International comparison of Supplier of Last Resort rules and regulation | Februari 2015 International Comparison The Netherlands International comparison of Supplier of Last Resort rules and regulation | Februari 2015 1. Introduction On behalf of TenneT, GTS, Ministry of Economic affairs and ACM (regulator), UMS is assessing the current rules & regulations related to “supplier of last resorts” in the Power and Gas industry. For this assessment, we want to compare the situation in the Netherlands with the situation in Belgium, England and Germany. To guide this comparison, we have made the format as described in the following chapters. This format has been filled out for the Netherlands, Belgium, England and Germany. It has also been discussed with representatives from the respective countries. For good order; aim of this comparison is to get a feel of the principles and approaches used in other countries in order to mutually benefit from the provided insights. We are not aiming for a complete legal description. International comparison of Supplier of Last Resort rules and regulation | Februari 2015 1.1 Key figures and characteristics Topics The Netherlands 1. National consumption in (E and G) 120 TWh/y (power)/ 400 TWh/y (gas) 1.1. maximum demand statistics (gas per day) 1.2. % protected / non Protected Customers Circa 1/3 of the volume is delivered to Protected Customers (“households”) 2. Production capacity (firm), Power: Circa 25 GW firm capacity installed (some short term mothballed) 2.1. E-Production 2.2. gas storage Gas (all max daily numbers): Production: 3 TWh, gas storage 3,8 TWh, 2.3. domestic production for gas 3. Import/Export Saldo: E: 20 TWh/y imported; 5 TWh export to Belgium, 5 TWh export to UK, 30 TWh import from Germany and Norway Gas: Netherlands is a net exporting country, circa 350 TWh/y 4. Import/Export capacity E: 2500 MW Germany, 1400 MW Belgium, 1000 UK, 700 Norway (all bi-directional) Gas (max daily numbers): import 2,4 TWh (50/50 Norway/Germany) Export: 2,8 TWh 5. Fuel mix policy “Energieakkoord”: For electricity, government wants to grow renewable portfolio (mix of wind, solar and biomass); decreasing market share for conventional generation, especially because demand is dropping. High share of Combined Heat & Power Generation in the conventional mix. For gas, government focus on making the Netherlands a gas hub; no subsidies, but government supportive to commercial initiatives (storage, LNG terminal). Gas is imported and exported, including import via an LNG terminal. Green gas neglectable in volume. Expectation is that Holland remains net exporter of gas for coming decennium, 6. Security of supply risk Power: due to thermal overcapacity, not on the radar screen; government awaits developments in Germany (regarding capacity tariff) and follows developments in International comparison of Supplier of Last Resort rules and regulation | Februari 2015 Belgium. Gas: Significant gas reserves. However, earth quakes may make this less winnable than expected, but no short term issues expected 7. Investment climate Power: Wholesale price level not attractive for fuel based production (esp. not for gas), 7.1. Price levels high retail price pressure. Renewable support systems reasonable attractive. 7.2. Investment climate for production 7.3. Competition on retail side (margin indication) Gas: TTF is benchmark for Europe; wholesale gas prices are relative stable and still seem attractive for upstream & midstream investments. Increasing retail price pressure, slowly decreasing demand (isolation) 8. Demand Suppliers The 3 largest Power and Gas suppliers are Eneco, RWE/Essent, Vattenfall/NUON. The 8.1. Concentration ratio, market share of top 4 no4 position is, depending on who you ask, for GDF, Greenchoice or EON. In the companies (T4) industrial gas market, Gasterra is a major player (in addition to the parties mentioned 8.2. Type of ownership (private/public, above), focusing on wholesale/large industrial level. local/international group 8.3. Market share largest party The market share of the top4 will be around 80% (small and mid sized customers). 8.4. Churn / # customers Every year, circa 12% of protected customers switches supplier. Eneco is municipality owned, Gasterra 50% Dutch state, 50% private. Other large players are owned by companies abroad (RWE, Vattenfall, EON, GDF) or majority privately owned (Greenchoice) 9. Balance Responsible Party (BRP) There is a split in BRP between trading BRP’s and full service BRP’s (involved in physical supply & demand, and also in trading). A BRP does not have to be the same party as the supplier; supplier and BRP are separate roles. The major ‘full service’ players are RWE/Essent, Gasterra (gas), Vattenfall/NUON, EON, ENECO, GDF Suez. The required bank guarantee (posted to TSO) for E is circa 100 k (for a 50 MW participant) and 1 mln (for a 500 MW participant). In addition, there are some ‘direct bank access’ facilities (“inzake regeling”) for TenneT, limiting payments terms and International comparison of Supplier of Last Resort rules and regulation | Februari 2015 giving an early warning signal in case of financial constraints of the BRP. The required bank guarantee for G is conditional. GTS determines credit rating of the company. If rating is lower than Baa2 (Moody’s) or BBB (S&P) bank guarantee is necessary. In other cases credit limit is calculated depending on investigation. Exposure to be hedged is (roughly) the sum of the value of transported gasvolume during 3 days and the value of 3 months of booked capacity. TTF trading: € 50.000,--There are also several trading houses and banks active (trading BRP). In general, both in power and gas, there is a relative liquid market. 10. Exchanges & Clearing APX (power spot), ICE-Endex (gas & power term, gas spot), EEX (gas & power term, gas spot). Clearing via IceClear Europe, ECC and APX clearing. Volume via cleared exchanges significant (~50% of trade volume). The ICE Endex and EEX are supervised by respectively BankofEngland and Bafin. APX is (to our knowledge) supervised by AFM. 11. Production Power: the 4 large production companies (all non-dutch companies, mostly privately 11.1. concentration ratio owned) control circa 80% of the installed conventional capacity. 11.2. type of ownership (private/public, local/international group Gas: NAM is biggest production company (70%). Private (international) ownership (Shell, Exxon). Production is not separately regulated. 12. Metering Companies General: Metering companies have historically strong connections to DSO’s. Metering is regulated via the so called Measurement code. Protected customers: supplier responsible for collecting measurement data; 3 yearly control by DSO. Non-protected customers: They are themselves Measurement Responsible, various private parties provide this service. International comparison of Supplier of Last Resort rules and regulation | Februari 2015 Metering companies report via EDSN to DSO, DSO reports to TSO the allocation per PV (daily basis, 15 min granularity). Profiled customers are reconciled with measured data up to 21 months later (no impact on unbalance allocation) 13. Strategic Reserve Power: Market driven; TenneT will only act when there are severe disturbances and in 13.1. -energy only markets case of physical issues in grid. TenneT contacts primary & secondary reserve and emergency power. Gas: Market driven, however GTS is responsible for the additional supply in case temperature is below -9 - -17 degree. Any other comments? International comparison of Supplier of Last Resort rules and regulation | Februari 2015 2. Parties Topics THE NETHERLANDS TSO Tennet for E (110kV+), state owned - Type of ownership GTS for G, state owned Major DSO’s 3 large DSO’s (Enexis, Liander, Stedin) 7 small/medium sized DSO’s All DSO are publically owned Major Retail Suppliers (“Leveranciers”) Nuon (Vattenfall) Essent (RWE) Eneco Nederlandse Energie Maatschappij Greenchoice Oxxio With exception of Eneco are all retail suppliers privately owned International comparison of Supplier of Last Resort rules and regulation | Februari 2015 Metering Companies Major metering companies are linked to DSO’s. Circa 7 new entrants, however relative small market share. Major Balance Responsible Parties (fully For E: RWE, Vattenfall, GDF-Suez, Eneco, EON, PVNed (Delta/Eneco) licensed) For G: Gasterra, Vattenfall, RWE Supply & Trading GmBH, E.ON Global Commodities, Eneco Energy Trade, Electrabel, RWE Supply & Trading Netherlands, GDF SUEZ, Dong Naturgas, Delta Energy, samen goed voor 70% marktaandeel. Major Producers (gas:including importers) For E: GDF, RWE, Vattenfall, EON; For G: NAM, EON, RWE, Gazprom export, Recent Relevant bankruptcy Trianel, 2013 aantal aansluitingen Gas: 3000 KV en 100 GV (als PV’er ca 10.000 aansluitingen) . Electra: 3000 KV en 350 GV. 80 GWh (power respectively gas) customers 3. Regulatory Framework – description of the roles Topics THE NETHERLANDS 1. Customer segmentation from ‘Kleinverbruik’ (< 3*80A, or < 40 m3/h) and ‘Grootverbruik’. ‘Kleinverbruikers’, (hereafter Protected regulatory point of view Customers) are well protected under market regulations and will be assigned new suppliers/PR’s through regulation. ‘Grootverbruikers’ are deemed to be professional parties and have their own responsibility to contract new parties per role. 2. Regulator - ACM assigns licenses to suppliers of Protected Customers: (Leveringsvergunning),no bank guarantee, 2.1. - mandate just plausibility check - ACM regulates ‘Kleinverbruikers’ prices through a cap-regulation