ITC, Inter TSO Compensation mechanism

1
ITC, Inter TSO Compensation mechanism

• TCMF 22 June 2006

2
Why we need to join

• National Grid is required to comply with the
  Regulations
• Regulation 1228/2003 allows for binding
  guidelines dealing with a number of issues
• Tariff Harmonisation
• Congestion management
• ITC scheme
• ERGEG recently consulted on guidelines for an ITC
  scheme
• National Grid is required to join ITC when
  guidelines become active
• Proposed implementation date 1 January 2007

3
The proposed scheme

• Three elements
• Costs
• Existing costs vs LRAIC
• Infrastructure
• IMICA
• Losses
• WWT

4
Infrastructure principles

• Improved ETSO scheme
• Compensation cost reflective - MWkm impact
• more accurate contributions
• Removing payment for causing loop flows
• Sensitivity factors for each combination
• E.g. France to Portugal effect on Spain
• Compensation based on reference exchanges
• Compensation and contribution calculated
  simultaneously
• Minimum of 72 snapshots

5
Losses principles

• Based on with without transits
• Compensation
• Calculate losses with transit
• Calculate losses without transit
• Multiply difference by a reference price
• Calculated in isolation
• Based on a minimum of 72 snapshots
• Contribution
• Based on metered imports and exports
• Socialised centrally calculated

6
Review charging methodology

• Required to take account of regulation in
  charges for network access
• Consistency with ITC principles
• Currently
• Interconnector Owners charged on same basis as
  generators and suppliers
• Under ITC scheme
• ITC provides compensation for transits
• Need to review GB charges for transit
• Not all imports and exports lead to transits

7
Initial proposal

• Adjust the TNUoS charge for interconnected
  parties
• Establish transit
• Based on average hourly flow
• Subtract from chargeable TEC
• Subtract from chargeable demand
• Additional rules for more than 2 interconnectors
• CISG comment on proposals

8
Issues

• Rules for sharing transit
• How to manage January to March
• When to consult (ERGEG next meeting 5 Oct)
• Not enough certainty to consult prior to this
• European commission comitology