PROPOSED MODIFICATIONS TO MARKET SUPPORT SERVICES CODE TO IMPLEMENT THE FORWARD SALES CONTRACTS

Transcription

1 PROPOSED MODIFICATIONS TO MARKET SUPPORT SERVICES CODE TO IMPLEMENT THE FORWARD SALES CONTRACTS CONSULTATION PAPER Closing date for submission of comments and feedback: 25 June 2014, 4pm 28 May 2014 ENERGY MARKET AUTHORITY 991G ALEXANDRA ROAD #01-29 SINGAPORE

2 Disclaimer: The information in this Paper is not to be treated by any person as any kind of advice. The Energy Market Authority shall not be liable for any damage or loss suffered as a result of the use of or reliance on the information given in this Paper.

3 Background 1 The Market Support Services (MSS) Code sets the minimum standards of performance in accordance with which a Market Support Services Licensee (MSSL) is required to perform market support services. The MSS Code also describes the rights and obligations of a Retail Electricity Licensee, a Generation Licensee, the Transmission Licensee and a contestable consumer with respect to market support services. The Forward Sales Contract 2 In October 2012, the Energy Market Authority (EMA) issued a public consultation paper to seek feedback on the suggested implementation approach and roadmap for the development of an electricity futures market in Singapore. Specifically, the EMA requested feedback from stakeholders on the Forward Sales Contract (FSC) scheme to facilitate electricity generation companies participation in the electricity futures market as market makers. This was followed by the Request-for-Interest (RFI) paper in May 2013, which provided further details on the FSC scheme. 3 Similar to the Vesting Contracts, which are Contracts-for-Difference (CfDs), the counterparties for the FSC are the MSSL on the buy side and the generation licensees on the sell side. 4 Given that the primary beneficiaries of the electricity futures market will be the contestable consumers (CCs), the FSC will be spread across all CCs (i.e. any debits or credits from the FSC would be spread across all CCs load). Like Vesting Contracts, the FSC provides a hedge for consumers against volatile prices in the wholesale market while ensuring that participating generators have certainty of revenue stream for their allocated volumes. 1 5 In view of the decision to proceed with the FSC scheme, EMA intends to make the modifications to the MSS Code to implement the FSC scheme set out in the RFI paper. 1 The FSCs are CfDs with a strike price based on the prevailing LNG Vesting Price or Balance Vesting Price. The CfDs work on the following basis: when wholesale electricity price is above the strike price, the generation licensees pay the contestable consumers through the MSSL the difference between the wholesale electricity price and strike price, and vice versa. Page 1 of 5

4 Proposed Modifications 6 Pursuant to Section 1.6 of the MSS Code, EMA is seeking feedback and comments on the proposed modifications as set out in Appendix I. 7 The key modifications to the MSS Code are to effect the following proposals: (i) (ii) To include the FSC as a regulatory contract which MSSL enters into with the participating electricity generation licensees. This is to align with Condition 13 (Regulatory Contracts) of the MSSL Licence 2 ; and To include the FSC credits or debits in the vesting credits or debits for market settlement between MSSL and contestable consumers. Request for Comments and Feedback 8 EMA invites comments and feedback on the proposed modifications to the MSS Code as set out in Appendix I. 9 Please send your submission by to: [email protected] Alternatively, you may send your submission by post/fax to the following address: Policy Department Energy Planning and Development Division Energy Market Authority 991G Alexandra Road #02-29 Singapore Fax: (65) Anonymous submissions will not be considered. 11 All comments and feedback must reach EMA by 25 June EMA will acknowledge receipt of all submissions electronically. Please contact Dr Chua Shen Hwee at or Ms Leow Rui Ping at if you have not received an acknowledgement of your submission within two business days. 13 EMA reserves the right to make public all or parts of any written submissions made in response to this Consultation Paper and to disclose the identity of the source. Any part of the submission, which is considered by respondents to be confidential, should be clearly marked and placed as an annex. EMA will take this into account regarding disclosure of the information submitted. 2 Refer to MSSL Licence Notification 2, dated 16 August Page 2 of 6

5 Proposed Modifications to the Market Support Services Code Appendix I Modification Ref No. Clause Original Text Modified Text or Addition (Modifications in highlights; Additions in double underline) Reason for modification: To include a definition for the Forward Sales Contract (FSC) MSSC/2014/ NA [To insert the following definition] Reason for modification: To update the reference of the Electricity Act and the Energy Market Authority Act MSSC/2014/ relevant legislation means the Electricity Act 2001, the Energy Market Authority of Singapore Act 2001, and includes in each case the regulations made thereunder; forward sales contract means a contract or other financial arrangement between a Market Support Services Licensee and a Generation Licensee in a form approved by, and designated as a forward sales contract by, the Authority; relevant legislation means the Electricity Act (Cap. 89A), the Energy Market Authority of Singapore Act (Cap. 92B), and includes in each case the regulations made thereunder; Reason for modification: To include FSC as one of the contracts the MSSL enter into with the generation licensees MSSC/2014/3 2.3 Vesting Contracts Vesting Contracts and Forward Sales Contract MSSC/2014/ A Market Support Services Licensee shall, if so required by its electricity licence, enter into vesting contracts with Generation Licensees. MSSC/2014/ Where a Market Support Services Licensee has entered into a vesting contract with a Generation Licensee, the Market Support Services Licensee shall determine vesting contract credits or debits in accordance with equation 6.1(c) for each contestable consumer, regardless of the contestable consumer s purchase arrangements. In A Market Support Services Licensee shall, if so required by its electricity licence, enter into vesting contracts and forward sales contracts with Generation Licensees. Where a Market Support Services Licensee has entered into a vesting contract or a forward sales contract with a Generation Licensee, the Market Support Services Licensee shall determine vesting contract credits or debits in accordance with equation 6.1(c) for each contestable consumer, regardless of the contestable consumer s purchase arrangements. In the case of a non-market Page 3 of 6

6 Modification Ref No. Clause Original Text Modified Text or Addition (Modifications in highlights; Additions in double underline) the case of a non-market participant consumer, the participant consumer, the Market Support Services Market Support Services Licensee shall include such credit or debit as a separate line item on the contestable consumer s bill or on the bill to the Licensee shall include such credit or debit as a separate line item on the contestable consumer s bill or on the bill to the Retail Electricity Licensee from whom the consumer Retail Electricity Licensee from whom the purchases electricity, and shall settle for this amount. In the consumer purchases electricity, and shall settle for this amount. In the case of a market participant consumer, the Market Support Services Licensee shall settle for the amount of such credit or debit with the market participant consumer or the Retail case of a market participant consumer, the Market Support Services Licensee shall settle for the amount of such credit or debit with the market participant consumer or the Retail Electricity Licensee from which the market participant consumer purchases electricity. Electricity Licensee from which the market participant consumer purchases electricity. Reason for modification: To subsume FSC credits and debits in the vesting credits and debits for market settlement between MSSL and contestable consumers MSSC/2014/ Equation 6.1 (c) VCC r B Where: k r nm, r VCRP PRP TLF E VHP B h Q h h h Where: Equation 6.1 (c) {[( ) ( ) ] } r VCC B k VCRP h = Vesting contract credit for consumer r in billing period B ($); or 0, if nm r E, h is negative = Vesting Contract Reference Price for half-hour h for the settlement account associated with the MSSL counterparty calculated in = Vesting contract credit for consumer r in billing period B ($); or 0, if nm r E, h is negative Page 4 of 6

7 Modification Ref No. Clause Original Text Modified Text or Addition (Modifications in highlights; Additions in double underline) accordance with the applicable provisions of Chapter 7 of the Market Rules PRP Q VHP h = Payment Reference Price ($/kwh) for quarter Q, determined quarterly on the basis of such methodology and on such schedule as may be specified by the Authority = Vesting contract proportion factor for half-hour h, determined quarterly on the basis of such methodology and on such schedule as may be specified by the Authority = Vesting Contract Reference Price for half-hour h for the settlement account associated with the MSSL counterparty calculated in accordance with the applicable provisions of Chapter 7 of the Market Rules = Payment Reference Price ($/kwh) for vesting contracts for quarter Q, determined quarterly on the basis of such methodology and on such schedule as may be specified by the Authority = Vesting contract proportion factor for half-hour h, determined quarterly on the basis of such methodology and on such schedule as may be specified by the Authority = Forward sales contract Reference Price for the half hour h for the settlement account associated with MSSL counterparty calculated in accordance with the applicable provisions of Chapter 7 of the Market Rules = Payment Reference Price ($/kwh) for forward sales contracts for quarter Q, determined quarterly on the basis of such methodology and on such schedule as may be specified by the Page 5 of 6

8 Modification Ref No. Clause Original Text Modified Text or Addition (Modifications in highlights; Additions in double underline) Authority MSSC/2014/ (b) Credits/debits associated with vesting contracts calculated in accordance with equation 6.1(c) MSSC/2014/ (b) Credits/debits associated with vesting contracts calculated in accordance with equation 6.1(c) MSSC/2014/ (b) Credits/debits associated with vesting contracts calculated in accordance with equation 6.1(c) = Forward sales contract proportion factor for half-hour h, determined quarterly on the basis of such methodology and on such schedule as may be specified by the Authority Vesting contract credits/debits in accordance with equation 6.1(c) Vesting contract credits/debits in accordance with equation 6.1(c) Vesting contract credits/debits in accordance with equation 6.1(c) MSSC/2014 / (b) Credits/debits associated with vesting contracts calculated in accordance with equation 6.1(c) Vesting contract credits/debits in accordance with equation 6.1(c) ********** Page 6 of 6