cer15017 cer annual report and accounts - 2013 (english)
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A n n u a l R e p o r t 2
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Note to Minister (30th June 2014)
To: Mr Pat Rabbitte, T.D., Minister for Communications,
Energy and Natural Resources
In accordance with paragraph 25 (b) of Schedule 1 to the
Electricity Regulation Act, 1999, as amended by Section 10 Energy
(Miscellaneous Provisions) Act, 2006, we are pleased to present
to you the twelfth Annual Report of the Commission for Energy
Regulation, in respect of the period from 1st January 2013 to 31st
December 2013.
Garrett Blaney
Chairperson
Paul McGowan
Commissioner
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Table of Contents
Foreword by the Commissioners 02
Public Interest Statement 12
Energy Efficiency 2013 16
Statement of Best Practice 18
Background to the Annual Report 20
Key Task 1: Wholesale Market Integration 22
Key Task 2: Smart Metering Programme 28
Key Task 3: Petroleum Safety Project 32
Key Task 4: Water Project 36
Key Task 5: Key Operational Items 38
Key Task 5 (a): Retail Monitoring and Customer Protection 38
Key Task 5 (b): Energy Networks 44
Key Task 5 (c): Progress Existing Onshore Safety System 50
Key Task 5 (d): European Matters 56
Financial Statements 66
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COMMISSION FOR ENERGY REGULATION (CER)
Introduction
The Commission for Energy Regulation (“the CER”) is
Ireland’s independent energy and water regulator. The
CER was established in 1999. Since then its powers
and functions have expanded and it now has a wide
range of economic, customer protection and safety
responsibilities in energy. The CER has been given a new
role as the economic regulator of the Irish public water
and wastewater sector which took effect in early in 2014.
Below we provide a brief summary of our diverse roles
across energy and water.
Economic Regulation
Energy
Our aim is to protect the interests of energy customers,
maintain security of supply, and to promote competition
covering the generation and supply of electricity andsupply of natural gas. As part of this role, the CER jointly
regulates the all-island wholesale Single Electricity Market
(SEM) with its counterpart in Northern Ireland, the Utility
Regulator. The SEM is governed by a decision-making
body known as the SEM Committee, consisting of the
CER, the Utility Regulator and an independent member.
Water
The CER has recently assumed the role of economic
regulator for the public water and wastewater sector,covering the services provided by Irish Water. Our primary
aim is to protect the interests of customers of Irish Water.
This role will focus on water and wastewater charges and
customer protection.
Customer Complaints
The CER has an important related function in customer
protection by resolving complaints that customers have
with energy companies through its Customer Care team.This will expand to deal with Irish Water customers, in line
with legislation.
Energy Safety Regulation
In energy safety, the core focus of the CER is to protect
lives across a range of areas in the energy sector. This
includes safety regulation of electrical contractors and
gas installers (covering both natural gas and Liquefied
Petroleum Gas (LPG). In addition, the CER is the
safety regulator of the downstream natural gas industry(covering storage, transportation and supply) and LPG
piped distribution systems. It is also safety regulator of
upstream petroleum safety extraction and exploration
activities; this includes oil and gas activity both onshore
and offshore.
Purpose of this Document
This document details the CER’s Annual Report for 2013.
It outlines the key work items delivered by the CER during
2013, with reference to its stated Work Plan for 2013published in March 2013. It also briefly touches on some
of the key challenges ahead, which will be encapsulated
in further detail in the CER Work Plan for 2014.
Overview of this Document
Overview of Key Tasks Progress during 2013
In common with previous years, 2013 presented many
challenges and opportunities for the CER and its staff
across the range of its energy safety and energy andwater economic functions. To provide structure to our
reporting we establish a set of Key Tasks from the full
Foreword by the Commissioners
Chairperson Garrett Blaney Commissioner Paul McGowan
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range of operational functions and projects which we
undertake each year. The CER’s expanded functions in
the areas of both water regulation and petroleum safety
regulation were the subject of dedicated projects under
which significant progress was made in 2013, including
the enactment / commencement of significant new
pieces of legislation. Both the I-SEM (Integrating theSEM wholesale market into European markets) and the
National Smart Metering Programme represent major
transformational projects across energy wholesale and
retail markets; both of these projects also saw significant
progress in 2013. The operational aspects of the CER’s
functions are equally significant to delivering consumer
benefits across the energy market and in public safety
and we report here on the progress made in various
areas including wholesale and retail markets regulation,
networks regulation and energy safety oversight.
Below is a summary of the five keys tasks that were
outlined in the CER Work Plan 2013 and an overview of
progress against these tasks by the end of 2013. Further
detail for each key task is contained within the main
sections of this document.
1. Key Task 1 – Wholesale Market Integration
2. Key Task 2 – Smart Metering Programme
3. Key Task 3 – Petroleum Safety Project
4. Key Task 4 – Water Project
5. Key Task 5 – Key Operational Items:
(a) Retail monitoring and customer protection
(b) Energy networks
(c) On-shore safety
(d) European energy matters
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Key Task 1: Wholesale Market Integration
2013 Work Plan 2013 Annual Report
The CER will work with the Utility Regulator to carry out a detailed review ofthe High Level Design of the Single Electricity Market (SEM) to ensure thatthe SEM can meet the requirements of the EU Target Model for electricity by
2016.
During 2013 the SEM Committee developed a Consultation Paper on theHigh level Design of the SEM from 2016. There was significant stakeholderengagement in this process culminating in the publication of the Consultation
Paper on the Integrated SEM (I-SEM) High level Design Options in February2014.
In early 2013 the CER will also decide on the next steps in relation to all-island gas arrangements, following the completion of an analysis of all-islandgas balancing and a cost-benefit study.
In the light of the findings of these studies and, more particularly, developmentsat EU/ACER level on the application of network codes in areas such as capacityallocation congestion management, balancing, inter-operability etc. It wasdecided to focus on cooperation in developing these codes.
Key Task 2: Smart Metering Programme
2013 Work Plan 2013 Annual Report
The CER’s smart metering roll-out programme is an important nationalenergy infrastructure initiative and the focus of 2013 will be on firming-upon the high-level design and requirements for a roll-out programme, with theinvolvement of all relevant stakeholders. The current plan is for a nationalroll-out of smart meters from 2015.
Significant progress was made in 2013 with the CER publishing its proposeddecision on the High Level Design of the Smart Metering solution in December2013. The national rollout strategy will be decided upon post the publication ofthe decision paper on the High Level Design in 2014.
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Key Task 3: Petroleum Safety Project
2013 Work Plan 2013 Annual Report
In April 2010 the CER’s safety role was expanded with the enactment of thePetroleum (Exploration and Extraction) Safety Act, 2010 to include the safetyregulation of petroleum undertakings engaging in certain petroleum activities.
Specifically the CER is required to establish and implement a risk-basedpetroleum safety framework (the Framework) which is based on a safety caseregime. To this end, the CER established the Petroleum Safety FrameworkImplementation Project which involves the CER:
• implementing the provisions of the Act in full; and,
• putting in place the people, processes and procedures to enable theeffective operation and enforcement of the Framework once implemented.
In 2011 the CER publicly consulted on its proposed high level design of thepetroleum Framework (the High Level Design), with the final High LevelDesign itself published in 2012. Following consultation on the detailed policies,
procedures and guidelines which underpin the Framework in 2012 and into2013, the CER expects the Framework to come into full effect in November2013.
During 2013, CER put in place the people, policies and procedures to giveeffect to the final design of the petroleum safety framework.
The following detailed design documents were published as part of the
Framework development in 2013:
• Designated Petroleum Activities Regulations (S.I. 89 of 2013);
• Petroleum Safety (Petroleum Incident) Regulations (S.I. 004 of 2014)
• ALARP Guidance;
• Safety Case Guidelines;
• Compliance Assurance System, comprising:
o Audit & Inspection;
o Facilities and Well Verification;
o Independent Safety Case Review; ando Safety Performance Reporting.
On December 18th 2013, the remaining provisions of the Petroleum(Exploration and Extraction) Safety Act, 2010 were enacted and theresponsibility for Petroleum Safety Regulation under the approved frameworkin Ireland was conferred on the CER. At this point, the CER had in place thepeople, processes and procedures to enable it to carry out its new safetyregulatory functions.
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Key Task 4: Water Project
2013 Work Plan 2013 Annual Report
Subject to forthcoming legislation, the CER will create an economic regulatoryframework for the public water and waste water system. This f ramework willrequire Irish Water to provide a high level of services to water customers at a
regulated price.
In 2013, the CER published two documents, The CER and Water Regulation inIreland, an information paper, to introduce stakeholders to the expected futurerole of the CER in the public water services sector, outlining the CER’s values,
and the benefits that independent regulation can bring to the sector. Thispaper included indicative timelines for project deliverables in 2014.
In parallel to the information paper, the CER published a consultation on theEconomic Regulatory Framework for the public Irish water services sector.This consultation covered the workstreams that CER proposed to undertake inestablishing the economic framework and the work items pertaining to eachof these of workstreams.
Key Task 5: Key Operational Items
(a) Retail monitoring and customer protection
2013 Work Plan 2013 Annual Report
The CER’s core tasks in the retail markets will continue to be the promotion ofcompetition, leading to the full deregulation of all gas and electricity marketsand the implementation of additional measures to protect and empowercustomers in the competitive market. The CER will continue to monitorthe retail markets to ensure that suppliers comply with all relevant marketrequirements and that consumers are benefitting from competition.
The CER will also continue to resolve issues that customers have with theirnetwork operator or supplier through its Energy Customers Team.
In 2013, CER publicly consulted on the Market Monitoring Framework tosupport its role in promoting competition in the gas and electricity retailmarkets. The framework has been developed to provide the CER with effectivesight of the market.
The CER continued its work to assist customers in seeking out the best dealsand it accredited a second price comparison website, Uswitch.ie.
The CER also audited domestic suppliers to ensure that they were meeting theminimum requirements, as set out in the Supplier Handbook.
The CER continued its work in ensuring that customers enjoy a high level ofprotection, with a particular emphasis on customers having trouble payingbills, through support for installation of Pay As You Go meters.
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Key Task 5: Key Operational Items
(b) Energy networks
2013 Work Plan 2013 Annual Report
With regard to electricity networks, the CER will continue the implementationand monitoring of the current price control (PR3) for ESB Networks andEirGrid which runs until end 2015. In addition to this, 2013 will be animportant year for the development of Gate 3 renewable connections withconstraint and curtailment reports from EirGrid to be prepared and issued. TheCER will continue to oversee Gate 3 and other connection matters includingpolicy in relation to non GPA (non Group Processing Approach) applicants. Thefurther integration of renewable energy onto the electricity system will also bea priority as the CER works with the Northern Ireland Utility Regulator and theTSOs on the DS3 project (Delivering a secure, sustainable power system).
In natural gas, with the completion of Price Control 3 in 2012, the CER will,during 2013, continue to ensure that gas is safely and securely delivered to
customers and that charges are efficient and customer service levels aremaintained to the best international standards. A key focus in 2013 will be thecertification of the Independent Transmission Operator. Subject to the outcomeof existing Judicial Review proceedings, the redesign of the TransmissionTariffing arrangements is expected to be ongoing through 2013.
For energy networks, European work is also a key focus – please see part (d)of this key task.
CER continued the implementation and monitoring of the current price control(PR3) for ESB Networks and EirGrid which runs until end 2015. In 2013EirGrid prepared and issued constraint and curtailment reports for most Gate3 renewable connections. These followed the SEM Committee’s decision onthe Treatment of Curtailment in Tie-Break situations (SEM-13010) which setthe framework which allowed constraint modelling to be completed. The CERcontinued to oversee Gate 3 and other connection matters including policy inrelation to non GPA (non-Group Processing Approach) applicants. CER workedwith the Northern Ireland Utility Regulator and the TSOs on the DS3 project(Delivering a secure, sustainable power system). CER supported the SEMCommittee in publishing a consultation paper on the TSOs’ recommendationsand its decision on the technical definitions of the DS3 services.
In natural gas, following the completion of Price Control 3 in 2012, the CERcontinued its operational focus to ensure that gas was safely and securelydelivered to customers and that charges were efficient and customer servicelevels were maintained to the best international standards.
In July 2013 the CER decided to grant BGÉ preliminary certification asan ITO, subject to the completion of all outstanding ITO items identified inthe CER’s preliminary certification decision. The rationale for the delay infull Independent Transmission Operator (ITO) certification was due to theimpending sale of Bord Gáis Energy, which would result in BGE becomingFully Ownership Unbundled (FOU). Specifically, the CER was of the viewthat the imposition of a full ITO model, such as rebranding, would impose
unnecessary transaction costs on BGE in the likely event that BGE becameFOU by 2014.
In December 2013, the Irish Government confirmed that a preferred bidderwas selected for the purchase of Bord Gáis Energy, with the final sale tobe concluded in 2014. Consequently, in 2014, the CER will be workingtowards reviewing BGE’s FOU certification application, and certifying BGEin accordance with Directive 2009/73/EC (concerning common rules for theinternal market in natural gas) and Regulation (EC) 715/2009 (conditions foraccess to the natural gas transmission network).
In December 2013, the High Court delivered its verdict on the Judicial Review
of the CER decision “The regulatory treatment of the BGÉ Interconnectors andfuture transmission tariff regime”. The High Court upheld the CER decision;further to this the CER will in 2014 commence the process of reform of thetariffing arrangements in line with the 2012 decision.
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Key Task 5: Key Operational Items
(c) On-shore safety
2013 Work Plan 2013 Annual Report
During 2013 the CER will continue implementing its existing downstreamsafety obligations in electricity and gas safety. This includes continuing tomonitor the downstream gas and electrical safety frameworks.
The work plan for 2013 will focus on continuing the development of thenecessary process and procedures needed to give effect to the CER’s newlegal enforcement powers. This will ensure that identified breaches of thegas safety framework by natural and LPG gas undertakings are rectified. TheCER will also continue to monitor and enforce provisions of the 1999 Act (asamended by, inter alia, the Energy (Miscellaneous Provisions) Act, 2006),through the operation of the regulatory regime for gas installers and electricalcontractors. Investigations of gas safety incidents will remain an on-goingpriority.
Audits and inspections were carried out on natural gas undertakings, includingBord Gáis Networks, shippers and suppliers.
Initial work was carried out which will allow Liquefied Petroleum Gas (LPG)undertakings to be regulated under the Gas Safety Framework during 2014.
Two type B, one type C and 16 ‘reportable under guidance’ incidents werereported to the CER under the Gas Safety Framework.
The performance of the gas and electrical Safety Supervisory Bodies weremonitored by the CER through quarterly reporting, audits and inspections.
An individual was prosecuted in October 2013 for carrying out Gas Works,while not being registered as a Registered Gas Installer.
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Key Task 5: Key Operational Items
(d) European energy matters
2013 Work Plan 2013 Annual Report
The CER will continue to work at a European level on the development ofrelevant Agency for Co-operaton of Energy Regulators (ACER) FrameworkGuidelines and associated Network Codes (including task 1 for the “targetmodel”), as well as on the implementation of Regulation 994 (Gas Security ofSupply) and the EU Regulation on Energy Market Integrity and Transparency(REMIT).
Work will be advanced also on the implementation of the European FrameworkGuidelines and Codes at the gas interconnection points at Moffat and theSouth North Pipeline. Specifically, UK, Ireland and Northern Ireland workprogrammes will be finalised in 2013 and congestion management procedureswill be implemented.
One additional area is our interaction with stakeholders and European partners
on the completion of the CER’s list of Projects of Common Interest (PCIs) forboth gas and electricity.
During 2013, the development of a number of Framework Guidelines andNetwork Codes were progressed. The Capacity Allocation and CongestionManagement (CACM) Network Code moved into comitology phase with anumber of other network codes awaiting comitology phase.
Progress was made on the programme for implementation of the EUGas Network Codes in 2013. Support was provided to DCENR for thecomitology process on Capacity Allocation Management (CAM), Balancingand Interoperability Codes. In addition, the CER played a significant role inthe Agency for the Co-operation of Energy Regulators (ACER) developmentof the framework guidelines for tariffs. The CER worked closely with theTransmission System Operators (TSOs) and adjacent National RegulationAuthorities (NRAs) on the implementation of the CAM code and a series
of trilateral meetings were held towards the end of the year. CongestionManagement Principles were put in place at Moffat and South North Pipelineby 1st October as required by EU deadline.
The CER had a significant role to play in 2013 in progressing PCI (EuropeanProjects of Common Interest) applications under the European InfrastructureRegulation. The European Commission published the Energy InfrastructureRegulation and the list of PCI projects was finalised in October 2013.There are 14 Irish Electricity PCIs, ranging from a proposed France Irelandinterconnector and pumped hydro projects in Mayo, to the North AtlanticGreen Zone Smart Grid Project being conducted by ESBN and EirGrid inconjunction with the Northern Ireland System Operators (SOs). In 2013 the
CER continued its PCI work by contributing to:
• Input to European Commission and ACER on the development of theenduring arrangements for selection of projects of common interest andcarrying out the tasks assigned to NRAs
• Development of methodology and the criteria that will be used to evaluateinvestments in electricity and gas transmission projects and the higherrisks associated by them. The CER contributed to the development ofa Cross Border Cost Allocation methodology, and Cost Benefit Analysismethodology developed by ENTSO-E and ENTSO-G; the Europeanorganisations for the electricity and gas network operators,
• Input of CER’s evaluations on regional gas and electricity projects.
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Looking Ahead
The CER looks forward to the operational and project
challenges of 2014. It is a year in which we will see the
introduction of domestic water charges, the full operation
of the Petroleum Safety Framework, the expected
deregulation of the domestic retail market for gas and the
ensuing focus on market monitoring, and the finalisationof a high level design for the new Integrated Single
Electricity Market (I-SEM), amongst other things.
Building on our achievements to date and looking forward
to new challenges, the CER will continue to endeavour to
provide a first-class regulatory service to all its customers
in a cost-effective manner.
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COMMISSION FOR ENERGY REGULATION (CER)
Ireland’s Energy Regulator
In 2013 the CER commenced a review of its Strategic
Plan and priorities for the period 2014-2018. That work
is now nearing completion and our proposals in this area
are reflected in this report for 2013.
The Commission for Energy Regulation (CER) is theindependent body in Ireland with a mission of ‘regulating
water, energy and safety in the public interest’. Our vision
is as follows:
The short and long run interests of the public are protected
by ensuring:
• energy is supplied safely;
• the lights stay on;
• the gas continues to flow;
• a reliable supply of clean water and efficient treatment
of wastewater;
• consumer prices for energy and water are fair and
reasonable; and
• regulation is to best international practice.
In fulfilling our mission and our statutory functions, it is
vital that the CER develops and adheres to key values for
the organisation so that all stakeholders, and particularly
the public, trust us and have faith that we will serve them
properly as an independent regulator. In regulating we
stress that:
• We are committed to public service – we will always
act in the public interest
• We act with integrity in everything we do
• We are professional in our dealings with stakeholders
• We are accessible to stakeholders – we listen to what
people have to say
• We are proportionate and objective – we take balanced
decisions
• We are transparent – we are open to scrutiny and are
committed to explaining our decisions
• We are accountable for our decisions and for the way
we spend our resources
• We value and develop our staff – they are our chief
resource
For detailed information on our work please see our
website at www.cer.ie
Duties & Functions
The Commission for Energy Regulation (CER) is Ireland’s
independent energy and water regulator. The Commission
was established in 1999. Since then its powers and
functions have expanded and it now has a wide range of
economic, customer protection and safety responsibilitiesin energy. The Commission has also commenced its new
role as the economic regulator of the Irish public water
and wastewater sector which took effect in early 2014.
The Commission is financed by means of a levy on
industry. An overview of the Commission’s current (as at
June 2014) key functions are as follows:
• Economic Regulation of Energy: Our aim is to protect
the interests of energy customers, maintain security
of supply, and to promote competition covering the
generation and supply of electricity and supply of
natural gas. As part of this role, the Commission jointly
regulates the all-island wholesale Single Electricity
Market (SEM) with its counterpart in Northern Ireland,
the Utility Regulator. The SEM is governed by a
decision-making body known as the SEM Committee,
consisting of the Commission, the Utility Regulator and
an independent member.
• Economic Regulation of Water: The Commission has
recently assumed the role of economic regulator forthe public water and wastewater sector, covering the
services provided by Irish Water. Our primary aim is to
Public Interest Statement
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protect the interests of customers of Irish Water. This
role will focus on water and wastewater charges and
customer protection.
• Customer Complaints (Energy & Water): The
Commission has an important related function in
customer protection by resolving complaints that
customers have with energy companies through itsCustomer Care team. This will expand to deal with Irish
Water customers, in line with legislation.
• Energy Safety Regulation: In energy safety, the core
focus of the Commission is to protect lives across
a range of areas in the energy sector. This includes
safety regulation of electrical contractors and gas
installers (covering both natural gas and Liquefied
Petroleum Gas (LPG). In addition, the CER is the safety
regulator of the downstream natural gas industry(covering storage, transportation and supply) and LPG
piped distribution systems. It is also safety regulator of
upstream petroleum safety extraction and exploration
activities; this includes oil and gas activity both onshore
and offshore.
The following is an overview of the key legislation
underpinning CER’s duties and functions:
• The CER was established under the provisions of the
Electricity Regulation Act, 1999, and has taken onsignificant additional responsibilities since then under
various pieces of legislation. Responsibility for the
regulation of the natural gas market was conferred
upon the CER under the Gas (Interim) Regulation Act,
2002.
• The Energy (Miscellaneous Provisions) Act 2006
added to the role and functions of the CER, including
providing for additional responsibilities in natural gas
and electrical safety.
• The Electricity Regulation Amendment (SEM) Act,
2007 outlined the CER’s functions in relation to the
Single Electricity Market (SEM) for the island of Ireland.
The SEM is governed through the SEM Committee
consisting of the CER, the Utility Regulator in Belfast
and an Independent Member.
• In 2010 the CER’s statutory safety responsibilitiesexpanded significantly with the enactment of the
Petroleum (Exploration and Extraction) Safety Act,
2010. Further legislation has seen the Registered
Gas Installer scheme expand to include Liquefied
Petroleum Gas (LPG) installers and piped LPG
distribution systems that supply domestic customers.
• The Water Services Act (WSA) was enacted in March
2013. The Act empowered CER to commence
preparation for the role of Economic Regulator forpublic water and waste water services as provided by
Irish Water to domestic and business customers..
• The Water Services (No.2) Act 2013 was enacted on
25th December 2013. With effect, from 1st January
2014, the Act provides for the transfer of Water
Service functions from Local Authorities to Irish Water
and CER assumed the role of economic regulator for
the sector soon thereafter.
CER Organisation 2013The CER is headed by up to three Commissioners at
any one time. In 2013 the Commissioners were Dermot
Nolan, Chairperson, Garret Blaney and Paul McGowan
(who was appointed Commissioner in March 2013).
The Commissioners were assisted in their duties by a
staff of about 80, including 4 directors. The chart below
summarises the organisational structure from last year.
There were a number of organisational changes during
2013 including the appointment of Sheenagh Rooney as
Director of Energy Safety in May 2013, replacing PaulMcGowan who became Commissioner.
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COMMISSION FOR ENERGY REGULATION (CER)
Since last year Garrett Blaney has been appointed as
Chairperson (in February 2014) following the departure
of Dermot Nolan. Dermot left to become the head of
Ofgem, the British energy regulatory body, and his former
colleagues in the CER would like to thank him sincerely
for his significant leadership and contribution to the workof the CER during his tenure in the CER. There were also
a number of other organisational changes since last year
including the appointment of Laura Brien in February
2014 as Director of Energy Markets, replacing Eugene
Coughlan who retired at the end of 2013 - his former
colleagues in the CER would like to thank him sincerely
for his significant leadership & contribution to the work of
the CER during his many years’ service. These and otherorganisational changes in 2014 will be reflected in next
year’s annual report.
CER Organisation 2013
Dermot Nolan
Chairperson
Garrett Blaney
Commissioner
Paul McGowan
Commissioner
Cathy Mannion
Director of EnergyRetail & Water
Eugene Coughlan
Director of ElectricityMarkets
Eugene Coughlan
Director of Operations
Denis Cagney
Director of GasRenewables and Legal
Sheenagh Rooney
Director of Safety
Transmission
Distribution
Independent SystemOperator
Smart Metering
EW Interconnector
Electricity and GasRetail (Water)
Energy Customers TeamCEER / ACER
Market Modelling
Trading & SettlementCode
Joint Reg Arrangement
Electricity Generation
Security of SupplyGas & Electricity
Emergency ProceduresCEER / ACER
Human Resources
Finance
Business InformationCentre
I.T.
Networks - Technical
Networks - Commercial
Independent SystemOperator
All Island GasRenewables
CER Legal
CEER / ACER
Safety Supervision
Gas Safety Framework
Petroleum SafetyFramework
EUOAG / NSOAF
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Information Provision
The CER is committed to providing a high quality, user-
friendly and easily accessible service to our customers in
all of our areas of responsibility, as set out in its customer
charter which is available on www.cer.ie. An upgrade of
the CER website was initiated in 2013 and completed in
early 2014 with the launch of the enhanced website.
In making its decisions on policy matters, the CER regularly
carries out formal consultations with stakeholders over its
website www.cer.ie and the associated website for all-
island energy regulatory issues, at www.allislandproject.
org. Responses to these consultations are considered
in the formulation of decision papers. The CER also
regularly communicates and meets with industry and
customer stakeholders.
This process of formal consultation was in evidence during
2013 when the CER made public policy consultations
and decisions to achieve its mission (shown above) in
the public interest. This is detailed in the “5 Key Tasks” in
this Annual Report which focuses on the most important
strategic tasks that the CER set for itself for 2013 in
order to achieve its mission. For example:
• Key Task 1 (Wholesale Market Integration)
contributes to the lights staying on and the electricity
prices being fair and reasonable for customers.
• Key Task 2 (Smart Metering Programme)
contributes to electricity/gas prices being fair and
reasonable for customers and to the environment
being protected.
• Key Task 3 (Petroleum Safety Project) contributes
to energy being supplied safely.
• Key Task 4 (Water Project) contributes to a
reliable supply of clean water and efficient treatment
of wastewater and also contributes to ensuring that
customer prices for water are fair and reasonable.
• Key Task 5a (Retail monitoring and customer
protection) contributes to electricity/gas prices being
fair and reasonable for customers.
• Key Task 5b (Energy networks) contributes to
the gas continuing to flow, the lights staying on and
customers paying fair and reasonable prices for their
electricity/gas.
• Key Task 5c (On-shore safety) contributes to
energy being supplied safely.
• Key Task 5d (European energy matters)
contributes to achieving all elements of the mission
statement.
The CER also delivers energy information to the general
public and provides a dispute resolution service for
electricity and gas customers, through the CER websitesat www.cer.ie and www.energycustomers.ie and through
face-to-face meetings and through published documents.
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The CER, as a public sector agency, is fully committed to
playing its part in the achievement of energy efficiency
(reduction) targets – currently 33% - across the public
sector by 2020. Over the course of 2011 the CER
appointed its Energy Manager and established its Energy
Management Team. The team developed a CER Energy
Policy which was adopted by the CER in February 2011and has since been updated in April 2014.
The CER’s objective for 2013 in this area was: exemplary
performance in energy management and energy efficiency
in the public sector. In pursuance of this objective, the
CER put in place a number of initiatives, set out below.
The CER is participating in SEAI’s Public Sector
Programme “The Public Sector Energy Partnership”.
The CER is an active member of Sustainable Energy
Ireland (SEAI’s) Energy Consumption in the Public SectorProgramme.
With regards to awareness, the CER ran an Energy
Efficiency Competition between the different floors in the
office with weekly updates to encourage energy efficiency.
It also promoted awareness through the implementation
of signage and the installation of energy monitors.
Additional measures, not originally part of the 2013
programme, included a suggestion box for energy
efficiency ideas.
The results from the SEAI monitoring and reporting
system demonstrate the CER has made excellent
progress in terms of achieving our energy efficiency
target; we achieved 1st place in 2013. Our challenge now
is to maintain and improve upon this performance.
Energy Usage
The CER’s office accounts for 100% of its energy
usage. During 2013, a total of 181.6 MWh of energy wasconsumed, consisting solely of electricity. This represents
a small increase of 7.45 MWh on 2012.
The CER’s key performance metric is EnPI (please refer
to diagram above). On this measure the CER continued
to show improved efficiency in 2013.
Energy Efficiency – 2013
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We wish to state that the CER continues and will continue
to adopt best practice in the area of corporate governance
in carrying out its functions and duties. In this regard, the
CER is required to comply with the “Code of Practice for
the Governance of State Bodies” which was published by
the Department of Finance in October 2001 and updated
in May 2009. The CER is committed to complying withthe revised Code.
The CER is in compliance with the revised Code issued in
May 2009 save for a few generic elements which are not
relevant to an independent regulatory authority. The CER
has agreed with the Department of Communications,
Energy and Natural Resources on the extent to which
requirements are adapted to the CER.
Procedures that the CER currently has in place in this
regard include:
• A code of conduct for Commissioners and employees;
• Ensuring compliance with Irish and EU tendering and
procurement requirements;
• CER Corporate Procurement Plan;
• Procedures for the disposal of assets;
• Compliance with Government Policy on the
remuneration of Commissioners and members of staff;
• Provision of details of Members of the Commission’s
emoluments and details of the Chairperson’s
remuneration package within Financial Statements
published with the Annual Report;
• Submission of interim unaudited accounts to the
Department of Communications, Energy and Natural
Resources every six months;
• Appointment of external expertise to perform the
internal audit function. The report of the CER Audit
Committee is included in the Financial Statementssection of this Annual Report;
• Submission, to the Department of Communications,
Energy and Natural Resources, of a statement
confirming compliance with taxation laws and
confirming that all tax liabilities are paid on or before
the due date;
• Submission of “Report on Compliance with the Code
of Practice for the Governance of State Bodies” tothe Minister for Communications, Energy and Natural
Resources with the Annual Report and Financial
Statements;
• Completion of Strategic Plan - a new Strategic Plan
covering the period 2014 to 2018 was developed
in 2014. It is due to be finalised in mid-2014 after a
period of consultation.
• Development of an annual Work Programme to be
submitted to the Minister by 30 November each year.The Work Programme for 2013 was published on the
CER’s website on 8th March 2013;
• Implementation of a Risk Management Policy, which is
monitored by the CER;
• Establishment of a Risk Committee;
• Implementation of a policy on foreign travel; and
• Adoption of a policy for confidential disclosures
regarding possible irregularities in financial reporting.
The Commissioners met formally on 50 occasions in 2013,
and the number of Special meetings was 10. Chairman
Dermot Nolan attended 45 Commission meetings and 9
Special meetings, Commissioner Garrett Blaney attended
39 Commission meetings and 6 Special meetings and
Commissioner Paul McGowan attended 36 Commission
meetings and 10 Special meetings.
Statement of Best Practice
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Ethics in Public Office
We hereby confirm that we are not directly engaged in,
concerned in or interested in any electricity generating
business or in any electricity or natural gas transmission,
distribution or supply business or in any energy business,
whether as participator, investor, consultant or otherwise.
In addition, in respect of the period covered by this report,there are no registerable interests, as specified in the
Ethics in Public Office Acts 1995 and 2001 and the
Gas (Interim) (Regulation) Act, 2002, of our own, or, to
our actual knowledge, of a spouse or child, which could
materially influence us in, or in relation to, the performance
of the functions of our position.
Garrett Blaney
Chairperson
Paul McGowan
Commissioner
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Report Structure
This Annual Report provides an overview of the CER’s
key work items and achievements in 2013. While the
Annual Report is designed to provide an update on the
CER’s progress in achieving its strategic goals during
the year, many of the CER’s work items are ongoing and
will continue into and in some cases beyond 2014. Suchwork is generally mentioned here for completeness.
As part of the CER’s business planning process a large
number of work items were identified for commencement,
continuation or delivery during 2013. Of these, 5 were
selected as the CER’s “5 Key Tasks for 2013”. These key
tasks are distributed across the CER’s responsibilities
and were viewed as being the CER’s most important
strategic tasks for the year 2013 in order to achieve its
mission. While the main focus of the CER’s work during2013 was on these “5 Key Tasks”, each of the work items
contributed to the CER’s overall strategic objectives.
The following section of this Annual Report focus primarily
on the work carried out by the CER in meeting these 5
key strategic tasks, and related matters, in 2013. They
are discussed in the same order as listed below.
The Report then informs on the outcomes against the “Key
Performance Indicators” (KPIs) which were agreed with
the Department of Communications, Energy and NaturalResources as part of Department of the Taoiseach’s
“Better Regulation” drive.
Finally, the audited Financial Statements for the year
ended 31st December 2013 are provided at the end of
this Annual Report.
CER’s Five Key Tasks
In its work programme for 2013, published on the
CER’s website (8th March 2013), the CER identified
the following 5 key strategic tasks for commencement,
progression, or delivery during 2013, all of which would
help the CER to fulfil its mission statement. These tasks
are as follows, and are discussed in detail in the followingsections of the Report.
1. Key Task 1 – Wholesale Market Integration
2. Key Task 2 – Smart Metering Programme
3. Key Task 3 – Petroleum Safety Project
4. Key Task 4 – Water Project
5. Key Task 5 – Key Operational Items:
(a) Retail monitoring and customer protection
(b) Energy networks
(c) On-shore safety
(d) European energy matters
Please see the CER’s 2013 Work Programme for more
detail behind each of these tasks.
Background to the Annual Report
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The following items were identified as key tasks in the all-
island Single Electricity Market (SEM) for 2013:
• Publish a decision paper outlining the SEM Committee
recommendations to the Departments, DCENR and
DETI, on the next steps in the process of implementing
the European Target Model in Ireland/Northern Ireland;
• Procure international market design experts to advise
the Regulatory Authorities (RAs - CER and NAIUR)
on the High Level market design changes required to
implement the European Target Model in SEM;
• Engage in an inclusive consultation process with all
stakeholders on the changes to the High Level design
and endeavour to publish a decision on same by end
2013;
• Progress annual work streams such as DirectedContracts and generator charges/losses;
• Complete Capacity Payments Review; and,
• Implement regulatory changes decided on from the
market power and liquidity review.
The end of this section of the report also covers
wholesale/generation issues relevant to Ireland only, i.e.
security of supply, generation licensing and the Public
Service Obligation (PSO).
SEM Background
The SEM is the wholesale electricity market for the island
of Ireland which was opened on 1st November 2007.
Comprising two separate jurisdictional electricity markets,
the SEM is one of the first markets of its kind in Europe.
It is designed to provide for the least-cost source of
electricity generation to meet customer demand at any
one time across the island, while also maximising long-
term sustainability and reliability.
The SEM includes a centralised all-island gross
mandatory pool (or spot) market. In this pool, electricity
is bought and sold through a market clearing mechanism,
whereby generators bid in their marginal cost and receive
the System Marginal Price (SMP) for each trading period
for their scheduled dispatch quantities, with the cheapest
possible generator run to meet demand across the island.
Suppliers (to electricity customers) that purchase energy
from the pool, pay the SMP for each trading period alongwith capacity costs and system charges. This is illustrated
below, with the detailed rules set out in the Trading and
Settlement Code.
Key Task 1
Wholesale Market Integration
GENERATORS
Wholesale
Market
Generatorssubmit bids Generatorsreceive SMP
Retail
Market
POOL
SUPPLIERS
CUSTOMERS
Suppliers take
power at SMP
Suppliers
pay SMP
Customers
consume power
Customers
pay supplier
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The SEM is regulated jointly by the CER and its counterpart
in Belfast, the Northern Ireland Authority for Utility
Regulation (Utility Regulator), and together referred to as
the Regulatory Authorities or RAs. The decision-making
body which governs the market is the SEM Committee,
consisting of the CER, the Utility Regulator as well as an
Independent Member (who also has a deputy), with eachentity having one vote.
During 2013 the Regulatory Authorities continued to
monitor and oversee the SEM and the suite of regulatory
rules governing it, actively supervising the SEM and
representing the interests of all-island consumers. Key
SEM updates for 2013 are shown below.
European Market Integration
At the February 2011 European Council meeting,Member States committed to deliver a fully-functioning,
interconnected and integrated internal energy market
by 2014. The Communication on the Internal Energy
Market published by the European Commission on
15th November 2012 highlighted the benefits of a truly
integrated European market and identified the need for
further action in a number of areas including consumer
protection, enforcing the existing rules and investing in
the modernisation of energy infrastructure.
In this context, a key focus for the CER during 2013
was to develop plans to integrate the SEM into this pan-
European electricity market to promote cross-border
competition and deliver significant benefits to consumers.
The EU “Target Model” for electricity evolved out of
the EU’s Third Energy Package in 2009, which is a
set of legislative measures that aim to create a single
competitive European energy market. The Agency for the
Cooperation of Energy Regulators (ACER), established
under the third Package of EU energy legislation, hasidentified a number of key elements to the design of
the Target Model to facilitate market integration. These
include methods for calculating interconnector capacity
available across borders and determining appropriate
market zones. These also include methodologies for
allocating cross border capacity in different timeframes
namely forwards, day ahead and intraday.
SEM Market Integration Project (I-SEM)Due to its centralised structure and gross mandatory pool
design, it seems likely that the SEM will require significant
modifications in order to implement the Target Model. In
recognition of this, the SEM market was granted a two-
year derogation, an additional two years to implement the
Target Model, i.e. from 2014 to 2016.
In January 2012, the SEM Committee published a
Consultation Paper seeking views on options for the
implementation of the Target Model in Ireland andNorthern Ireland in a manner that is consistent with
national and EU policy objectives. In addition, the RAs
hosted a number of industry workshops and engaged
with a wide range of stakeholders including Government
Departments, System Operators, Ofgem and ACER to
discuss the issues involved in integrating SEM into the
European market.
The SEM Committee published a proposed decision
paper on the next steps in the process of market
integration in November 2012 and a final decision paper
in February 2013. The main conclusions of this decision
paper include:
• The establishment of a set of high-level principles
which will govern the design and implementation of the
new market;
• The establishment of project governance arrangements
with strengthened stakeholder engagement to ensure
that consumer groups and market participants are
adequately involved in the project.
• A commitment to maintaining the current structure
of the SEM until 2016 and to carrying out an impact
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assessment on the new market design in line with best
practice; and,
• A working assumption that the new market will
continue to be based on transparent, centralised
trading arrangements with least-cost dispatch.
• The total remuneration from energy payments, capacitypayments and ancillary services will be sufficient to
ensure security of supply.
Following the publication of the Next Steps decision paper
the Regulatory Authorities (RAs) initiated the project
to develop a new SEM High Level Design. The RAs
procured consultancy support to advise the RAs on this
project in September 2013. As part of the development
of the Consultation Paper, the RAs established a High
Level Design (HLD) Review Group consisting of experts
from across the energy industry and consumer groups.
The HLD Review Group met on four occasions from
October 2013 to January 2014 and discussed various
elements of the European Target Model and how SEM
could be changed to meet its requirements.
In early February 2014 the SEM Committee published a
consultation paper on the ‘High Level Design for Ireland
and Northern Ireland from 2016’. This consultation
paper contains four distinct options for energy trading
arrangements, including a qualitative assessment of eachoption against the High Level Design criteria. These four
options allow full consideration of the choices facing
the SEM in achieving compliance with the European
Target Model. The consultation paper also contained
a description of possible approaches to the explicit
remuneration of capacity that can be used to support any
of the four proposed options for the high-level energy
trading arrangements. As per the Consultation Paper,
the SEM Committee has named the new market to be in
place from 2016 the Integrated SEM or I-SEM for short.
The SEM Committee l published a Proposed Decision on
the I-SEM High Level Design in June 2014. This will be
followed by a final Decision on the High Level Design in
August 2014, along with a full impact assessment. The
I-SEM Project will then move to detailed design phase
with go live of the new market planned for end 2016.
Framework Guidelines and Network
CodesThe detailed rules of the Target Model are developed by
the Agency for Cooperation of Energy Regulators (ACER)
and the European Network of Transmission System
Operators for Electricity (ENTSOE) and are finalised by
the European Commission.
ACER initiates the process by developing Framework
Guidelines. Based on these Framework Guidelines,
ENTSOE develops detailed Network Codes. This is all
done in consultation with interested stakeholders. Thefinal Network Codes will be made into binding Regulations
following a comitology process. More information on this
process and the individual Framework Guidelines and
Network Codes is available on the ACER and ENTSOE
websites.
There are nine proposed Network Codes on:
• Capacity Allocation and Congestion Management
• Requirements for Generators
• Electricity Balancing
• Forward Capacity Allocation
• Demand Connection
• Operational Security
• Operational Planning and Scheduling
• Load Frequency Control and Reserves
• High Voltage Direct Current
ACER finalised the last Framework Guideline in 2012
and therefore the focus during 2013 was on providing
Reasoned Opinions on ENTSOE Network Codes. In
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addition to this, a number of Network Codes have entered
the informal stages of the comitology process.
In March 2013 ACER issued Recommendations to the
European Commission to adopt the Network Code on
Capacity Allocation and Congestion Management, the
Network Code on Requirements for Generators, and the
Demand Connection Code. The Capacity Allocation and
Congestion Management Network Code entered the
comitology process in December 2013.
In September 2013 the final Network Code on Operational
Security and the final Network Code on Operational
Planning and Scheduling were resubmitted to ACER by
ENTSO-E, following amendments being made in light of
ACER’s opinions and stakeholder comments.
In September 2013 ACER issued a positive reasonedopinion and recommendation to adopt the Network Code
on Load Frequency Control and Reserves.
In October 2013 ENTSO-E delivered the Network Code
on Forward Capacity Allocation to ACER. In December
2013 ACER published its Opinion on this Code, outlining
a number of issues on which it considers adjustments
are required. The mains issues raised by ACER related
to firmness of cross border capacity and timelines
for implementation. ENTSOE is currently reviewing
ACER and other stakeholder comments with a view toresubmitting the code in 2014.
In December 2013, ENTSO-E delivered the Network
Code on Electricity Balancing to ACER. ACER has a
period of three months to provide a Reasoned Opinion.
EC Consideration of Generation
Adequacy in the EU
In late 2012 the European Commission (DG Energy)
published a Consultation Paper on generation adequacyin the EU in the context of their communication on the
Internal Energy Market.
In particular it had become apparent that there are plans
in some Member States to take steps to secure new
generation capacity to ensure security of supply. One
key message of that Communication is the importance
of allowing the market to work and ensuring that any
interventions are well designed and effective. The
consultation paper put forward for consideration potential
criteria on assessing capacity remuneration mechanisms
and other related interventions.
The EC subsequently published a Communication in
November 2013 entitled “Delivering the internal electricity
market and making the most of public intervention”. In
the communication, the EC assessed the main features
of public interventions to correct market failures and
considers how they can be designed or respectivelyadapted in order to increase their effectiveness. A key
message in the EC document was that Well-designed,
targeted and proportionate public intervention allows
the competent public authorities to achieve public policy
objectives without distorting markets beyond what is
necessary.
Also in later 2013, the EC (DG Competition) published
a Consultation Paper entitled “Draft Guidelines on
environmental and Energy State aid for 2014-2020”in late 2013. The paper was open for consultation until
14 February 2014. The draft guidelines consultation
sought to set out the conditions under which state aid
measures may be declared compatible with the internal
market. The EC are due to publish the final Guidelines on
environmental and energy state aid in April 2014.
France-UK-Ireland (FUI)
In order to enable an efficient transition to the single
European market, a number of regional initiatives werelaunched in 2006. These initiatives bring together
Regulators, TSOs, the European Commission, Member
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State Governments, industry and stakeholders to develop
and implement common policies for the trading of
electricity across borders in each region. Ireland is part of
the France-UK-Ireland (FUI) region.
The SEM Committee continued to progress work
related to increasing electricity market integration with
neighbouring jurisdictions in the FUI region throughout
2013. Key areas of cooperation include:
• Liaising between Regulators on progress with
implementation of the European Target Model and
ensuring coordination between developments in
energy and capacity market designs.
• Progress by TSOs in the region on developing more
robust countertrading and balancing arrangements in
region
• Approval with access rules for East West and Moyle
interconnectors including rules on curtailment and
auctioning of capacity
Treatment of Curtailment in Tie-Break
situations in the SEM
On 1 March 2013, the SEM Committee published its final
decision on the Treatment of Curtailment in Tie-break
situations (SEM-13-010). This important decision was
the culmination of a number of years work in developing
the policy framework to reflect the requirement for priority
dispatch for renewable generators in the SEM. Priority
dispatch for renewable generators is a requirement under
the 2008 Renewables Directive. The SEM Committee’s
decision on curtailment followed decisions made by the
Committee in SEM-11-062 and SEM-11-105 which build
the operational rule-set which the TSOs should operate
under when applying priority dispatch (and other matters)
in the SEM. This decision on curtailment provided that
the TSOs should curtail wind generators on a pro-rata
basis (i.e. turn wind generators down by proportionately
the same level) when a curtailment event occurs. The
paper outlined the basis for a curtailment event and
how it can be distinguished from other events on the
system which require the TSO to turn down generation.
The decision paper also outlined the SEM Committee’s
intention to protect consumers from the risk of rising
levels of curtailment by ceasing curtailment payments
to generators from the end of 2017. Further the paperalso discussed the importance of the DS3 programme
in reducing volumes of wind curtailment, which represent
and economic loss to generators and consumers.
Market Modelling Group
During 2013 the RAs’ Market Modelling Group (MMG),
based in the CER, continued to develop and monitor
various Contracts for Differences (CfDs) for participants
in the SEM. In particular the MMG set the price, quantity
and supplier eligibility of Directed Contracts (DCs), setthe reserve price for public Service (PSO)-related CfDs,
and monitored the volume and price of Non-Directed
Contracts (NDCs).
The MMG also modelled SEM outcomes for the RAs, to
feed into policy considerations.
DCs
As part of the SEM Market Power Mitigation Strategy
the MMG implements a suite of DCs on behalf of theSEM Committee. DCs are designed to significantly
reduce the incentive on the incumbent generators (ESB
Power Generation and NIE Energy Power Procurement
Business) to submit bids in the SEM above competitive
levels or withhold capacity in order to influence SEM spot
prices or future contract prices.
The quantities of DCs imposed on the incumbent
generators are set to achieve a desired concentration
level in the SEM which is measured by the Herfindahl-Hirschman Index (HHI). A HHI threshold of 1,150
was chosen by the RAs. At this level, only ESB Power
Generation (ESB PG) was required to sell DCs in 2013.
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The RAs required ESB PG to offer three types of DCs,
namely baseload, mid-merit and peak, in order to reduce
market concentration in each segment for each quarter.
Following public consultation, since Summer 2012 DCs
have been offered quarterly for a period up to five quarters
ahead, on a rolling basis. The number of DCs offered by
ESB to eligible suppliers from Q1 2013 to Q4 2013, as
modelled by the MMG, are shown in the table below.
ESB Baseload
MW
Mid Merit
MW
Peak MW
2013 Q1 643 - -
2013 Q2 788 19 -
2013 Q3 795 153 -
2013 Q4 868 142 51
Pricing of DCs
The price of DCs were determined each day during the
subscription periods using forward fuel and carbon prices
and regression formulae determined by the RAs through
econometric analysis. These formulae were designed to
mimic the results of the validated SEM PLEXOS model.
The price of DCs are published by the RAs on the All
Island Project website after each quarterly auction.
PSO-Related Contracts
In addition to the above contracts, ESB PG also offered
contracts associated with the Irish Public Service
Obligation (PSO). Using the validated PLEXOS model
and up-to-date forward fuel prices, the RAs determine the
reserve prices of the PSO related contracts, i.e. the price
at which they are offered to the market and auctioned off
to suppliers.
During 2013 the PSO-Related CfDs were offered on
a quarterly basis, with auctions occurring one monthahead of the quarter in question. The contracts were
being offered at monthly granularity and the types of
contracts offered include: baseload, mid-merit 1 and mid-
merit 2, thus providing a wide range of choice for market
participants.
Non-Directed Contracts
While the RAs’ legal remit on behalf of the SEM
Committee largely extends to DCs, licensed generatorscan also offer NDCs to the market. The RAs do not set
the price or quantity of NDCs. They do however take an
active role in the monitoring and development of the NDC
market in order to assist contract liquidity.
ESB Licence Change
In 2012 the SEM Committee issued, following a previous
public consultation, a decision on market power and
liquidity, which included a decision to allow the horizontal
integration of ESB generation units given the low marketpower risks involved. During the first half of 2013 ESB’s
Generation licence was amended to allow for horizontal
generation integration. This followed a public consultation
on the matter during which no objections to the proposed
licence change were received by the CER.
Irish PSO Levy 2013
The Public Service Obligation (PSO) levy is a subsidy
charged to electricity customers in Ireland. It is designed
by the Irish Government and consists of various subsidyschemes to support its national policy objectives related
to renewable energy, indigenous fuels (peat) and security
of energy supply. The proceeds of the levy are used to
contribute to the additional relevant costs incurred by
PSO-supported electricity generators which are not
recovered in the electricity market.
The CER calculates the PSO levy annually in accordance
with Government policy. Following consultation, the CER’s
decision paper on the PSO levy for the period 1st October2013 to 30th September 2014 was published on 31st
July 2013. The total levy set for this period amounted to
circa €210.9 million.
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Background
Smart meters are the next generation of meters, which
can replace existing electro-mechanical and diaphragm
meters. They offer a range of benefits for both the individual
electricity and gas consumer and for the electricity andgas systems in general. The implementation of a smart
metering system encompasses more than just metering.
It is essentially a hybrid technology consisting of three
high level layers; physical meters and associated devices,
communications layer covering data transport and
communications network management, and IT systems
which manage the data, applications, and services.
In particular, smart meters can provide customers with
more real-time energy consumption recording and
information services, with the following benefits:
• Better Customer Information and Choice: Smart
meters can record customers’ use of energy over short
intervals, for example every 30 minutes. Suppliers can
use this to provide customers with detailed information
regarding their actual electricity and gas consumption
and costs, through Smart Bills. In addition, an In-
Home Display screen can be used with smart meters,
providing customers with more real-time information
on their energy consumption. All of this informationwill empower customers to reduce their energy
consumption and manage their bills better.
• Lower Energy Bills: By recording electricity use over
short intervals, smart meters will allow suppliers to
charge varying prices to electricity customers, in what
is known as Time-of-Use Pricing. This reflects the fact
that electricity costs more at peak demand times, i.e.
from 5pm to 7pm on a weekday, when more power
stations are needed, and less at off-peak times. Byhaving lower electricity prices at off-peak times, smart
meters will encourage customers to move electricity
consumption to cheaper off-peak times, thereby
reducing their electricity bills.
• Greater Energy Efficiency and Reduced Costs: By
facilitating a reduction in energy usage, smart meters
will help improve energy efficiency and lower Ireland’s
CO2 emissions, which is good for the environment.
Smart meters will also allow the network operator to
be more efficient because it will not be necessary to
visit customers’ premises to read the meter, resulting in
cost savings which should be passed on to customers.
The CER, working closely with the Department of
Communications, Energy and Natural Resources
(DCENR), established the Smart Metering Programme.
The programme was structured in different phases
(see below). Phase 1 commenced in late 2007 with
the objective of setting up and running smart metering
trials and assessing their costs and benefits, in order toinform decisions relating to the full rollout of an optimally
designed universal National Smart Metering Programme.
The key deliverables of Phase 1, namely the comprehensive
electricity and gas smart metering trials findings reports
and cost-benefit analyses reports were published by the
CER during 2011/12. The rollout of smart metering
represents a major national infrastructure programme,
potentially requiring an investment of up to €1 billion. The
cost-benefit analyses show that the long-term benefitsshould clearly exceed these investment costs by around
€229 million net present value over a period of 20 years,
and that there are likely to be further non-quantifiable
Key Task 2
Smart Metering Programme
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benefits in terms of informed consumers, technological
innovation, and synergies with other areas.
Taking all this together, the case for proceeding with the
full-scale rollout seems very clear, and this is strengthened
further when relevant EU legislative requirements are
considered.Following the 2012 decision paper the CER has worked
with key stakeholders to formally mobilise and initiate
Phase 2 (High Level Requirements Definition) of the
National Smart Metering Programme.
In 2013, to facilitate the detailed requirements gathering
and definition required in Phase 2, the CER identified the
following work streams, which are ongoing and include
representation from Industry stakeholders:
• Time of Use Tariffs work stream – seeks to define the
mandate;
• Consumer Web Interface, Smart Billing and (Mandated)
In Home Display (Consumer Web Interface, Smart
Bill and In Home Display) – seeks to define the
requirements required to affect consumer consumption
behaviour and the optimal communication channel to
deliver these requirements;
• PAYG (Pay As You Go) – seeks to define the
requirements and optimal model for delivering thesmart PAYG consumer product;
• Retail Market Processes, is Networks Led – seeks
to define the core smart services to be delivered by
the networks organisations (i.e. ESB Networks and
Bord Gáis Networks) plus provide a high level impact
analysis on the Retail Market processes;
• Consumer Engagement – seeks to identify and
develop consumer interaction methods to enable the
realisation of the benefits of smart meters; and,
• Data Protection – seeks to ensure data protection
considerations are addressed in the design of the
integrated smart metering solution.
During 2013 the CER consulted on the High Level
Design of the Smart Metering solution. Consultation was
launched in Summer and Autumn 2013, with a Proposed
Decision published shortly before Christmas 2013.
PHASE 1
Trials & CBAs
Completed 2008-11
PHASE 2
Requirements Definition
& Procurement 2012-16
PHASE 3
Build & Test
PHASE 4
Deployment
Figure 1: Program Timelines
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Plan for 2014
The High Level Design requirements definition part
of phase 2 is expected to be completed in 2014 with
the publication of the final decision on the high level
requirements on the smart metering solution. Following this
ESBN and BGN will commence a range of procurement
activities to procure the relevant components of the smartmetering solution for which they are responsible. The
Network companies will also lead the detailed design of
the Market Systems changes required to support smart
metering. It is expected that the industry stakeholders will
actively participate in this process.
A range of activities will take place across various other
work streams (e.g., Consumer Engagement, Transition,
more detail on the Time of Use tariffs) and this detail
will allow suppliers to plan their own procurement andbuild activities. Pending the successful completion of
the design phase, CER intends to publish an information
paper detailing transition and rollout activities.
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This key task involved completion of the following
objectives by November 2013:
• Implementing the provisions of the Petroleum
(Exploration and Extraction) Safety Act, 2010 in full;
and
• Putting in place the people, processes and proceduresto enable the effective operation of a safety framework,
including its enforcement.
Background
The Petroleum (Exploration and Extraction) Safety Act,
2010 (the “2010 Act”) passed on 3rd April 2010 confers
upon the CER the role of safety regulator for designated
upstream petroleum activities. In essence this means that
specific exploration and extraction activities carried out
by petroleum undertakings in Ireland are subject to safetyregulation by the CER.
The key benefits that will be realised by the Petroleum
Safety Framework are:
1. The State has a risk-based system for regulating
designated petroleum activities with respect to
safety that is in line with best international practice;
2. It will engender confidence and assurance amongst
the general public and the industry that the safetyregulation of designated petroleum activities protects
the public and is in line with the public interest; and,
3. It will bring greater clarity and transparency to the
regulation of petroleum activities with respect to
safety in Ireland.
The 2010 Act required the CER to establish and
implement a risk-based safety framework. The resultant
Petroleum Safety Framework (the ‘Framework’)
comprises regulations and written regulatory documents,
which taken together describe the system that is used to
regulate, petroleum undertakings with respect to safety
while carrying out designated petroleum activities.
The Framework sets out the scope of the petroleum
activities and associated infrastructure that are
regulated by the CER. Together with the Act, it requires
petroleum undertakings to obtain permission from the
CER to undertake ‘designated petroleum activities’ by
submission and approval of a safety case that, amongst
other things, describes how risks have been reduced
to a level that is as low as is reasonably practicable
(ALARP). “Designated petroleum activities”, are defined
in regulation and include activities such as onshore and
offshore exploration (drilling) and extraction (production),
and decommissioning activities.
Carrying out a designated petroleum activity without a
safety permit from the CER will be a criminal offence thatcould result in a fine of up to €3 million and/or a term of
imprisonment of up to 3 years.
The Framework covers existing and future petroleum
developments in Ireland. The map below shows the
extent of the area in and around Ireland where petroleum
exploration and extraction can be licensed. Where
designated petroleum activities occur within this area they
are subject to CER petroleum safety regulation under the
Framework.
Key Task 3
Petroleum Safety Project
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The safety regulatory functions conferred on the CER
relate to ‘upstream’ activities, i.e. those onshore and
offshore activities involved in the exploration or extraction
of hydrocarbons and subsequent processing. The CER
also have a safety regulatory function with regard to
the downstream gas network, under the Gas Safety
Framework. The figure below illustrates where upstream
and downstream activities and infrastructure are divided:
the red pipes illustrate upstream infrastructure and
activities, while the yellow depict downstream.
The Framework is funded by way of a levy on the petroleum
industry. It became fully operational on December 18th
2013.
Framework Development
To enable the CER to carry out its new petroleum safety
regulatory functions, the Petroleum Safety Framework
Implementation Project was set up in 2010. The purpose
of this project was to ensure the CER had the people,processes and procedures in place to discharge its
petroleum safety functions under the 2010 Act.
In June 2012 the CER first consulted on the High Level
Design of the Petroleum Safety Framework . This paper
set out the CER approach to the Framework development
and informed the basis for the detailed and technical
regulatory documents that would follow. These included
the following documents which were completed as part
of the 2013 work plan:
• Designated Petroleum Activities Regulations (S.I. 89
of 2013) published February 2013. This document setin regulation the petroleum activities which require a
safety permit from the CER prior to commencement;
• Safety Permit Application Guidelines published
November 2013. These application guidelines were
published to assist petroleum undertakings in submitting
their application for a safety permit to the CER;
• Safety Case Guidelines published November 2013.
These guidelines set out the requirements for the
content of safety case to be submitted to the CER;
• ALARP Guidance published November 2013. This
paper provides detailed guidance to petroleum
Example of petroleum infrastructure and activities indicating upstream and downstream pipelines
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undertakings on the CER’s requirements concerning
the processes that must be used to determine whether
a risk is ALARP;
• Petroleum Safety (Petroleum Incident) Regulations (S.I.
4 of 2014) published January 2014. These regulations
set out petroleum incidents that must be reported to
the CER;
• Compliance Assurance System published November
2013. This paper defines how petroleum undertakings
must comply with their obligations under the Act with
regard to verification activities, safety performance
reporting and independent safety case reviews. It
also set outs the CER audit and inspect function on
petroleum undertakings; and
• High Level Design of the Petroleum Safety Framework
(Version 2) published December 2013;
The Framework entered the operational phase in
December 2013 following the enactment of the
remaining provisions of the 2010 Act. From this point, the
CER was ready to receive safety cases submitted from
petroleum undertakings for the purpose of issuing safety
permits. The operational PSF team is made up of in house
CER staff with technical support from external specialist
consultants.
Operational Work in 2013
The CER took receipt of two Well Work Safety Permit
applications in December 2013. The CER commenced
assessment of both of these Safety Permit Applications
in December. The safety permit applications related to
well work activities planned for 2014.
Currently in Ireland there is one production gas facility
located off the coast of Cork. This supplies approximately
5% of Ireland’s total gas requirement with the rest of thecountry’s gas demand imported from the UK. The Corrib
gas field which is under development also has a petroleum
authorisation from the Minister for Communications,
Energy and Natural Resources to extract gas. The Corrib
development will require a Production Safety Permit from
the CER in order to commence production operations.
The Kinsale development will also require a safety permit
from the CER to continue operating and this must be
submitted prior to November 29th 2014.
Onshore there are currently no petroleum extraction
activities ongoing. However, interest has been expressed
in recent years in exploration onshore by means of
hydraulic fracturing (also known as “fracking”). Should
such activities be authorised within Ireland, they would
also be regulated with respect to safety through the
Framework.
Operation of the Framework
The assessment of safety cases is one role of the CERPetroleum Safety Team. Following the issuance of safety
permits, the CER also has significant functions in relation
to monitoring the compliance of petroleum undertakings
with their requirements under the Act. As part of the
overall Framework, the CER will put in place an audit and
inspection programme for all petroleum undertakings
holding safety permits. Petroleum undertakings will also
be required to submit regular safety performance reports
to the CER to assist in their monitoring function. If the CER
deems that a petroleum undertaking is not in compliancewith its obligations under the Act or the Framework, it
may take enforcement against the petroleum undertaking.
This includes the issuance of an improvement notice or a
prohibition notice . Non-compliance with an improvement
notice or a prohibition notice is an offence that could result
in a fine of up to €3 million and/or a term of imprisonment
of up to 3 years.
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Background Information
In 2011, the Government embarked on a programme to
reform the public water and waste water sector in Ireland.
This reform is part of the programme for Government and
the programme of financial support for Ireland from the
EU/IMF/ECG.
The CER’s remit was expanded in legislation in 2013 to
prepare to become the independent economic regulator
for the public water sector and to advise the Minister for
the Environment, Community and Local Government on
matters related to the economic regulation of the public
water sector in Ireland.
2013 Activities
1. Water Establishment Project
The CER established an internal project to implement
requirements of the Water Services Act 2013 and
commenced putting in place people, processes and
procedures to enable domestic water charging in 2014.
2. Stakeholder Engagement
In 2013, the CER commenced engagement with
the relevant stakeholders to develop the role of the
independent economic regulator for the public water
sector. The primary stakeholders are:
• Irish Water
• Environmental Protection Agency
• Department of the Environment, Community and Local
Government
• Department of Communications, Energy and Natural
Resources
• Water Service Authorities
3. Publications
In October 2013, the CER published an information paper,
The CER and Water Regulation in Ireland, to introduce
stakeholders to the expected future role of the CER in the
public water services sector, outlining the CER’s values,
and the benefits that independent regulation can bring
to the sector. This paper included indicative timelines forproject deliverables in 2014:
• Economic Regulatory Framework (final advice to the
Minister)
• Domestic Tariff Structure
• Non Domesti