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13 February 2007, Brussels

Electricity Infrastructure Workshop Shaun Kent, co-chair Electricity Regional Initiative TF. 13 February 2007, Brussels. Overview – Cross border infrastructure. Cross border interconnection capacity needed e.g. : Develop effective internal market Security of Supply

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13 February 2007, Brussels

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  1. Electricity Infrastructure Workshop Shaun Kent, co-chair Electricity Regional Initiative TF 13 February 2007, Brussels

  2. Overview – Cross border infrastructure • Cross border interconnection capacity needed e.g. : • Develop effective internal market • Security of Supply • Broaden scope for achieving environmental targets • Emphasised since e.g. : • Barcelona Council 2002 10% target • Commission Strategy paper March 2003 • ERGEG June 2005 consultation paper “The Creation of Regional Electricity Markets” • “Priority Interconnection Plan” • Hence ERGEG Consultation Paper October 2006: • Description and analysis of current methods / regimes • Particular focus on cross border elements • Two broad themes – Building and Construction Authorisations and Permissions, Regulatory Framework

  3. Process for identification and provision • Transmission project triggered by one or more : • Obligation on TSO to plan, build, operate according to operating and security standards • TSO seeking to improve market functioning • Private party profit opportunity – ‘Merchant’ line • Other – environmental, reaction to transmission user request • Infrastructure builder seeks necessary building and construction authorisations and permissions • Investment financed • TSO – ‘regulatory contract’ • Private party – access fees / sale of long term right • Infrastructure built • Revenues collected

  4. ERGEG survey of present practice • ERGEG survey of practice in 21 countries : • Regulatory framework, including operating and security standards • Planning • Operation and Maintenance • Financing • Building and Construction : Authorisation and Permissions • Technical, safety and quality standards • + ‘case studies’ • ETSO input

  5. Findings - BCAP • Clear that BCAPs major issue • Average time to project realisation 5 – 7 years in many countries • Worst case scenarios up to 10 years • Numerous different setting and approval bodies • Range of criteria : • Economic / competition • Engineering • Environmental • Local • Health • International obligations • Compounded in cross border settings

  6. Findings - BCAP • ETSO paper • Veto powers of the Regions • Effect of local authorities • Number of bodies in charge of permissions and/or Environment assessment • Laws / some country specifics : • Italy legislative initiative 2003 • Germay Infrastructure Planning Acceleration Law 2006/07 • UK – Energy review

  7. Findings - Case studies

  8. Findings – Regulatory Framework • Provision of transmission infrastructure generally driven by national requirement on TSO to meet standards • National ‘regulatory contract’ generally exists • Few requirements in ‘cross border’ sense, hence : • Cost and risk allocation • Few obligations to plan / operate in cross border sense • ITC mechanism helps in principle • Points to need for cross border obligations and competences for (at least) regulators, TSOs

  9. First Recommendations - BCAP • Demands immediate attention • Naturally recognize need for proper expression of national and local concerns • ERGEG first observations : • Need for clear criteria, transparent guidelines, timelines and deadlines and appeals processes • National regulators / ERGEG can provide helpful independent view concerning market impact ? • Necessary and helpful to reconcile in some manner wider economic and security of supply against costs at local level

  10. First Recommendations – Regulatory Framework • ERGEG broadly arguing for cross border approach, requiring : • Overarching operating and security standards • Obligation on TSOs to meet them • Joint role for TSOs, subject to regulatory oversight • Joint role for Regulators, to mandate TSO (cross border) cost recovery, enforce standards • Clarity regarding treatment of ‘Merchant’ lines, particularly ‘exemptions’ regime • Views invited

  11. Next steps • Consultation closed 1 December 2006 • 13 Responses received • Broadly supportive of ERGEG initial recommendations concerning BCAPs • Broader range views concerning framework • Presently anticipate ERGEG Conclusions paper to be published March 2007

  12. Thank you Shaun Kent shaun.kent@ofgem.gov.uk

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