20 July 2017

I-SEM Project Managers’ Group

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Agenda

1. Previous Meeting Minutes & Actions

2. Project Status & Key Risks

3. Readiness & Market Trial Update

4. Training Update

5. AOB

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Agenda

1. Previous Meeting Minutes & Actions

2. Project Status & Key Risks

3. Readiness & Market Trial Update

4. Training Update

5. AOB

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Previous Meeting Minutes & Actions – I No. Action Resolution Status

242 In relation to the Capacity Remuneration Mechanism Parameters & Auction Timings Decision Paper (10 April 2017), clarification is sought over what is envisaged by “targeted contracting mechanisms”, which the RAs’ Decision Paper notes may need to be established in order to address local security of supply requirements that may emerge after the auction.

Awaiting RAs’ clarification. Open

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Previous Meeting Minutes & Actions – II No. Action Resolution Status

252 Feedback was requested regarding an outstanding TLG action from Nov 2016 regarding charge code identifiers (#182).

Passed back to TLG for action. It will be managed and tracked there; we’ll report back here at PMG when closed.

Open

253 Update requested from the January SEMC minutes regarding an integrated project plan for I-SEM and DS3.

RAs provided an integrated view of the I-SEM and DS3 Projects at the recent Senior Stakeholder event of 28 June 2017 – see: Slide #11 of https://www.semcommittee.com/sites/semcommittee.com/files/media-files/RAs%20-%20Senior%20Stakeholder%20Event%20Presentation.pdf

Closed

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• 12 milestones completed since the PMG on 26 June, as follows:

– TSO • #165a Participant Training Plan Published • #210 Framework Agreement between TSOs, ICOs & NEMOs for Day Ahead Regional Coupling • #211 Framework Agreement between TSOs, ICOs & NEMOs for Intraday Regional Coupling

– RA • #115 ETA Parameter Decision • #118b Publication of SEMOpx Rules • #143 NEMO and SEMO Revenue Recovery Principles Decision Paper Published • #148 Local Capacity Constraints Methodology Decision • #152 Publish BMPCOP Decision • #159 Deadline for new TSC and CMC intermediary applications to be received by the RAs • #162 Approval of Intermediaries under the CMC and the TSC • #212 Regulator approved Framework Agreement for Day Ahead Regional Coupling

– ICO • #192 FTR Auction – Initial Trial and Participant Test period start

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Current Progress on Milestones

• The slides which follow detail the 2 milestones currently reported as being late (red), including the impacts and mitigating actions.

• Please refer to the latest Status Report for more details, which is published weekly on the SEMO website.

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Current Progress on Milestones

• #144 Publish NEMO Price Control Consultation: The milestone has slipped by a few days to allow for validation at the I-SEM Joint Project Board. Now expected 19 July.

• #213 Regulator approved Framework Agreement between TSO, ICOs & NEMOs for Intraday Regional Coupling: The milestone remains open until 19 July, awaiting the I-SEM Joint Project Board’s consideration of the limited responses received to JCR287. Those responses confirmed preference for 17:30 IDA1 over 19:00, but also promoted alternative options which had been discussed/considered by the regional partners, but proved not be viable or obtainable.

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Slipped Milestones – Currently ‘Red’

There are no milestones currently marked as being at specific risk; although we acknowledge that there are a number of general risks to I-SEM delivery and the overall timeline which the central programme and all participant programmes are continuing to actively manage (e.g. vendor non-performance).

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At Risk Milestones (Amber)

• The following TSO Level 2 Milestones are due to be delivered by the end of August 2017:

• #7f I-SEM Technical Specification Release 6.0

• #243 Establishment of the Market Trial Working Group

• #33 CM Auction Application Deadline

• #79 Market Trial Entry/Exit Criteria

• #11a DAM/IDM application deadline (for inclusion in MT)

• #76 I-SEM End-to-End Testing Commences

• #78 Training delivery commences

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Forward Look at Upcoming Milestones

• The following RA Level 2 Milestones are due by the end of August 2017:

• #144 Publish NEMO Price Control Consultation

• #213 Regulator approved Framework Agreement for Intraday Regional Coupling

• #214 Regulatory approval of Interim cross zonal arrangements and Regulatory instruments

• #145 SEM Active Revenue Decision paper published

• #15 Publish approved BMPS

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Forward Look at Upcoming Milestones

Two Joint Change Requests have been approved to date in July ‘17:

• JCR_260 SEMO Price Control Milestones

• JCR_270 Closing Date for Registration for Market Trial

In addition, the following JCR has been sent to the Joint Project Board for approval at its 19 July meeting, post impact assessment:

• JCR_287 Change to ID Auction Timelines (republished as ‘moderate’ with 10 day IA)

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Change Requests

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Top Risks – I (not in any particular order)

Risk Mitigating Controls Trend

State Aid Approval not received for Capacity Market: Risk that EC State Aid approval is not received for the CM creating significant levels of market participant disquiet and jeopardising I-SEM go-live.

• Ongoing monitoring through the RAs’ CRM team to update risk status and potential impact.

• Key tasks and activities documented within project plan for regular progress reporting at Project Board. Ongoing monitoring at departmental and European levels.

Neutral

Legislation/Licensing Delays: Risk that necessary legislation or licensing arrangements are not in place in time for Go-Live.

• RAs on-going liaison with Departments. • Include relevant market readiness metrics

against which to track and report progress.

Down

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Top Risks – II

Risk Mitigating Controls Trend

Changes after System Designs Locked Down with Vendors: Risk that changes required to systems to align with the finalised market design/rules cannot be delivered in time for market trial (or go live) &/or increase costs above current budgetary estimates.

• Assess all proposed changes – are they absolutely necessary, or could the market go-live without the change, or via a manual workaround rather than require the systems to be changed.

Up Now codes are finalised, a small number of CRs are being assessed by vendor to align systems with mkt codes.

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Top Risks – III Risk Mitigating Controls Trend

External Dependencies - Regional Coupling & Cross Zonal Arrangements: Risk that NGET, Ofgem, GB NEMOs &/or ICOs will not deliver key elements/decisions required in a timely fashion resulting in Project delays, cost overruns, or reduced quality.

•Joint Implementation Group (RAs, TSOs, NEMOs & ICOs) set up with regular meetings.

•Put in place framework agreements between regional partners.

•Agree cost sharing arrangements.

Down

Participant Readiness: Risk that market participants are not ready for May 2018 go-live

• Regular market readiness assessment reporting.

• Regular market participant engagement.

Neutral

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Top Risks – IV

Risk Mitigating Controls Trend

Day Ahead Bid/Offer Types: Risk that the manner in which I-SEM participants can submit their Day Ahead trading bids/offers into the centralised algorithm, EUPHEMIA, is less flexible than that sought by participants.

• Extensive stress testing on-going by EPEX to inform the details of the formal CR.

• Strategy and advocacy plan agreed on levers to pull at a senior level within Europe; now being enacted – e.g. RAs have escalated with some success via ACER; discussions initiated by TSOs with Chair of NEMO Committee; and positive discussion at 11 July meeting of NEMO Committee.

• BLG workshop 19 July to inform minimum product set and need for certainty.

• Regular progress reports being provided to I-SEM participants

Up Limitations of Euphemia Algorithm and PCR process becoming evident. Increasing concern regarding first come first served process and that Multi-NEMO related changes may ‘jump the queue’.

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Top Risks – V Risk Mitigating Controls Trend

Participant Access to Clearing Bank: Risk that the clearing model may cause a barrier to entry for market participants, especially smaller participants. The result may be that smaller participants may not be able to enter the DA and ID markets, with flow on consequences for market readiness.

• ECC allowing members to contract Clearing Bank/Settlement Banks by the 7 Feb. 2018 rather than the previously communicated 7 Aug. 2017

• ECC implementing a direct clearing solution for market participants.

• ECC engaging with banks in ROI & NI to allow for local banks in the I-SEM.

• Workshop(s) to educate market participants on clearing models and their obligations to make suitable clearing arrangements.

Neutral

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Top Risks – VI Risk Mitigating Controls Trend

BREXIT Impact: Risk that Government revisits I-SEM decision, or National Grid/Ofgem choose not to comply with the European Network Codes or not actively support the Target Model cross border arrangements, resulting in changes to scope, project delays, cost overruns, reduced quality, or potentially undermine I-SEM.

• Ensure key decision makers are well informed about the benefits of market coupling.

• Close liaison between RAs and Depts.

Up BREXIT temperature increasing

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Top Risks – VII Risk Mitigating Controls Trend

Vendor Non Performance: Vendor non-performance against established statements of work may have significant impacts upon both schedule and budget, especially if there are delays in identification of the problem.

• Rigorous management processes for identifying and tracking deliverables.

• Seek damages clauses in contractual arrangements with vendors.

Up As vendors progress from build into test, non-performance temperature is rising

ABB’s nMarket is not available to meet Project Timelines: There is a risk to the start of Market Trial given the dependency of a large number of participants on ABB’s nMarket Suite, in the event that the vendor’s delivery plans slip.

• To be discussed at the meeting.

Neutral

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Top Risks – VIII Risk Mitigating Controls Trend

Changing Intermediaries: There is a risk that that the timing of the REFIT decision does not allow sufficient time for those parties, to submit their intermediary applications - who as a result of the REFIT decision determine to change their intermediary. This could adversely affect the registration process and readiness for the inaugural capacity auction.

• RAs to continue to engage with the DCCAE and seek any necessary clarifications, which would provide additional certainty to facilitate the registration process in the absence of a REFIT decision.

• Discussion at PMG to gain a better understanding of the dependency and to identify any mitigating controls.

• Participants to provide (in confidence) to the RAs/TSOs details of how they might proceed under a range of scenarios to assist TSOs’ planning and contingency arrangements.

• TSOs/RAs to review and confirm registration timelines.

Neutral

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Agenda

1. Previous Meeting Minutes & Actions

2. Project Status & Key Risks

3. Readiness & Market Trial Updates

4. Training Update

5. AOB

• Readiness of Central Market and Participants progressing to plan

• External uncertainties present risks: REFIT, AOLR charges, State Aid and EUPHEMIA

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What the MRA told us…

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Overall Readiness

• Risks identified for users of AOLR service as fees have not been finalised

• REFIT to be finalised so without this certain participants are uncertain about which markets to participate in

• Concerns raised about uncertainty associated with PCR testing process

• Participants unable to complete trading strategy without detailed FTR Product Information

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What the survey told us about the Balancing Market

• Risk raised about flagging and tagging

• Delaying order from vendors until last moment

• Perceived need for full clarity on central market systems

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What the survey told us about the Capacity Market

• Concerns about the risk that State Aid clearance may not be given

• Final decision paper on the Locational Capacity Constraints

• More information needed about the Technical Specifications

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What the survey told us about the Day-Ahead and Intra-Day

• Outstanding decision on DA Market Products

• Decision on the timings of the IDM auctions

• REFIT decision has implications for choice of market

• Timelines for Registration as forms are due back in August

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What the survey told us about the FTR Market

• Announcement that FTRs are Physical Derivatives cause trade capture concerns

• Trading strategy associated with rescheduling interconnectors

• Certain assumptions around deliverables from the I-SEM Project including capacity calculation and running cross border aspects of DAM

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Schedule for the Next Readiness Survey

• Get your data in this week please …July 21st

• Publish next report early August

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Questions?

Market Trial Quick Update

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Scenario Development

Jan Feb Mar Apr May June July Aug

Market Trial Timeline - activities

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Sep Oct Nov Dec Jan Feb Mar Apr May

GO-LIVE

Market Trial - Preparation Market Trial – Execution

Market Trial Planning, Preparation and Execution

Entry/Exit Criteria

• Mobilise Market Trial Team • Prepare TOR for Market Trial

Working Group (MTWG)

Market Trial Working Group

WG TOR

Market Trial – Plan update

WG Established

Transition and Cutover Strategy

Registration

Data Packages Participant Guidebook

Decision to proceed

2017 2018

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Schedule for the Market Trial Working Group

• MTWG up and running from July 27th

Kick-off

Entry-Exit

High Level Plan

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Agenda

1. Previous Meeting Minutes & Actions

2. Project Status & Key Risks

3. Readiness and Market Trial Update

4. Training Update

5. AOB

• Scheduling Plan, Communications Plan and Logistics Plan are completed

• Based on these plans, a Tender for Training Venues was launched – Results awaiting sign off

• Learning Management System is operational: – 910+ Trainees were invited to set-up their accounts in the Learning Management System

– 600 Trainees set-up their account

– Market Overview self-learning course is now available on the LMS

– 233 Trainees have commenced the Market Overview course

– 70 Trainees have completed the Market Overview course

• Training materials for first Instructor-led Training sessions in production

• Training Liaison Call is planned for the next week

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Training Status

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Training Schedule

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Training Communications Plan

• Instructor-Led Training (ILT) activities kick-off week commencing 14 August – Training schedule will be provided to Training Contacts by the end of next week

– Later today we will send the initial Awareness Communications to Trainees

– Today, registration for the Week 1 sessions will be opened for Trainees

• Self-learning content will be added to the LMS on an on-going basis – Not later than 2 weeks before the first session of the specific training (to provide

Trainees with the preparation materials required for undertaking the classroom training)

– Next release of new self-learning materials is scheduled for the end of next week

– Completion of the appropriate self-learning is a pre-requisite to the ILT

• Please encourage Trainees in your organisations to register early for scheduled classroom training and to actively manage their bookings.

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Next Steps and Deadlines

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Agenda

1. Previous Meeting Minutes & Actions

2. Project Status & Key Risks

3. Readiness Update

4. Training Update

5. AOB

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AOB – Day-Ahead Market Products (Euphemia)

• Further to the Special PMG Meeting of 27 June (see: 27-06-17 PMG Meeting Notes):

– the advocacy plan has been advanced via discussions with ACER and the NEMO Committee; and

– we have received valuable participant feedback on the day-ahead products

• A BLG workshop is scheduled for 19 July, focused on the day-ahead products:

– aim of the workshop is to improve understanding of the product needs of participants and to facilitate discussion

– discussion regarding products needed for go-live

– discussion on issues relating to product delivery/certainty

1. The Chair noted that this is a hot issue for Regulators.

2. Our CR combined with the Italian CRs failed only a single test - a stress test scenario with 2 years out growth (94.5% against 97% target).

3. The NEMO Committee advised that we seek a PCR test without the Italian CRs to confirm whether it is a problem of individual feasibility or coexistence (with the Italians) - if it's the former, there is not a problem to arbitrate.

4. The point was made that it was never envisioned that blocks, linked blocks, and complex orders would be combined in a single Bidding Zone.

5. It was also noted that the assumptions used on cross border capacity can have quite a significant bearing on Euphemia results.

6. It was remarked that: • both (ours and the Italian) CRs are legitimate requests;

• there is a case to support a short term solution;

• our issue should not be embroiled in the longer-term Euphemia scalability issue; and

• the NEMO Committee wants to find a solution

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Feedback from 12 July 2017 NEMO Committee

It was questioned whether:

1. we can moderate our mix of products?

2. there a simpler form of complex order that can be developed by the PCR that's less of a burden on the Euphemia algorithm?

3. the NEMO Committee need to introduce usage limits across all markets – this was acknowledged as being extremely difficult question given different product mixes?; or

4. we can legitimately reduce (or cap) the growth usage levels in the test scenario that we failed?

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Discussion Points

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AOB?

Contact Details

Web: http://www.sem-o.com/isem/Pages/Home.aspx

Email : I-SEMproject@sem-o.com

Next Meeting: Wednesday, 23 August 2017 @10:30

THANK YOU

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