Decision Paper on Amendment of a Green Supplier’s Balancing Requirement under the Trading and
th9 June 2004
This Paper contains an amendment to Regulation 3(4) of SI No. 49 of 2000 –
Electricity Regulation Act, 1999 (Trading Arrangements in Electricity) Regulations, 2000.
thA decision paper was published by the Commission on 25 March 2003
(CER/03/071) on the balancing requirements for Green suppliers and generators under the Trading and Settlement Code.
The balancing requirements for Green suppliers were incorporated into the Code as follows:
Decision on Balancing for Green suppliers:
1. A Green supplier must balance over the course of a year the total of
1) its green (where green is renewable, sustainable or alternative
bilateral sales plus its exports, plus its demand with the total of its
green bilateral purchases plus its green imports. This balancing
requirement will be limited to 95 per cent of the supplier’s demand;
therefore a 5 per cent margin of error will be permitted. This is in
recognition of the difficulty in balancing a supplier’s demand on a
For the purposes of tracking and balancing, a supplier’s demand will
be the aggregate of all the demands of its final customers, except
where some (or all) of a specific final customer’s demand is met by on-
site generation, in which case the net import across the site boundary
will be used.
In the case of non-quarter hour metered customers the demand shall
be the profiled demand, which has been settled at year end plus or
minus all reconcilations that have been settled up to the end of the
month of the reconciliation year (that is, the year of trading). Any
further reconciled volumes will be added to the balancing requirement
of the supplier for the following year.
2. Should a Green supplier exceed the 5% margin of error in its first year
of trading, it is required to balance this excess in the following year of
trading. Thus the supplier will be required to have a corresponding
excess (i.e. the amount in excess of the 5% margin) of total green
bilateral purchases plus its green imports over green bilateral sales
plus its exports plus its demand between the first and second year of
trading. This is in recognition of the special circumstances which may
face a supplier during its first year of trading.
3. The Commission notes that within the current systems the balance
position for green generators and suppliers is calculated on a monthly
basis. Thus there is no specific facility at present to compute balance
1 As defined in the Electricity Regulation Act, 1999
positions on a specified date. However, a manual accounting for a few
days in the month of reconciliation of the balancing condition will
Condition 20 of a Licence to Supply Electricity applies to Licensees issued with a Licence to Supply Electricity under Section 14 (1) (c) of the Electricity Regulation Act, 1999 (“the Act”), termed “Green” suppliers by the Trading and Settlement Code (“the Code”).
An applicant issued with a supply licence by the Commission under Section
214 (1) (c) of the Act is defined as one that is enabled:
“…to supply electricity to final customers which in aggregate does not exceed
the amount of electricity which is available to the supplier and which is produced using renewable sustainable or alternative forms of energy or electricity purchased, in place of such electricity, in accordance with the trading arrangements provided for in regulations to be made by the Commission, under section 9(1)(d)”
Condition 20 of a Licence to Supply Electricity is as follows:
“The Licensee shall, each year within 90 days of the anniversary of the date of issue of the licence, deliver to the Commission a certificate, duly audited, specifying the source of the electricity supplied for the previous year ending on the anniversary of the date of issue of the licence. This certificate shall also certify that the Licensee has, for the previous year to the anniversary of the date of issue of the licence, complied with the electricity balancing criteria, pursuant to the Trading and Settlement Code.”
Commission’s Interpretation of Condition 20
The Commission considers it vital to ensure that Green suppliers comply with the principle and requirement to supply no more electricity to final customers than that which is available to them using renewable, sustainable or alternative forms of energy on an annual basis from their start date of trading. This is the basis on which the applicant receives a supply licence from the Commission and on which it trades under the Code.
However, the Commission recognises that it may be difficult for a Green supplier to fully comply with Condition 20 and balance exactly on an annual basis on a certain date. Furthermore, for a start-up supplier operating in its first year, exact balancing may be more difficult to achieve. This is because such a supplier will typically need to particularly concentrate on customer acquisition so as to achieve economies of scale, making exact co-ordination of its Green purchases with Green sales more problematic.
2 For clarification this decision is not intended to apply to CHP suppliers who are licensed under Section 14 (1) (d) of the Act.
; The Commission reserves the right to investigate a Licensee’s
activities, where a green supplier supplies up to 5% more electricity to
final customers than that which is available to it using renewable
sustainable or alternative forms of energy, to uncover whether or not
this discrepancy is the result of forecasting and other such errors or
came about as a result of deliberate actions.
; In the event that a supplier fails to adequately comply with the criteria
laid down in this Decision, the Commission may issue a direction
under Section 24 of the Act, a determination under Section 25 of the
Act or an order under Section 26 of the Act, to ensure that the licence
holder takes all measures necessary to comply with Condition 20.
This could include requiring the supplier to cease from supplying any
additional customers, with immediate effect. Under a Licence to
Supply Electricity, the Commission has powers to revoke a licence if
the Licensee fails to comply with a direction, determination or order
under the Act.
Objective of Decision
Since February 2000, renewable suppliers have had preferential access to 100% of the market. The market has opened gradually to brown suppliers. In February 2004, 56% of the market was opened to brown suppliers and full market opening will take place in February 2005. Following from this renewable suppliers may not be able to continue to acquire customers at the same rate and may lose some customers. Given that customers can move supplier and the effective date can be within one week of a change of supplier notification, there is a significant risk that the loss of a small number of large customers would move a green supplier’s balancing position from being largely in balance to outside the 5% band.
This would result in a significant surplus of green energy, which would have been contracted to supply these customers. No credit would be given for any green surpluses accrued in this manner, although a green supplier would have incurred a cost and green electricity would have been supplied to the Republic of Ireland system. Any alternatives, such as delaying purchasing significant amounts of green power to avoid such potential costs, would run the risk of failing to fall within the permitted 5% balancing tolerance.
In light of this risk the Commission for Energy Regulation has determined to amend the current rules applying to green suppliers for green balancing under the Trading and Settlement Code to permit banking of green surpluses for any 12 month period ending on anniversary of trading for up to 5% of sales in that year.