The information in this presentation has been collated by ELEXON and while all due care has been taken to ensure the accuracy of this information, ELEXON accepts no responsibility for errors.

Market Integration: England, Wales and Scotland

Brian Saunders

The information in this presentation has been collated by ELEXON and while all due care has been taken to ensure the accuracy of this information, ELEXON accepts no responsibility for errors.

Contents

• ELEXON and NETA

• The BSC is not NETA

• How is it supposed to work?

• How has it worked?

– Prices, volumes, changes

• Impact on/of the market

• Security of Supply

• NETA to BETTA There are two T’s in BETTA

Overview of the E&W Electricity Market Place

Transmission and SOPrivate Monopoly

No generation – open accessCan trade for system balancing

Shallow Connection ChargesMild Zonal UoS Charges

Self DespatchPartial separation of SO/TO coming

RPI –x Control

GenerationPrivate

Fully competitiveSome Vertical Integration of

Generation and Supply

Diverse mix for nowNo price controls

SupplyPrivate

Fully competitiveNo “Host Supplier”

(legally)Fragmented competitive

servicesNo price controls

Distribution12 Private Monopolies

No Supply or Generation (but can be owned by VI

companies)Open access

Facing major change if distributed generation grows

RPI-x Control

BSC

ELEXON’s Role in NETA

New Electricity Trading

Arrangements

(E&W)

ELEXON &Panel

Contracts

Trading

Exchanges

Risk Management

Problems of the Pool

• One price• Mechanism• Manipulable• CompulsoryProduction

set the price DemandTook the price

• Barrier

Also inherently difficult to change

Exchanges

• 2 Exchanges – UKPX & APX

– Typical Exchange Volumes

* Contracts * Volume

• Standardise Contract Form – GTMA

• Bilateral

• Volume in BM – 2%

• SO can buy forward

Settlement

Settlement Process

Contract Notifications

Meter Readings

Accepted Bids and Offers

And PX data

Cashout Prices - SSP/SBP

Accepted Bids & Offers Energy Imbalance Cashout

System Operator Charges Spread of Surplus

(Don’t forget competition for 22 million customers)

Transmission & Cross Border

• UoS Charging - Slightly zonal

- Developing TTR

• Interconnectors - Auction for Capacity

- Trade at entry

• Connection - Shallow

Why? The design intent of the BSC

• Replace the Pool

• Encourage bi-lateral trading

• Enable competition for Balancing Services

• Allocate costs of imbalance

• Responsive governance

• Get out of the way!

Imbalance Cash out prices

Daily Average Sysem Prices Since NETA Go Live

-£50

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£150

£200

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SSP

SBP

Wholesale Prices

Annual OTC Prices Since NETA Go-Live

0

5

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Annual Baseload Annual Peakload

Wholesale Prices

Day Ahead OTC Prices and System Prices Since NETA Go-Live

-10

10

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50

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Day Ahead Baseload Day Ahead Peakload SSP SBP

Volumes

• Imbalance volume ~2%

• Total notified contracts 3 times physical consumption

• Number of notifications 4.7 million* since Go live

* As at 09/06/03

Flexible?!

• 143 Proposed Modifications to the BSC

• 114 decisions made, 12 withdrawn

• Many already implemented

Impact on the Market

• Low wholesale generation prices, but rising

(NETA plus )

• Some consolidation

• Vertical integration

• Industrial and commercial customers happy

• Doubts about pass through to domestic customers – more work on change of supplier in hand

Impact of the Market

• BSC and NETA coped well with corporate failures and administration

• Credit arrangements well tested - robust but complex - Cash or LoC only; Credit Rating not accepted

• Security of Supply?

Security of Supply

• This was examined carefully by a report to Government and by a recent White Paper by Government

• Security of Supply (generation) has been left to the market

• Government and Regulator have statutory responsibilities

• Some mothballing – No major permanent closures yet. SO caution

NETA to BETTA

• Working so well it is being rolled out to include Scotland

• There are two T’s in BETTA

British Electricity Trading and Transmission Arrangements

The Big Change

• System and Transmission Operation

England and Wales

TO

GB System Operator

Scotland TO Scotland TO

NGC Scottish PowerScottish and

Southern

How deep?

GB Settlement?

• BSC to GB BSC

• Extension of geographic scope

• Consequential changes only

• Still a significant piece of work for ELEXON

Summary

• NETA has worked and delivered its design intent

• Recent reviews have identified no major changes

• Flexible governance has enabled beneficial change – more to come

• Roll out to GB – transmission issues still outstanding

BUT THE LIGHTS HAD BETTER STAY ON!