Common Balance & Reconciliation Settlement. Report

Transcription

1 I Common Balance & Reconciliation Settlement Report December 18 th, 2009

2 Content O Executive Summary Terminology Background Ambition for COBS Benefits for the Norwegian / Swedish electricity market Commitment from Statnett and Svenska Kraftnät A Nordic solution including Denmark and Finland Basic functionality of COBS in Norway and Sweden The proposed COBS settlement model Changes introduced by COBS settlement model Outstanding issues COBS Settlement Model Principles for common management of collateral security Fees Suggestion of a common handling of revenues and costs Common framework for market surveillance Consequences in Norway and Sweden of selected model Balance agreement Laws and regulations Trade on NPS without being BRP in Norway Regulators roles and responsibilities Need for harmonisation of EDI Organisation and operation of COBS Common entity to manage settlement Interface SR - SO Cost base for COBS Cost benefit considerations Proposed further development and time table Issues to be evaluated further Appendices Appendix 1 Balance agreement and regulations Appendix 2 EDI report Appendix 3 Current regime for collateral security in Norway & Sweden Appendix 4 Current cost base and fees in Norway & Sweden Appendix 5 Current market surveillance in Norway & Sweden Appendix 6 Hub... 64

3 3 (66) Executive Summary Background Balance settlement is a natural monopoly and a necessary function in a commercial based electricity market. Statnett and Svenska Kraftnät have the role as Settlement Responsible as well as System Operator in Norway and Sweden respectively. Currently there is no retailer present in all the Nordic countries, and only a few retailers have operation in more than one country. Due to differences in the national end user markets, a Pan-Nordic retailer has to have parallel supply functions through most of the value chain. Balance settlement and reconciliation settlement are significant parts of this value chain, and different national rules and routines in this area represent barriers for entry. Rules for balance settlement also give guidance for other business processes such as supplier change, reporting of meter data as well as the relation between grid companies and retailers. Common balance settlement and reconciliation settlement is therefore a prerequisite for a common end user market. The Nordic Council of Ministers has for several years supported a development of a common Nordic end user market for electricity. This has now been put in concrete form in a report from NordReg 1 that recommends a common end user market including common balance settlement. The Nordic Council of Ministers gave their support to the report on the minister meeting in October At the same time the Ministers ordered a detailed implementation plan to be presented on the next Minister meeting. As part of the strategic cooperation between Statnett and Svenska Kraftnät, a project was established in the first quarter of The ambition for the project has been to establish a principal model and a decision document for a common balance settlement in Norway and Sweden. This report summarises the results from the project. In the later part of the project it was decided to establish a new project where Fingrid and Energinet.dk will be included into the process during first quarter of Proposed model for common balance settlement The project proposes a model with the following main elements: o Each TSO has the formal balance responsibility in the country they operate. o A common operational unit responsible for settlement is established either as a separate company or under Nord Pool Spot AS. The actual organisation of the operational unit has not been concluded on. The settlement responsible unit performs the balance settlement and invoices the BRPs for the reconciled energy. o The DSO has the responsibility to calculate the reconciled energy and report relevant data to the SR. 1 NordReg consists of the regulators in Norway, Sweden, Denmark and Finland

4 4 (66) o Identical balance agreements for balance responsibility in different countries are established (different legal frameworks might demand formal differences in the balance agreement). Also a common handbook which collects all necessary information for balance and reconciliation settlement is to be established. o Equal business processes for reporting, settlement; invoicing, collaterals and corrections are established. o Establishment of equal fee structure, however different fee levels dependent on the real cost of balancing in each country (primary and secondary regulation). o Establishment of one common standard for electronic communication. The model ensure the requirements for a common end user market and supports equal treatment of all players independent of nationality and national markets. Essential changes Given current differences, a common balance settlement will require some changes. The most important changes are the following: o Changes to the secondary law in Norway which regulate the settlement responsibility and the player s duties. NVE appoints this secondary law. o The settlement responsible has, according to the Energy Law in Norway, been given public authority. This means that the settlement responsible has the authority to give binding resolution to market players. These resolutions have to be obeyed and cannot be appealed. Statnett give binding resolution each time one instruct a market player. The invoicing of the balance responsible is regarded as exercise of public authority. It is of importance that a new balance settlement model does not alter this principle. o In Sweden, either a new agreement for balance regulation has to be developed or the relevant rules have to be structured in a regulation. It will also require changes to ordinance and regulation o A new common balance settlement agreement has to be developed. o The operational settlement responsibility is transferred from Statnett and Svenska Kraftnät to a common operational unit.. o Market players have to adapt to changed standards for data communication. The model is based on centralised financial settlement of the difference between estimated and metered consumption for household customers (settlement of reconciled energy). The DSOs responsibility in relation to settlement of reconciled energy is changed which requires changes in both Sweden and Norway but the main change is in Sweden.. Cost Benefit Analysis The project has looked into the costs and benefits of introducing COBS. This is a high level analysis and should be verified through later interaction and feedback from the market participants. The analysis has been divided in two parts: a. The investment and return of the COBS implementation project b. The socio-economic benefits of a common retail market.

5 5 (66) Project profitability Costs and savings have been estimated for the markets participants 2 and Settlement Responsible (SvK and Statnett). The estimates give a total investment of 232 MSEK where 205 MSEK is the share for the market participants and 27 MSEK for the Settlement Responsible. The investment will return a yearly cost saving of 34 MSEK where 25 MSEK is the share for the market participants and 9 MSEK for the Settlement Responsible. By the proposed model the distribution companies in Sweden will face increased yearly costs in addition to the investment. With an investment life-time of 15 years and a required rate of return of 6 %, the investment will return a positive net present value of approximately 100 MSEK for the total project including markets participants and Settlement Responsible. The contribution from the market participants is 40 MSEK and 60MSEK is the contribution from the Settlement Responsible. The profitability will be increased further by the inclusion of Finland and Denmark. Especially the profitability of the Settlement Responsible will then increase significantly. Socio-economic benefits of a common retail market The project has evaluated different reports concerning the margin in the end user market. The reports show that the margin for spot price related contracts in the end user market is around 3 and 4 øre/kwh (Norway and Sweden respectively). For other power contracts the margin is higher. There are also high administrative cost variations between suppliers. Due to this, the reports support a potential for cost reductions in the industry. The size of the Norwegian-Swedish end user market, excluding heavy industries, is approximately 120 TWh per year. Through standardized solutions and increased competition through a common market, the suppliers can reduce their administrative costs. Roughly a reduction in costs of 10% meaning a margin reduction of 0.35 øre/kwh, will result in 420 MNOK annually. This will then be released in the form of price reductions to the end users. Common balance settlement is a prerequisite for a common end user market. The project has not found any external quantitative references to social economic profitability by introducing a common end user market. On the other hand one should emphasize that the Nordic Council of Ministers and the Nordic regulators clearly signal that they think it is social economically profitable. Further the project has identified social economical advantages that have not been quantifiable. Some of these are: A common market will increase competition, and counter the fact that it has become fewer and larger suppliers in the national markets It is assumed that the imbalance for the market participants will be reduced as a result of increased and better reporting from the DSOs, especially in Norway. Higher efficiency in IT investments for both IT providers and the market participants. 2 For Sweden 122 grid companies and 30 balance responsible companies has been included. The corresponding numbers for Norway are 102 and 140.

6 6 (66) Larger potential for innovation in a larger homogenized market. In addition to this it should be mentioned that by not integrating the markets, the cost could increase substantially. This since Norway and Sweden separately then could be marginalized and that future EU directives can inflict on market solutions which would enhance the economic costs in Norway and Sweden. Process and Time Schedule A process has been outlined where Energinet.dk and Fingrid enters the project. This process will create a basis for a decision by the TSOs of implementing the proposed solution. Thereafter the market players and the regulators will be consulted and a process for changing laws and regulations has to be started. It is assumed that new secondary laws formally can be decided on by May 2011, and that the market players will need a one year adaptation period. Common balance settlement can then be operational by May 2012 at the earliest.

7 7 (66) 1 Terminology The project has used the following terminology in the report. Ancillary services Andelstal Automatic Meter Reading (AMR) Balance Power (BP) Balance Power Price (BPP) Balance Responsible Party (BRP) Balance settlement Bilateral trade Bottleneck Central Data Aggregator (CDA) COBS Componentcode Congestion Congestion area (CA) Distribution System Operator (DSO) EDI EDIEL Electricity market Definition Ancillary services includes primary and secondary regulation and other facilities for system operations managed by SO Andelstal is the load profile share. The term is used in Sweden. AMR is a system with meters and communication for remote collecting of metered data in metering points. BP is the imbalance per hour in the BRPs supply and is calculated as the difference between the metered energy and the stipulated delivery. BP is divided in production- and consumption- BP. BPP is the price to valuate the balance power. BPP is established by the SO per regulation area. BRP is a roll of an actor that has the agreement with the TSO to fulfil the responsibility to deliver the electrical energy that covers the BRPs customers consumed energy. Balance settlement is the settlement of balance power. Bilateral trade is trade between two actors and is cleared as fixed energy volumes in the balance settlement. Bottleneck = congestion. CDA is a function where detailed data for a BRP is aggregated to data per regulation area used in the national settlement. I.e. the metering data from metering grid areas is aggregated. Common balance and reconciliation settlement Component code is a unique identifier (serie-id) for reported EDIEL data. The term is used in Norway. Congestions could occur due to limitation in capacity in transmission grids. CA is the area between bottlenecks. Se also regulation area. DSO is the grid owner with the responsibility to transmit electricity from producers to customers. The DSOs have the responsibility to meter the energy flow and report the metered data to the stakeholders involved. EDI is Electronic Data Interchange EDIEL is EDI for the ELectricity market The electricity market is the market where actors trade with electric energy. In the market there are markets places organised for physical and financial trade. The market place for physical energy is organised by NPS.

8 8 (66) Justerad Inmatnings Profil (JIP) Kvarkraft Load profile Load profile share Metering Grid Area (MGA) Metering Point (MP) National settlement Nord Pool Spot AS (NPS) Power Delivery Obligation (PDO) Preliminary profile settlement Preliminary profiled delivery Profiling Profiled metering grid area (PMGA) JIP is the load profile per metering grid area calculated as the residual energy minus calculated losses. Used in Norway. Kvarkraft is the reconciled energy. The term is used in Sweden. The load profile is the residual energy per hour representing all non hourly metered consumption within one profiled metering grid area. In Sweden, förbrukningsprofil includes grid losses. In Norway, JIP, without technically calculated grid losses The load profile shares represent one actors total energy share in kwh of the load profile within one metering grid area. In Sweden Andelstal. Load profile shares are divided into preliminary and final load profile shares. The preliminary load profile shares are calculated before the meters in profiled metering points has been read. The final load profile shares are calculated after all meters for profiled metering point has been read. In Sweden the load profile shares have a monthly resolution whereas it is a daily resolution in Norway. The MGA is owned by one DSO and the area where metering is organised. One MGA has hourly metered exchange points to other MGAs. Metered data in a MGA are aggregated (summed up) per MGA and reported to the stakeholders. There is only one BRP that have responsibility for the MGA transmission losses. MPs are the points in the MGA where the DSO meters the electricity flow. MP is divided into exchange-, production- and consumption-mp. The national settlement is divided into two faces the balance settlement and the reconciliation settlement. NPS is the company who organise physical electricity markets in the Nordic countries. PDO is the overall and total delivery that one BRP have and includes power to consumption as well as sold bilateral trade, regulation and balance power. PDO could be used to quantify the total risk exposure from a BRP in the collateral security, i.e. total assets in electricity supply. The term Balansomslutning is used in Sweden. The preliminary profile settlement is a part of the balance settlement procedures where the load profile is divided between the actors. The preliminary profiled deliveries are calculated energy per hour for one actor as his part of the load profile. Profiling is the procedure to calculate and redistribute the energy per delivery period according to an assumption of what the consumption pattern look like. Profiling takes place in the profile settlement. PMGA is local metering grid area with metering points for consumption which not are hourly metered and with the

9 9 (66) Profile settlement Reconciled energy Reconciliation settlement Regulation area Regulation object (RO) Regulation power (RP) Regulation power market Regulation power price (RPP) Retailer (RE) System operator (SO) Settlement Settlement Responsible (SR) Unit Quality Assurance (QA) consumed energy profiled according to the Load profile. Profile settlement is divided into two steps. 1) preliminary profile settlement and 2) reconciliation settlement. The reconciled energy is calculated in the reconciliation settlement. The reconciled energy is the differences between the final profile shares (metered consumption) and the preliminary load profiled delivery for one actor s deliveries to non hourly metered consumption within one profiled metering grid area. The term Kvarkraft is used in Sweden. The reconciliation settlement is the settlement of reconciled energy for non hourly metered consumption. ( slutavräkning in Sweden and saldooppgjør in Norway). A regulation area is the area where SO increase or decrease the balance between production and consumption. Normally the regulation area is within one congestion area. A RO is one or more units which operate in the regulation market. The BRP report regulation bids and operational plans to the SO per RO and the SO activated regulation power per RO. RP is activated per RO by SO in order to rebalance the electricity system. Regulation power market is organised by the SO to administrate bids from BRPs for up- and down regulation in the aim to balance the system within one regulation area. RPP is the price to valuate the regulation power. RPP is established by the SO per regulation area in the regulation power market and is based on bids for up- and down regulation from the BRPs. RE is the roll of actors which have a contract with the customer and have the obligation to supply the electricity in consumption metering points. RE i.e. supplier. SO have the responsibility to supervise the balance of the electricity system and take actions to rebalance the system. Settlement is the calculation of different actors obligations in energy and costs. An important part is to QA the input data to the settlement. The national settlement in an electricity market is divided in the balance settlement and the reconciliation settlement. SR has the responsibility to operate the COBS settlement. Unit mentioned in connection with metering point or regulation object means a installation /plant with generator, power station or consumption. QA is the procedure to establish quality in a business.

10 10 (66) 2 Background SvK and Statnett have defined four areas for which they see a potential for co-operation between the companies. One of these areas concerns a common end-user market where both TSOs play an important role managing and settling all imbalances in their respective countries. A common settlement solution in the Nordic countries is supported by the governments and regulators in the Nordic Countries. Harmonising the settlement between Norway and Sweden is regarded as an important step towards a fully functional common end user market for Norway and Sweden. Existing balance settlement solutions in Sweden and Norway have many similarities; however there are also some important differences concerning roles and the daily operation. A common settlement will lower the entry barriers for balance responsible market participants with an ambition of operating in both countries. Further, a common settlement is a prerequisite for a common end-user market and finally a common settlement is assumed to lower the administration costs of settlement. The project COBS, COmmon Balance Settlement, has described a platform for a common settlement in Sweden and Norway. This means that a balance responsible party (BRP) face one interface and one set of rules when settling his imbalances in both Sweden and Norway. The platform can also be extended to include the remaining Nordic countries. This report aims to present the basic framework for a joint settlement and will provide a basis for further work on a more detailed model. Furthermore it shall give the management of the respective companies enough information in order for it to decide on implementation of a common settlement. In addition the documentation can be used as the platform for communication with external stakeholders. Naturally a settlement solution that encompasses all the Nordic countries is a prerequisite for a common Nordic end user market- which is the final goal. 2.1 Ambition for COBS The project COBS was initiated to support the political ambition for a common end user market in the Nordic countries. Statnett s and Svenska Kraftnät s ambition is to create a common settlement solution which is effective, supports the goal of a common end user market and serves the energy industry s need for a neutral and harmonised solution. The settlement is a condition for a well functioning electricity market, and Statnett and Svenska Kraftnät will offer an efficient settlement solution in line with the users need for a smooth operation in the Norwegian/Swedish electricity market.

11 11 (66) 2.2 Benefits for the Norwegian / Swedish electricity market The suggested COBS model has several benefits for the electricity market: A common model that fully supports a common Swedish/Norwegian end-user market: o Lower entry barriers for new actors. o Harmonisation of laws, regulations, balance agreements and rules will reduce the administrative cost for market participants and ease the operation for market players operating in both national markets. o Supports an efficient electricity market o Supports efficient operation across national borders as it reduces cost of administrative systems as well as IT systems and reduces staff cost of serving two markets Cost effective solution for settlement and invoicing of reconciled energy o Economy of scale in a set up with one Settlement Responsible unit (SR) as it means reduced cost of operation as the efficiency is increased. o Utilisation of SR s IT systems on a larger scale, i.e. same systems used in several countries. One counterpart for balance responsible parties (BRPs), i.e. only the Settlement Responsible unit instead of all distribution system operators (DSOs). Increased unbundling between BRPs and DSOs. Reduces the complexity for BRPs to operate in both Sweden and Norway. Faster closing of settlement (in Sweden). A common Nordic solution may serve as role model for European development. 2.3 Commitment from Statnett and Svenska Kraftnät Statnett and Svenska Kraftnät will work for a common settlement solution for Norway and Sweden and possibly for all Nordic Countries. The implementation of the proposed solution has to be done in close cooperation with the stakeholders in the electricity markets, this include mainly BRPs, DSOs and regulatory bodies. Statnett and Svenska Kraftnät will strive to design and implement the best and most efficient solution, and avoid special national solutions. Implementation of a common settlement model is dependent on several changes to national laws and regulations as well as change of technical systems. The time table for implementation is therefore difficult to assess but it is the ambition of Statnett and Svenska Kraftnät to do their best to implement a common settlement as soon as possible without jeopardizing the goal of implementing an efficient and good solution for the market.

12 12 (66) 2.4 A Nordic solution including Denmark and Finland To establish a Nordic end user market it is necessary to have common settlement rules in the Nordic countries. As the COBS project was initially setup as a Norwegian/Swedish project, communication with Fingrid and Energinet.dk has been important. During the project phase, a workshop with Fingrid and Energinet.dk has been held to exchange information and to discuss the COBS ideas. Lately, Energinet.dk and Fingrid have stated their interest in participating in the project. Statnett and Svenska Kraftnät are positive to expanding the scope of COBS to also include Fingrid and Energinet.dk. Recently it has been decided to start up a second phase of COBS, where Fingrid and Energinet.dk will participate. The foundation of this process will be the principles described in this report. Minor changes in the model could be made in order to meet special requirements in the Finish and Danish markets. During approximately a 3 month period Statnett and Svenska Kraftnät will together with Energinet.dk and Fingrid evaluate how to expand the proposed model to a Nordic solution.

13 13 (66) 3 Basic functionality of COBS in Norway and Sweden Statnett and Svenska Kraftnät have developed a proposal for a common balance and reconciliation settlement solution for Norway and Sweden. The solution could be expanded to also include Denmark and Finland. The abbreviation COBS will in the following be used in references to common balance and reconciliation settlement. The proposed COBS solution is described in this chapter. 3.1 The proposed COBS settlement model Alternative models for settlement have been evaluated by the project based on the current models in Sweden and Norway, the project suggests an adjusted model that is based on the best features of the current solutions with the aim to create an effective and harmonised Norwegian / Swedish settlement. The suggested model will ease market access in both countries for players with Balance responsibility (BRPs), hence supporting an effective end user market and competition. The proposed COBS model, illustrated in principle in the figure below, entails a settlement that basically will be managed as today, but with adjustments for the differences between the two current models regarding roles and responsibilities for the profile settlement 3. 3 Profile settlement have two steps, 1) preliminary profiling and 2) reconciliation (final settlement)

14 14 (66) 5 Metering data per metering point RE DSO (i) Hourly metered data production & consumption /RE (ii)preliminary Profiled consumption /RE 5 7 Reconciled energy Reconciled 7 energy /RE 5 Per metering grid area & BRP (i) Hourly metered data exchange, production & consumption (ii) Preliminary Profiled consumption BRP 2 Bilateral trades 6 Balance settlement 8 Reconciliation settlement SR 2 Elspot trades Elbas trades NPS 3 Production plans 4 Activated ancillary services 1 Regulation bids 3 Production plans 4 Activated ancillary services SO 2 Trade between price areas Figure 1, COBS model The arrows and numbers in the figure indicate the sequential processes involved in the overall settlement process takes place before the delivery hour, 4 takes place before, during and after the delivery day, 5-6 takes place within days after the delivery period whereas 7-8 takes place weeks and months after the delivery period Each of these processes is described in more detail in the following sections Bids to the regulation market The BRP reports bids per Regulation object to SO for up- and down regulation. 4 According to operational rules; 3 = Production plans have to be reported whenever the production is changed. However the data is fixed as settlement binding before the delivery hour starts.

15 15 (66) Bilateral trades BRPs have the opportunity to clear their trade in the balance settlement. The trade is settlement binding if SR receives the report of bilateral trade data before the hour of delivery according to rules in the balance agreement (today 45 minutes before the delivery hour starts). Nord Pool Spot is the only actor that is allowed to trade between regulation areas (so called market split). After finished trade on the Elspot and Elbas markets Nord Pool Spot reports the trade between each regulation area: Elbas volumes Elspot volumes Nord Pool Spot also report the price per regulation area: Elspot prices All data on BRPs trade in the Elspot and Elbas markets is reported by Nord Pool Spot before the hour of delivery to SR. The data reported are the following per BRP: Elbas volumes Elspot volumes Also BRPs bilateral trade with other BRPs than Nord Pool Spot has to be reported directly to SR according to these rules Production plans On a daily basis the SO calculates the power flows in the transmission grid and gives the market capacities for the trade for the next delivery hour or day. The BRPs production plans are essential input for the SOs work. BRPs should therefore have the obligation to report production plans to the SO the day before the day of delivery and have to be updated whenever the BRP change their production. Updates of the production plan are binding in the settlement up to changes before the hour of delivery according to rules in the balance agreement (today 45 minutes before the delivery hour starts). The production plans should be reported per regulation object, which is a production unit or a group of production units. The terms for reporting of production plans are decided by the respective SO and not relevant for COBS as such. Nevertheless SO is responsible for reporting the following data to SR during the day of delivery or the following night: Production plans per regulation object Activated Ancillary Services SO will report the following data to BRP when bids are activated and to SR during the day of delivery or the following night: Activated ancillary services per regulation object Regulation and balance power prices

16 16 (66) Metered data Metered data in individual metering points The COBS concept for the metered data from individual metering points is: Exchange metering points: Exchange metering points should be metered by hourly registered meters and the metering data should be reported the day after the day of delivery to the DSO in the adjacent metering grid area. Production metering points: Production metering points should be metered by hourly registered meters and the metered data should be reported the day after the day of delivery to the producer, the retailer who buy the produced electricity and to SR. Consumption metering points > 63 A main fuse: Consumption metering points > 63 A main fuse should be metered by hourly registered meters and the metered data should be reported the day after the day of delivery to the retailer who sell the electricity. Consumption metering points with maximum 63 A main fuse: Consumption metering points with maximum 63 A main fuse should be metered by meters which are either periodically registered or manually read and the metered data should be reported close after the metered period to the retailer who sells the electricity. When a customer switches retailer the DSO is obliged to report a load forecast on the upcoming consumption to the retailer. The load forecast is the metered annually consumption before the new supply starts up (with monthly resolution in Sweden and daily resolution in Norway). This information makes it possible to make forecasts for deliveries to new costumers. How RE and BRP organize their information exchange is not relevant for COBS. Metered data for load forecasting To keep imbalances at a minimum it is important that the BRPs have data to base their forecasts on. Most of the metered data could be used for load forecasting if the data is received fast enough. The COBS concept proposes that hourly metered data should be reported the day after the delivery day to the actors involved. Hourly metered data for the previous day have to be reported by the DSO on a daily basis and submitted to the BRP at least one hour before gate closure at Nord Pool Spot. This requirement does not allow for manual corrections of faults in the metered data so that automatic estimation should be applied when data missing or outside reasonable boundaries. The quality of the aggregated metered data used for load forecasting will be of less quality than data used for the balance settlement, but still adequate enough for forecasting because the number of missing individual data the day after the day of delivery is, based on experience, approximately 1-3 %. Large consumers will often have a different pattern of consumption than household consumers which is why data for larger consumers is very useful for load forecasting. Household consumption will then become a calculated residual with a much more homogenous load profile.

17 17 (66) Aggregated metered data for profiled consumption: With metering data for production and consumption together with metering data on exchange metering points to other metering grid areas, it will be possible for the DSO to calculate the Load Profile every day for the previous day. The load profile is the total consumption which is not hourly metered. By the single BRPs knowledge of his share of the load profile (the preliminary load profile share) and the actual load profile, BRP have enough information to make reasonable good daily load forecast on the consumption for costumers with profiled consumption. The DSO ought to be obliged to report the load profile on the daily basis to all actors within the metering grid area at least one hour before gate closure at NP Spot to make it possible for the actors to make necessarily preparations. Metered data for forecasting hourly metered consumption: The DSO should on a daily basis be obliged to report the aggregated metered data per RE within the metered grid area to the BRPs and the aggregated metered data per BRP within the metered grid area to SR. Metered data for exchange between metering grid areas: The DSO should on a daily basis be obliged to report the aggregated metered data per metering grid to SR. The SR will make QA controls of the data and give feed back to the DSO about the quality. Energy data for balance settlement Hourly metered data: If needed the DSO should be obliged to report updates up to the 2 nd day after the end of the delivery week and eventually correcting disputes from BRPs the 3 rd day after the end of the delivery week to the same receivers that originally received the data. Hourly preliminary profiled deliveries: The DSO should be obliged to report preliminary profiled per RE to BRP and per BRP to SR, within the metering grid area up to the 2 nd day after the end of the delivery week and eventually correcting disputes from BRPs the 3 rd day after the end of the delivery week Balance Settlement Based on received data from DSO, SO, NP and BRP, SR will perform settlement and invoicing. Preliminary settlement (secure QA of reported data) When the SR receives data from DSOs the SR can conduct preliminary settlement continuously. Trades and production plans will be known to SR for every BRP before the hour of delivery. SR will according to production plans and bilateral trade calculate the BRPs settlement binding plan for consumption per regulation area. These data will be made available for the BRP. This could preferably be done using a web application which allows the BRPs/DSOs to continuously follow and control the data and their position. The BRPs and the DSOs can then monitor and control the data reported and registered by the SR.

18 18 (66) The preliminary settlement will be published both in energy volume and in money terms based on actual price information. Publishing should be done in one common web application like Balance Web in Norway or MIMER in Sweden. Such application should also have an API for machine-to machine communication. Verification by BRP BRPs must have access to the data used in the balance settlement in order to control the input data and the settlement results before SR produce the balance power invoice. The data must enable them to calculate all the settlement data by themselves during the 3 rd working day after the delivery week and give the BRP the opportunity to dispute bad quality in the input data to the settlement or on the settlement result before invoicing the balance power. Regulation and balance power will be reported as volumes and amounts to BRPs by SR before invoicing. All other data included in the balance settlement will be made available for BRPs online. Balance settlement Two working days after end of week all necessary data from DSOs is reported to SR and eventually updated after disputes from BRPs. SR will conduct the balance settlement on the 4 th working day after end of week. Settlement is calculated in the chosen currency. As a rule there will be no re-run of the settlement unless SR has committed errors or due to extraordinary circumstances. Invoicing After the balance settlement has been conducted the SR will invoice the BRPs. Invoicing will be conducted on a weekly basis the fourth working day after end of week. Settlement and invoicing will be conducted in EURO. As a service to the market players, invoicing in SEK or NOK can be offered against a service fee that will cover costs for extra work and currency risk. It is suggested that invoicing should be done electronically. Statnett already send their invoice electronically today (pdf), while Svenska Kraftnät sends the invoice by regular post. Report Settlement will be reported continuously both in energy volume and in money terms when data is available to make the settlement. Publishing should be done via a common web application like Balance Web in Norway or MIMER in Sweden. Such application should also have an API for machine-to machine communication Reconciliation settlement DSO shall report, per metering grid area, aggregated reconciled energy for profiled consumption per BRP to SR and per RE to BRP no later than 20 working days after the end of the month for all meter readings collected in that month.

19 19 (66) SR will aggregate the reconciled energy data and invoice the BRPs. The SR will take the role as the financial counterpart towards the BRPs. SR will hold an open account per BRP for both receivables and payables per metering grid area. These accounts will be updated every month based on received meter readings and recalculated reconciliation. The net account will be settled and balanced out towards the BRP every month Electronic communication (EDI) The communication described in figure 1 will be electronic as will all communication described in the COBS settlement model, allowing for machine-to-machine communication. Both Norway and Sweden currently base this communication on the Edifact standard, although more or less differently implemented as national Ediel standards. The Cobs project has done a review of these standards with respect to the proposed settlement model. Further information about EDI can be found in a separate report in appendix Changes introduced by COBS settlement model The following sections describing the model separated into handling 1) of hourly metered data and 2) of load profiled consumption data. The changes the COBS settlement model introduces are mainly related to the handling of load profiled consumption Balance settlement of hourly-metered consumption/production The suggested model will cause small changes in balance settlement of hourly metered consumption/production compared to the current solutions. Planned production per regulation object is reported by the BRPs to the SO which report the data to Settlement Responsible (SR). Trading data are reported by the BRPs to the SR prior to the delivery hour, alternatively via the SO. SR calculates the BRP s stipulated consumption per regulation area. Metered data should be reported after delivery hour by the DSO to the SR. In Sweden today the DSOs are obliged to report hourly metered aggregated data per metering grid area the day after the day of delivery and corrections within 5 working days. In Norway the hourly metered aggregated data is reported by the DSOs 2 days after the end of the week of delivery. The project suggest that the DSOs should report hourly aggregated metered data the day after the day of delivery to be used by the BRPs for load forecasts of consumption and updated hourly aggregated metered data 2 days after the end of the delivery week for balance settlement. The DSOs are obliged to report the losses separated from other consumption. The losses could be either 1) profiled (se separate below) or 2) metered. In metering grid areas with all metering points metered by hourly metering the DSO calculates the metered losses as a residual energy and is obliged to report this to the actors separately. The SR is then in position to conduct the balance settlement per regulation area.

20 20 (66) Profile settlement The profile settlement is divided in two steps 1) preliminary profile settlement and 2) reconciliation settlement (final settlement of profiled energy). The main changes introduced by the COBS settlement model is related to the settlement of the profiled consumption which is where the settlement model between the countries today has significantly different solutions. Preliminary profile settlement The preliminary profile settlement is a part of the balance settlement for non hourly metered consumption. The COBS project suggests that the DSOs should be the responsible to calculate the preliminary profiles deliveries and report this data to the actors. The preliminary profile settlement in the suggested model leads to changes especially in Sweden where the DSOs will get the responsibility to calculate and report the hourly profiled energy deliveries per actor. This is a function that the DSOs in Norway already have. In Sweden is the preliminary load shares are reported by the DSOs to the actors and the calculations of the preliminary profiled deliveries are made by SvK for the BRPs and by the BRPs for the RE. The COBS project has not come up with an agreed method to calculate the preliminary profiled deliveries. In Norway, the base for estimates is the profiled metering points annually consumption, the preliminary load shares in daily resolution and per day ex post updated delivery structure. The accuracy of the preliminary load shares in Norway is based on the estimates on the annual consumption and the assumption that the metering point has the same consumption pattern as the load profile (JIP) during the upcoming year. In Sweden, the base for the calculations is the profiled metering point s monthly consumption, the preliminary load shares in monthly resolution and per month ex ante updated delivery structure. The accuracy of the preliminary load shares in Sweden is based on the assumption that the metering point has the same monthly energy consumption as the month one year before and the same consumption pattern as the load profile during the upcoming month. The profiled metering grid areas losses are handled differently in the two countries. The result in the calculation is hourly energy volumes in the balance settlement both in Norway and in Sweden. In Norway the losses are preliminary calculated in accordance with a theoretical model with technical data. In Sweden the losses are preliminary calculated based on the assumption that the grid losses have the same energy as the same month one year before and the same consumption pattern as the load profile during the incoming month. Reconciliation settlement The COBS project suggests that the DSOs should be the responsible to calculate the reconciled energy and report this data to the actors and the SR. SR should be responsible to settle the costs of the reconciled energy and invoice the BRPs. The reconciliation settlement in the suggested model leads to some major changes in both Norway and Sweden.

21 21 (66) The reconciliation settlement is possible to make when the meters in the profiled metering points have been read. In Sweden all profiled metering point are read by remote readable meters (AMR) at every shift of the month and when a customer moves any day during the month. Estimation (extrapolation) of metered data is not permitted. This means an incentive for the DSO to collect metered data; otherwise the energy will be regarded as grid losses. Metered energy per metering points are aggregated (summed up) per metering grid area to a total monthly energy volume per actor called slutliga andelstal (final profile share), which is reported to each actor. The final profile share is an exact energy volumes based on metered data without estimations. In Norway the meters are read in different time intervals depending on the size of metering point, minimum ones a year. Estimations on metered data are allowed. Metered energy volumes are redistributed to a daily energy volume per metering point according to the load profile (JIP) between the meter readings with the assumption that all customers have the same consumption pattern as the load profile. The redistributed energy is not aggregated per metering grid area and actor as in Sweden. The reconciliation settlement is handled in different ways in the two countries. In Norway the reconciliation is made locally by the DSOs and in Sweden the reconciliation is centralized to SvK. Both models have some weaknesses as well as positive qualities. The working group suggests a new model building on the best praxis from the two countries. In Norway, reconciliation settlement (saldooppgjør) including economical transactions is today operated by the different DSOs. The solution means that many REs have to deal with many DSOs. The calculation of the reconciled energy is done per metering point in a daily resolution. The profile settlement daily price is calculated by the DSO volume weighted to the grid areas load profile. The solution means that the reconciliation settlement deal with a lot of detailed data, with different time schedules and are finished differently depending of when the meter is read. In Sweden the DSO obligation is limited to settles the definite load shares which are then reported to the market participants. SvK makes the reconciliation including economical transactions between the BRPs and BRPs makes the reconciliation including economical transactions against retailers under the BRPs responsibility. The reconciled energy ( kvarkraft ) are calculated in monthly resolution and made per metering grid area as a hole after that the DSO has reported the final load profile shares. This means that the reconciliation settlement process is finished as fast as the DSO has reported the final load shares two month after the end of the delivery month. Before introduction of monthly meter readings in Sweden the reconciliation settlement was made with monthly energies after 13 month after the delivery month due to the obligation to read the meters annually. The Swedish solution with centralized reconciliation settlement makes it possible to settle the reconciled energy for all profiled metering grid areas in Sweden in one moment. The profile settlement monthly price is calculated by SvK volume weighted to the aggregated load profile per regulation area. The suggested model with the DSOs process to calculate the reconciled energy is quite similar to the current Norwegian routines, but with the extension that the energy have to be aggregated per metering grid area before reporting. Furthermore, the DSOs in Norway do not have to be the financial counterpart in the settlement of reconciled energy. The Swedish DSOs have to take a bigger scope in

22 22 (66) the settlement process to calculate the reconciled energy per metering grid area. The economical part of the reconciliation settlement will be performed by the SR and is equal to SvK s role as the financial counterpart to the BRP for the reconciled energy EDIEL To be able to implement the COBS solution, EDI 5 and EDI identification schemes has to be harmonised. This process involves the whole industry which implies that it can be both difficult and time consuming. However it will be necessary in order to obtain an effective long term solution for a common settlement regime in Sweden and Norway. If Denmark and Finland harmonise their regimes together with Sweden and Norway it would greatly benefit the Nordic market players. 3.3 Outstanding issues COBS Settlement Model There are a number of issues regarding the COBS settlement model that the project has no clear recommendation for. This is partly due to lack of time and partly because these issues preferably should be discussed with other stakeholders. These issues are described below SR as a service for BRP or a service also for RE In order to facilitate the market, SR only needs to relate to the BRP. With the described reporting structure the BRP will transparently be able to separate the settlement between his respective RE. In the current Norwegian structure the BRP is allowed to define an account structure allowing him to get the settlement per RE directly from the settlement process at SR. By offering RE settlement as an additional service the data volume will increase substantially in Sweden but not so much in Norway since here almost every RE is also a BRP. The additional service of RE reporting will represent an extra cost for the SR. This should be a specific subject for input by regulators and market players Preliminary profile delivery calculation For non-hourly metered consumption a preliminary load calculation shall be performed. The current Swedish model for calculation of the preliminary profile delivery is made by splitting the load profile between the BRPs according to each BRPs preliminary load profile share. The preliminary load profile share is based on monthly metered data in the consumption metering points the same month one year before the delivery month per BRP and per metering grid area. The preliminary load profile share data is reported to the BRP before the start of the delivery month. In Norway the calculation of the preliminary profile delivery is made by splitting the JIP between the BRPs according to each BRPs preliminary load profile share. The preliminary load profile share is based on historic annual consumption which is redistributed to daily data by the historical JIP. The 5 EDI = Electronic Data Interchange

23 23 (66) annually consumption is updated by meter reading which according to the regulation should be every quarter or annually. The preliminary load profile share data is reported to the BRP after the delivery week per metering point. Profiling will be a subject for further discussions before decision could be taken how the preliminary profiling should be designed. It is not obvious that data with high resolution gives a more accurate result in the calculations. The result is primarily dependent of the accuracy of the registered metered data and how the data is calculated. One aspect is also how AMR will influence the reconciliation settlement Reconciled energy calculation For non-hourly metered consumption a reconciliation settlement shall be performed. The current Swedish model for calculation of the reconciled energy (kvarkraft) for the BRPs is made by SvK according to each BRPs final load profile share. The final load profile share is based on monthly metered data in the consumption metering points for the delivery month per RE, BRP and per metering grid area. The reconciled energy data is reported to the BRP after reconciliation settlement the third month after the delivery month. In Norway the calculation of the reconciled energy (kvarkraft) for the REs is made by DSO according to metered energy. The final load profile share is based on meter readings which according to the regulation should be every quarter or annually in the consumption metering points. The metered energy is redistributed per day between the meter readings by the JIP with the assumption that the consumption pattern is equal to the JIP. The reconciled energy data is reported to the RE after reconciliation settlement the continuously after meter readings per metering point. Profiling will be subject for further discussions before decision could be taken how the reconciliation should be designed. It is not obvious that data with high resolution gives a more accurate result in the calculations. The result is primarily dependent of the accuracy of the registered metered data and how the data is calculated. One aspect is also how AMR will influence the reconciliation settlement Reporting of Bilateral Trade by BRP In Sweden bilateral trade is reported to SR by both trading BRPs. SvK has an automatic correction scheme if the trade doesn t match. SvK doesn t have to take any action to make own corrections when deviations occur. Disputes between buyer and seller regarding reported data is left to the contract parties to handle bilaterally, i.e. SR does not perform a recalculation of the settlement. There is a possibility for the BRPs up to the first working day after the delivery day to make corrections of one of the counterparties reported data to get the data to match. In Norway only the selling party reports the bilateral trade. Statnett assumes that the reported data are correct and settles accordingly. Disputes between buyer and seller regarding reported data is left to the contract parties to handle bilaterally, i.e. SR does not perform a recalculation of the settlement.

24 24 (66) The same number of time series is reported in both countries if both counter parties have the role of the seller. Reporting of bilateral trade will be subject for further discussions before a decision on how bilateral trade should be treated in the balance agreement can be taken Grid Loss included or excluded in the Load profile In Sweden the grid losses are included in the load profile whereas it is excluded (JIP) in Norway. In addition the calculation of the grid loss is different. This has consequences for the DSOs as well as the BRPs. This matter has to be discussed further Controls performed by SR SR will calculate the area balance per metering grid area (the sum of all reported hourly metered data) as a control that metered data from a DSOs for one metering grid area is in balance. This can be done when exchange to other metering grid areas, production and consumption are received by SR. The result will be made available for the DSO. Grid area balance can be calculated and revealed in the balance settlement. When imbalances occur, the data will be reported both to the DSO and BRP. It is undecided if it shall be a requirement that the DSOs provide SR with this data daily. It is also possible for the SR to perform controls for SO on the quality of the performed ancillary services. This is possible since production plans are reported per regulation object and the metered data to SR is reported per production per unit in the balance settlement. SO may require that metered production and consumption for regulation objects are reported to SR daily to enable more frequent controls. It has not been concluded whether the SR shall deliver this service to SO EDI The syntax to be used for the COBS documents (e.g. EDIFACT or XML) have not been evaluated by the COBS-EDI project. The ongoing Nordic TSO XML project is expected to test XML document exchanges between the Nordic TSOs and a decision for which syntax to be used should be based on the result from that project. Many of the documents exchanged today will, within the COBS model, be sent between new roles, such as the reconciliation documents, aggregated per Balance supplier and Metering grid area, which will be received by the Imbalance settlement responsible in addition to today s receivers. The Norwegian and Swedish Product code is a totally different data element than the Product in the COBS proposal. The Product code is defining the content of the document and can be seen as a combination of the Document type, Process type (ENTSO-E header elements) and Business type, while the COBS Product is used for specifying electricity characteristics, such as active/reactive energy/power or capacity.

25 25 (66) The Norwegian Station group and the Swedish regulation object is similar to the COBS Resource object. With a common settlement system the identification scheme for the Resource object should probably be harmonised and thus changed to GS1 GSRN (18 digits). The identification of Metering grid areas should be harmonised between Norway and Sweden. The coding scheme should probably be GS1 GSRN (18 digits). 3.4 Principles for common management of collateral security The working group suggests that identical principles for collaterals should be implemented in Norway and Sweden. The goal is to shorten the time period for balance settlement and for invoicing. As a result the financial exposure to the SR will decrease and the collateral demand can be put to a minimum. Main principles The collateral demand should reflect the individual risk of each BRP s capital strength, trading position and imbalance exposure. A BRP s trading position is all the deliveries that the BRP has committed himself to by trade agreements. The demand should also include the risk of the BRP s exposure in the reconciliation settlement but not as extra collateral but rather as an extension of the collateral commitment, a BRP is responsible for his deliveries until they are settled in the reconciliation settlement. Furthermore the main principles should be established in a formula for calculating the collateral. This formula must be: Transparent Free of entry barriers Non discriminating Routines for collateral When the Balance settlement is completed the 4 th working day each week, final information about the BRPs total exposure to the SR and trading position is revealed. The overall risk exposure could be found in the total power delivery obligation (balansomslutning), which is the total delivery that one BRP have including balanced consumption and sold bilateral trade, sold regulation and sold balance power. Weekly calculations of the security demands can utilize this information together with updated prices, spot and bilateral trades. Agreements We suggest that the main principles for collateral demands are included in the Balance Agreement. Further principles to be handled There are several principles and details regarding the process for managing collaterals, for example; type of collateral, relations to deposit banks, routines for communicating with the BRP, detailed input to the formula etc. These items are not discussed within this project.

26 26 (66) If COBS is operated from a common Statnett/SvK entity a preferred model is that the collaterals for Norway and Sweden are managed together. A BRP will then be responsible for setting collateral covering its exposure in both Sweden and Norway. This solution has to be legally evaluated in more detail in the implementation stage. A solution for collaterals given the least costly solution for the BRPs will be implemented. 3.5 Fees The fees for settlement and management are different in Norway and Sweden but the main principles for allocating costs and income have been harmonised previously even though some smaller discrepancies still remain. It is suggested that similar principles for calculating fees should be implemented in both countries. All direct cost and overhead costs for running COBS will be covered by fees, and be similar in Norway and Sweden. These costs include labour, office cost, IT-cost etc Suggestion of principles for fees in COBS The principles for calculating fees for consumption and production should be the same in Norway and Sweden. The actual fees will for some elements differ due to the fact that the costs of power reserves are different in Sweden and Norway. Overall principles should be applied: Costs related to the SR and the SO should be included in the cost base that will be covered by the fees stipulated in the balance agreement. The SR are paid for the services it provides for the SO. All direct cost (examples: staff in relation to SR and all direct costs in relation to SO should be transparent and presented separately. All indirect cost (office, IT etc.) in relation to both SR and SO shall be included and be presented separately. Monthly fees should be equal in Norway and Sweden. Imbalance fee should be equal in Norway and Sweden. Power cost elements differ between Norway and Sweden. Market participants will pay the fees that apply in the areas where they are active. Cost and revenue for international exchange should be included Common economic base for calculating fees Costs for system operation reserves for BRPs are: Frequency Controlled Normal Operational Reserves (FCNOR): 100% Frequency Controlled Disturbance Reserves (FCDR): 10-33% Fast Active Disturbance Reserves (FADR): 10-33%

27 27 (66) Cost of system operation reserves shall be included in accordance with Nordic harmonised rules on cost allocation described above. A study of the use of the FADR should be done to see if a common share of cost can be decided on. Overhead costs Cost of staff in the settlement division and some cost for management/support using some of their time in settlement (management, controller, legal, IT etc.) Balance power cost International exchange costs (due to exchange of balance power between the countries) Depreciation Explanation of 2-price method on production balance power The 2-price method on production balance power arises from the fact that BRP with production balance power that put on load on the electricity system will pay /get paid based on the balance power price. The BRP pays a regulation fee according to the difference between the balance power price and the spot price. A BRP with production balance power that in the same situation helps to rebalance the system will get paid / pay the spot price for the production balance power. He will not get any extra revenue to help to rebalance the electrical system. Explanation of 1-price method on consumption balance power The 1-price method on consumption balance power arises from the fact that BRP with consumption balance power that put on load on the electricity system will pay /get paid based on the balance power price. The BRP pays a regulation fee according to the difference between the balance power price and the spot price. A BRP with consumption balance power that in the same situation helps to rebalance the system will get paid / pay the balance power price for the consumption balance power. The BRP receives a revenue for helping rebalancing the electrical system. The amount is credited to the BRP and is equal to the difference between the balance power price and the spot price. Explanation of revenues or cost from exchange of balance power between bidding areas The revenues or cost from exchange of balance power between bidding areas arise from the different balance power prices in the bidding areas and balance power exchange. It occurs when bidding areas have different balance power prices and power flows do not correspond to plan. An agreement between the Nordic countries, fix the price to be the average of the balance power prices. 3.6 Suggestion of a common handling of revenues and costs The working group has evaluated different models for handling revenues and cost in a common balance settlement. The proposed solution is described below.

28 28 (66) BRP SR TSO SO BRPs pays fee for the balance settlement to the SR. SR Collect the fees on behalf of TSO and transfer the money to TSO. Fees are monthly fixed fee, consumption-, productionand imbalance fees, costs for reserves and model revenues (2 price and balance power between areas. Sold and bought energy for a given price Service fee paid by TSOs to SR for the agreed service The SR will be paid a service fee on a monthly or quarterly basis by each TSO participating in the common settlement model. The income from the BRPs is collected by the SR who then redistributes the income on each participating TSO. Each TSO will internally cover their costs for system utilities. When setting the fees the SO will estimate the cost for system operations reserves that are to be covered through the balance settlement. This together with the overhead cost for SR will be the total cost that the fees and 2-price income shall cover. SO s cost base will vary between years. Fees will be set once a year based on budgeted cost next year, adjusted for potential surplus/deficit from previous year. The model is possible to implement in both Sweden and Norway and recommended for a common balance settlement. 3.7 Common framework for market surveillance Currently the Nordic TSOs and the regulators have different roles and responsibilities in the national electricity markets. The project has described a common framework for market surveillance in Norway and Sweden Market surveillance Market surveillance in Norway and Sweden has two main purposes. According to the rules in the respective Balance Agreements in Norway and Sweden, the TSO follows the BRPs imbalances to make sure that the imbalances are at a reasonable level. The second main purpose is control of possible utilization of market position and misbehaviour in regulation power market. Both TSOs have a responsibility to develop and facilitate an efficient market.

29 29 (66) In January 2009 Nordel started up a Nordic Monitoring group, NMG. The objective of the NMG work is to analyze and monitor the development of the common Nordic balancing market. The group supplies analytical input for discussions regarding the market design and improves knowledge sharing between the Nordic TSOs Common market surveillance in COBS For the common framework for market surveillance in COBS it s important to determine the roles and the tasks. The purpose of control of imbalances is an issue for SR who will assemble data and publish them on a similar and transparent way. SO analyze the data and contact the BRP with a request for an explanation to the imbalances if large or systematic imbalances occur. The purpose of control of possible utilization and misbehaviour of market position in regulation power market is an issue for SR. Depending of the organization the legal aspect who can supervise imbalances according to the rules in the Balance Agreement is a question for future work when the organization has been set. The balance agreement should describe the SR s position in relation to contact BRPs for evaluating imbalances Routines After SR has conducted the balance settlement SR assembles data for imbalances per BRP and week. SR publishes the imbalances to each BRP and publishes the imbalances anonymously (directly to the BRP and through web application if efficient. The purpose of publishing the imbalances to each BRP is to point out the imbalances to the BRP. When big imbalances occur regularly for one BRP TSO has the power to claim that it is a violation of the balance agreement, therefore this data is also important for the TSO to be able to verify that the balance agreement is followed. The purpose of publishing the imbalances anonymously is so that the BRPs may compare themselves to other BRPs so that a perspective of their current imbalance situation is provided without revealing other BRPs imbalance situation. Data to publish: Imbalance of production, % of total metered production Imbalance of consumption, % of total metered consumption For statistic reasons there will be further data to publish. SR should also follow up the reporting of metering data from DSOs and publish that data on a common WEB-site. The purpose of publishing the statistics of reporting metering data are to improve the reporting from DSOs and give the Regulator statistics to work with. Since reporting is regulated by metering regulations, missing data is a violation to the metering regulations and therefore should the published data not be anonymous. Data to publish:

30 30 (66) Missing data, due to metering regulations 10:00 day after delivery Data with quality less than metered 10:00 day after delivery Missing data, three working days after end of week (balance settlement data) Data with quality less than metered, three working days after end of week (balance settlement data) Missing reconciliation data, 20 working days after end of month TSO and SR meet regularly to discuss and decide if any actions are necessary. TSO contact the BRP with a request for an explanation to the imbalances if large or systematic imbalances occur. If the SR function is to be managed by Nord Pool Spot the market surveillance for financial market, Elspot, Elbas, regulating market and balancing market could be coordinated. The markets which are of most interest to co-monitor is the regulating market and the spot market,

31 31 (66) 4 Consequences in Norway and Sweden of selected model 4.1 Balance agreement The current regulation of balance settlement and reconciliation in Norway and Sweden differ substantially. Basically the Swedish balance agreement is very detailed and governs both settlement and balance regulation while the Norwegian balance agreement only governs balance settlement which is explained by the fact that there are two different concessions for settlement and regulation in Norway. Appendix 1 gives more details on the balance agreements and the different regulations in Norway and Sweden. The project identified some legal structures that could be envisaged in the future: 1. One agreement as in Sweden (settlement and regulation) 2. One balance (settlement) agreement and one balance regulation agreement 3. One balance (settlement) agreement as in Norway and the rest in regulations 4. As 3 but with a handbook containing all necessary information in balance agreement, regulations, ordinances and other praxis. Although alternative 1 and 2 have the benefit of gathering all the necessary information in one place, it will not be feasible in the future. The reason is the changed roles and responsibilities for DSOs which must be stated in a regulation or an ordinance. Alternative 3 and 4 were seen as the only feasible options. There are however some drawbacks with alternative 3. Currently it has been hard to understand all aspects of the Norwegian balancing market as the rules are spread between agreements, regulations and instructions. Some information might not even be found as it is considered as general knowledge. Also regulations are written in the national language. This is not transparent for foreign market players. To solve this problem a handbook in English containing information on all rules in balance agreements, regulations, ordinances, instructions and general praxis could be put together. Taking the above into consideration alternative 4 has been deemed the most suitable option. The recommendation is thus to separate settlement and balance regulation so they are described in different frameworks. The balance settlement agreement is to be complemented by regulations in the national language. As market players from other countries should not be discriminated a handbook in English containing all the information on all rules in balance agreements, regulations, ordinances, instructions and general praxis should be compiled. The handbook would also have the benefit of gathering all necessary information for settlement in one place making it easy accessible and transparent for all market players. 4.2 Laws and regulations Consequences for balance agreement and laws and regulations in Norway and Sweden The balance agreements have to be redrafted so that they are structured the same way and that the paragraphs contain the same information. Some small discrepancies are expected to remain as the

32 32 (66) different agreements will be under the respective countries court of law. For more information see appendix 1. In Sweden it can be foreseen that the model chosen for the common settlement will require changes to the balance agreement. As the current agreement contain both settlement and regulation rules it is likely that it has to be split into two agreements. One option could also be to issue regulations but this would require a change in the law. How to handle this in the future is up to Svenska Kraftnät to decide as it has no relevance for COBS. Also, some of the detailed information on reporting should be moved into the ordinance and regulation on metering and reporting. The chosen model will also require changes to be made in the Ordinance and the Regulation on metering and Reporting. Changes in the Ordinance on system responsibility should also be made to allow Svenska Kraftnät to issue a regulation on settlement and possibly on reporting. The consequence in Norway is limited since the proposed structure is almost in place, apart from the handbook. Next task will be to decide what the common balance settlement agreement should contain and what rules should be encompassed by regulations. The terms for modifications etc must be decided upon and approved by NVE and the Energy Market Inspectorate. Also, the handbook must be in place before the implementation of a new settlement model Energy tax in Sweden In Sweden it is highly recommended that the regulation is changed so that energy tax should be collected by the grid owners (DSOs) and not the retailer (as is the case today in Sweden). If changed to the proposed solution the rules for the energy tax would be the same in all Nordic countries. 4.3 Trade on NPS without being BRP in Norway It is recommended that Statnett adjust its request that all market players which trade in the Norwegian areas at Nord Pool Spot need to be balance responsible parties. It should be altered so it is sufficient that the market player can enter into an agreement with a BRP to manage his balance. 4.4 Regulators roles and responsibilities The proposed COBS model requires changes to several agreements and regulations. A harmonised regulation covering the balance settlement has to be developed. Future changes and adjustments in relation to settlement has to be coordinated between the national regulators. Specific national differences have to be kept to a minimum to avoid that the common platform as described in this document is dissolved over time.

33 33 (66) 4.5 Need for harmonisation of EDI All communication described in the COBS settlement model will be electronic allowing for machineto-machine communication. Both Norway and Sweden currently base this communication on the Edifact standard, although more or less differently implemented as national Ediel standards. A harmonisation of the EDI standard and operational use of the standards has to be implemented.

34 34 (66) 5 Organisation and operation of COBS In the future with a common settlement model in Norway, Sweden and possibly the other Nordic countries it is envisaged that the most efficient organisation model would be to let a common entity perform the settlement using one and the same IT-system. It is assumed that a common entity performing the settlement would have the benefit of being more cost-effective and should also give scale advantages compared to having two (or more) separate settlement systems. 5.1 Common entity to manage settlement Some assumptions had to be made in order to make an evaluation of the different options available. The following prerequisites were set up. The settlement will be performed in the same way in the participating countries. Each TSO will keep its national responsibility for the settlement and will be party to the national balance agreement with the balance responsible parties. A separate company/entity shall perform services for the TSOs regarding settlement. There are several options for how this common settlement function could be organised Evaluation of alternatives The project has evaluated three possible organisation alternatives. 1. To establish a new company jointly owned by Statnett and Svenska Kraftnät (and possibly other TSOs) 2. To outsource the settlement function to a service provider, for instance Nord Pool Spot 3. To let one of the TSOs make the settlement on behalf of the other TSO(s) It has been concluded that alternative 1 and 2 are quite equivalent while the least interesting option is alternative 3 as it signals a temporary solution. There are also difficulties in deciding on which TSO should act as SR and there is a risk that one country s BRPs would be favoured. In the following, the benefits and drawback of the remaining alternatives have been listed and compared to each other. Alternative 1, jointly owned company Under the assumption that only SvK and Statnett have a common settlement there would be a 50/50 % ownership divided by SvK and Statnett. The location of the company could be either country. Shows the TSO commitment to the new model Compared to alternative 2 the distance in relation between the SR and the TSOs will be much shorter.

35 35 (66) Direct governance with own board. No interference from other owners or other business interests. The focus will be on settlement. Initially much work to set up the organisation (compared to alternative 2) but not a problem in the long run. Difficult process if other TSOs decide they would like to join the COBS model at a later stage, i.e. when the company has already been set up. Issues regarding for ownership would need to be resolved. Knowledge about settlement within the TSOs might be lost or reduced but not as much as in alternative 2. In a scenario where also Energinet.dk and Fingrid join a common settlement solution from the outset some of the drawbacks as described above are not relevant as equal shares in the joint company is then assumed. Alternative 2, outsourcing to company/entity under Nord Pool Spot NPS could either perform this service within their current organisation or set up a daughter company in either of the countries solely for balance and reconciliation settlement. This solution has not been discussed with NPS, and if relevant one should initiate a dialog with the company to evaluate if this is a good solution. The BRPs already have relations with NPS. NPS has a good reputation and would probably be well received as a SR In case of Nordic common settlement it is beneficial that all TSOs own the company. This could also be a step on the way towards alternative 1, a jointly owned company. NPS have existing systems for collaterals, clearing/economical settlement, accounting and market surveillance. Existing in-house IT- expertise. Shows the TSO commitment to the new model (comparable to alternative 1). Existing offices in all relevant countries (better than alternative 1 and 3)

36 36 (66) Less control of the actual balance settlement as there would be a distance in relation between SR and the TSOs (worse than alternative 1). Uncertainty about how our customers (BRPs and DSOs) are treated. However there is an incentive for NPS to offer good service as all BRPs are their customers and the DSOs are potential customers (if they are not NPS customers already). NPS lack deep competence within balance settlement. This is however only a start up problem but alternative 1 would not experience this problem. TSOs would lose contact with BRPs (as they will call NPS instead) but the problem is comparable to alternative 1. NPS might give BRPs misleading information in matters when TSO should have been contacted. If the common balance settlement is limited to SvK and Statnett, difficult discussion might arise as all owners of NPS might not wish NPS to provide this service or might have other ideas about priorities. An alternative that hasn t been evaluated thoroughly is to outsource the settlement function to another company than Nord Pool Spot. This could be done in order to enhance competition. However, the question is whether this would be a good solution as they would lack the unique competence to perform the settlement. Also, the distance between the TSO and their customers would increase and it would be more difficult to make sure that the BRPs receive good customer service from the company the TSOs have outsourced the settlement function to Issues for consideration regardless of chosen organisation alternative This section pinpoints some issues that need to be dealt with when setting up a new organisation of the settlement. Organising a new company It is rather cheap to start up a new company but it is a time consuming processes with decisions on location, recruitment of staff, governance issues etc. Customer relations, service and language Customer relations will be needed in all relevant languages. Swedish, Norwegian and English for starters and Danish and Finnish if this is to become a Nordic common settlement. Call centres would need to be organised in both alternatives. Feedback from SR No matter what model is chosen there will be a need for feedback from the SR to the involved TSOs regarding amount of imbalances, complaints from the customers, SR s experiences of the settlement

37 37 (66) model among other things. This can be solved through weekly reports, meetings between SR and TSO etc. AMR differences in settlement As long as AMR has not been implemented in all countries the procedure of performing the settlement will differ between the countries which means that the IT-system initially need to take care of different procedures Legal evaluation depending on chosen organisation Changes needed in the Swedish set of rules The balancing settlement is regulated by Svenska Kraftnät s Balance Agreement and the legislation listed below. The Electricity Act (Ellag (1997:857)) The Ordinance on Electricity (Elförordning (1994:1250)) The Ordinance on System Responsibility (Förordning (1994:1806) om systemansvar för el) With the model chosen no changes have to be made in the Electricity Act, the Ordinance on System Responsibility or the Ordinance on Electricity. If alternative 1 or 2 is chosen, changes and amendments will probably have to be made in the Ordinance on Metering and Reporting and the Regulation on Metering and Reporting as well as in the Balance Agreement. This since it is assumed that network owners and/or balancing responsible parties would be obliged to communicate with the entity. The TSOs and the entity involved should enter into an agreement regulating the balancing settlement. The TSOs should enter into an agreement on balancing settlement regardless of who performs the services. The complexity of the changes and amendments that have to be made are regardless of which alternative that is chosen, very dependent on the way in which the exchange of information is to be regulated. Without this knowledge, no alternative seems more favourable than the other from a legal point of view. Changes needed in the Norwegian set of rules Statnett will keep its national responsibility for the balance settlement; i.e. will be party to the balancing agreement with the Market Participants, and deciding the content of this agreement. A separate company/entity shall perform services for Statnett regarding metering, settlement and co-ordinated action in connection with electricity trading and invoicing of network services. From a Norwegian perspective, it is crucial how the model is shaped. If all public authority will remain within Statnett, probably only minor changes have to be made in the Norwegian legislation. Statnett will then exercise public authority, and the routines ( footwork ) will be performed by the company/entity instead of within Statnett. Which entity that performs routine work is of less importance from a legal point of view. The Balancing Agreement will need a few changes, but that will pose few problems.

38 38 (66) However, it is today not clear exactly which activities under the balance settlement that must be regarded as decisions made under public authority. The Energy Act 4-3 states that all instructions made while exercising the balancing settlement responsibility are made under public authority. In short one can say that all instructions that the Balancing Responsible Party must obey must be regarded to be made under public authority. One key issue regarding exercising public authority is who shall give clarifications to the Balance Responsible Party on how things must be done. Such clarifications might sometimes be regarded as exercising public authority, and must therefore be done by Statnett. But in practise, it will be the company/entity that handles the problem and therefore in a better position to make this clarification. This has to be discussed further. There will probably be a need for minor changes in the Regulations regarding metering, settlement and co-ordinated action in connection with electricity trading and invoicing of network services. There might be a need for changes in Statnett s concession as Settlement Responsible (granted by NVE). Summary of changes in Sweden and Norway No changes in Swedish law are required for alternative 1 and 2 but changes and amendments in the ordinance and the regulation on metering and reporting will be required as well as changes in the balance agreement. In addition to this the entity, Svenska Kraftnät and Statnett have to enter into an agreement on balancing settlement. As long as all public authority stays within Statnett and is exercised by Statnett, alternatives 1 and 2 are feasible and will require just minor changes in the set of rules that regulate the balance settlement. It will be crucial to find a clear distinction between which decisions imply exercising public authority and thus must be made by Statnett, and what will be routine work that does not imply making decisions towards balance responsible parties. There might be a need for minor changes in Norwegian regulations and the concession as Settlement responsible Summary & recommendation The main difficulty with the above mentioned alternatives is that the task of balance settlement has been defined as public authority in Norway. This means that it is difficult to entrust that task to a company which is not a Norwegian entity. To change the legislation regarding public authority, a long process is foreseen and it is necessary to present substantial benefits in order to gain approval and subsequent alterations of Norwegian law. However, the above mentioned models could still be implemented as long as the responsibility for the balance settlement still lies within the respective TSO. With this as a prerequisite alternative 1 a common company, or 2 i.e. to outsource the practical work with balance settlement are considered the main alternatives. Naturally all alternatives require some changes in legislation. Taking into account only the drawbacks and benefits of each alternative (excluding costs) alternative 1 and 2 are concluded to be quite equivalent.

39 39 (66) Alternative 1 is a good solution if all TSOs are involved in a Nordic common settlement from the start. Alternative 1 could also be a first step towards alternative 2 if for instance monitoring of the regulation power market could be facilitated by such a solution. Alternative 2 is found to be a practical solution if all Nordic TSOs would join but not at the same time. NPS has routines for collaterals and have relations with the BRPs. Furthermore, possible advantages can be envisaged if surveillance of the regulation market could be handled in conjunction with market surveillance of the spot market. Alternative 2 could also be a step on the way towards alternative 1. The project recommends that the two options are further investigated. 5.2 Interface SR - SO Depending on the way the organisation of COBS function is organised slight differences in details can be expected. The SR will be the body who manage collateral securities, sends the invoices and collects the fees from the BRPs. The SR will then distribute the income to the participating TSOs. Each TSO will receive the income that has been generated through activities within its country. How the individual TSO choose to organise the distribution of revenues and income between the settlement activities (mainly managed by the SR) and the national regulation (managed by the SO) is up to each TSO and not a matter which is necessary to harmonise. What is important is that the costs and income can be followed and presented in a transparent way. The SR will be paid an agreed service fee by the TSOs to perform the settlement function. This service fee could be paid monthly, quarterly or annually. 5.3 Cost base for COBS Currently the SR function has a cost base of approximately 16.5 MSEK per year in each country. A common SR function will have scaling effects mainly due to combined IT system and better utilization of the staff. It is assumed that the common SR function will have an operating cost base of approximately 24 MSEK. with the following distribution: Staff: MSEK 10.5 IT costs: MSEK 9.5 Misc. costs MSEK 4.0 The scaling effect can be improved 6. 6 With Finland and Denmark included it is assumed to represent an additional cost of approximately SEK 9 mill in total. In that case the operational cost saving of a common SR function will be close to 50 % (SEK 33 mill.) given same current cost base in Finland and Denmark as in Norway and Sweden.

40 40 (66) 6 Cost benefit considerations A common Nordic end user market for electricity is supported by the energy ministers in the Nordic countries. This support was even strengthened in the last ministry meeting in October The Electricity Market Group (EMG) concluded and recommended: o The EMG reaffirms its support for a Nordic retail market by 2015 o The EMG invites NordREG to specify, in concert with other relevant actors, more in detail the actions needed to reach their ambition o The EMG will, based on NordREG s report, give a recommendation to the Nordic Council of Ministers in 2010 A competition in the retail market is essential to ensure high quality services at the lowest prices and maximize social welfare in the Nordic region. A common solution for settlement is a prerequisite for establishing a common end-user market. The political environment, the regulators and large parts of the energy industry support the concept of a common end-user market. The ambition is that it will contribute to increased competition, less administrative cost and ease the operation across national borders. The actual cost-benefit of a common end-user market for electricity in the Nordic countries has, to the knowledge of this project, not been calculated in detail. It is further difficult to evaluate the cost-benefit of a common settlement as a separate part of the planned Nordic harmonisation. Nevertheless the project has tried to make an analysis of the costs for implementing a common settlement in Norway and Sweden (not taking into account Finland and Denmark at this stage). It has not been possible to accurately calculate the cost-benefit for establishing a common settlement in Norway and Sweden. However, an indication of the different cost elements has been developed. It should be stressed that this indication has first of all been developed to indentify the different cost elements, and a more detailed evaluation of the different cost elements should be developed at a later stage in cooperation with the industry players. A more comprehensive analysis will give a better evaluation of the cost elements, and the potential savings from introducing a common balance settlement, TSO Statnett and Svenska Kraftnät have to adjust their IT-systems so that the SR can manage both the Norwegian and Swedish settlement. It is assumed that COBS can build on one of the existing settlement systems and further develop this system to cover both Norway and Sweden. This adaption is roughly set to be 18 MSEK. Creating a totally new IT-system will most likely be more expensive. Expanding COBS to Denmark and Finland will not increase the IT-adaption cost significantly. The implementation of COBS is a large project, and it is estimated that the project cost could be in the area of 8.5 MSEK. This cost includes four fulltime project participants, legal support and use of specialised in-house resources.

41 41 (66) Today Statnett and Svenska Kraftnät have approximately 14 man-years directly working with the settlement. A new SR function should be able to utilise economy of scale, and reduce the personnel cost equal to 4 man-years compared to today. In addition the use of 1 IT system will significantly reduce the IT costs. The annual benefit will then be approximately 9 MSEK. An expansion of COBS to include Denmark and Finland will further increase the benefits from economy of scale, and contribute to reduced cost for the SR. DSO Today there are 200 DSOs in Sweden, 122 of the DSOs are active themselves towards Svenska Kraftnät in the settlement while the remaining DSOs act through an agent. The proposed COBS model gives the Swedish DSO a larger operational burden than today. In addition investments in new systems and procedures have to be taken in order to support changes to business requirements, more reporting (meters>63a) and harmonization of electronic communication. The required IT changes will more or less apply equally to all DSOs so that system vendors to a large extent will be able to recover investment costs from all its customers. The investment cost is set to 1 MSEK per DSO. Total investment cost for Swedish DSOs will then be approximately 120 MSEK. Increased operational costs for Swedish DSOs are assumed to be 0.25 MSEK per year per DSO, in total 30.5 MSEK. The DSOs in Norway, 102 which report to Statnett, will like Swedish DSO face extended reporting requirements (meters>63a) and harmonization of electronic communication. The corresponding investment cost is estimated to 0.5 MSEK per DSO, totally 51 MSEK. On the other side the Norwegian DSOs will not longer invoice the BRPs, and their cost will be somewhat lower. This operational cost reduction has been estimated to 0.25 MSEK per year per DSO, in total 13 MSEK per year.. BRP Today there are approximately 30 balance responsible parties in Sweden and approximately 140 in Norway. As all BRPs will have the SR as counterpart in the balance settlement and reconciliation instead of the DSOs. The operational cost should be lower for the BRPs in COBS than today. A BRP operating in both countries will be able to use one system and method in both countries, and thereby reduce its operational cost. The reduced operational cost has been set to 0.25 MSEK per BRP per year. The annual benefit is then evaluated to be 42.5 MSEK. Naturally the benefits would be larger if Denmark and Finland are included. The investment cost for the BRPs are limited to harmonization of electronic communication and have been estimated to 0.2 MSEK per BRP, 34 MSEK in total. Financial consideration for the involved parties Based on the rough assumptions described above, the combined net present value of investments and operational cost and savings for the TSOs, DSOs and BRPs over a period of 15 years is 278,5 MSEK. This is purely a financial evaluation and does not consider the socio-economic benefits of creating a competitive Nordic end user market.

42 42 (66) This calculation is only indicative, and a more comprehensive evaluation of actual cost and benefit should be evaluated before an implementation decision is taken. The calculation for establishing a common settlement in Sweden and Norway can be seen in the table below. MSEK(2009) Year 0 Yearly Sum 15 years COBS IT system -18 COBS project -9 DSO SE (investment) -120 DSO NO (investment) -51 BRP Investment -34 DSO SE increased operational costs DSO NO reduced operational costs BRP operational cost savings COBS operational cost savings Cash flow Net present value 99 (6% real discount rate before tax) The net present value is calculated by estimating the cash flow from the investment year (year 0) and through a period of 15 years. Each year the total saving is estimated to be 34 MSEK in real money terms. The cash flow is then reduced (discounted) with the cost of capital. The cost of capital is the value the owner put on its investments. The cost of capital used in the calculation is 6% (real rate before tax). This corresponds to risk free lending rate + 1%. The low risk in balance settlement requires a small risk premium to the risk free rate and is therefore set to 1%. Discounting the cash flow reduces the value of the savings later in the calculation period. The net present value of the cash flow, investment of 232 MSEK (year 0), and annual savings of 34 MSEK in 15 years, is approximately 100 MSEK. For the isolated COBS investment (COBS IT system, COBS project and COBS operational cost savings) the net present value is approximately 60 MSEK. The calculation can be seen in the table below. MSEK(2009) Year 0 Yearly Sum 15 years COBS IT system -18 COBS project -9 COBS operational cost savings Cash flow Net present value 61 (6% real discount rate before tax) The net present value for the market players (DSOs and BRPs) are approximately 40 MSEK.

43 43 (66) MSEK(2009) Year 0 Yearly Sum 15 years DSO SE (investment) -120 DSO NO (investment) -51 BRP Investment -34 DSO SE increased operational costs DSO NO reduced operational costs BRP operational cost savings Cash flow Net present value 38 (6% real discount rate before tax) If one look isolated on the Swedish DSOs, the net present value of the suggested model is negative. They will have both significant initial investments, and increased operational cost. The socio-economic benefit of increased competition based on NordReg s analysis The main reasons for establishing a common Balance settlement solution is the creation of a competitive end user market. Lack of end-user competition in the Nordic electricity market gives a loss for the society. Increased competition and reduced margins for the electricity sellers will give a socioeconomic efficiency gain. NordREG summarised its view on the cost and benefits of a common Nordic retail market in a paper to the Nordic Council of ministers The overall conclusion in the report was: General retail market development leading to harmonized solutions in all Nordic Countries will most likely lead to substantial benefits through efficiency improvements, reduction of operational costs and increased innovation in all the Nordic retail markets. NordREG presented a report in 2007, Cost and benefits of Nordic Retail market Integration. Based on the report NordReg concluded that the benefits from the Nordic retail market integration most likely would outweigh the costs. NorREG has also contributed to two reports developed by YTT and Econ. Both reports indicated that the benefit could be beneficial, and that the cost could be significant. Especially IT-costs could be large. Both reports also stated that consumers would benefit from an integrated Nordic end-user market. None of these reports were able to calculate the actual costs and benefits, and the conclusions were taken based on qualitative reasoning. Based on the NordReg reports it is likely to assume that the socio-economic benefit is significant from creating a common end user market for electricity in Norway and Sweden. The socio-economic benefit is likely to be significant and COBS should therefore be implemented. Indications of efficiency gains from a Norwegian/Swedish end-user market The cost for handling end-users in the electricity market in Norway and Sweden varies between retailers and between Norway and Sweden. A study by Elforsk (report number 07:49) in 2007 concluded that the cost per customer (spot contract) ranged from SEK. The average cost in Norway was 342

44 44 (66) SEK/customer while the average cost in Sweden was 405 SEK/customer. There are large differences between the different retailers and there should be room for cost reductions. The differences between Sweden and Norway can be seen in the figure below. A common settlement in Norway and Sweden and harmonisation of regulation will make it easier for retailers to be active in both countries. A 10% reduction in the cost (IT, staff etc.) will give an efficiency reduction of SEK/customer in Norway and Sweden. In Norway it is estimated to be 2.5 million customers (consumption less than KWh) while in Sweden there are some 5 million customers. The total efficiency gain will then be approximately 35 SEK per customer for 7 million customers. The total efficiency gain will then be in order of 250 million SEK per year. Increased competition in the retail market should lead to decreased margins for the retailers. This margin reduction gives an efficiency gain for the end user market. In 2006 the gross retail margin for a spot price contract for a customer with consumption of KWh was about 4 øre/kwh in Sweden, and 3 øre/kwh in Norway. The margin for 1-year fixed price contract was at about 3,5-4 øre/kwh in both countries in 2006 (Elforsk 07:49 based on a report developed by Econ Poyry for the Swedish Energy Markets Inspectorate). The margin development for spot contracts in Norway and Sweden can be seen in the following figure.

45 45 (66) To calculate the reduced margin a set of rough assumptions has been made: o Increased competition will reduce retail margin with 10%. Reduced margin is assumed to be 3.5 øre/kwh x 10% = 0.35 øre/kwh o Assumed consumption in the retail market (excluding heavy industry) is 120 TWh in Norway and Sweden. Reduced margin as a result of increased competition in the retail market in Norway and Sweden will then be 120 billion kwh x 0.35 øre/kwh = 420 million SEK. In addition there are other socio-economic gains of a combined market that has not been quantified within the project. These are shortly described below: o IT systems can be standardized for the common market. I.e. instead of separate systems for each country there could be one covering both. This will increase economics of scale for the IT vendors, attract more IT vendors and reduce costs for the BRPs and DSOs o A larger market will motivate higher market innovation. More customers to distribute the innovation costs on. o Economics of scale for BRPs in staff and administrative costs. More customers can be handled with same staff and location o Additional daily reporting requirements for DSO (meters > 63A) will reduce BRPs imbalance costs and set free reserves. This will also reduce the balancing price as fewer objects are required to keep the balance. This applies mainly in Norway as daily reporting is already established in Sweden. o The higher concentration of retailers in the national electricity markets can be counteracted through a common retail market with more retailers.

46 46 (66) The above indications of efficiency gains are significant. Implementing COBS in Norway and Sweden has a positive net present value before one consider the socio economic gains from a common Norwegian/Swedish end user market. The socio economic gains from a common end user market are probably significant. Based on the assumptions in the rough estimates above, it seems rational to create a common settlement for Norway and Sweden. An expansion to Denmark and Finland will increase the economy of scale, and thereby increase the gains further. 7 Proposed further development and time table There still remain a number of issues that need to be addressed and concluded on before implementation of the proposed model. A provisional process is outlined in the following. Developing the framework for an expansion of COBS to Denmark and Finland Statnett and Svenska Kraftnät will invite Fingrid and Energinet.dk to a process with the ambition to include Denmark and Finland in a second phase of the COBS project. It is recommended that the second phase starts mid December. A project, which includes all Nordic TSOs, will then run until mid March The project will deliver a report and recommendations to the management groups in Statnett, Svenska Kraftnät, Fingrid and Energinet.dk mid March. The project will be staffed with resources from all TSOs, both in the project work and in the steering committee. Based on the report and recommendations, the four TSOs can decide on the framework of a Nordic settlement. Acceptance from stakeholders and regulators The four TSOs will consult the electricity industry with the recommendations from COBS in a hearing process, and in parallel conduct information meetings with the users of the settlement. This hearing process should be held during May Based on the framework for COBS and feedback from the industry, a consultation with all four regulators should be carried out in June It is expected that the regulators need some time to evaluate the proposal and give a formal feed-back on the proposed solution. Implementation of COBS A decision document for implementation of COBS will be presented for the management and board in the four TSOs in September The decision document shall include a detailed project plan including milestones, resources and steering model. The decision document will also give clear guidance on organisational model, governance structure and budget for the implementation and operation of COBS. After the implementation decision has been taken the work with the implementation will start in September A project group with dedicated resources from all TSOs will work with implementation until May 2012 and closely follow the operation some months after COBS has gone live. Adjustments to laws, regulations and industry procedures and systems It is of high importance to have emphasis on adjustments to laws and regulations in order to reach the target of implementation by May A draft of new regulations and instructions should be

47 47 (66) completed by December 2010, and the new regulatory framework should be approved by May This requires that the regulators work fast and efficient. As soon as the new regulatory framework has been concluded on the industry has to prepare changes in their routines and systems to meet new requirements described in laws and regulations. It is estimated that the industry needs a 12 months adaptation period which has been taken into consideration when drafting the time schedule. According to this time schedule COBS could be operational by May The indicative time schedule for implementation of a common settlement in the Nordic countries is also illustrated in the figure below. The time schedule describes, on a high level, the necessary steps in order to implement COBS. Expand COBS to Finland and Denmark Conclude and report COBS (Nordic solution) TSO decision on COBS D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J Consultation with industry stakeholders (hearing) Consultation with regulators Feedback from regulators TSO decision on implementation of COBS Implementation project Draft laws and regulations Approved laws and regulations Industry adaptions COBS goes live Prerequisites in the time schedule The time schedule described above is the minimum time needed to implement a common settlement. To implement COBS according to the time schedule it is required that: o The TSOs should put enough resources into the development and implementation of COBS. o Project leader (full time) o Two to three project workers full time o Access to specialists from all TSOs(settlement and legal) o The regulators in the Nordic countries have to work fast and efficiently so that the regulation framework and laws are approved according to the time table. o The industry has to adapt to the changes during a twelve months period. It still has to be investigated if the indicative time schedule is compatible with processes necessary in Denmark and Finland.

48 8 Issues to be evaluated further There are several issues regarding the COBS settlement model which has to be addressed in the further work. The project has identified some issues, but does not have specific recommendations at the moment. Important issues are described below. Issues to be evaluated further Description Described in report 1 Reporting to RE Should the SR report to RE, if RE Chapter request this service 2 Preliminary profile Model for calculating preliminary nonhourly Chapter delivery calculation metered load 3 Reconciled energy Model for profiling Chapter calculation 3 Reporting of bilateral Should bilateral trades be reported by Chapter trade by BRP both buying and selling BRP 4 Grid loss included or Evaluate if grid loss should be included in Chapter excluded in the load profile the load profile (as in Sweden) or excluded (as in Norway) 5 Controls performed SR to perform controls for the SO on the Chapter by SR on behalf of SO quality of the performed ancillary services 6 Model for collaterals Develop detailed framework for Chapter 3.4 collaterals 7 Balance agreement Develop suggestion for balance agreement 8 Regulations Furher evaluation of necessary changes in regulations 9 Collection of energy Collection of energy tax by the DSO in tax in Sweden Sweden 10 Trade on NPS without Allow for trading on NPS without being Chapter 4.3 being BRP BRP (change rules in Norway) 11 Organisation How to organise the SR, as an own Harmonisation of EDI company or outsourcing. A harmonisation of the EDI standard and operational use of the standards has to be implemented 13 Hub Evaluate implementation of a central market register (reference to Energinet.dk s project) Chapter 3.3.7,4.5 and Appendix 2 Appendix 6

49 49 (66) 9 Appendices

50 50 (66) Appendix 1 Balance agreement and regulations The balance settlement is regulated differently in Sweden and Norway. The main difference is that in Sweden the balance agreement contains very detailed information about reporting etc. In Norway similar kind of detailed information can be found in regulations. The following two sections will describe the balance agreements and regulations in Sweden and Norway respectively. Sweden The following laws and regulations are applicable to balance responsibility and system responsibility. The balance agreement is an agreement between the system operator, Svenska Kraftnät and a balance responsible Party (BRP). The agreement is identical for all balance responsible parties. Swedish set of rules The following legislation contains provisions on balance settlement or reporting necessary for the balance settlement: The Electricity Act (Ellag (1997:857)) The Ordinance on Electricity (Elförordning (1994:1250)) The Ordinance on System Responsibility (Förordning (1994:1806) om systemansvar för el) The Ordinance on Metering and Reporting (Förordning (1999:716) om mätning, beräkning och rapportering av överförd el) Regulation on Metering and Reporting (Statens energimyndighets föreskrifter och allmänna råd om mätning, beräkning och rapportering av överförd el) The Electricity Act Ch 8 4c, 4f, 4g, 6, 9 and 10 all contain rules on information of who is balance responsible and for what. The Electricity Act Ch 8 11 states that the system responsible authority shall be responsible for the balancing settlement according to rules set by the Government or, if the Government so decides, the system responsible authority. No such rules have been issued. The Electricity Act Ch 3 10 states the fundamental obligation for DSOs to meter, calculate and to report these according to rules set out by the Government or the authority chosen by the Government. The Ordinance on System Responsibility 1 states that Svenska Kraftnät is the system responsible authority. The Ordinance on Metering and Reporting contains several provisions on metering and reporting necessary for the balancing settlement and 10 states that the regulatory authority shall have the right to issue regulations on metering and reporting. The Ordinance on Electricity 1 states that the Energy Market Inspectorate is the regulatory authority. The Regulation on Metering and Reporting contains detailed provisions on metering and reporting necessary for the balancing settlement. Balance agreement requirements Certain requirements are set forth in the agreement. The balance responsible party shall:

51 51 (66) - plan for, and in a businesslike way achieve, an hourly balance between the supply and withdrawal of electricity - be registered at the National Tax Board to pay energy tax - be equipped with systems for electronic reporting via Ediel, in accordance with SvK s instructions, or enter into an agreement with a proxy who has such equipment - report the required information to Svenska Kraftnät's Balance Service - undertake to scrutinise settlement data from Svenska Kraftnät - ensure that information received is dealt with as agreed - pay for the services Svenska Kraftnät performs for the company - observe the terms and conditions applicable to regulation under special operating conditions. The balance agreement is structured as one main agreement and 7 appendices. The appendices constitute integral parts of the Agreement. The main agreement comprises the following paragraphs that govern general matters: 1. Introduction (refers to electricity act) 2. General 3. BRP s obligations 4. Svenska Kraftnät's obligations 5. Balance Obligation Register (consent for registration) 6. Fees (advance notification) 7. Security 8. Breach of Contract 9. Liability 10. Force Majeure 11. Assignment of rights or obligations 12. Disputes 13. Changes and additions. 14. Effective date, provisional regulations etc The previously mentioned appendices contain quite detailed information about fee levels, when and what to report and to whom, information about peak power reserve (Swedish mechanism), rules for submitting bids to balance regulations etc. The appendices are listed below: 1. Definitions (Appendix 1) 2. Reporting (Appendix 2) 3. Trading with Primary regulation (Appendix 3) 4. Trading with Secondary regulation (Appendix 4) 5. Pricing and fees (Appendix 5) 6. Financing of the peak power reserve (Appendix 6) 7. Settlement and invoicing (Appendix 7)

52 52 (66) There are a lot of issues in the Swedish balance agreement that does not relate to balance settlement directly but that are rather connected to balance regulation. From 1 November 2009 the Swedish balance agreement and the appendices will only be renewed when required. Previously the balance agreement has been valid for one year. The BRP needs to give notice 3 months before they wish to terminate the agreement. However, if Svenska Kraftnät amends the appendices of the agreement the BRP has the right to give notice of termination from the day the adjustments come into force. Svenska Kraftnät has the right to amend the appendices with 2 months notice but first after a consultation with the BRPs and discussion of the modifications have taken place in Svenska Kraftnät s Commercial Committee (approximately the equivalent of Statnett's user council). There is no possibility for Svenska Kraftnät to unilaterally alter the appendices on short notice. Before the amendment will come into force the Energy Market Inspectorate has to approve the methods of how the amendment has been formed as to ensure that the terms in the balance agreement will be objective and non discriminatory. Norway Statnett has been allocated, with the authorisation of NVE (Norwegian Water Resources and Energy Directorate), the role as authority responsible for settlements in the Regulated Power Market. Laws and regulations in the balance agreement apply to system responsibility and balance responsibility. Norwegian set of rules 1. The Energy act In Norway, the Ministry of Petroleum and Energy is responsible for the Energy Act. In 4-3 it says that the Ministry (in practise NVE) appoints a Settlement Responsible (SR), which main responsibility is to ensure that all feeding in and withdrawal of electricity shall be correctly settled in a way that economic balance in the power market is attained ( 4-3 EL). Statnett has concession as SR in Norway. A very important aspect is that the Energy Act 4-3 states clearly that anyone who owns or operates a network, production or organised market place as well as retailers and consumers are obliged to obey instructions from the settlement responsible party. Statnett has thus been granted public authority when Statnett as SR gives instructions. The instructions from the SR are final, and can not be appealed. 2. Regulations relating to generation, conversion, transmission, trading and distribution of energy The Ministry of Petroleum and Energy is responsible for the regulation. Metering and settlement shall be done in a way that ensures simple market access and gives the basis for an efficient power supply ( 4-5 ENL). 3. Regulations regarding metering, settlement and co-ordinated action in connection with electricity trading and invoicing of network services (ENL) NVE is responsible for this regulation. The regulation is quite detailed. The party responsible for settlement shall calculate regulating power balances for every balance responsible party, every hour and every regulation area ( 4-1). Terms for settlement of regulating power shall be laid down in an agreement between the balance responsible parties and the party responsible for

53 53 (66) settlement ( 4-7). A retailer who is not balance responsible has to be connected to a balance responsible party. 4. Statnett s concession as Settlement Responsible (SR) This concession is granted by the NVE. The concession gives quite detailed rules regarding organisation, accounting, financing, reporting and supervision of the SR. It also requires that the SR shall have an Expert Panel consisting of two independent finance and risk experts. Balance agreement requirements The ENL 4-7 states that the SR and each balancing responsible market player must enter into an agreement. This agreement has traditionally not been the result of negotiations, but merely based on the needs of the SR. The agreement (full title is Agreement on Access to the Wholesale Market for Electrical Power in Norway) regulates important issues between the SR and the balancing responsible party. It deals with among others credit assessment and establishment of security, fees, metering and rationing. The agreement has two appendices. The agreement is identical for all balance responsible parties and is to be presented to NVE, cf. 4-7 of the Regulation and the Concessions item 2.2. Certain requirements are set forth in the agreement. The balance responsible party shall: - Provide security for all financial settlement - Provide all the information required by Statnett in order to assess further need for security (at request by Statnett) - Settle with Statnett all turnover of trade in the wholesale market before agreement ends (when cancelling or establishing a new agreement) - Comply with rules and regulations valid at any one time The balance agreement is structured as one main agreement and two appendices. The main agreement comprises the following paragraphs that govern general matters: 1. Introduction 2. The Parties 3. Credit assessment and establishment of security 4. Transfer of administration of the security 5. Rationing 6. Fees 7. Confidentiality 8. Breach of contract 9. Force Majeure 10. Liability for damages 11. Information 12. Changes in the agreement as well as in the appendix 13. Duration and cancellation 14. Cessation of the Balance Agreement 15. Disputes 16. Entry into force

54 54 (66) The Norwegian Balance Agreement differs a lot from the Swedish agreement regarding detailing level. There are no details in the main part of the Balance Agreement regarding how the balance settlement is carried out, reporting to SO or SR nor how collaterals are calculated. The main agreement mainly establishes the framework of the relation between the BRP and SR. The appendices contain more information on rules for reporting, the settlement and calculation of collaterals. The appendices constitute: 1. Rules for reporting and settlement 2. Rules on calculation of the amount of security Amending the Norwegian balance agreement implies a hearing amongst the BRPs, and any changes must be submitted to the Kundeforum and Statnett's User Council for consultation. The final changes must be presented to the regulator. Noteworthy, the appendices to the Norwegian balance agreement can be amended unilaterally with only one week notice. The section below gives a short summary of issues in the appendices that can be subject to amendment within one week notice: - Reporting of bilateral agreements - Deadline on complaints about error in the calculation - Deadline on invoices and credit notes - Interest rate on interest compensation - Amount of basic security - Formula for the settlement risk - (Exemption from the requirement for security) The regulation power market is regulated through regulations relating to power system operation. In addition the system operator has developed a set of directions to fulfil, and a manual on how the system responsibility is put into practice.

55 Appendix 2 EDI report See separate document attached.

56 Appendix 3 Current regime for collateral security in Norway & Sweden Sweden today Regulations There are no external regulations in Sweden today. Collaterals are only managed by internal policies. Agreements The Swedish TSO requires security from all BRPs. The principles for this are stated in a separate document called Collateral management - guidelines for BRPs. This is not part of the balance agreement in Sweden. Calculating collateral In Sweden the collateral demand is calculated once a year based on financial status, peak consumption and average standard imbalance for the previous year etc. The BRP s total collateral amount consists of two parts: Basic security The BRP must provide a basic security of at least SEK 500,000 (basic amount) or more (risk supplement). The size of the risk supplement is specific to each BRP and depends on its physical and financial structure. The Balance responsible counterpart should immediately and without delay during the contract period, report significant changes in the company s planned hourly delivery as well as other significant changes that might affect the relation to the SR. The raised security then must be provided within five bank days. Supplementary security The BRP must provide a supplementary security to cover total actual financial exposure that arise due to activities in accordance with the agreement as well as the additional exposure that might occur when payments are due. The time from this point until Svenska Kraftnät will be able to verify essential breach of agreement (and cancel it) will also be considered. If calculated supplementary security is lower than the actual supplementary security raised by the BRP, Svenska Kraftnät has the right to require that the supplementary security raised will be increased. Requirements for increased supplementary security must be raised within one bank day. Routines The BRP shall provide security in the form of a so-called on demand-bank guarantee or as a financial amount deposited in an account pledged to Svenska Kraftnät. Amounts are stated including VAT and are normally revised once a year. 28 out of 30 BRP s has a bank guarantee today. We monitor the imbalance exposure on a daily basis. If we notice a need for additional collateral we normally contact the BRP and ask them to pay invoices that are passed or near due date.

57 57 (66) SvK has the authority to change the amount of the supplementary security whenever necessary. Only in a few cases per year we demand additional collateral. Instead, this is normally handled at the yearly revision. Present solution for collateral in Norway Regulations Statnett is obliged by its license for operating the balancing settlements to establish a system for collateral. The placed collateral shall cover the risk made up by the SR's current liabilities. Collateral shall be calculated on a running basis. Agreements Chapter 3 in the balance agreement regulates the main principles for collateral requirements. The detailed rules for the calculations of collateral are given in appendix 2. All BRPs need to open a deposit account in a bank approved by Statnett. The responsibilities Statnett impose on deposit banks are regulated in a deposit bank agreement. When opening a deposit account the BRP has to enter into three agreements with the deposit bank, all drawn up by Statnett. -Deposit account agreement -Pledge deposit account -Right of disposal In addition to the deposit account a BRP may place collateral as a guarantee. This must be done using the demand guarantee drawn up by Statnett. Routines Collateral demands are updated before 10:00 first working day each week. Adequate collateral shall be put up before 10:00 the next day. All withdrawals from the deposit account must be approved by Statnett. Calculating collateral Collateral is calculated based upon BRPs volumes in the wholesale market using the following formula. Collateral = 2 * F 1 + F 2 + (V 1 + V 2 ) * P F 1 F 2 V 1 V 2 P Invoices not paid within due date Invoiced amount last settled period 50% of the latest settled weeks consumption, max MWh Bilateral purchases reported up front may be subtracted from the consumption 50% of the last weeks bilateral and elspot sales, max 4000MWh Average price in the regulating power market for the previous calendar week

58 58 (66) The BRP shall as a minimum put up security to the amount of NOK According to the balance agreement the amount of security shall be based on the BRPs capital strength and trading position. Statnett may deviate from the standard formula and specify what type of security is required and the amount. The BRP may require Statnett to justify the need for the security demanded.

59 Appendix 4 Current cost base and fees in Norway & Sweden Cost base and fees in Norway current solution Expected total cost for the Balance settlement in Norway is 62 MNOK for Where approx. 50 MNOK is system operation cost carried by the BRPs, and overhead cost is approx. 12 MNOK. Costs for system operation reserves covered by the BRPs are: Frequency Controlled Normal Operational Reserves (FCNOR) 100% Frequency Controlled Disturbance Reserves (FCDR) 10 % Fast Active Disturbance Reserves (FADR) 10 % Overhead cost : Wages cost of staff in Balance Settlement division and some cost for management/support using some of their time in Balance Settlement (management, controller, legal, IT etc.) External IT-support ( consultants) Share of overhead cost in Statnett (office cost) calculated based on number of man-years Financial cost (discount rate) for more / less revenue (NVE-discount rate) System cost EDIEL has been subsidised historically. Real cost should be used in future calculations Revenue: Fee on actual consumption Fee on metered production Volume fee on consumption imbalance Monthly fee 2-price income on production imbalance Statnett revenue based on the two-price system for imbalances in production is estimated to be 5 MNOK per year, and will reduce the cost base that the fees are calculated from with the same amount. Based on Statnett's cost base the fee-level from 29 September 2009 will be: Fee on actual consumption: 0.28 NOK/MWh Fee on metered production: 0.14 NOK/MWh Volume fee on consumption unbalance: 0.80 NOK/MWh Monthly fee: 500 NOK/month Parts of this revenue will cover the cost for system operation reserves; estimated 50MNOK.The rest shall ensure efficient operations and cover overhead cost for the SR. In 2009 this amount is budgeted to be 12 MNOK.

60 60 (66) Statnett s cost base varies between years, fees are set once a year based on budgeted cost next year, potentially adjusted for more/less revenue last year. SO is invoiced the following cost and revenues from SR. SO is a BRP in the balance settlement. They are invoiced the revenue/cost from exchange of balance power between countries. Revenues from exchange of balance power between regulation areas internally in Norway are calculated separately in the balance settlement and invoiced SO. These amounts are kept by the SO: They are not divided between SR and SO afterwards. Cost base and fees in Sweden current solution The revenue from the fees of actual consumption and metered production for 2009 are approximate 170MSEK. The costs for system operation reserves (System side) are approximate 170MSEK and cost for overhead is approximate 20MSEK. Apart from the above mentioned costs and revenues there are balance power costs/revenues like two-price production revenues and foreign trade costs/revenues. Costs for system operation reserves for BRPs are: Frequency Controlled Normal Operational Reserves (FCNOR) 100% Frequency Controlled Disturbance Reserves (FCDR) 33 % Fast Active Disturbance Reserves (FADR) 33 % Overhead cost : Balance power cost Other costs for example wages for personnel in the balance settlement division and costs for IT-systems Depreciation Revenue: Fee on actual consumption Fee on metered production Volume fee on consumption imbalance Monthly fee 2-price income on production imbalance Based on Svenska Kraftnät's cost base the fee-level from 29 September 2009 will be: Fee on actual consumption: 1.0 SEK/MWh Fee on metered production: 0.5 SEK/MWh Volume fee on consumption unbalance: 1 SEK/MWh Monthly fee: SEK/month Furthermore, BRPs in Sweden are debited a fee to finance the peak load reserve. For 2010 the fee will be 3.75 SEK/MWh (metered consumption, grid losses excluded).

61 61 (66) Fee comparison Sweden Norway Fee on actual consumption: 1.0 SEK/MWh 0.28 NOK/MWh Fee on metered production: 0.5 SEK/MWh 0.14 NOK/MWh Volume fee on consumption unbalance: 1.0 SEK/MWh 0.80 NOK/MWh Monthly fee: SEK/month 500 NOK/month Fee of peak load reserve 3.75 SEK/MWh 0

62 Appendix 5 Current market surveillance in Norway & Sweden Svenska Kraftnät's role and responsibility in market monitoring The Energy Market Inspectorate is the competent body for market monitoring the electricity market. In accordance to that, the Competition Authority shall actively prevent harmful restrictions on competition for the benefit of consumers. The Competition Authority applies the Competition Act and Articles 81(1) and 82 of the EC Treaty. Svenska Kraftnät's Market Department follows the BRPs imbalances to make sure that the imbalances are in a reasonable level according to the rules in the Balance Agreement. If large or systematic imbalances occur, Svenska Kraftnät shall contact the Balance Responsible with a request for an explanation to the imbalances. This is published on where all BRPs can see their own imbalances but not each others. The follow up is described in more detail below. Svenska Kraftnät focuses on the BRP s ability to stay in balance, the statistics that are published measures the BRP s total imbalance for consumption during the month in relation to it s total balance prolongation (i.e. the total energy that the BRP has promised to deliver), published in a diagram with everyone else. The imbalance can be either positive or negative. The BRPs maximal imbalance in relation to its total balance prolongation is also published. Another diagram shows when the imbalances occur for all the BRPs, not in date-format but in relation to their costs (in SEK/MWH) for their imbalance during the month. This makes it possible to see if they ve imbalances when the price is high or when the price is low or if they ve managed to be imbalanced in the right direction (helped the system). Svenska Kraftnät also follows up the reporting of metering data from DSOs and publishes that data on the data published are: Missing data 06:00 day after delivery day (when everything is recommended to be reported) Data with estimated or uncertain status 06:00 day after delivery day Missing data 10:00 day after delivery day (when everything should be reported) Data with estimated or uncertain status 10:00 day after delivery day Missing data 5 days after delivery day Data with estimated or uncertain status 5 days after delivery day (when everything should have the quality metered)

63 63 (66) Statnett's role and responsibility in market monitoring Market surveillance at Statnett is a shared responsibility between SR and SO, and a common working group is meeting monthly coordinating the activities. The need for market surveillance is mainly motivated by two reasons: 1. To supervise that the imbalances are acceptable in accordance with the demands established in the regulations, i.e. verifying that the participants in fact plan for a situation of balance. SO is instructed in the regulations to reveal breaches of the balance requirement. 2. As a risk reducing measure regarding counterparty risk in the settlement. To keep the collaterals at today s moderate level, a well functioning market surveillance that reveals irregularities in participant trading is a prerequisite. The market surveillance activities may be divided into daily, weekly, monthly and yearly activities: Daily The traded physical volumes at NPS for the next day (Elspot and Elbas) are checked as well as the prices in the Elspot- and Regulation market. Significant deviations from the input in weekly calculations of collaterals, will lead to immediate increased collaterals for one or more participants. Weekly After the weekly settlement, the traded volumes are evaluated as regards collaterals. Significant deviations from the input in weekly calculations of collaterals, will lead to immediate increased collaterals for one or more participants. The imbalances (passive) are calculated, and the key figures for each participant are published on balanseweb. Explanations are asked for if unusual observations. Monthly A report on imbalances is made and published each month. In addition to information about total imbalances per price area and some market information, the report contains a ranking of the BRP s ability to fulfil the balance requirement. This is meant as an incitement for the participants to improve their balance. The participant specific information on their web pages will give them further information of their own imbalances. SO and SR meet each month to discuss the past month and decide if any actions are necessary. Yearly An independent financial entity carries out a credit rating/evaluation of each BRP based on the last annual accounts. Statnett s focus concerning imbalances is mainly relative imbalances in proportion with the total acquisition and enduring differences between purchased and sold balance power. Tendencies of some duration will cause a contact with the participant, and their given a deadline for improvement. If no improvement a written warning regarding a breach of the balance agreement is given, and the regulator will be informed. The regulator may give a fine, although this has never been done. In the recent years bilateral meetings with participants have been used quite a lot, as a measure to reduced imbalances.

64 Appendix 6 Hub Introduction The COBS-project have suggested a model using a central aggregator, to which the DSOs report metered data. The central aggregator then aggregates the data to be used in the balance and reconciliation settlement. Discussions within the project have been that the Central aggregator is more of a function than a real actor in the electricity market. One central question which has arisen during discussions of the data flows to and from the settlement has been what level of detail the aggregation should be on. In a workshop with the other Nordic TSOs the idea of a central market register in the market was discussed as Denmark intend to implement such a function and has set up a project with this purpose. What can a hub do? A hub can be designed to do a number of things. In Denmark the hub solution is intended to manage both switching of retailers and data flows between the market players. To handle the switching of retailers a large register of structural market data is needed. Data on end customers will be collected from public registers and metered data will be collected from the DSOs. The market register will be the central point for the retailer switching and all metered data. The solution will allow the end customer to log into the hub and se its own consumption with the resolution level that is available. Also, statistics for authorities or other stakeholders can be aggregated in the hub and transmitted. The DSOs task is to submit data per consumption metering point to the hub. The data the DSO have to update the hub with is the identification number on the metering point and the meter, which customer has the access contract to the grid and the tariff (fuse type, säkringsabonnemang or else) and also to which metering grid area the metering point is in. On the other hand the DSO doesn t have to have any information on which retailer and BRP that is associated with the metering point as this information is updated by the retailer in the hubs database. The hub can function as some kind of metering register that all retailers can access when needed. The retailer will have all the data available to make a switch and the metering data per metering point in the hub. The hub register information about RE and BRP per metering point and will act as a aggregator which aggregate metered data per metering grid area as well to regulation area and submit the data for the settlement between RE, BRP and SR. The market register (hub) will also have as a task to calculate the preliminary profile deliveries and the reconciled energy for non hourly metered consumption.

65 65 (66) This will increase the transparency of the electricity market and reduce the link between the DSO and the retailer substantially. Advantages & disadvantages No extensive research has been made by the COBS-project on this topic but some obvious advantages and disadvantages have been identified. There are certainly more research that need to be done before concluding on the subject. Advantages A hub could solve the problem with different versions of metered data, all relevant market players will have the same identical set of data Transparent towards the regulator, all metered data is available in one and the same place which makes it possible for the regulator to control and monitor how for instance DSOs follow the metering regulations. This would by all means improve data quality. A common Nordic hub demands the same rules and will make it more difficult for one country to deviate from the stipulated rules. Lower running costs for the market players since everything that is needed (communicationwise) is a link between the market player and the hub. It will be easier and more efficient to make changes. Lower costs for the retailer would lead to lower prices for the end customer One system for switching of retailers One system that enables invoicing of both grid tariff and energy on the same invoice. This is likely to lead to increased customer mobility in the market and better competition when all retailers can offer the customers one invoice containing all costs related to electricity purchases (grid and energy). Disadvantages A completely new system will imply a high initial cost It is an advanced IT-project and as such a high risk. Implementing a hub solution? When studying data flows necessary to perform settlement it is obvious that DSOs send data to several parties but often at a different aggregation level. This could be amended by the introduction of a central market register; thus obtaining synergies in reporting of data. To achieve simpler reporting of data for the market players all data could be sent to a central register which has an aggregating function for the settlement. This central register would deal with all data for every metering point in the grid from switching of retailers to metered data. A common hub would provide the Nordic market players with one interface. The advantages for the market would be a common solution in the Nordic countries, structured handling of all metering points and the same interface for all players both in reporting and receiving

66 66 (66) data. The hub would also stimulate the market and offer solutions to some of the fundamental problems in the Nordic markets. In the NordReg report Market Design Common Nordic End-user market it is stated: It is important that each country has an arrangement for making relevant customer data about their national customers available, and that this information is easily accessible to every Nordic supplier inexpensively. The statement is based on the regulators wish to harmonise necessary parts of the retailer switching process. It is not within the frames of the COBS project to examine for instance switching of retailers but the purpose of COBS is to facilitate a Nordic end-user market. A hub could potentially manage switching of retailers, common invoicing (grid and energy) on a Nordic basis. In the COBS-model there is a possibility to connect a hub to the settlement as the central aggregator function can be managed by the hub. However, such an advanced project is costly and the pre-requisites would need would need to be examined thoroughly as there are many challenges. Challenges The challenge for a central register would be to have a correct structure of all the metering points in the market as a common solution for Sweden, Norway and Denmark would include approximately 13 million metering points. Also, will the benefits that a hub provides outweigh the drawbacks? If a hub or a central market register is found to be a good solution there are a number of issues that need to be dealt with as regards place of location, ownership of hub and data, IT-systems, time schedules etc. This is however something that is not relevant to look into at this point.

67 APPENDIX 2 REPORT FROM COBS-EDI Version: 1.0.B Date: November 27 th, 2009

68 -EDI report CONTENT 1 INTRODUCTION BACKGROUND STATUS OF THIS DOCUMENT PROJECT ORGANISATION REFERENCES CHANGE LOG ENTSO-E (ETSO) IMPLEMENTATION GUIDES ROLES AND DOMAINS USED IN THE COBS MODEL ROLES AND DOMAINS FROM THE HARMONISED ROLE MODEL COBS EXTENSIONS TO THE HARMONISED ROLE MODEL ROLES IN THE COBS CORE MODEL CONSEQUENCES FOR NORWEGIAN/SWEDISH ELECTRICITY MARKET GENERAL COMMENTS CHANGES TO DATA ELEMENTS USED IN NORWAY/SWEDEN TODAY NORWAY From Description, COBS Concept model from the COBS Core project: Changes to today s Norwegian model SWEDEN From Description, COBS Concept model from the COBS Core project: Changes to today s Swedish model COBS-EDI MODEL COBS BID PROCESS COBS PLANNING COBS IMBALANCE SETTLEMENT COBS RECONCILIATION DOCUMENT CONTENT APPENDIX A CHANGES TO DOCUMENT CONTENT IN NORWAY A.1 BID PROCESS A.2 PLANNING A.3 IMBALANCE SETTLEMENT A.4 RECONCILIATION APPENDIX B CHANGES TO DOCUMENT CONTENT IN SWEDEN B.1 BID PROCESS B.2 PLANNING B.3 IMBALANCE SETTLEMENT B.4 RECONCILIATION APPENDIX C BRIEF INTRODUCTION TO UML NOTATION C.1 USECASE DIAGRAMS C.2 SEQUENCE DIAGRAMS APPENDIX D CODE LISTS D.1 ENTSO-E ASSET TYPE CODES D.2 ENTSO-E BUSINESS TYPE CODES D.3 ENTSO-E CLASSIFICATION TYPE CODES D.4 EBIX / ENTSO-E ENERGY PRODUCT CODES D.5 ENTSO-E OBJECT AGGREGATION CODES D.6 NORDIC TSO XML PROJECT BUSINESS TYPE CHARACTERISTICS CODES Page: 2

69 -EDI report 1 INTRODUCTION 1.1 Background COBS-EDI is a sub project under the COBS project, which aims to harmonise the balance settlement between Norway and Sweden. Among others the COBS-EDI project will look into issues such as, reporting and data formats that differ between the current models and the model suggested by the COBS Core project. The model described in this document is based on the Business Requirements View of the UN/CEFACT Modelling Methodology [2]. In Appendix C the UML notation for UseCase diagrams and Sequence diagrams are briefly described. 1.2 Status of this document This document is the first report from the COBS-EDI working group. It is a preliminary report, which will be updated during the continued work in COBS the project phase Project organisation The COBS-EDI project is a sub-project under COBS Core Group. The members of COBS-EDI are: Jan Owe, SvK, Jan.Owe@svk.se and Ove Nesvik, EdiSys, ove.nesvik@edisys.no Lars Munter, lars.munter@svk.se, (partly) 1.4 References [1] The ebix, EFET and ETSO (ENTSO-E) Harmonised role model, see [2] UN/CEFACT Unified Modelling Methodology (UMM), see [3] The ebix EMD models for imbalance settlement and reconciliation [4] Ediel Implementation guides, see [5] NORDEL (Nordic Ediel Group) BRS for the Nordic TSO Determine transfer capacity model, see [6] Norsk Ediel Standard prosessbeskrivelse for avregningsgrunnlag i det norske kraftmarkedet, see [7] User guide for message exchange in the Norwegian balance regulation market, see [8] Meldinger til/fra Statnett, see [9] Norsk Ediel-standard brukerveiledning, see [10] Report on Proposed principles for Common Balance Management, NORDEL [11] Avtal om Balansansvar för el, see [12] Modeller för en förbättrad balansavräkning, Elforsk rapport 09:54, see [13] ENTSO-E (ETSO) Settlement process v1r1, see [14] ENTSO-E (ETSO) Scheduling System (ESS), see [15] Teknisk Ediel-anvisning UTILTS & APERAK, see Page: 3

70 -EDI report 1.5 Change log Ver/rel/rev Changed by Date Changes 1.0.B Jan Owe Updates mainly in chapter 4.4 and Appendix B based on the model from COBS Core group A Ove Nesvik First official version from the project group: Version is set to 1.0.A A Status of this document is added to paragraph 1.2 Draft note, marked changes, and question marks have been removed 0.5.A Ove Nesvik Update according to new model from COBS Core group A Jan Owe Added references to appendices, added that information sent in balance settlement also is used as input for planning, also made some layout and minor adjustments 0.3.B Jan Owe Updates of Appendix B and of chapter (Changes to the Swedish model) 0.3.A Ove Nesvik Draft document after COBS-EDI meeting September 23 rd, A Ove Nesvik Draft document, changes not tracked 0.1.A Ove Nesvik First draft Page: 4

71 -EDI report 2 ENTSO-E (ETSO) IMPLEMENTATION GUIDES The process and document (message) information in this document is based on the ENTSO-E implementation guides, with some needed adjustments. The planning phase is based on the Nordic TSO XML projects interpretation of the ENTSO-E Scheduling System (ESS), see [14]. The COBS-EDI project has also reviewed the ENTSO-E (ETSO) Settlement process [13] and found that the proposed COBS process is similar, however with the following differences: In the COBS model there are no Confirmation reports of the production schedules exchanged in the Planning phase. The ENTSO-E (ETSO) Settlement process describes a detailed and iterative process for agreement of the final imbalance settlement data between the Imbalance settlement responsible and the Balance responsible party. This process is simplified in the COBS model. A Billing agent is defined in the the ENTSO-E (ETSO) Settlement process, which is left out in the COBS model. In the COBS model the billing is done by the Imbalance settlement responsible and the Reconciliation responsible. The information content of the Energy Account Report document (EAR) does however not cover the needs for the COBS information exchange. The COBS-EDI has therefore based the settlement documents on the ESS information model, i.e.: Figure 1 COBS and EAR time series classes Page: 5

72 -EDI report 3 ROLES AND DOMAINS USED IN THE COBS MODEL 3.1 Roles and domains from the Harmonised role model The following roles from ebix, EFET and ETSO (ENTSO-E) Harmonised role model [1] have been used in this document: Role Balance Responsible Party Description A party that has a contract proving financial security and identifying balance responsibility with the imbalance settlement responsible of the market balance area entitling the party to operate in the market. This is the only role allowing a party to buy or sell energy on a wholesale level. 1 Additional information: The meaning of the word "balance" in this context signifies that that the quantity contracted to provide or to consume must be equal to the quantity really provided or consumed. Such a party is often owned by a number of market players. Balance supplier Consumption responsible party Imbalance settlement responsible Market operator Equivalent to "Program responsible party" in the Netherlands. Equivalent to "Balance responsible group" in Germany. Equivalent to "market agent" in Spain. A party that markets the difference between actual metered energy consumption and the energy bought with firm energy contracts by the party connected to the grid. In addition the balance supplier markets any difference with the firm energy contract (of the party connected to the grid) and the metered production. Additional information: There is only one balance supplier for each metering point. A party who can be brought to rights, legally and financially, for any imbalance between energy bought and consumed for all associated metering points. Additional information: This is a type of Balance Responsible Party A party that is responsible for settlement of the difference between the contracted quantities and the realised quantities of energy products for the balance responsible parties in a market balance area. The unique power exchange of trades for the actual delivery of energy that receives the bids from the Balance Responsible Parties that have a contract to bid. The market operator determines the market energy price for the market balance area after applying technical constraints from the system operator. It may also establish the price for the reconciliation within a metering grid area. 1 In Sweden you don't need to be a Balance Responsible Party to trade at the NordPool markets. If a Party doesn't have a Balance agreement himself, the Party needs to have an agreement through a third company having such balance responsibility. Page: 6

73 -EDI report Metered data responsible Metered data aggregator Production responsible party Reconciliation accountable Reconciliation responsible System Operator A party responsible for the establishment and validation of metered data based on the collected data received from the Metered Data Collector. The party is responsible for the history of metered data in a metering point. A party responsible for the establishment and qualification of metered data from the Metered data responsible. This data is aggregated according to a defined set of market rules. A party who can be brought to rights, legally and financially, for any imbalance between energy sold and produced for all associated metering points. Additional information: This is a type of Balance Responsible Party. A party that is financially accountable for the reconciled volume of energy products for a profiled Local metering point. A party that is responsible for reconciling, within a Metering grid area, the volumes used in the imbalance settlement process for profiled metering points and the actual metered quantities. A party that is responsible for a stable power system operation (including the organisation of physical balance) through a transmission grid in a geographical area. The SO will also determine and be responsible for cross border capacity and exchanges. If necessary he may reduce allocated capacity to ensure operational stability. Transmission as mentioned above means "the transport of electricity on the extra high or high voltage network with a view to its delivery to final customers or to distributors. Operation of transmission includes as well the tasks of system operation concerning its management of energy flows, reliability of the system and availability of all necessary system services." (Definition taken from the UCTE Operation handbook Glossary). Trade responsible party Note: Additional obligations may be imposed through local market rules. A party who can be brought to rights, legally and financially, for any imbalance between energy bought and consumed for all associated metering points. Note: A power exchange without any privileged responsibilities acts as a Trade Responsible Party. Additional information: This is a type of Balance Responsible Party. Table 1 Roles from the Harmonised role model The following domains from ebix, EFET and ETSO (ENTSO-E) Harmonised role model [1] have been used in this document: Domain Description Functional group A collection of metering points for consumption and generation within a Market balance area. Page: 7

74 -EDI report Local metering point Market balance area Metering grid area Metering point Resource object The smallest entity for which there is a balance responsibility and where a Balance supplier change can take place. It may be a physical or a logical point. Additional information: This is a type of Metering Point. A geographic area consisting of one or more metering grid areas with common market rules for which the settlement responsible party carries out a balance settlement and which has the same price for imbalance. A market balance area may also be defined due to bottlenecks. A metering grid area is a physical area where consumption, production and exchange can be metered. It is delimited by the placement of meters for period measurement for input to, and withdrawal from the area. It can be used to establish the sum of consumption and production with no period measurement and network losses. A point where energy products are measured. A resource that can either produce or consume energy and that is reported in a schedule. Additional information: This is a type of Functional Group COBS comment: Used in this document for Station groups (Norway) and Regulation object (Sweden), i.e. one or more Production- or Consumption metering points, within a Market balance area. Table 2 Domains from the Harmonised role model 3.2 COBS extensions to the Harmonised role model In addition to the roles taken from the ebix, EFET and ETSO (ENTSO-E) Harmonised role model [1] the following roles have been defined by the COBS-EDI project: Reconciliation responsible, central Reconciliation accountable, central Reconciliation responsible, local Reconciliation accountable, local A party that is responsible for reconciling, within a Market balance area, the volumes used in the imbalance settlement process for profiled metering points and the actual metered quantities. A party that is financially accountable for the reconciled volume of energy products for the profiled Local metering point, which has a given Balance responsible party. A party that is responsible for reconciling, within a Metering grid area, the volumes used in the imbalance settlement process for profiled metering points and the actual metered quantities. A party that is financially accountable for the reconciled volume of energy products for a profiled Local metering point. Table 3 COBS role extensions to the Harmonised role model And the following domain has been defined by the COBS-EDI project: Corridor A corridor is a group of power cables/lines. Corridors are used in order to give details about individual cables. The information is used in balance management to present details of import/export plans (individual plans display) and to compute surplus/deficit of each control area. For example, Skagerrak corridor has 3 cables and can be defined as two HVDC corridors (Skagerrak1-2 and Skagerrak3). The Corridors can be split into three types: Page: 8

75 -EDI report Elspot corridor Cut corridor External corridor The reason for creating the roles above is that the COBS Core project proposes a model with two levels of reconciliation. The first reconciliation process is run between the Reconciliation responsible, central ( SR ) and the Reconciliation accountable, central (Balance responsible party). The second reconciliation process, which is outside the scope of the COBS project, is run between the Reconciliation responsible, local (Balance responsible party) and the Reconciliation accountable, local (Balance supplier). 3.3 Roles in the COBS core model The following roles from the ebix, EFET and ETSO (ENTSO-E) Harmonised role model [1] maps to the roles used in this document: Core model roles BRP DSO SR NPS COBS-EDI (harmonised) roles Balance responsible party Metered data aggregator Imbalance settlement responsible Market operator Page: 9

76 -EDI report 4 CONSEQUENCES FOR NORWEGIAN/SWEDISH ELECTRICITY MARKET 4.1 General comments In addition to sending metered data to the Imbalance settlement responsible, the Metered data aggregator currently sends these to the relevant Balance responsible parties and Balance suppliers. This applies to both Norway and Sweden. This data exchange will also be needed in the future. A simplification of the new Balance settlement model from the Balance responsible parties point of view could be to send all trade (bilateral inclusive) and flow messages to either the Imbalance settlement responsible or the System operator. In this case relevant data will have to be forwarded from the receiving role (Imbalance settlement responsible or the System operator) to the other role. The syntax to be used for the COBS documents (e.g. EDIFACT or XML) have not been evaluated by the COBS-EDI project. The ongoing Nordic TSO XML project is expected to test XML document exchanges between the Nordic TSOs and a decision for which syntax to be used should be based on the result from that project. Many of the documents exchanged today will, within the COBS model, be sent between new roles, such as the reconciliation documents, aggregated per Balance supplier and Metering grid area, which will be received by the Imbalance settlement responsible in addition to today s receivers. 4.2 Changes to data elements used in Norway/Sweden today The Norwegian and Swedish Product code is a totally different data element than the Product in the COBS proposal. The Product code is defining the content of the document and can be seen as a combination of the Document type, Process type (ENTSO-E header elements) and Business type, while the COBS Product is used for specifying electricity characteristics, such as active/reactive energy/power or capacity. The Norwegian Station group and the Swedish regulation object are similar to the COBS Resource object. With a common settlement system the identification scheme for the Resource object (In the COBS report called Regulation object or Production unit) should probably be harmonised and thus changed to GS1 GSRN (18 digits). The identification of Metering grid areas should be harmonised between Norway and Sweden. The coding scheme should probably be GS1 GSRN (18 digits). 4.3 Norway From Description, COBS Concept model from the COBS Core project: The solution implies that the new Imbalance settlement responsible (SR), one entity in Norway and Sweden, takes over the settlement and invoicing of reconciled power from the Metered data aggregators (DSO) in Norway. Creating an entity carrying out these functions will increase efficiency (economy of scale) and reduce the number of invoices the Balance responsible party (BRP) will receive. Today the Balance responsible party (BRP) receives one invoice from each Metered data aggregator (DSO) where they have a customer. In the new solution the Balance responsible party (BRP) will only receive one invoice from the Settlement Responsible. The Nordic harmonised rules for settlement should be implemented also in Norway. The deviation regarding production less than 3 MW should be terminated in order to get the same solution in both Norway and Sweden, and then in the Nordics. Reconciliation will be managed on fixed dates. Today this is managed continuously Changes to today s Norwegian model The Norwegian Bulk supply codes will be split into separate fields, i.e.: o C and F codes (Consumption) Out area (Metering grid area) Balance supplier Balance responsible party o P codes (Production) Resource object Page: 10

77 -EDI report In area (Metering grid area or Market balance area) o H codes (Exchange between the Central grid and Lower (Regional- or Distribution) grids) Exchange metering point or In area and Out area o R codes (Exchange between the Regional- and/or Distribution grids) Exchange metering point or In area and Out area o B codes (Bilateral trade) In area (Market balance area) Out area (Market balance area) (Equal to the In area) In party (buyer) Out party (seller) o I codes (Disconnectable installations) In area (Metering grid area) Out area (Metering grid area) (Equal to the In area) o S codes (Settlement) Balance responsible party o Q codes (Settlement of grid usage) In area (Metering grid area) or Resource object (Transformer station) Metering grid areas should be established according to the definition in chapter 3.1. The coding scheme should probably be GS1 GSRN (18 digits). Today reconciliation documents are sent from the Reconciliation responsible (DSO) to the Reconciliation accountable (Balance supplier). In the COBS model aggregated data per Balance supplier and Metering grid area will be sent to the Reconciliation responsible, local (Balance responsible party) and Reconciliation responsible, central (Imbalance responsible party). In addition the reconciled volumes aggregated per Balance responsible party will be returned from the Reconciliation responsible, central (Imbalance responsible party) to the Reconciliation accountable, central (Balance responsible party). Changes to document content in Norway are summarized in Appendix A. 4.4 Sweden From Description, COBS Concept model from the COBS Core project: Swedish Metered data aggregators (DSO) have to feed the Central Aggregator with load profiles so that the Central Aggregator is able to conduct the settlement and invoicing. The Swedish Metered data aggregator (DSO) has this data already in their systems; however some adjustments in routines and procedures have to be made Changes to today s Swedish model The Bilateral trades will in the COBS model be sent to the Imbalance settlement responsible, while this document today is sent to the System operator. The matching of trade and QA of production plans performed today are outside of the COBS scope, but might be continued a Swedish service by SvK (System operator). The metered production data from the Metered data aggregator to the Imbalance settlement responsible is expected to be per Resource object instead of per Balance responsible party within a Metering grid area, as today. The metered production data from the Metered data aggregator to the Balance responsible party is expected to be per Resource object instead of per Balance responsible party and Balance supplier within a Metering grid area, as today. The net loss is today included in the proposed Preliminary consumption for profiled Metering points in Sweden (see Figure 8). Today the data is calculated (not estimated) and represents the Adjusted Input Profile, JIP (in-feed (production and in-feed from neighbouring grids) minus hourly metered consumption). The present Swedish Time Series products will be replaced with new fields, cfr Identity Type (OTcode) in the Time Series Product with Object Aggregation in the COBS model. Page: 11

78 -EDI report Metering grid areas should be established according to the definition in chapter 3.1. The coding scheme should probably be GS1 GSRN (18 digits). Today reconciliation documents are sent with monthly volumes both before the month and after the month (preliminary and final Load profile shares). In the COBS model Reconciled volume per Balance supplier and Metering grid area are expected to be sent on monthly basis to the Reconciliation responsible, local (Balance responsible party) and Reconciliation responsible, central (Imbalance responsible party) almost as today. In addition the reconciled volumes aggregated per Balance responsible party will be returned from the Reconciliation responsible, central (Imbalance responsible party) to the Reconciliation accountable, central (Balance responsible party), also this almost as today. Changes to document content in Sweden are summarized in Appendix B. Page: 12

79 -EDI report 5 COBS-EDI MODEL The basis for the models in this document is the concept model from the COBS Core project group: BS 5 Metered data per metering point DSO Reconciled energy / RE 7 Reconsiled energy (i) Hourly metered data production & consumption / RE (ii) Preliminary Profiled consumption / RE 5 Per metering grid area & BRP (i) Hourly Metered data exchange, production & consumption (ii) Preliminary Profiled consumption BRP 2 6 Bilateral trades Balance settlement SR 2 Elspot trade Elbas trade SO* NPS 8 Reconciliation settlement 3 Production Plans 4 Activated ancillary services 4 1 Regulation bids 4 3 Production Plans 4 Activated ancillary services NPS SO 2 Trade between price-areas Figure 2 COBS concept model The concept model is elaborated by using the methodology from the UMM Business Requirements View. The content of the document is the harmonised content of documents used today in Norway and Sweden. The COBS-EDI model is decomposed into four basic processes; Planning, Bid, Imbalance settlement and Reconciliation. Both in the Imbalance settlement phase and in the Reconciliation phase there are connected processes and message exchanges between the actors which are seen outside the scope of the COBS project. These processes are outlined in the UseCase diagrams below, but not further elaborated. Page: 13

80 -EDI report 5.1 COBS Bid process Figure 3 UseCase diagram: COBS Bid process Figure 4 Sequence diagram: COBS Bid documents Comments to the figure: TBD. Page: 14

81 -EDI report Content of the documents: Business type Product Object aggregation Business type characteristics In area Out area In party Out party Metering Point Resource object Balance supplier Balance responsible party Quantity Price Activation time Resting time Duration Table 4: Content of bid documents 1 Comments to the table: TBD Page: 15

82 -EDI report 5.2 COBS Planning Figure 5 UseCase diagram: COBS planning Page: 16

83 -EDI report Figure 6 Sequence diagram: COBS planning documents Comments to the figure: The Imbalance settlement responsible gets the following data, which have a cut-off time before hour of operation: o Production plans, trade on interconnectors and bids for ancillary services from the System operator o Elspot /Elbas programs and flows from the Market operator The data exchanges between the Market operator and the Balance responsible parties, such as sales reports from the Elspot- and Elbas markets, are not included in the sequence diagram above. Activated ancillary services (volume and prices) are sent from the System operator to the Imbalance settlement responsible. This is however managed differently in Norway and Sweden today and might be changed. In Sweden the Imbalance settlement responsible is responsible for calculating and settlement, while in Norway this responsibility lies within the System operator. Page: 17

84 -EDI report Content of the documents: Business type Product Object aggregation Business type characteristics In area Out area In party Out party Metering Point 1) Resource object Balance supplier Balance responsible party Quantity Price Table 5: Content of planning documents Comments to the table: 1) The metering point is referencing a Corridor. A class diagram showing the basic structure of time series documents is shown in chapter 6. Code lists can be found in Appendix D. Page: 18

85 -EDI report 5.3 COBS Imbalance settlement Figure 7: UseCase diagram: COBS imbalance settlement Comments to the diagram: In addition to sending metered data to the Imbalance settlement responsible, the Metered data aggregator currently sends these to the relevant Balance responsible parties and Balance suppliers. This applies to both Norway and Sweden. This data exchange will also be needed in the future. Metered data should be sent after delivery hour by the Metered data aggregator to the Imbalance settlement responsible. The Imbalance settlement responsible is then in position to conduct the balance settlement. Activated ancillary services (volume and prices or amounts) are sent from the System operator to the Imbalance settlement responsible. Settlement of ancillary services is managed differently today. In Sweden the SR is responsible for calculating and settlement, while in Norway this responsibility lies with the SO The Imbalance settlement responsible will conduct a limited QA of received metered data and calculate the balancing settlement using Nordic Harmonised Rules. Data will then be made available for Balance responsible parties and Metered data aggregators (either through direct Ediel-messages or through a webapplication). This data will be on an aggregated level, in Norway per Market balance area (with common price) and in Sweden per Market balance area (Cut area or Constraint area with no capacity restriction). Page: 19

86 -EDI report Figure 8: Sequence diagram: COBS imbalance settlement documents Comments to the diagram: Arrow 1 is actually sent from the Metered data responsible role (see Figure 7). It is however chosen to show the arrow from the Metered data aggregator for simplification reasons and since both the Metered data responsible and the Metered data aggregator are a part of the DSO in the Nordic countries. After the hour of operation the Imbalance settlement responsible receives the following settlement data: o Consumption and production flow (hourly metered values), sent by the Metered data aggregator. o Estimated non hourly metered consumption, sent by the Metered data aggregator. The same type of information is also sent to the Balance responsible, when first received it is also used as a basis for the Planning documents, see 5.2. Page: 20

87 -EDI report It is being discussed if the Metered production data should be per Metering point instead of per Resource object. Content of the documents: Business type Product Object aggregation Business type characteristics Metering Point Resource object In area Out area Balance supplier Balance responsible party Quantity Price/amount Table 6: Content of Imbalance settlement documents Comments to the table: A class diagram showing the basic structure of time series documents is shown in chapter 6. Code lists can be found in Appendix D. It is being discussed if the Metered production data (row 1) should be per Metering point instead of per Resource object. Page: 21

88 -EDI report 5.4 COBS Reconciliation Figure 9: UseCase diagram: COBS reconciliation Comments to the diagram: In addition to sending metered data to the Reconciliation responsible, the Metered data aggregator currently sends these to the relevant Balance responsible parties and Balance suppliers. This applies to both Norway and Sweden. This data exchange will also be needed in the future. The Metered data aggregator will be charged with the responsibility for load profile shares and distribution of consumption since they are the source closest to the measurement data. The Metered data aggregator will calculate preliminary load profile shares, the hourly distributed profiled energy, final load profile shares and the reconciled energy (kvarkraft). This is currently done in Norway per customer but the difference is that the Metered data aggregator now should send the results to the Imbalance settlement responsible in their combined role as central aggregator (CA) and settlement responsible (SR). The Imbalance settlement responsible will aggregate the results per Balance responsible party and then invoice the reconciled energy. With Automated Meter Reading (AMR) in place reconciliation could by operated on a monthly basis. The solution described will give the Metered data aggregator in Sweden an increased responsibility for dividing the load profile to each Balance responsible party and to calculate the reconciled energy. Page: 22

89 -EDI report Figure 10: Sequence diagram: COBS reconciliation documents Comments to the diagram: The Reconciled consumption is the difference between Preliminary consumption and Final consumption, i.e. Arrow number 4 = Arrow number 2 - Arrow number 3. A prerequisite (also according to the ebix Metered data (EMD) model Measure, Exchange metered data for Reconciliation is that the Reconciliation accountable, central (Balance responsible party) who is responsible for the Metering point is sent for each Metering point. Content of the documents: 1 2 Business type Product Object aggregation Business type characteristics Metering Point Resource object In area Out area Balance supplier Balance responsible party Quantity Price Table 7: Content of Reconciliation documents Page: 23

90 -EDI report Comments to the table: A class diagram showing the basic structure of time series documents and a description of the data elements are shown in chapter 6. Code lists can be found in Appendix D. Page: 24

91 -EDI report 6 DOCUMENT CONTENT The COBS-EDI project uses elements from the class diagrams below to propose content for the business documents defined in the previous defined sequence diagrams. The class diagram shows the important information needed to identify the time series to be exchanged, i.e.: The reported object, such as Metering point, Resource object (Station group or Regulation object, In area and Out area The level of aggregation, such as per Balance supplier and Balance responsible party The characteristics needed to express the nature of the time series, such as Business type and Product Technical elements related to the communication channel (SMTP, WS ) and syntax (EDIFACT, XML.) are skipped. Figure 11: Class diagram: COBS planned production document Page: 25

92 -EDI report Appendix A CHANGES TO DOCUMENT CONTENT IN NORWAY The table below shows the mapping between the data elements in the proposed COBS solution and current documents exchanged in the Norwegian market. Related data elements are tried to be logically grouped: In the COBS Identification column relevant header elements are grouped in the first cell for the documents. Corresponding cells in the COBS Identification column and the Norwegian Identification column are shown in the same row. If several elements in one of the columns are needed to express one (or more) elements in the other column, these are grouped in one row. A.1 Bid process # COBS document Norwegian document COBS Identification Norwegian Identification 1 Regulation bids (per Balance regulation market Document type Message type (QUOTES) Resource object) bids (QUOTES) [7] Process type Business type Product Object aggregation Resource object Station group In area Out area A.2 Planning # COBS document Norwegian document COBS Identification Norwegian Identification 1 Elspot & Elbas programs (volume & price) TBD Document type Process type Business type Product Object aggregation In area Out area 2 Bilateral trade Bilateral trade [8] Document type Message type (MSCONS) 3 Energy flow between areas (Elspot & Elbas) 4 Production plans (per Resource object) 5 Production plans (per Resource object) TBD Production schedules and ancillary services (DELFOR) [7] Process type Business type Product Object aggregation In area Out area In party Out party Document type Process type Business type Product Object aggregation In area Out area Document type Process type Business type Product Object aggregation Resource object In area Statnett internal data exchange Message name Product code (1411, Bilateral trade) Bulk supply code (B code) Message type () Product code (1100, Production, Hydro power) Station group Elspot area Page: 26

93 -EDI report 6 Activated Ancillary services (per Resource object and price) 7 Trade on interconnections (between System operators) 8 Activated Ancillary services (per Resource object and price) 9 Prices (balance power, up- & down regulation) Regulation report Statnett internal data exchange Statnett internal data exchange Statnett internal data exchange Table 8: COBS/Norwegian comparison of planning documents Message type (UTILTS) Comments: The row numbers above corresponds with the message numbers in Figure 6 Sequence diagram: COBS planning documents. Page: 27

94 -EDI report A.3 Imbalance settlement # COBS document Norwegian document COBS Identification Norwegian Identification 2, 5 Metered production data Metered production [8] Document type Process type Business type Product Object aggregation Business type characteristics Resource object Message type (MSCONS) Product code (1101, Metered production) Bulk supply code (P code) 1, 3, 6 Metered consumption data 4, 8 Preliminary consumption for profiled MP per MGA and BS 7 Metered exchange between Metering grid areas 9 Anomaly report for metered data Total consumption [6] Sum profiled consumption [6] Metered exchange against Central grid [8] & Metered exchange between Lower grids [8] Quality assured volumes [8] 10 Settlement results Imbalance (kwh) [9] & Imbalance (NOK) [9] Balance responsible party Document type Process type Business type Product Object aggregation Out area Balance supplier Balance responsible party Document type Process type Business type Product Object aggregation Out area Balance supplier Balance responsible party Document type Process type Business type Product Object aggregation In area Out area Document type Process type Business type Product Object aggregation In area Out area Document type Process type Business type Product Object aggregation In area Out area Balance responsible party Table 9: COBS/Norwegian comparison of Imbalance settlement documents Message type (MSCONS) Product code (1501, Total consumption) Bulk supply code (C or F code) Message type (MSCONS) Product code (1482, Sum profiled consumption) Bulk supply code (C or F code) Message type (MSCONS) Product code (1401, Metered value for settlement) Bulk supply code (H or R code) Message type (MSCONS) Product code (1493, Quality assured volumes) Bulk supply code (P code) Message type (MSCONS) Product code (1445,Imbalance kwh & 1446,Imbalance NOK) Price area Balance responsible party Comments: The row numbers above corresponds with the message numbers in Figure 8: Sequence diagram: COBS imbalance settlement documents. Page: 28

95 -EDI report A.4 Reconciliation # COBS document Norwegian document COBS Identification Norwegian Identification 1 Reconciled volume (kvarkraft) per BS and MGA - daily resolution Not sent in Norway today Document type Process type 2 Reconciled volume (kvarkraft) per "Reconciliation accountable, central", monthly resolution Reconciliation Business type Product Object aggregation Balance responsible party Balance supplier Out area Document type Process type Business type Product Object aggregation Balance responsible party Balance supplier Out area Table 10: COBS/Norwegian comparison of Reconciliation documents Message type (UTILTS) Product code (1591, Metered consumption per day) Reason for transaction Today sent on Metering point level Message type (UTILTS) Product code (1591, Metered consumption per day) Reason for transaction Today sent on Metering point level Comments: The row numbers above corresponds with the message numbers in Figure 10. Page: 29

96 -EDI report Appendix B CHANGES TO DOCUMENT CONTENT IN SWEDEN The table below shows the mapping between the data elements in the proposed COBS solution and current documents exchanged in the Swedish market. The table below shows the mapping between the data elements in the proposed COBS solution and current documents exchanged in the Swedish market. Related data elements are tried to be logically grouped: In the COBS Identification column relevant header elements are grouped in the first cell for the documents. Corresponding cells in the COBS Identification column and the Swedish Identification column are shown in the same row. If several elements in one of the columns are needed to express one (or more) elements in the other column, these are grouped in one row. B.1 Bid process # COBS document Swedish documentation 1 Regulation bids (per [11] appendix 4.4, Resource object) secondary balance regulation, see also appendix 3 for primary regulation B.2 Planning COBS Identification Document type Process type Business type Product Object aggregation Resource object In area Out area Swedish Identification Message type (QUOTES) Regulation object (Reglerobjekt) # COBS document Swedish documentation COBS Identification Swedish Identification 1 Elspot & Elbas programs (volume & price) TBD Document type Process type Business type Product Object aggregation In area Out area 2 Bilateral trade [11] chapter 2.3.1, Fixed Power Agreement (Fastkraftavtal) 3 Energy flow between areas (Elspot & Elbas) 4 Production plans (per Resource object) TBD [11] chapter 2.3.1, regulation object plans for production regulation object (reglerobjektsplaner för produktionsreglerobjekt) Document type Process type Business type Product Object aggregation In area Out area In party Out party Document type Process type Business type Product Object aggregation In area Out area Document type Process type Business type Product Object aggregation Resource object In area Message type (DELFOR) Product code (1027, Bilateral handel handelsvärde) Two Balance responsible parties Message type (DELFOR) Product code (1020, Produktionsplan) Regulation object (Reglerobjekt) Cut area (Snittområde) Page: 30

97 -EDI report 5 Production plans (per Resource object) 6 Activated Ancillary services (per Resource object and price) 7 Trade on interconnections (between System operators) 8 Activated Ancillary services (per Resource object and price) 9 Prices (balance power, up- & down regulation) SvK internal data exchange TBD TBD TBD SvK internal data exchange SvK internal data exchange SvK internal data exchange Table 11: COBS/Swedish comparison of planning documents Comments: The row numbers above corresponds with the message numbers in Figure 6 Sequence diagram: COBS planning documents. Today also the following is sent from Balance responsible parties, however not for Settlement purposes: o Production plan (Produktionsplan) per Cut area (Snittområde) [11], chapter o Regulation object plans for consumption regulation object (Reglerobjeksplaner för förbrukningsreglerobjekt) [11], chapter o Planned production shutdowns (Planerade produktionsavställningar) per Cut area (Snittområde) [11], chapter o Planned Regulation Capabilty (Planerad reglerstyrka) [11], chapter o Planned Frequency-Controlled Disturbance Reserves (Planerad frekvensstyrd störningsreserv) [11], chapter o Planned Rapid Actve Disturbance Reserves (Planerad Snabb Aktiv Störningsreserv) [11], chapter Page: 31

98 -EDI report B.3 Imbalance settlement # COBS document Swedish documentation 1 Metered UTILTS guide [15], consumption per Chapter MP 2, 5 Metered production data 3, 6 Metered consumption data 4 Preliminary consumption for profiled MP per MGA and BS UTILTS guide [15], Chapter UTILTS guide [15], Chapter UTILTS guide [15], Chapter COBS Identification Document type Process type Business type Product Object aggregation Out area Document type Process type Business type Product Object aggregation Business type characteristics Resource object Balance supplier (if #2) Balance responsible party Document type Process type Business type Product Object aggregation Out area Balance supplier (if #3) Balance responsible party Document type Process type Business type Product Swedish Identification Message type (UTILTS E66) Type of Metering Point (Typ av anläggning) = Consumption Reason for Transaction = Billing Energy Metering grid area (i.e. out area) Message type (UTILTS E66) 2 Type of Metering Point (Typ av anläggning) = Production Reason for Transaction = Settlement 3 Metering grid area (i.e. in area) If UTILTS E66: Station group id (Reglerobjekts id) If UTILTS E31: Balance supplier Balance resp. party Message type (UTILTS E31) Type of Metering Point = Consumption Reason for Transaction = Settlement Metering grid area (i.e. out area) Balance responsible party Message type (UTILTS E31) Type of Metering Point = Swedish Time Series Product N/A Not used for UTILTS E66 If UTILTS E31: PC= Elektrisk produktion PT=Type of production cfr Appendix D.6, OT=(BS)+BRP+MGA LOD=Timme, Fast BAP=Mätning/ Rapportering PC=Elförbrukning PT=Uppmätt utmatning OT=(BS)+BRP+MGA LOD=Timme, Fast BAP=Mätning/ Rapportering PC=Elförbrukning PT=Profil 2 UTILTS E66 if per Metering Point, UTILTS E31 if per Balance Supplier and/or Balance Responsible Party per Metering Grid Area. 3 Today Periodic Meter Reading is used since E66 isn't sent for settlement purposes to Svenska Kraftnät. Page: 32

99 -EDI report 7 Metered exchange between Metering grid areas 8 Preliminary consumption for profiled MP per MGA 9 Anomaly report for metered data 10 Settlement results UTILTS guide [15], Chapter UTILTS guide [15], Chapter UTILTS guide [15], Chapter UTILTS guide [15], Chapter Object aggregation Out area Balance supplier Balance responsible party Document type Process type Business type Product Object aggregation In area Out area Document type Process type Business type Product Object aggregation Out area Balance responsible party Document type Process type Business type Product Object aggregation In area Out area Document type Process type Business type Product Object aggregation In area Out area Balance responsible party Consumption Reason for Transaction = Settlement Metering grid area (i.e. out area) Balance supplier Message type (UTILTS E31) Type of Metering Point = Exchange Reason for Transaction = Settlement Source area Sink area Message type (UTILTS E31) Type of Metering Point = Consumption Reason for Transaction = Settlement Metering grid area (i.e. out area) Message type (UTILTS S01) Reason for Transaction = Settlement 1) Metering grid area (i.e. in area) 2) Source area Sink area 3) Metering grid area (i.e. out area) Message type (UTILTS S01) Reason for Transaction = Settlement In most cases one: Metering grid area (in or out) Balance responsible party OT=BS+MGA LOD=Timme, Fast BAP=Mätning/ Rapportering PC=Elektriskt utbyte PT=Fysikaliskt utbyte OT=MGA+MGA LOD=Timme, Fast BAP=Mätning/ Rapportering PC=Elförbrukning PT=Profil OT=MGA LOD=Timme, Fast BAP=Mätning/ Rapportering 1) PC= Elektrisk balans; PT= Områdesbalans; OT= MGA 2) PC= Elektriskt utbyte; PT= Utbytesdifferens; OT= MGA+MGA 3) PC= Elförbrukning; PT= Profil; OT= MGA For all: LOD=Timme, Fast BAP=Avräkning Not described here Page: 33

100 -EDI report Table 12: COBS/Swedish comparison of Imbalance settlement documents Comments: The row numbers above corresponds with the message numbers in Figure 8: Sequence diagram: COBS imbalance settlement documents. Comments to specific flows o Metered production might in COBS be sent per Regulation object (Resource object). Today this is sent aggregated per Business type characteristic (e.g. Hydro, Nuclear etc) per Balance Responsible Party within a Metering grid area. o Several different time series are sent to the Balance responsible party, not further described here. Page: 34

101 -EDI report B.4 Reconciliation # COBS document Swedish 1 Reconciled volume (kvarkraft) per BS and MGA - daily resolution 2 Reconciled volume (kvarkraft) per "Reconciliation accountable, central", monthly resolution documentation Not sent in Sweden today UTILTS guide [15], Chapter COBS Identification Document type Process type Business type Product Object aggregation Balance responsible party Balance supplier Out area Document type Process type Business type Product Object aggregation Balance responsible party Balance supplier Out area Swedish Identification Message type (UTILTS E31) Type of Metering Point = Consumption Reason for Transaction = Reconciliation BRP BS Metering grid area (i.e. out area) Message type (UTILTS S01) Reason for Transaction = Reconciliation BRP BS Metering grid area (i.e. out area) Swedish Time Series Product TBD TBD Table 13: COBS/Swedish comparison of Reconciliation documents Comments: The row numbers above corresponds with the message numbers in Figure 10. Page: 35

102 -EDI report Appendix C BRIEF INTRODUCTION TO UML NOTATION C.1 UseCase diagrams A UseCase diagram is used to show relationships between UseCases and Roles. A UseCase is the specification of a set of actions performed by a system, such as COBS, which yields an observable result that is, typically, of value for one or more actors or other stakeholders of the system. The following notations are used in UseCase diagrams: Generalisation: A generalisation is used to show a relationship between a general role and one or more specific roles. A Generalisation is shown as a line with a hollow triangle as an arrowhead between the symbols representing the involved classifiers. The arrowhead points to the symbol representing the general classifier. Figure 12 UseCase diagram, generalisation Include relationship: An Include relationship from use case A to use case B indicates that an instance of the use case A will also contain the behaviour as specified by B. Include relationship is used to split a system into smaller parts. Figure 13 UseCase diagram, include relationship Participate relationship: A Participate relationship is used to show that a certain role participates in a specific UseCase. Figure 14 UseCase diagram, participate relationship Page: 36