this area in 2014. These prosecutions took place in updated document was published to reflect the inclusion Dublin, Limerick, Navan, Drogheda and Gorey. within the framework of the CER’s new safety regulatory responsibilities over LPG, and to reflect a change to There have been a total of eleven prosecutions since the the regulation of natural gas storage as a result of the introduction of the RGI regulatory scheme in 2009. These introduction of the operation of the Petroleum Safety prosecutions took place between 2011 and 2014. Framework. Furthermore, the enforcement powers granted Electrical Safety Prosecutions to the CER under the Energy (Miscellaneous Provisions) Act 2012 were also outlined. The Gas Safety Regulatory Since the 1st October 2013, under Irish law only RECs can Framework describes how the CER regulates natural carry out Restricted Electrical Works, i.e. electrical work gas and LPG Undertakings, through the use of six key in domestic premises. Minor electrical works such as like Regulatory objectives: for like changes, changing a switch, adding a socket to an existing circuit or moving a light fitting, are not covered by 1. Minimising the loss of containment; this legislation. It is also a criminal offence for an individual 2. Maintaining safe system operating pressure; or company to describe oneself as a REC or in a manner 3. Minimising the risk of injecting gas of non-conforming likely to suggest they are a REC without being registered. quality;
5. Extension of the Registered Gas Installer Scheme to include Non-Domestic Gas Works Consultation Document CER/14/425 6. Gas Safety Regulatory Framework for Ireland – High Level Approach Decision Paper CER/14/296
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4. Providing an efficient and coordinated response to gas must be reported to the CER by LPG undertakings. emergencies; During 2014, the CER set out, in law, the three categories 5. Minimising the safety risks associated with the utilisation of incidents which must be reported and the reporting of gas; and requirements. These regulations are: 6. Promoting public awareness of gas safety. Liquefied Petroleum Gas Safety (Liquefied Petroleum During 2014, Bord Gáis Networks (BGN) changed its name Gas Incident) Regulations 2014 (SI No: 77); and to Gas Networks Ireland (GNI). Therefore, throughout this Liquefied Petroleum Gas Safety (Liquefied Petroleum section both names will be used. Gas Incident Reporting and Investigation) Regulations 2014 (SI No: 78). The CER undertook the following works in 2014 regarding its gas safety functions, as follows: Reportable LPG incidents are classified in a similar way to natural gas incidents: Gas Safety Incidents Requirements to Report Natural Gas Incidents Type A which involve a fatality;
Bord Gáis Éireann (BGÉ)7 are legally required to report Type B which involve inpatient hospital treatment of specific categories of incidents to CER: individuals; and Type C which involve property damage in excess of a
Type A which involve a fatality; specified value. Type B which involve inpatient hospital treatment of individuals; and Failure by LPG Undertakings to notify the CER of an LPG incident is a criminal offence which may lead to Type C which involve property damage in excess of a prosecution. An undertaking may also voluntarily report specified value. an incident to the CER8, however there is no legislative These incidents are referred to as “Reportable” incidents. requirement for them to do so. The CER has put in place The CER may also be notified of other incidents by Bord incident reporting guidelines to assist LPG Undertakings. Gáis Networks where they are of the view that CER may be concerned or interested in relation to the findings CER’s Role in natural gas and LPG Incidents associated with the event(s). These incidents are referred to Formal reporting arrangements are in place whereby as “Reportable under Guidance” (RuG) incidents. undertakings must report specified incidents to the CER. All incidents reported to the CER are examined in order to Once an incident has been reported to the CER, the CER consider learnings for the Gas Safety Framework. may seek further information regarding the incident, if necessary, from the undertaking involved. Depending Requirements to Report LPG Incidents on the nature of the incident, the CER may carry out an Under the Electricity Regulation Act 1999, as amended by investigation as to the cause and circumstances of the the Energy (Miscellaneous Provisions) Act 2012, the CER incident. If appropriate, other agencies may be involved has been given increased safety regulatory powers over in this investigation. The CER uses any knowledge gained the Liquefied Petroleum Gas (LPG) industry. As part of from the outcome of the investigations to help further these new responsibilities, certain classes of LPG incidents develop safety policy and to inform promotion and public awareness activities for safe use of natural gas and LPG.
7. Bord Gáis Networks carry out this function on behalf of Bord Gáis Éireann. 8. LPG undertakings may voluntarily report matters to the CER which are not categorised as A, B, or C incidents.
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Incidents during 2014 Auditing and Inspections As part of the overall Framework, an audit and inspection Type A Type B Type C RuG Other Total programme was completed by CER inspectors in 2014 Natural 1 1 1 17 N/A 20 covering all natural gas Undertakings. The number/type of Gas audits and inspections completed were based on current gas undertaking projects and findings from previous LPG 0 0 0 N/A 5 5 audits and inspections. This included four inspections on Total 1 1 1 17 5 25 the distribution network and six audits/inspections on the transmission system, one of which was also related to distribution. 14 audits were also completed on licensed In 2014 a total of 25 gas incidents were reported to CER: 20 Shipper Supplier undertakings by the CER. Incidents relating to natural gas and 5 incidents reported regarding LPG. The natural gas incidents included one Type A, one Type B and one Type C, and occurred in Electricity Regulation Act 1999 (Liquefied January, June and August 2014. The other 17 natural gas Petroleum Gas Works) incidents were Reportable under Guidance. The Type In 2014, the CER continued to work on developing and A and Type B related to the customers’ side of the gas implementing a regime under its new powers to regulate installation and were categorised as accidental and non- safety in the LPG industry. A number of consultations accidental damage, and one occurred at a commercial were carried out in 2014 on various aspects of the Safety property and was due to vandalism. There were two Regulatory Framework, including licensing of certain Carbon Monoxide incidents relating to Natural Gas during LPG undertakings, and a levy methodology for LPG 2015. The remainder of the incidents reported were either undertakings. The CER’s new licensing powers under the natural gas incidents that were Reportable under Guidance Energy (Miscellaneous Provisions) Act 2012 extend to LPG or LPG incidents that were voluntarily reported by LPG undertakings operating piped LPG distribution networks Undertakings8. to multiple domestic final customers. This safety licensing regime for LPG undertakings was fully implemented in Natural Gas Safety Cases & Material Changes April 2014. The regime placed a requirement on LPG undertakings to submit a safety case to the CER as part of The CER engaged with GNI during 2014 regarding their licence application. Safety cases have been received required updates to its transmission and distribution safety from two undertakings, and are currently being assessed. cases. These updates related to matters including the Once this is complete and if the safety cases are accepted, rebranding of Bord Gáis Networks to Gas Networks Ireland, the CER will be in a position to grant licences to these the incorporation of the South North gas pipeline into undertakings. the safety case, and the introduction of the Bellanaboy connected system point related to the Corrib gas field terminal at Bellanaboy, Co. Mayo. The CER accepted revised safety cases for transmission and distribution in November 2014.
9. These consultations included Gas Safety Regulatory Framework – Consultation Response and Next Steps Paper CER/13/127; Safety Case Guidelines for LPG Undertakings – Decision Paper CER/13/253; Gas Safety Regulatory Framework for Ireland – Decision Paper on LPG Safety Licence and LPG Safety Licence Fees CER/14/096; Gas Safety Regulatory Framework for Ireland – Decision Paper on a Levy Methodology for Licensed LPG undertakings CER/14/101. 10. Gas Safety Regulatory Framework for Ireland – High Level Approach Decision Paper CER/14/296
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Key Task 9
Downstream Energy Safety Regime continued
Following a number of consultations9 with regard to LPG, an Natural Gas and LPG Undertakings Safety updated version of the Gas Safety Regulatory Framework Enforcement for Ireland High Level Approach document10 was published During 2014 the CER commenced updating relevant during 2014. This expanded the existing regulatory documents including licences and introducing internal Framework to include the safety regulation of LPG. processes incorporating detailed robust operating The CER will continue to progress changes to the existing procedures which will assist the CER in exercising the Gas Safety Framework in 2015 to ensure it is fit for purpose new enforcement powers granted to it under the 2012 in light of CER legislative safety responsibilities. legislation. The system and procedures will ensure that the CER is in a position to take enforcement actions, as Natural Gas Licences required, in the event of a natural gas or LPG undertaking’s non-compliance with their obligations under legislation or The CER is also responsible for the licensing of natural their licence. gas undertakings, under Section 16 of the Gas (Interim) (Regulation) Act, 2002. While certain conditions of existing The CER’s enforcement powers are progressive in nature licences relate to safety, including the requirement to have similar to other regimes, for example in the UK, and include a safety case, a review indicated that more comprehensive instructing the natural gas or LPG undertaking to submit safety conditions would be preferable in the existing an improvement plan to the CER, where the improvement natural gas licences. In 2014, the CER began consulting plan sets out how the natural gas or LPG undertaking upon modifications to the natural gas Storage Licence11 will remedy a non-compliance, all the way up to the CER and the natural gas Shipping Licence12 in order to bring it issuing a prohibition notice for an activity. up to date with legislative developments with respect to In the event of non-compliance, or inadequate compliance safety regulation and the CER’s increased enforcement by the natural gas or LPG undertaking with specified powers. enforcement actions taken by the CER, the CER can bring In 2015, the CER will continue the process of updating criminal prosecutions against the natural gas or LPG natural gas licences to bring them in-line with new safety undertaking. legislative developments. CER will continue to update the Gas Safety Framework in The key proposed modifications are: 2015 to reflect new enforcement powers in greater detail. Modifications to include further safety conditions, to take into account the CER’s responsibility for safety Promotion and Public Awareness regulation of natural gas undertakings, under the Energy Increasing public awareness of safety issues regarding (Miscellaneous Provisions) Act 2006; and electrical and gas issues are a key objective for the CER. Modifications to accommodate the CER’s increased In light of this, public awareness campaigns highlighting enforcement powers with regard to natural gas these issues were undertaken, by CER and other Undertakings, as provided for under the Energy stakeholders in 2014. Further detail is provided below. (Miscellaneous Provisions) Act 2012. Electrical Safety Promotion and Public Awareness These updates will bring the licences in line with the CER’s full legislative remit and the safety conditions contained in In 2014 the CER ran the safety awareness campaign, other licences issued by the CER. known as “Safe Electric”. This was run across multiple media including TV, radio, press and online. The campaign emphasised that only a Registered Electrical Contractor
11. Revised Natural Gas Storage Licence Proposed Safety and Enforcement Conditions Consultation Paper, CER/14/450. 12. Review of the Natural Gas Shipping Licence Consultation Paper, CER/14/776.
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(REC) can carry out Restricted Electrical Works, i.e. Carbon Monoxide Awareness Week electrical work on domestic installations (excluding Minor Carbon Monoxide Awareness Week took place from Works) and highlighted the requirement to ask for a Monday 22nd to Sunday 28th of September 2014. This certificate when the work is complete. It also highlighted involved a PR launch with the Minister for Communications, that it is an offense for a non-registered contractor to Energy and Natural Resources, Alex White, together with portray themselves as being a REC. The advertisements advertising, radio, press on-line, social media and television directed people towards the www.safeelectric.ie website campaigns where the risk of Carbon Monoxide poisoning for more information. and the importance of Carbon Monoxide alarms were discussed. An important element of the campaign was the active involvement of people directly affected by Carbon Monoxide.
The objective of the awareness week was to create and maintain awareness of the dangers associated with Carbon Monoxide and to communicate the preventative measures that the public should take.
Gas Safety Promotion and Public Awareness The 2014 promotion programme continued to focus on developing awareness amongst the general public of the RGI scheme and Carbon Monoxide (CO) safety. One of the highlights of the 2014 campaign was the Carbon Monoxide Awareness Week held in September, as further outlined below.
The programme of campaigns used a range of mediums The three core messages of the campaign were: to develop public awareness and generally includes on an Remember the causes: Carbon Monoxide can be on-going basis: produced when any fuel is burnt, including oil, gas, wood Carbon Monoxide Awareness Week; and coal; Gas escapes awareness through TV, radio and national Remember to service: To prevent Carbon Monoxide, press; have your appliances serviced annually and keep vents, Carbon Monoxide awareness and prevention with TV, flues and chimneys clear; and radio, leaflets, posters, national and local press; Remember the alarm: For added protection install an Promotion of the RGI scheme and the need to use a audible Carbon Monoxide alarm. Registered Gas Installer through TV radio, national press; To find out more about Carbon Monoxide causes, Increased vigilance when working in the vicinity of buried symptoms, prevention and protection measures, call gas apparatus through national and local press and trade 1850 79 79 79 or visit www.carbonmonoxide.ie. journals; Advertising of emergency details, advice and contact information; Instructions to landowners with gas pipelines on their property through on site advice, liaison and instruction leaflets; and Gas safety leaflets circulated with gas bills.
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Key Task 10 New Petroleum Safety Regime
Background in Ireland in 2014. As above, one of these applications was withdrawn by the petroleum undertaking prior to The Petroleum (Exploration and Extraction) Safety Act 2010 completion of the assessment. For the other application, (the Act) conferred new safety regulatory responsibilities the CER issued the first safety permit under the Act to Shell on the CER with respect to petroleum exploration and Exploration and Production Ireland Limited and partners on extraction activities. The Act required the CER to establish April 16th 2014, for well work activities associated with the and implement a risk based Safety Framework, which Corrib gas field. has been entitled the Petroleum Safety Framework. The Framework can be best understood as a collection of In February 2014 the CER commenced the assessment regulations, written regulatory documents and procedures of a safety permit application for the production activity which, taken together describe the system the CER will use for the Shell Exploration and Production Ireland Limited to regulate safety for petroleum activities and infrastructure and partners operated Corrib gas field. In August the in Ireland. The establishment of the Framework CER issued a safety permit for production to Shell commenced in 2010. Exploration and Production Ireland Limited for the Corrib gas field. Since then, the Petroleum Safety team has been On December 18th 2013, the remaining provisions of monitoring compliance with the safety permit through the Act were commenced and the CER took over the audits and inspections. responsibility for the safety regulation of upstream petroleum activities. In January 2014, the final documents In November 2014, the CER commenced the safety permit under the Petroleum Safety Framework Implementation application of the PSE Kinsale Limited/PSE Seven Heads Project were published: S.I. 004 The Petroleum Safety Limited production activities. The assessment of the PSE (Petroleum Incident) Regulations 2014 and the Guidance Kinsale Limited/PSE Seven Heads Limited safety permit on the Notification of Petroleum Incidents (CER14015) paper. applications is ongoing.
The main functions of the CER under the Act are to: Regulate designated petroleum activities with respect to Auditing and Inspections safety; During the safety permit application assessments Investigate petroleum incidents; and following the issuance of safety permits, the CER discharged its monitoring function through the carrying out Monitor and enforce compliance by petroleum of audits and inspections of the petroleum activities. This undertakings; included: Issue safety permits; and
Provide safety information to the public. The offshore inspection of drilling rigs prior to entering Irish waters; Safety Permit Applications during 2014 The offshore inspection of the well work activity on location during operations in Ireland; and During 2014, the CER carried out four safety permit application assessments and issued two safety permits. The onshore inspection of the Corrib gas field terminal at Two applications were with respect to well work activities Bellanaboy, Co. Mayo. and two were with respect to production activities. One well work application was withdrawn by the petroleum International Engagement undertakings prior to completion of the assessment and one The CER continued to actively engage with European production application assessment was ongoing into 2015. safety regulators through the North Seas Offshore Authorities Forum (NSOAF). Petroleum Safety team The CER endeavours to assess well work safety permit representatives attended meetings at the NSOAF EU applications within three months and production safety Working Group, the Wells Working Group and the permit applications within six months. In December Health, Safety and Environment Working Group. The CER 2013, the CER commenced the assessment of two well representative also took over as chair of the EU Working work safety permit applications from different petroleum Group in 2014. undertakings planning to carry out well work activities
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In additional to the NSOAF, the CER attended and actively Petroleum Incidents engaged with the European Union Offshore Authorities Twelve (12) petroleum incidents were reported to the Group (EUOAG). The EUOAG was set up in 2013 under CER in line with the requirements of the Petroleum Safety Directive 2013/30/EU on the Safety of Offshore Oil (Petroleum Incident) Regulations 2014. The petroleum and Gas Operations (the ‘Offshore Safety Directive’) incidents were: and its objectives include the sharing, prioritisation and supervision of the development of guidelines on best Five (5) instances of ‘Instance of a stand-by vessel not practices and the rapid exchange of information on being in a position to provide rescue to persons on incidents. During 2014, the focus of EUOAG meetings was offshore petroleum infrastructure’; on the implementation of the Offshore Safety Directive. The Six (6) instances of ‘Mustering on onshore or offshore CER input into multiple associated EU led deliverables. petroleum infrastructure, other than for planned drills an unplanned muster’; Implementation of the Offshore Safety Two (2) instances of ‘Failure or malfunction of plant Directive 2013/30/EU and equipment used as part of or in a manner closely The CER also commenced work on the implementation associated with petroleum infrastructure’ (also reported of the Offshore Safety Directive in 2014. This including under point (c) above; and the completion of a gap analysis of the Offshore Safety One (1) ‘dropping of an object’. Directive requirements and the existing Petroleum Safety All of the above petroleum incidents have been closed out Framework, and the development of a Petroleum Safety to the satisfaction of the CER. Framework Update work plan to July 2015. Enforcement Actions No petroleum safety enforcement actions were taken by the CER in 2014.
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Key Performance Indicators
The Government Statement on Economic Regulation, Safety published by the Department of the Taoiseach in October 2009, aimed at strengthening the process of assessing the Issue KPI Outcome performance of regulators across key economic sectors. Regulation Numbers The number of RGIs at the This included a requirement that the performance of of electrical of electrical end of each year was: regulators be measured annually against clear indicators, contractors and contractors • 2014 – 3,048; gas installers and gas and reported on in the Annual Report. • 2013 – 2,982; in Ireland with installers • 2012 – 2,969; In line with this, the CER has agreed “Key Performance respect to safety. registered. • 2011 – 2,843; Indicators” (KPIs) for 2014 with the Department of Communications, Energy and Natural Resources, which • 2010 – 2,733; were published in the CER 2014 Work Programme. The • 2009 – 2,667 KPIs were selected to be specific and measurable and • 2014 – 4,065 many are related to the CER’s “10 key tasks” for 2014, • 2013 – 3,990; described earlier in this document. The outcomes against • 2012 – 4,022; these KPIs are shown below. • 2011 – 4,264; • 2010 – 4,561; Water • 2009 – 5,006.
Issue KPI Outcome Natural Number of The number of reportable Review of Irish Q3 2014 This was completed in Gas Safety reportable natural gas safety incidents Water revenue September 2014. This was Framework natural by year 2009 – 2014: requirements revised following government Performance. gas safety 2014-2016 legislation in 2014 and a • 2014: 3 reportable natural incidents revised Water Charges Plan gas incidents by year, published in March 2015. • 2013: 1 reportable natural 2009 to gas incident 2014. Tariffs applicable Q4 2014 This was completed in • 2012: 1 reportable natural for domestic September 2014. This was gas incident water customers revised following government • 2011: 3 reportable natural from October legislation in 2014 and a gas incidents 2014 revised Water Charges Plan published in March 2015. • 2009: 3 reportable natural gas incidents
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Retail
Issue KPI In monitoring competition in the retail electricity and gas markets, Total number of domestic (residential) electricity one of the issues for the CER is customer switching rates between and gas customers who switched supplier annually suppliers. from 2009 to 2014, and a comparison, where data is easily available, with other EU countries. Number of electricity and gas customers who switched supplier annually from 2009 to 2014, by customer type (residential and non-residential) and the resulting market shares of the suppliers.
Outcomes Customer Switches – Electricity 2009 2010 2011 2012 2013 2014 Domestic 410,470 431,409 306,295 215,196 228,544 275,559 Small Business 39,021 33,455 29,597 33,358 34,114 33,581
Medium 5,206 3,028 2,072 3,271 3,363 3,151 Business
LEU 267 286 215 231 203 186 Total 454,964 468,178 338,179 252,056 266,224 312,477 Customer Switches – Gas 2010 2011 2012 2013 2014 Domestic 90,036 108,938 106,712 112,216 106,108 IC 3,901 4,342 3,867 4,786 3,642 Total 93,937 113,280 110,579 117,002 109,750
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Key Performance Indicators continued
Wholesale Electricity Market Integration
Issue KPI Outcome
Publication of SEM Committee Consultation - Publish Consultation in February 2014 Consultation Paper was published in on High Level Design to facilitate integration February 2014 into the EU Target Model
Publication of SEM Committee Decision on - Publish Decision in August 2014 Decision was published in September 2014 High Level Design to facilitate integration into the EU Target Model
Smart Metering
Issue KPI Outcome
Complete High Level Design Stage 2 Conduct significant stakeholder Decision on High Level Design published in engagement (including industry workshops, October 2014 consumer focus groups/surveys & full public consultations) in order to inform CER Decision Paper(s) on Smart Metering Regulatory Policy Requirements to be published by end-2014.
Solution Procurement Go/No Go Decision Re-run smart metering electricity & gas Re-run of cost-benefit analyses cost-benefit analyses during Q3/4 2013 commenced in October 2013 and in order to inform CER decision regarding completed in 2014. Decision to move to proceeding to the Solution Procurement Phase 3 – Detailed Design & Procurement. stage. Further re-run to be completed in Q3 2016.
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Key Performance Indicators continued
Customer Protection
Issue KPI Outcome
To continue to provide a high quality, Number of complex customer complaints 276 = 2009 efficient complaints resolution service for opened by the Customer Care Team each 239 = 2010 domestic and small business customers year from 2009 to 2014 502 = 2011 through the CER’s Customer Care Team 508 = 2012 651 = 2013 435 = 2014
To monitor customer usage and awareness Overall customer contacts including The CER merged websites in late 2013. of the energycustomers.ie service website by year 2009 to 2014 As a result it is not possible to identify the number of hits to the Customer Care section on the new CER website. Below is the number of contacts received by the Customer Care team each year from 2009 to 2014: 2009 = 1927 2010 = 1930 2011 = 2860 2012 = 3067 2013 = 5567 2014 = 5554
Customer Service 80% or higher of “non-complex” customer Achieved. 94% of non-complex complaints complaints resolved by the CER within 10 resolved within 10 working days working days.
Gas Market Integration
Issue KPI Outcome
Capacity Allocation Management (CAM) – Sign off on the CAM and CMP (Phase 2) – Sign off of CAM and CMP (Phase 2) & Congestion Management Procedures business rules and IT system requirements business rules and IT changes completed in (CPM) Phase 2 Implementation at all by December 2014 October 2014 Interconnection Points – Sign off on capacity auction platform – Use of the Prisma Auction platform approved in April 2014
Progress implementation of Balancing & – Approve Balancing (Phase 1) draft – GNI consulted on the implementation Interoperability Network codes business rules of interim measures in relation to the – Support DCENR on finalising of Balancing Network Code in early 2015, and Interoperability Network Code through the CER approved this approach in April comitology process 2015 – The CER supported DCENR in the finalisation of the Interoperability Network Code through the comitology process. The Interoperability Network Code was formally finalised in November 2014.
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Key Performance Indicators continued
Renewables
Issue KPI Outcome
To continue to host regular Generator – Number of Generator Connections – 4 Generator Connections Liaison Group Connections Liaison Group meetings Liaison Group meetings held during year. meetings held with the renewable industry and system – Publication of regular updates on Gate 3 – Regular updates published post Liaison operators. These meetings primarily monitor workstreams on CER website. Group the roll-out of Gate 3 work streams, which – Commencement of consideration of – Work commenced with a view to are the key means to achieve the 40% connection policy post Gate 3. consultation in 2015. renewables target for 2020.
To increase the amount of renewable – Amount of renewable generation 2009: 1,558 MW electricity generation in Ireland, moving connected to the network, by year 2009 to 2010: 1,668 MW towards the 40% target for 2020. 2014 2011: 1,902 MW – Percentage of electricity consumption 2012: 2,013 MW from renewables, by year 2009 to 2014. 2013: 2,307 MW 2014: 2,579 MW Percentage of electricity consumption from renewables by year 2009 to 2014: % RoI Renewable Consumption: SEAI “Normalised”: 2014: 22.61% 2013: 20.9% 2012: 19.6% 2011: 17.6% 2010: 14.9% 2009: 13.7% % ROI Renewable Consumption: SEAI “Non- Normalised”: 2014: 22.57% 2013: 20.1% 2012: 18.9% 2011: 19.4% 2010: 12.9% 2009: 14.3%
To work with the System Operators, north – SEM Committee to issue a decision in – Decision issued in December 2014 (SEM- and south to progress the DS3 programme relation to the TSO’s system services review 14-108) aimed at ensuring continued security of in 2014. supply and system operation as levels of wind on the system increase.
To monitor progress by EirGrid and ESB – Publication of quarterly capex monitoring – 2 senior level meetings plus a number of Networks on the delivery of agreed network reports. other meetings held with ESBN and EirGrid; capex programme in PR3 – Holding of 2 meetings over the year with – Quarterly reports submitted from ESBN ESB Networks and EirGrid to discuss capex and EirGrid to CER. delivery.
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Financial Statements
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Information Page for the year ended 31 December 2014
Commission Members CER Address Garrett Blaney, Chairperson Commission for Energy Regulation Paul McGowan, Commissioner The Exchange Aoife MacEvilly, Commissioner Belgard Square North Tallaght Dublin 24 Bank Ireland Allied Irish Bank, 7/12 Dame Street, Dublin 2 Auditors Ireland The Office of the Comptroller and Auditor General, Treasury Block, Dublin Castle, Dublin 2, Ireland
58 COMMISSION FOR ENERGY REGULATION // ANNUAL REPORT 2014
Report of the Commission for the year ended 31 December 2014
I have pleasure in presenting the audited financial 2013, grants the CER regulatory powers over the public statements of the Commission for Energy Regulation (CER) water and waste water sector, in particular to regulate for the year ended 31 December 2014. from an economic and customer service perspective the activities of the water utility. Financial Year The CER, working closely with the Department of The accounting period consists of twelve months to Communications, Energy and Natural Resources (DCENR), 31 December 2014. established the National Smart Metering Programme (NSMP) in late 2007. In Phase 1, a trial was carried out in Principal Activities order to assess the costs and benefits of smart meters The European Electricity Directive was implemented by and to inform decisions relating to the full rollout. In July Ireland with the passing of the Electricity Regulation Act, 2012 a decision was announced to rollout electricity and 1999, which established the Commission for Electricity gas smart meters for all residential and small and medium Regulation (CER) on 14 July 1999. This legislation and sized businesses. Phase 2 commenced in January 2013 the signing of Statutory Instrument 445 of 2000 sets and is broadly composed of a high level design and out the powers and duties of the CER and provides the procurement phase. Since the middle of 2013 CER have framework for the introduction of competition in the been engaging with industry and consulting with the public generation and supply of electricity in Ireland. The Gas on the smart metering High Level Design. A decision on (Interim) (Regulation) Act 2002 established the CER as the High Level Design was published in October 2014. The the Irish natural gas regulator under the name of the High Level Design outlines the CER’s decision on its design Commission for Energy Regulation. It gave the CER the for the future electricity and gas markets when smart necessary powers to license and regulate the transmission, meters have been installed. distribution, storage and supply of natural gas and issue orders in relation to the supply, transmission, distribution The Commission is funded by levy and licence income and sale of gas. The Energy (Miscellaneous Provisions) Act received from the relevant electricity, gas, water, and 2006 sets out the powers and duties with respect to public petroleum safety industry participants. The CER have safety involving the regulation of transmission, distribution, secured a short term commercial loan facility to fund storage, supply and shipping of natural gas; and the safety petroleum safety activities, as consented to by Ministerial supervision of Registered Gas Installers and Registered approval, with respect to Establishment Costs of the High Electrical Contractors. The Electricity Regulation Act (1999) Level Design of the Petroleum Safety Framework. The has been amended by the Petroleum (Exploration and CER levy petroleum undertakings for all establishment Extraction) Safety Act 2010 (the Safety Act) which sets out costs incurred to date as well as ongoing operational costs the powers and duties of the CER in this regard. for the Framework. The final decision with respect to the administration of the petroleum safety levy is set out in CER The Government has decided by way of formal Decision Paper CER/13008. In 2013, the Department of the Government decision to expand the CER remit to include Environment, Community and Local Government provided the economic regulation of the public water and waste funding to cover the Commission’s costs in relation to the water sector. To this end the Government has passed performance of its functions under the Water Services Act legislation, the Water Services Act 2013, to provide the 2013. In 2014, the CER imposed a levy on Irish Water. CER with a function to undertake all things necessary or expedient to prepare for the performance of it of water Results regulatory functions and to advise the Minister on the Details of the financial results of the Commission for the development of policy regarding the regulation of the year are set out in the Financial Statements and in the provision of water services. The Water Services (No.2) Act related notes.
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Auditors and Accounts met on four occasions. The Committee places significant importance on reports and assurance on governance Paragraph 25 of the Schedule to the Electricity Regulation matters such as financial controls, risk management and Act, 1999 as amended requires the Commission to prepare internal audit reports/ findings. The Committee’s work financial statements in such form as may be approved during the year included: by the Minister for Communications, Energy and Natural Resources with the concurrence of the Minister for Public • Review of internal audit reports on Review of Internal Expenditure and Reform. The Commission submits Financial Control and Audit of Risk Management accounts in respect of each year to the Comptroller and Framework including an assessment of implementation Auditor General. As soon as may be subsequent to the of agreed actions; audit the Commission is required to present to the Minister • Input to the development of CER’s Internal Audit Plan for Communications, Energy and Natural Resources a including oversight of its implementation; copy of such accounts together with the audit report of the • Met with the nominee of the Comptroller and Auditor Comptroller and Auditor General. General to review the external audit management letter Audit Committee and the organisational response; • Liaised regularly with management in relation to the The Audit Committee members at the end of December, conduct of risk management and mitigation work within 2014 are the CER; and • Chairperson: Tom O’Higgins – external • Developing knowledge of areas of priority within the CER • Member: Tom Mason - external by receiving regular briefings from senior management. • Member: Paul McGowan - CER Commissioner On behalf of the Commission • Member: Laura Brien - CER Director (May’14 replaced Garrett Blaney, CER Commissioner)
The secretary of the Committee is a staff member of the CER, and other members of staff, including the Finance Manager and the HR Manager, also attend the meetings of Garrett Blaney, Chairperson the Committee.
The role of the Audit Committee, as set out in the Audit Committee Charter, is to assess how the Commission is managing key financial and operational risks, to evaluate the effectiveness of internal financial controls, to oversee the internal audit function, and to monitor implementation of Commission decisions arising from Audit Committee recommendations. During 2014, the Audit Committee
60 COMMISSION FOR ENERGY REGULATION // ANNUAL REPORT 2014
Comptroller and Auditor General for the year ended 31 December 2014
Commission for Energy Regulation Scope of Audit of the Financial Statements I have audited the financial statements of the Commission An audit involves obtaining evidence about the amounts for Energy Regulation for the year ended 31 December and disclosures in the financial statements, sufficient to 2014 under the Electricity Regulation Act, 1999 as give reasonable assurance that the financial statements are amended by the Gas (Interim) (Regulation) Act, 2002. free from material misstatement, whether caused by fraud The financial statements, which have been prepared or error. This includes an assessment of under the accounting policies set out therein, comprise • whether the accounting policies are appropriate to the Statement of Accounting Policies, the Income and the Commission’s circumstances, and have been Expenditure Account, the Statement of Total Recognised consistently applied and adequately disclosed Gains and Losses, the Balance Sheet, the Cash Flow Statement and the related notes. The financial statements • the reasonableness of significant accounting estimates have been prepared in the form prescribed in paragraph made in the preparation of the financial statements, and 25 of the Schedule to the Electricity Regulation Act 1999 • the overall presentation of the financial statements. as amended by Section 22 of the Gas (Interim) (Regulation) Act 2002, and in accordance with generally accepted I also seek to obtain evidence about the regularity accounting practice in Ireland. of financial transactions in the course of the audit. In addition, I read the Commission’s annual report Responsibilities of the Commission to identify material inconsistencies with the audited The Commission is responsible for the preparation of the financial statements. If I become aware of any apparent financial statements, for ensuring that they give a true and material misstatements or inconsistencies I consider the fair view of the state of the Commission’s affairs and of its implications for my report. income and expenditure, and for ensuring the regularity of transactions. Opinion on the Financial Statements In my opinion, the financial statements, which have been Responsibilities of the Comptroller and properly prepared in accordance with generally accepted Auditor General accounting practice in Ireland, give a true and fair view of My responsibility is to audit the financial statements in the state of the Commission’s affairs at 31 December 2014 accordance with applicable law. and of its income and expenditure for 2014.
My audit is conducted by reference to the special In my opinion, proper books of account have been kept by considerations which attach to State bodies in relation to the Commission. The financial statements are in agreement their management and operation. with the books of account.
My audit is carried out in accordance with the International Standards on Auditing (UK and Ireland) and in compliance with the Auditing Practices Board’s Ethical Standards for Auditors.
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Matters on which I Report by Exception I report by exception if
• I have not received all the information and explanations I required for my audit, or • my audit noted any material instance where moneys have not been applied for the purposes intended or where the transactions did not conform to the authorities governing them, or • the information given in Commission’s annual report is not consistent with the financial statements, or • the Statement on Internal Financial Control does not reflect the Commission’s compliance with the Code of Practice for the Governance of State Bodies, or • I find there are other material matters relating to the manner in which public business has been conducted.
I have nothing to report in regard to these matter upon which reporting is by exception.
Patricia Sheehan
For and on behalf of the Comptroller and Auditor General
30 JUNE 2015
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Statement of Members’ Responsibilities
Paragraph 25 of the Schedule to the Electricity Regulation Act, 1999 as amended by Section 20 of the Petroleum (Exploration and Extraction) Safety Act 2010 requires the Commission to prepare financial statements in such form as may be approved by the Minister for Communications, Energy and Natural Resources with the concurrence of the Minister for Public Expenditure and Reform and to submit them for audit to the Comptroller and Auditor General. In preparing these financial statements, the Commission is required to:
• select suitable accounting policies and apply them consistently • make judgements and estimates that are reasonable and prudent • prepare the financial statements on the going concern basis, unless that basis is inappropriate • disclose and explain any material departures from applicable accounting standards.
The Commission is responsible for keeping proper books of account, which disclose with reasonable accuracy at any time the financial position of the Commission and which enable it to ensure that the financial statements comply with section 20 of the Petroleum (Exploration and Extraction) Safety Act 2010. The Commission is also responsible for safeguarding its assets and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
On behalf of the Commission
Garrett Blaney, Chairperson
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Statement on Internal Financial Control
On behalf of the Commission for Energy Regulation The Commission has an internal audit function, which I acknowledge our responsibility for ensuring that an operates in accordance with the Framework Codes effective system of internal financial control is maintained of Best Practice set out in the Code of Practice on the and operated. Governance of State Bodies. The work of internal audit is informed by analysis of the risks to which the body is The system can only provide reasonable and not absolute exposed, and annual internal audit plans are based on this assurance that assets are safeguarded, transactions analysis. The analysis of risk and the internal audit plans authorised and properly recorded, and that material errors are endorsed by the Audit Committee and approved by or irregularities are either prevented or would be detected the Commission. At least annually, the Internal Auditor in a timely period. provides the Commission with a report of internal audit The Commission has taken steps to ensure an appropriate activity. The report includes the Internal Auditor’s opinion control environment is in place by: on the adequacy and effectiveness of the system of internal financial control. The Commission’s monitoring • Clearly defining management responsibilities and and review of the effectiveness of the system of internal powers financial control is informed by the work of the internal • Establishing formal procedures for monitoring the auditor, the audit committee which oversees the work of activities and safeguarding the assets of the organisation the internal auditor, the executive managers within the • Developing a culture of accountability across all levels of Commission who have responsibility for the development the organisation. and maintenance of the financial control framework, and comments made by the Comptroller and Auditor General The Commission has established processes to identify and in his management letter. evaluate business risks by: • Identifying the nature, extent and financial implication of A review of the effectiveness of the system of internal risks facing the body including the extent and categories financial controls was carried out in 2014. which it regards as acceptable; On behalf of the Commission • Assessing the likelihood of identified risks occurring; • Working closely with Government and various Agencies to ensure that there is a clear understanding of the Commission’s goals and support for the Commission’s strategies to achieve those goals. Garrett Blaney, Chairperson The system of internal financial control is based on a framework of regular management information, administration procedures including segregation of duties, and a system of delegation and accountability. In particular it includes:
• A comprehensive budgeting system with an annual budget which is reviewed and agreed by the Members of the Commission; • Regular reviews by the Commission of periodic and annual financial reports which indicate financial performance against forecasts; • Setting targets to measure financial and other performance; • Formal project management disciplines.
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Statement of Accounting Policies
1. Basis of Accounts 4. Foreign Currencies The financial statements are prepared under the accruals Transactions denominated in foreign currencies relating method of accounting, except as indicated below, and in to revenues and costs are translated into Euro at the rates accordance with generally accepted accounting principles of exchange ruling on the dates on which the transactions under the historical cost convention. Financial Reporting occurred. Standards recommended by the recognised accountancy Monetary assets and liabilities denominated in foreign bodies are adopted, as they become operative. currencies are translated into Euro at the rates of exchange 2. Income Recognition at the Balance Sheet date. Electricity, Gas, Petroleum Safety (Operational) and Water 5. Pensions levy income is brought to account over the period to which A defined-benefit pension scheme is in place for all it relates. employees of the Commission for Energy Regulation. The Licence income from authorisations to construct, generate scheme is funded by contributions from the Commission and supply energy is brought to account in the year in and employees which are transferred to a separate trustee which the licence is issued. administered fund.
Petroleum safety case fee income is brought to account The pension charge in the Income and Expenditure in the year during which expenditure is incurred on account comprises the current service cost plus the assessment of the safety case. difference between the expected return on scheme assets and the interest cost of scheme liabilities less benefits paid 3. Fixed Assets and Depreciation in the year.
Fixed assets are stated at cost less accumulated Actuarial gains and losses arising from changes in actuarial depreciation. Depreciation is calculated in order to write assumptions and from experience surpluses and deficits off fixed assets on a straight-line basis over their estimated are recognised in the statement of total recognised gains useful lives at the following rates: and losses for the year in which they occur.
Fixtures and Fittings 15% Pension scheme assets are measured at fair value. Pension Office Equipment 15% scheme liabilities are measured on an actuarial basis using Computer Hardware 33 1/3% the projected unit’s method. An excess of scheme liabilities Computer Software 50% over scheme assets is presented on the Balance Sheet as a liability. Leasehold Improvement 4% The Pension Reserve represents the funding deficit on the defined benefit pension scheme.
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6. Taxation The Commission is not liable for Corporation Tax. Provision is made for taxation on deposit interest received. Income raised by the Commission is not subject to VAT.
7. Capital Account The capital account represents the unamortised value of income used for capital purposes.
8. Allocation of costs In the discharge of the Commission’s functions under section 20 of the Petroleum (Exploration and Extraction) Safety Act 2010, the financial statements identify separately all elements of cost and revenue in regard to the electricity, gas and petroleum sectors. In discharge of the Commission’s functions under the Water Services Act 2013, the financial statements identify separately all elements of costs in regard to the water sector.
In drawing up the separate accounts of the Commission, a set of accounting procedures for the allocation of assets, liabilities, income and expenditure is adhered to:
Revenues, expenses and capital expenditure directly incurred by each sector are recorded in the separate accounts of the electricity, gas, petroleum and water sectors. Shared costs are allocated to each sector in proportion to the staff numbers engaged in the relevant sector.
9. Commercial Loan Facility Interest-bearing commercial loans are initially recognised net of arrangement fees. These arrangement fees are amortised over the life time of the loan facility. Accrued finance costs to the extent that they are payable, are included in accruals rather than in the carrying amount of debt.
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Income and Expenditure Account for the year ended 31 December 2014
2014 2014 2014 2014 2014 2013 Electricity Gas Petroleum Water Total Total Notes €‘000 €‘000 €‘000 €‘000 €‘000 €‘000 INCOME Levy 2 8,566 4,633 3,845 2,734 19,778 16,563 Licensing Fees 25 1 0 0 26 23 Other Income 2 19 8 965 6 998 813 Gross Income 8,610 4,642 4,810 2,74 0 20,802 17,399 Transfer from/(to) capital account 8 45 47 ( 6) ( 15) 71 182 Net Income 8,655 4,689 4,804 2,725 20,873 17,581 EXPENDITURE Direct Wages & Salaries 3 2,621 1,654 451 871 5,597 5,467 Pension Costs 9 (a) 430 293 74 151 948 1,195 SEM Committee Fees 59 0 0 0 59 45 Recruitment and Training 62 48 61 30 201 234 Travel & Subsistence 76 45 22 14 157 135 Office Accommodation Expenses 407 246 64 136 853 776 IT & Communications 228 105 27 56 416 440 Office Service Costs 21 15 5 7 48 40 Insurance Premiums 40 24 7 13 84 74 Advertising 48 39 0 0 87 106 Professional & Consultancy Fees 4 2,725 1,405 1,210 764 6,104 6,455 Audit fees 6 4 1 2 13 13 Internal Audit fees 17 10 3 6 36 33 Other Expenses 27 28 13 5 73 64 Interest Payable 0 0 94 0 94 140 Depreciation 91 77 3 2 173 229 6,858 3,993 2,035 2,057 14,943 15,446 Surplus / (Deficit) for the year 1,797 696 2,769 668 5,930 2,135 Surplus brought forward 3,752 1,580 ( 2,886) ( 2) 2,444 187 Pension Cost reserve 11 (a) ( 92) ( 56) ( 15) ( 32) ( 195) 122 Operating Surplus / (Deficit) at 5,457 2,220 ( 132) 634 8,179 2,444 31 December
The Statement of Accounting Policies and Notes 1 to 14 form part of these Financial Statements.
On behalf of the Commission
Garrett Blaney, Chairperson
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Statement of Total Recognised Gains and Losses for the year ended 31 December 2014
2014 2013 Total Total Notes €‘000 €‘000
Surplus / (Deficit) for the year 5,930 2,135
Actual return less expected return on pension scheme assets 9 (biii) 1,430 1,353
Experience gains / (losses) on pension scheme liabilities 9 (d) 1,080 1,205
Changes in assumptions underlying the present value of pension scheme liabilities 9 (bii) (3,730) 1,800
Transfers in for prior service 9 (biii) 0 0
Actuarial Gain / (Loss) (1,220) 4,358
Total Recognised Gains/(Losses) relating to the Financial Year 4,710 6,493
The Statement of Accounting Policies and Notes 1 to 14 form part of these Financial Statements.
On behalf of the Commission
Garrett Blaney, Chairperson
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Balance Sheet as at 31 December 2014
2014 2013 Notes €‘000 €‘000 FIXED ASSETS
Tangible Assets 5 2,109 2,180
CURRENT ASSETS
Debtors 6 1,561 869
Cash at Bank and in hand 3,358 2,024
Short Term Deposits 7,507 5,480
12,426 8,373
CREDITORS (Amounts falling due within one year)
Creditors 7 (2,347) (2,129)
Short Term Loan 10 (1,900) (3,800)
(4,247) (5,929)
Net Current Assets excluding pension liability 8,179 2,444
Pension Liability 9(bi) (4,122) (3,097)
Net Current Assets including pension liability 4,057 (653)
Total Assets Less Current Liabilities 6,166 1,527
FINANCED BY
Capital Account 8 2,109 2,180
Income & Expenditure Account 11(b) 8,179 2,444
Pension Reserve 11(a) (4,122) (3,097)
6,166 1,527
The Statement of Accounting Policies and Notes 1 to 14 form part of these Financial Statements.
On behalf of the Commission
Garrett Blaney, Chairperson
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Cashflow Statement for the year ended 31 December 2014
2014 2013 €‘000 €‘000 Reconciliation of operating surplus to net cash inflow from operating activities
Deficit on Income and Expenditure 5,930 2,135
Difference between Pension Costs and Employers Contribution (195) 122
Depreciation 173 229
Bank Interest (32) (30)
Transfer from Capital Account (71) (182)
Decrease / (Increase) in Debtors (693) 65
Increase in Creditors 219 997
Net Cash Inflow From Operating Activities 5,331 3,336
Cash Flow Statement
Net cash inflow from operating activities 5,331 3,336
Returns on Investments
- bank interest 32 30
Capital expenditure
- purchase of fixed assets (102) (46)
Management of Liquid Resources
- short term deposits (2,027) (1,696)
Financing - Increase / (Reduction) in Debt (1,900) 0
Increase in Cash Balances 1,334 1,624
Reconciliation of net cash flow to movement in net funds
Increase in cash in hand in the period 1,334 1,624
Cash used to increase liquid resources 2,027 1,696
Cash (Inflow) / Outflow from increase / reduction in Debt 1,900 0
Change in net funds 5,261 3,320
Opening Net funds 3,704 384
Closing Net funds 8,965 3,704
The Statement of Accounting Policies and Notes 1 to 14 form part of these Financial Statements.
On behalf of the Commission
Garrett Blaney, Chairperson
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Notes to the Financial Statements for the year ended 31 December 2014
1. Establishment of the Commission The Commission for Electricity Regulation was initially established on 14 July 1999 under the provisions of the Electricity Regulation Act 1999 (No. 23 of 1999). The enactment of the Gas (Interim) (Regulation) Act 2002 expanded the Commission’s jurisdiction to include regulation of the natural gas market on 30 April 2002. The Commission was renamed the Commission for Energy Regulation (CER) to reflect this increased responsibility.
The Minister for Communications, Energy and Natural Resources, with the agreement of the Minister of Public Expenditure and Reform expanded the Commission to a three member Commission on 13 October 2004, as provided under Schedule 1 of the Electricity Regulation Act 1999. Commissioner Dermot Nolan was appointed as Chairperson on 29 May 2011, resigned on 13 February 2014. Commissioner Garrett Blaney was appointed as Chairperson on 19 February 2014. The other Members of the Commission are Commissioner Paul McGowan and Commissioner Aoife MacEvilly who commenced her appointment on 6 October 2014.
2 Income Levy: For the purpose of meeting its expenses under the Electricity Regulation Act, 1999 as amended, the Commission may impose a levy on the relevant energy, petroleum extraction and exploration undertakings and Irish Water. The Commission imposed a levy on the relevant energy undertakings for each activity of transmission, distribution, generation, supply or shipping that is carried out in Ireland as follows:
2014 2014 2014 2014 2014 2013 Electricity Gas Petroleum Water Total Total €‘000 €‘000 €‘000 €‘000 €‘000 €‘000 Generation 2,335 0 0 0 2,335 1,882 Transmission 2,062 1,544 0 0 3,606 3,932 Distribution 2,144 1,544 0 0 3,688 4,022 Supply 2,025 0 0 0 2,025 2,181 Shipping 0 1,545 0 0 1,545 1,676 Other Levies 0 0 1,945 2,734 4,679 0 Establishment: Safety 0 0 1,900 0 1,900 2,870 8,566 4,633 3,845 2,734 19,778 16,563 Other Income Bank Interest 18 8 0 6 32 30 DECLG (Vote 25) 0 0 0 0 0 781 Safety Case Fees 0 0 965 0 965 0 Other 1 0 0 0 1 2 19 8 965 6 998 813
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The Department of Environment Community and Local Government (DECLG) provided funding during 2013 to cover the CER’s costs relating to the performance of its functions under the Water Services Act 2013 and functions to be undertaken under a subsequent Act, as per a Memorandum of Understanding signed by CER and DECLG. In 2014 the Commission imposed a Levy on Irish Water for the supply of water and waste water services for the purpose of meeting expenses properly incurred by the Commission for Energy Regulation in the discharge of its functions under the Water Services Act (No.2) Act 2013.
3. Employees and Remuneration (a) Employees costs during the year:
2014 2014 2014 2014 2014 2013 Electricity Gas Petroleum Water Total Total €‘000 €‘000 €‘000 €‘000 €‘000 €‘000
Salaries 2,401 1,515 412 793 5,121 5,000
Employer PRSI 220 139 39 78 476 467
2,621 1,654 451 871 5,597 5,467
The average number of employees during the 41 25 7 14 87 78 year, analysed by sector was as follows:
The Commission operate a performance related remuneration scheme which was approved by the Department of Public Expenditure and Reform and the Department of Communications, Energy and Natural Resources. Of the total salary costs during 2014 €297,720 (2013 €273,798) represents the payments to staff associated with the provisions of the performance related remuneration scheme.
(b) Pension Related Deduction as provided under the Financial Emergency Measures in the Public Interest Act, 2009
During 2014 €343,092 (2013 €363,470) pension related deductions were made from the staff of the CER and paid over to the Department of Communications, Energy and Natural Resources (€300,503) and the Department of Environment Community and Local Government (€42,589).
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(c) Chairperson’s Remuneration
The Chairperson’s Remuneration package for 2014 was made up as follows:
Employer Travel & Pension Basic Pension Subsistence Related Salary Contribution Expenses Deduction €‘000 €‘000 €‘000 €‘000
Dermot Nolan- Resigned 13.02.14 19 4 0 (2)
Garrett Blaney- Appointed 19.02.14 144 33 14 (13)
163 37 14 (15)
The Chairperson’s pension entitlements do not extend beyond the standard entitlements in the public sector defined benefit superannuation scheme. Travel and Subsistence expenses paid to the Chairperson include the following categories: mileage, train fares, subsistence, airfares, hotel accommodation, and sundry items primarily associated with the Chairperson’s attendance at the Energy Regulators meetings in Europe.
The Chairperson and Members of the Commission do not receive any performance related payments.
4. Consultancy and Legal Fees The Commission procures professional and legal services in respect of economic, technical, and legal disciplines including litigation fees, usually on a fixed fee basis, for a defined period of time to perform specific self-contained tasks or projects. During 2014, the Commission procured services for each activity of electricity, gas, safety regulation (includes petroleum safety) and water and waste water regulation per discipline as follows;
Electricity Gas Petroleum Water Total 2014 Total 2013 €‘000 €‘000 €‘000 €‘000 €‘000 €‘000
Technical: Consultancy Services 892 269 0 0 1,161 414
Technical: Safety Consultancy Services 0 148 1,161 0 1,309 1469
Economic/ Financial : Consultancy Services 260 13 0 744 1,017 574
National Smart Metering Programme: Consultancy 1,270 322 0 0 1,592 2571 Services
Professional Fees plus Market Research 159 66 8 14 247 309
Legal including Judicial Review Litigation Fees 144 587 41 6 778 1118
2,725 1,405 1,210 764 6,104 6455
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5. Tangible Assets
Leasehold Fixtures & Office Computer Computer Improvement Fittings Equipment Hardware Software Total €‘000 €‘000 €‘000 €‘000 €‘000 €‘000 Cost:
At 31 December 2013 2,961 639 225 512 326 4,663
Additions 0 9 0 84 9 102
At 31 December 2014 2,961 648 225 596 335 4,765
Accumulated Depreciation:
At 31 December 2013 858 638 217 456 314 2,483
Charge for the year 118 2 2 38 13 173
At 31 December 2014 976 640 219 494 327 2,656
Net Book Value:
At 31 December 2014 1,985 8 6 102 8 2,109
At 31 December 2013 2,103 1 8 56 12 2,180
6. Debtors (due within one year)
2014 2013 €‘000 €‘000 Levy - Gas 6 69
Levy - Electricity 976 621
Levy / Fees - Petroleum Safety 396 0
SEM Costs due from UR 1 1
Other 14 23
Prepayments 168 155
1,561 869
The Single Electricity Market (‘SEM’) was established in November 2007. The legal framework establishes new powers and duties for the Commission and Northern Ireland Authority for Utility Regulation (UR) in relation to the regulation of the SEM. Costs are shared in equal proportions with respect to SEM Committee fees and consultancy support.
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7. Creditors (Amounts falling due within one year)
2014 2013 €‘000 €‘000 Trade Creditors 24 (1)
Accrual: Consultancy and Professional Fees 1,310 1,198
Accrual: Legal services 89 244
Accrual: Other Creditors 186 206
PAYE / PRSI 312 309
Payroll 24 (4)
Professional Services Withholding Tax 133 177
Deferred Income: Petroleum Safety Case Fees 269 0
2,347 2,129
8. Capital Account
2014 2014 2014 2014 2014 Electricity Gas Petroleum Water Total €‘000 €‘000 €‘000 €‘000 € Opening balance 1,744 428 4 4 2,180 Funds allocated to acquire fixed assets 46 30 9 17 102 Amount amortised in line with asset depreciation (91) (77) (3) (2) (173) Net amount of transfer (45) (47) 6 15 (71) 1,699 381 10 19 2,109
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9. Pensions
2014 2013 €’000 €’000 a) Pension Costs Current service cost 1,234 1,316 Interest Cost 689 731 Expected return on Scheme Assets (738) (617) Less: Employees Contributions (237) (235) Total 948 1,195 bi) Net Pension Liability Present value of funded obligations 21,645 17,191 Fair value of scheme assets (17,523) (14,094) Net Liability 4,122 3,097 bii) Present Value of Scheme Obligations at beginning of year 17,191 18,307 Current Service Cost 1,234 1,316 Interest Cost 689 731 Actuarial Loss / (Gain) 2,650 (2,982) Benefits Paid (119) (181) Present Value of Scheme Obligations at end of year 21,645 17,191 biii) Change in Scheme assets Fair Value of Scheme Assets at beginning of year 14,094 10,974 Expected return on Scheme Assets 738 617 Actuarial Gain / (Loss) 1,430 1,353 Employer Contributions 1,143 1,096 Members’ Contributions 237 235 Transfers in for prior service 0 0 Benefits paid from Scheme (119) (181) Fair Value of Scheme Assets at end of year 17,523 14,094
The current practice of increasing pensions in line with public sector salary inflation is taken into account in measuring the defined benefit obligation.
c) Description of Scheme and Actuarial Assumptions
The pension scheme is a defined benefit final salary pension arrangement with benefits defined by reference to current “model” public sector scheme regulations. Employer and employee contribution rates are set having regard to actuarial advice and periodic review on the funding rate required for the scheme. The scheme provides a pension (eightieths per year of service), a gratuity or lump sum (three eightieths per year of service) and spouse’s and children’s pensions. Normal Retirement Age is a member’s 65th birthday, and pre 2004 members have an entitlement to retire without actuarial reduction from age 60. Pensions in payment (and deferment) normally increase in line with general public sector salary inflation.
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The Financial assumptions used for FRS17 purposes were: 2014 2013 Discount Rate 2.20% 3.75%
Salary Increases 2.50% 3.25%
Pension Increases 1.25% 2.00%
Inflation Increases 1.25% 2.00%
Assumptions regarding future mortality experience are set based on published mortality tables (PMA92/PFA92) prepared for the Actuarial Profession in the U.K. by the Continuous Mortality Investigation Bureau tables. The mortality assumptions chosen are based on standard tables reflecting typical pensioner mortality and they allow for increasing life expectancy over time.
The weighted average life expectancy, for post-retirement mortality tables used to determine benefit obligations at:
Year of attaining age 65 2014 2013 Life expectancy - male 22.7 25.1
Life expectancy- female 24.0 26.1
The scheme assets at the year-end comprised: 2014 2013 Equities 44.7% 64.7%
Alternatives 15.8% 0.0%
Fixed Interest 36.3% 29.1%
Property 1.3% 2.6%
Other 1.9% 3.6%
100.0% 100.0%
2014 2013 Actual return less expected return on scheme assets €’000 €’000 Actual Return 2,168 1,970
Less: Expected return (738) (617)
1,430 1,353
In developing the expected long-term rate of return on assets assumption, the Commission considered the current level of expected returns on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class is then weighted based on the actual asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio. This resulted in the selection of the 5.01% assumption (after allowance for pension levy of 0.75% payable in 2014).
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d) History of defined benefit obligations, assets and experience gains and losses
2014 2013 2012 2011 2010 €’000 €’000 €’000 €’000 €’000 Defined benefit obligations 21,645 17,191 18,307 12,071 10,040 Fair value of Scheme Assets 17,523 14,094 10,974 8,601 8,126 Surplus/ (Deficit) for funded scheme (4,122) (3,097) (7,333) (3,470) (1,914) Actuarial gain/(loss) on liabilities (2,650) 2,982 (4,902) (960) 752 Experience adjustment on assets 1,430 1,353 74 0 (1,067) 211
e) Funding of Pensions
The Commission expects to contribute €1,171,000 to its pension scheme in 2015.
f) Prior pensionable service
The assets and liabilities of the pension schemes relate to retirement benefits arising from service with the Commission. Two Commission members and six staff members have superannuation entitlements arising from service with other public sector bodies prior to their joining the Commission. The Commission is entitled to recover the cost of funding the prior service from other public bodies under the terms of its membership of the Public Service Transfer Network.
10. Short Term Loan In accordance with paragraph 24 of the First Schedule to the Electricity Regulation Act, 1999, as amended, the CER have entered into a commercial loan agreement with National Treasury Management Agency for an amount not to exceed €5,000,000. The consent of the Minister for Communications, Energy and Natural Resources and the Minister for Finance was received on the 29th June 2011.This loan is required to meet the Commission’s financial requirements for the establishment and implementation of the Petroleum Safety Framework. The loan balance is re-paid in full in January 2015.
11 (a) Reconciliation of movements in Reserves
Income & Expenditure Account Capital Pension €’000 €’000 €’000 €’000 Account Reserve Total Electricity Gas Petroleum Water €’000 €’000 €’000 Opening Balance at 1 January 3,752 1,580 (2,886) ( 2) 2,180 (3,097) 1,527
Surplus/(Deficit) for the Financial Year 1,797 696 2,769 668 5,930 Net Movement in Capital (71) (71) Actuarial Gain/ (Loss) (1,220) (1,220) Movement in Reserve (92) (56) (15) ( 32) 195 0 Closing Balance at 31 December 5,457 2,220 (132) 634 2,109 (4,122) 6,166
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The pension reserve represents the cumulative cost of pensions less amounts contributed by the employer. The transfer in the year represents the difference between the full cost of pensions recognised in the income and expenditure account in the year of €948,000 and the employer contributions of €1,143,000.
11 (b) Accumulated Surplus / Deficit for the year In accordance with Paragraph 20 of the Schedule to the Electricity Regulation Act, 1999 as amended the Commission is required to apply any excess of revenue over expenditure in any year to meet its expenses.
Accordingly the accumulated surplus attributed to the electricity sector of €5.4M; the gas sector of €2.2M and the water and waste water sector of €0.6M was taken into account in determining the levy orders for 2015. The petroleum levy above shows a shortfall of €0.1M for 2014. The balance of establishment costs will be recovered in 2015.
12. Interests of Members of the Commission The Commission adopted procedures in accordance with the Code of Practice for the Governance of State Bodies issued by the Department of Public Expenditure and Reform in relation to the disclosure of interests by the Members of the Commission and these procedures have been adhered to in the year. There were no transactions in the year in relation to the Commission’s activities in which the Members of the Commission had any beneficial interest.
13. Commitments – Capital and Others 13.1 Capital Commitments: The Commission had neither contracted for nor authorised any capital expenditure at the balance sheet date.
13.2 Operating Leases The Commission has annual commitments of €411,933 payable on foot of a twenty five-year lease for office accommodation at The Exchange, Belgard Square North, Tallaght, Dublin 24, leased from GH Investments Limited, which are the only offices occupied by CER. The lease expires on 28th February 2023.
14. Approval of Financial Statements The Commission approved these financial statements on 26.06.2015
79 Commission for Energy Regulation (CER) The Exchange, Belgard Square North, Tallaght, Dublin 24, Ireland
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