terms of reference for the ress market auditor and auction ... · • the ress operator shall...

An Coimisiún um Rialáil Fóntais Commission for Regulation of Utilities

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Information Paper

Reference: CRU 19109 Date Published: 02/09/2019

An Coimisiún um Rialáil Fóntais

Commission for Regulation of Utilities

Terms of Reference for the RESS

Market Auditor and Auction Monitor Information paper

www.cru.ie


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Executive Summary The DCCAE are developing the new Renewable Electricity Support Scheme (RESS) to help deliver

Ireland’s contribution to the EU-wide binding renewable energy target of 32% RES out to 2030,

with this level of ambition agreed by the EU Commission, EU Parliament and EU Council in June

2018. The new Directive also includes a review clause by 2023 for an upward revision of the EU

level target.

The CRU has a general oversight and advisory role over the RESS process drawing on previous

auction and market experience. As part of this function the CRU determined that external support

should be secured to act as RESS Market Auditor and RESS Auction Monitor. As part of this

function the CRU will determine a Terms of Reference (ToR) for the RESS Market Auditor and

RESS Auction Monitor.

This information paper sets out the RESS Market Auditor and RESS Auction Monitor roles and

functions, and an initial, proposed Terms of Reference (ToR) for the RESS Market Auditor and

RESS Auction Monitor. These Terms of Reference refer to functions (e.g. qualification) described

in DCCAE’s Terms and Conditions document and associated Agreed Procedures documents,

carried out by Eirgrid on behalf of DCCAE in the functioning of the RESS auction process. The

CRU is happy to receive feedback on these proposed Terms of Reference and will take this on

board.

In conjunction with the publication of this information paper, the CRU is initiating a procurement

process to appoint a RESS Market Auditor and RESS Auction Monitor for the forthcoming auctions.


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Table of Contents

Table of Contents ...................................................................................................... 2

1. Introduction ........................................................................................................ 3

1.1 Background ........................................................................................................................ 3

1.1 RESS background ................................................................................................................. 3

1.2 Related Documents ............................................................................................................. 4

1.3 Structure of Paper ............................................................................................................... 4

2. Role of Auditor and Monitor ............................................................................. 5

Introduction ............................................................................................................................. 5

Role of RESS Auction Monitor and Market Auditor .................................................................... 5

2.1 Role of RESS Auction Monitor ............................................................................................. 5

2.2 Role of RESS Market Auditor ............................................................................................... 8

Standing of the RESS Terms and Conditions and Agreed Procedures .......................................... 9

Single opinion ........................................................................................................................ 10

Nature of opinion ................................................................................................................... 10

2.3 Compliance opinion .......................................................................................................... 10

2.4 ISRS 4400 opinion (Agreed Upon Procedures approach) ................................................. 11

2.5 ISAE 3000 Assurance ......................................................................................................... 12

3. Terms of Reference for RESS Market Auditor ............................................... 13

Main Principles ...................................................................................................................... 13

3.1 Nature of opinion .............................................................................................................. 13

3.2 Materiality ......................................................................................................................... 13

3.3 Report of Significant Issues ............................................................................................... 14

3.4 Governance and Reporting ............................................................................................... 14

3.5 Period covered by audit .................................................................................................... 14

3.6 Scope of RESS Market Audit.............................................................................................. 15

4. Terms of Reference for RESS Auction Monitor ............................................ 16

Main principles ...................................................................................................................... 16

4.1 Nature of opinion .............................................................................................................. 16

4.2 Materiality ......................................................................................................................... 16

4.3 Governance and Reporting ............................................................................................... 16

4.4 Period covered by RESS Auction Monitor ......................................................................... 17

4.5 Scope of RESS Auction Monitors role ............................................................................... 17

5. Next Steps ........................................................................................................ 18


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1. Introduction

1.1 Background

1.1 RESS background

The DCCAE are developing the new Renewable Electricity Support Scheme (RESS) to help deliver

Ireland’s contribution to the EU-wide binding renewable energy target of 32% RES out to 2030,

with this level of ambition agreed by the EU Commission, EU Parliament and EU Council in June

2018. The new Directive also includes a review clause by 2023 for an upward revision of the EU

level target.

Primary policy objectives that have shaped the design of the new RESS include:

• delivering renewable electricity ambitions as part of an EU-wide target;

• increasing community participation in and ownership of renewable electricity projects;

• ensuring value for money for electricity consumers and

• enhancing security of supply.

The scheme is also being designed with a view towards potentially delivering diversity, in terms of

an increased mix of renewable technologies, the number of and types of project actors, and the

scale of projects receiving support. The scheme aims to deliver on these policy objectives in a cost-

effective manner, designed under the 2014-2020 EU State Aid rules. The RESS scheme

represents a shift from guaranteed fixed prices for renewable generators (as per existing REFIT

feed in tariffs) to a more market-oriented mechanism (renewable auctions) where the cost of

support will be determined primarily by competitive bidding between renewable generators.

The design and implementation of the RESS scheme requires interaction and cooperation between

different implementation parties. These are the Department of Communications, Climate Action

and Environment (DCCAE), EirGrid and the Commission for Regulation of Utilities (CRU). Eirgrid

will run the RESS auction process on behalf of DCCAE.

The CRU has a general oversight and advisory role in the RESS process drawing on previous

auction and market experience. As part of this function the CRU determined that external support

should be secured to act as RESS Market Auditor and RESS Auction Monitor. As part of this, the

CRU will determine a Terms of Reference (ToR) for the RESS Market Auditor and RESS Auction

Monitor. This information paper sets out the RESS Market Auditor and RESS Auction Monitor roles

and functions, and a proposed ToR for the RESS Market Auditor and RESS Auction Monitor. This

information paper is intended to ensure openness to this process. Any feedback is welcomed from

interested parties, and the CRU will take this on board when finalising the Terms of Reference for


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the Market Auditor and Auction Monitors.

These ToR refer to functions (e.g. qualification) described in DCCAE’s Terms and Conditions

document and associated documents, carried out by Eirgrid on behalf of DCCAE in the functioning

of the RESS auction process.

1.2 Related Documents

• Options Paper – Renewable Electricity Support Scheme: Transitioning to I-SEM

(Options Paper), May 2017

• Proposed Decision Paper – Electricity Support Schemes I-SEM Arrangements,

November 2017

• Decision Paper – Electricity Support Schemes I-SEM Arrangements, June 2018

• Design Consultation - RESS - Design Consultation, Sept 2017

• RESS High Level Design - consultation

• RESS High Level Design – decision

1.3 Structure of Paper

This structure of this paper is broadly set out as follows:

• Section 1 - provides an introduction to paper

• Section 2 – outlines the roles and functions of the RESS Auditor and Monitor

• Section 3 – sets out the RESS Market Auditor Terms of Reference (ToR)

• Section 4 - sets out the RESS Auction Monitor Terms of Reference (ToR)

• Section 5 – outlines next steps in RESS Auditor and Monitor ToR process

https://www.dccae.gov.ie/en-ie/energy/consultations/Documents/32/consultations/2017_11_30%20Proposed%20Decision_REFIT%20Transition%20to%20I-SEM_.pdf

https://www.dccae.gov.ie/en-ie/energy/consultations/Documents/32/consultations/2017_11_30%20Proposed%20Decision_REFIT%20Transition%20to%20I-SEM_.pdf

https://www.dccae.gov.ie/en-ie/energy/publications/Documents/17/20180614%20ESS%20to%20I-SEM%20Final%20Decision.pdf

https://www.dccae.gov.ie/en-ie/energy/consultations/Pages/Renewable-Electricity-Support-Scheme-Design-Consultation.aspx

https://www.dccae.gov.ie/en-ie/energy/topics/Renewable-Energy/electricity/renewable-electricity-supports/ress/Pages/default.aspx

https://www.dccae.gov.ie/documents/RESS%20Design%20Paper.pdf


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2. Role of Auditor and Monitor

Introduction

The CRU as part of its oversight role over the RESS process determined that external support

should be secured to act as RESS Market Auditor and as RESS Auction Monitor. As part of this

process, the CRU will determine a Terms of Reference (ToR) for the RESS Market Auditor and

RESS Auction Monitor. This information paper sets out the proposed ToR for the RESS Market

Auditor and RESS Auction Monitor. It is proposed that the Monitor and Auditor would generally be

appointed for a term of one year, this may be extended by a further year or two, but with their

Terms of Reference reviewed on an annual basis, or as required. The same person may be

appointed as the RESS Market Auditor and as RESS Auction Monitor. As noted, the CRU is

initiating a procurement process for these services in tandem with the publication of this information

paper.

Role of RESS Auction Monitor and Market Auditor

2.1 Role of RESS Auction Monitor

The CRU will appoint a person or firm as RESS Auction Monitor every one to three years

(depending on extension of appointment), with the appointment to take effect from the date

specified by the CRU. The CRU shall conduct a tender process for the purposes of selecting the

RESS Auction Monitor. The fees and costs of the RESS Auction Monitor shall be paid by the CRU.

• The Monitor shall monitor the processes and procedures followed by Eirgrid in carrying out

qualification and conducting RESS auctions under the RESS Terms and Conditions and

Agreed Procedures, in accordance with the terms of reference determined by CRU.

• The RAs may make changes to these terms of reference from time to time.

• Terms of reference for the Monitor will be published by the CRU.

• Eirgrid and the Monitor shall promptly notify the other and DCCAE and CRU if they become

aware of a potential or suspected non-compliance with the RESS Terms and Conditions

and Agreed Procedures or any other potential or suspected irregularity with respect to the

conduct of a RESS Auction.

• Eirgrid may request that the Monitor give its opinion as to the most appropriate course of

action regarding any potential or suspected non-compliance with the RESS Terms and

Conditions and Agreed Procedures or other potential or suspected irregularity with respect

to the conduct of a RESS Auction;


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• The RESS operator will allow the RESS Auction Monitor access to its premises to the

extent reasonably necessary to enable the RESS Auction Monitor to carry out its functions.

When on the premises of Eirgrid, and when accessing information the RESS Auction

Monitor shall comply with Eirgrids’ reasonable requirements concerning health, safety and

welfare, data protection, confidentiality and security;

• The RESS operator shall ensure the RESS Auction Monitor has full read-only access to:

o applications for qualification and decisions of Eirgrid in respect of the qualification

process;

o the RESS market platform in order to monitor RESS auctions, including the ability

to view all RESS auction offers as they are submitted and all communications

during the RESS auction between the operator Eirgrid and the participants

participating in the RESS auction; and

o the RESS auction results register.

• The Monitor shall produce a report on the qualification process within 2 Working Days after

Eirgrid have notified parties of the provisional results of the qualification process under the

terms of the RESS Terms and Conditions and Agreed Procedures. This report will be made

available to DCCAE, CRU and Eirgrid;

o confirm the list of units that have been qualified;

o states whether or not the monitor considers that the qualification process was

conducted in accordance with the RESS Terms and Conditions and Agreed

Procedures; and

o where applicable, identifies any actual or potential non-compliance with the RESS

Terms and Conditions and Agreed Procedures or other actual or potential

irregularity in the conduct of the qualification process together with the Monitor’s

assessment as to the likely consequences of the actual or potential non-

compliance or irregularity.

• The Monitor shall produce a report on RESS Auction within 2 Working Days after Eirgrid

have notified participants of the provisional results of a RESS Auction under the terms of

the RESS Terms and Conditions and Agreed Procedures. This report will be made

available to DCCAE, CRU and Eirgrid and will:

o confirm the list of participants with units that have been allocated a RESS letter of

offer through the auction;

o state whether or not the Monitor considers that the RESS auction was conducted in

accordance with the RESS Terms and Conditions and Agreed Procedures; and

o where applicable, identifies any actual or potential non-compliance with the RESS

Terms and Conditions and Agreed Procedures or other actual or potential

irregularity in the conduct of the RESS auction together with the Monitor’s


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assessment as to the likely consequences of the actual or potential non-

compliance or irregularity.

As required each party will provide without charge to the RESS Auction Monitor in a timely manner

such information or assistance as is reasonably required by the RESS Auction Monitor to enable

them to comply with their functions and obligations and terms of reference. This is subject to any

obligations of confidentiality which the relevant party claims are owed to any third parties which

prevent disclosure of any such information required.

The CRU and DCCAE will review a version of the RESS Auction Monitor’s report which does not

contain any confidential information and does not identify any participant and provide it to Eirgrid.

The RESS operator shall publish this version of the report as soon as reasonably practicable after

receiving it.

The CRU will ensure that the terms of engagement for the RESS Auction Monitor require the

RESS Auction Monitor to:

• conduct its functions in accordance with this paper and the terms of reference for the RESS

Market Auditor determined by the CRU, and in accordance with RESS Terms and

Conditions and Agreed Procedures;

• comply with any provisions of this this paper, the terms of reference, RESS Terms and

Conditions and related Agreed Procedures that contemplate the RESS Auction Monitor

doing or not doing any matter or thing;

• have personnel on site with the RESS operators when Eirgrid are conducting a qualification

process or a RESS auction;

• deliver to the CRU and DCCAE a report on the qualification process for each RESS

auction;

• comply with confidential information requirements of DCCAE and Eirgrid as any information

which comes into its possession in its role as RESS Auction Monitor is confidential

information of Eirgrid and DCCAE;

• report to the CRU and DCCAE from time to time on any specific issue in relation to a

qualification process or a RESS auction;

• meet with the CRU and DCCAE at the request of the CRU at any time during the RESS

Auction Monitor’s engagement. Nominated representatives of Eirgrid shall be entitled to

attend such meeting; and

• co-operate with the RESS Market Auditor.


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2.2 Role of RESS Market Auditor

The CRU will appoint a person or firm as RESS Market Auditor every one to three years

(depending on extension of appointment), with the appointment to take effect from the date

specified by the CRU. The CRU shall conduct a tender process for the purposes of selecting the

RESS Market Auditor. The fees and costs of the RESS Market Auditor shall be paid by the CRU.

The purpose of the RESS Market Audit is to provide independent assurance to the market on the

operation of the RESS auction process. This assurance is required by participants and their

auditors and other stakeholders as the systems and calculations within the RESS Terms and

Conditions and Agreed Procedures fall outside their control, making them unable to verify for

themselves the processing and calculations being undertaken on their collective behalf.

• The Auditor shall conduct an audit of the operation and implementation of the RESS

auction, procedures and processes under the RESS Terms and Conditions and Agreed

Procedures at least annually, in accordance with the terms of reference determined by

CRU.

• The CRU may make changes to these terms of reference from time to time.

• Terms of reference for the Auditor will be published by the CRU.

• Eirgrid will arrange for the publication of the Audit Report in final form upon its delivery

subject to any confidentiality obligations.

• The RESS Market Auditor will be entitled to make recommendations in its audit report. The

CRU and DCCAE will consult with Eirgrid on any recommendations.

• The RESS Market Auditor shall comply with any direction given to it by CRU.

• The Audit Opinion is proposed to be conducted under ISRS 4400.

As required each party will provide without charge to the RESS Market Auditor in a timely manner

such information or assistance as is reasonably required by the RESS Market Auditor to enable

them to comply with their functions and obligations and terms of reference. This is subject to any

obligations of confidentiality which the relevant party claims are owed to any third parties which

prevent disclosure of any such information required.

The CRU will ensure that the terms of engagement for the RESS Market Auditor requires the

RESS Market Auditor to:

• consult with the RESS operator;


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• conduct the audit in accordance with this paper and the terms of reference for the RESS

Market Auditor determined by the CRU, and in accordance with RESS Terms and

Conditions and Agreed Procedures;

• comply with confidential information requirements of DCCAE and Eirgrid as any information

which comes into its possession in its role as RESS Market Auditor is confidential

information of Eirgrid and DCCAE;

• report to the CRU and DCCAE at such reasonable intervals as the CRU shall specify in the

terms of reference during the course of the audit;

• deliver its audit report to the CRU and DCCAE in draft form prior to it being finalised;

• deliver its audit report in final form to the CRU and DCCAE within 4 weeks of delivering its

draft audit; and

• meet with the CRU and DCCAE at the request of the CRU at any time during the RESS

Market Auditor’s engagement. The CRU will require the RESS Market Auditor to attend a

meeting with it and DCCAE within 6 weeks of its delivery of the audit report in final form.

Nominated representatives of Eirgrid shall be entitled to attend any such meeting.

Standing of the RESS Terms and Conditions and

Agreed Procedures

The RESS Terms and Conditions are being developed by DCCAE and will be finalised in advance

of the opening of the RESS 1 auction process. It is currently under development and will be

finalised and approved by DCCAE before the RESS auction process goes live. The precise scope

of the RESS auction will be as defined in these Terms and Conditions. The RESS Agreed

Procedures are being developed by Eirgrid and are supplementary to the RESS Terms and

Conditions; these will be finalised in advance of the opening of the RESS 1 auction process.

The CRU understands that, once published, the RESS Terms and Conditions and Agreed

Procedures may be subject to changes/modification between RESS auctions (reflecting updates or

learnings between RESS auctions), this may result in new versions of the RESS Terms and

Conditions and Agreed Procedures being issued between RESS audit periods.

For the purposes of both the Monitor and Auditor, it is assumed that the RESS Terms and

Conditions and Agreed Procedures contains all necessary requirements, and the Monitor and

Auditor are not required to review any other documents.


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The Monitor would require to be notified of any situations in which a conflict arose and would not be

expected to identify any such conflicts himself/herself. Neither the Monitor nor Auditor are required

to audit the RESS Terms and Conditions and Agreed Procedures itself. It is assumed that the

RESS Terms and Conditions and Agreed Procedures once finalised will be complete, valid and

correct. Accordingly, the roles of the Monitor and Auditor are not to identify errors in the RESS

Terms and Conditions and Agreed Procedures itself, but to identify non-compliance with these by

the operator Eirgrid and other parties as appropriate.

Single opinion

It is considered that a single, overarching opinion from one auditor (or monitor) has a number of

significant advantages over a suite of opinions from different auditors (or monitors). The principal

advantages are as follows:

• it avoids duplication of audit work over market systems and processes by the individual

participants’ own auditors;

• participants are provided with a single audit report, and are not forced to evaluate the

opinions of multiple auditors, potentially prepared on different bases, and assess for

themselves the effect of any individual qualifications or issues raised on the overall market

and them as participants;

• it enables practical monitoring of the qualification and auction processes; and

• it enables one market auditor (or monitor) to take overall responsibility for providing

independent assurance to all market participants. This allows the market auditor to plan

and perform the audit from end to end; to ensure that audit risk is addressed to his/her

satisfaction; and to provide an authoritative report to market participants at the conclusion

of his/her audit.

Nature of opinion

The CRU has considered a number of different approach to the form and approach to the

development of the single opinion. Three standard approaches are set out below which have been

considered.

2.3 Compliance opinion


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The work of the auditor and monitor may be directed at providing assurance that the operator

Eirgrid and other parties, as appropriate, have complied in all material respects with the RESS

Terms and Conditions and Agreed Procedures. This form of opinion would be restricted to

compliance with the RESS Terms and Conditions and Agreed Procedures. It would confirm proper

operation of the systems/processes, it would not address scenarios where errors or oversights in

the RESS Terms and Conditions and Agreed Procedures lead to inequitable results.

The opinion would be similar in format to a financial audit opinion on a company’s financial

statements. In accordance with ISA 700, it would set out the responsibilities of the respective

parties (including the auditor or monitor), the basis of the opinion and the opinion itself.

2.4 ISRS 4400 opinion (Agreed Upon Procedures approach)

An Agreed Upon Procedures (AUP) approach has some fundamental differences compared to an

audit. As an audit engagement, the auditor or monitor designs the approach in response to the

terms of reference issued by the CRU in order to provide an overall audit opinion on compliance

with the rules. Under AUP, the CRU, with input as necessary from the operator Eirgrid and the

auditor or monitor, would determine the specific audit procedures to be undertaken. The auditor or

monitor would be responsible for executing the tests and reporting the results which would require

interpretation and evaluation by the CRU and parties.

The approach to AUP assignments is well established and is set out in International Standards on

Related Services ('ISRS') 4400 - Engagements to Perform Agreed-upon Procedures Regarding

Financial Information. An AUP approach may be relevant where the focus is on key controls and

known/expected market issues. Testing would be reduced in areas where the potential impact is

minimal, the issue is dealt with by other verification mechanisms or other audit testing, or is directly

apparent to the affected parties without any testing or external assurance. The specific areas for

inclusion in the testing programme would be decided by the CRU and, as such, they would carry

the risk associated with the design of the procedures.

The AUP approach would no longer result in an audit opinion, but rather a report of the results of

testing performed in the areas agreed, although the final report may not be noticeably different from

a Statement of Significant Issues.

Benefits of an AUP approach may include:

• the opportunity for the CRU to direct the audit effort to the areas in which they have

greatest concern and where the risk is perceived to be highest, with the auditor or monitor


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carrying out an agreed programme of work in pre-defined areas. There would be a

deliberate decision to dispense with audit testing over low risk or peripheral areas;

• the ability to change the scope of the work year on year, to reflect changes in the incidence

and significance of errors and issues; and

• greater transparency and control of audit input and resulting costs, as the auditor or

monitor will be able to provide a cost for each line of the Agreed Upon Procedures work

programme, allowing the CRU to select those tests they believe are important, based on

their understanding of risks and settlement impact.

The AUP approach is often used for the current SEM Market Audit of the Trading and Settlement

Code (TSC) and Market Audit of the Capacity Market Code (CMC).

2.5 ISAE 3000 Assurance

International Standard on Assurance Engagements (ISAE) 3000 is the standard applicable to

assurance engagements other than audits or reviews of historical financial information and

presents an alternative basis for undertaking audit work. While ISAE 3000 supports both

reasonable assurance and limited assurance engagements, it is assumed that the former would be

the more relevant form for the auditor or monitor. An ISAE 3000 approach involves:

• definition of the subject matter, e.g. non-financial information and conditions for which the

subject matter information may be key indicators of efficiency or effectiveness, or systems

and processes for which the subject matter information may be an assertion about

effectiveness.

• identification of the criteria against which the subject matter is evaluated or measured.

• appropriate subject matter needs to be identifiable and capable of consistent evaluation or

measurement against the identified criteria and be able to be subjected to appropriate

procedures for gathering appropriate evidence.

• development of the work programme by the auditor or monitor to assess the subject matter

against the specified criteria.

• reporting the results of testing to the CRU, DCCAE and other stakeholders. The report

would provide “assurance” that the subject matter had satisfied the evaluation criteria, and

provide an “audit opinion”, supported by detail of the subject matter, evaluation criteria and

work performed, and not merely a report of factual findings.

ISAE 3000 assurance reports are becoming more commonplace, particularly for Corporate Social

Responsibility reports in public company accounts, reviews of internal controls and reporting on

performance and quality information.


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3. Terms of Reference for RESS Market Auditor

Main Principles

3.1 Nature of opinion

It is proposed that the basis of the Audit Opinion will be conducted under International Standards

on Related Services (ISRS 4400).

3.2 Materiality

Materiality depends on the size of the item or error judged in the particular circumstances of its

omission or misstatement. Thus, materiality provides a threshold or cut-off point rather than being a

primary qualitative characteristic which information must have if it is to be useful. Once selected the

audit materiality measure is used in two principal ways, firstly to determine the nature, timing and

extent of audit procedures required; and to evaluate the impact of errors, omission or

misstatements.

In terms of whether to use a financial versus a volumetric materiality threshold given that the

primary function of the RESS Terms and Conditions and Agreed Procedures is to contract for a

quantity of renewable energy, the materiality of any error or issue should be related to the volume

of energy affected. For issues with qualification, there is no clear basis on which to determine the

financial materiality of any error. This strongly suggests that a volumetric measure of materiality is

more relevant than a financial one. The current SEM TSC Market Audit and CMC Market Audit

both uses a market threshold level of 0.25%.

Materiality may be considered from the perspective of individual participants or the market as a

whole. While theoretically possible to choose the lowest materiality based on the volume traded by

the smallest generator, this would most likely be prohibitive in terms of the resources required and

costs associated with delivering the corresponding opinion. CRU favour using the same basis of

materiality for both market-level and participant-level reporting as it has the advantage of simplicity

and clarity. Also, participants will be provided with a Report of Significant Issues which would have

a lower threshold for reporting, this report would provide them with transparency over issues arising

in the market and allow them to estimate the impact on their own position for themselves.


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3.3 Report of Significant Issues

The market will also be provided with a Report of Significant Issues containing matters identified

during the course of the RESS Market Audit which did not affect the audit opinion but were in

themselves of significance. These issues would be reported to the DCCAE, CRU and other

stakeholders at the same time as the issue of the Auditor’s opinion and also after an interim audit

was performed.

The drafting process for the Report of Significant Issues would involve dialogue with operational

management to confirm factual accuracy of the detailed points and develop the response/

resolution, discussion of the draft report in its entirety with DCCAE and CRU prior to its issue. The

Report of Significant Issues provides market participants with comfort from the fact that issues

which are not material in overall market terms, are identified and quantified, enabling them to

assess for themselves the impact of each issue on their business.

3.4 Governance and Reporting

The CRU will appoint the Auditor and specify the terms of reference, and will pay the fees and

costs of the Auditor, and the Auditor will report to DCCAE and CRU. Nominated representatives of

the RESS operator (Eirgrid) shall be entitled to attend the meeting of the Auditor with DCCAE and

CRU following the delivery of the final Market Audit Report, and Eirgrid are required to publish the

final Market Audit Report.

The Auditor will be required to have significant interaction with the RESS auction operators in light

of their role. It is important that the scheme operators Eirgrid are engaged during the drafting and

finalisation of the report in order to allow them to confirm factual accuracy of issues raised and to

allow the development of appropriate and practical resolution actions. In addition to contractual

liability under the RESS Market Auditor’s contract or letter of engagement, it is probable that the

Auditor will have a duty of care to the scheme operators Eirgrid and the participants in the RESS

scheme who will receive the Market Audit report and may seek to rely on it.

3.5 Period covered by audit

The RESS Market Audit will cover all the processes under the RESS Terms and Conditions and

Agreed Procedures that take place within the period covered by the audit. This would include

registration, qualification, and auctions, through the centralised auction platform, and termination. It

would also cover all activities required under any active implementation agreements.


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It is practical for an audit to cover the full qualification and auction process for any given RESS

auction, rather than splitting these across two audits. Each audit would normally be expected to

cover one RESS auction. The audit year will be timed to coincide with the full RESS process. The

timing of future RESS auctions may not be finalised at the time the Terms of Reference are set for

the audit period.

3.6 Scope of RESS Market Audit

The audit will cover the RESS operators’ activities, to the extent covered by specific requirements

in the RESS Terms and Conditions and Agreed Procedures, would include:

• Registration;

• Termination;

• Qualification;

• Operation of the auction;

• Implementation agreements;

• Disputes.

As such, an audit focused on the operation of the RESS auction process would address

compliance of Eirgrids’ systems and associated processes with the RESS Terms and Conditions

and Agreed Procedures. It would cover, inter alia, the processes of acquisition of input data,

application of algorithms and calculations, provision of output data, and maintenance of standing

data. An initial assessment of auditability suggests that the design of appropriate audit procedures

is feasible in all areas.

While the work of the RESS Market Auditor would include checking the application of the RESS

Terms and Conditions and Agreed Procedures, validation of the RESS Terms and Conditions and

Agreed Procedures themselves is outside the RESS Market Auditor’s area of competence.

Although the RESS Market Auditor would report any inconsistency or error coming to his/her

attention during the course of the audit work but is not be specifically charged with confirming the

validity of the Terms and Conditions and Agreed Procedures.


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4. Terms of Reference for RESS Auction Monitor

Main principles

4.1 Nature of opinion

It is proposed that the basis of the Monitor’s Opinion will be conducted under the International

Standard on Assurance Engagements (ISAE 3000).

4.2 Materiality

In order to ensure valid operation of the whole RESS auction process, including qualification, it

seems most appropriate to not limit reporting of issues by the RESS Auction Monitor to any specific

level of materiality.

The Monitor should report on any issues with the operation of the auction process which it

identifies. It will be appropriate for the Monitor to indicate which issues would be expected to

directly affect the outcome of the qualification and auction process, and those issues which do not

affect the outcomes of the current auction, but which still need to be resolved.

4.3 Governance and Reporting

The CRU will appoint the Monitor and specify the terms of reference, and will pay the fees and

costs of the Monitor, and the Monitor will report to DCCAE and CRU. The RESS Auction Monitors

Report.will be published by Eirgrid. This published report may need to be redacted to protect

confidential data or if some of the report’s conclusions are commercially sensitive and remain

under investigation.

The CRU will engage the Monitor for the provision of auction monitoring services, and the Monitor’s

contractual and primary reporting responsibility will be to CRU and DCCAE. The Monitor will be

interacting extensively with the RESS operator in the absence of any contractual relationship

covering respective responsibilities, access to information, confidentiality, intellectual property,

liability provisions, use of deliverables, etc. It is assumed that those items not covered in the RESS

Terms and Conditions and Agreed Procedures themselves will need to be specified in the contract

with the Monitor.


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Notwithstanding the contractual arrangements, the RESS Auction Monitor will require to have

significant interaction with the RESS operators in light of their role. The RESS Auction Monitor will

require access to Eirgrids’ premises to monitor the auction itself. The Monitor will also require read-

only access to the qualification and auction systems and to the related RESS data register.

4.4 Period covered by RESS Auction Monitor

The Monitor will cover the full qualification and auction processes that take place within the period

covered by its appointment. The Monitor will cover the full qualification and auction process for any

given RESS auction. Each year of appointment would normally be expected to cover one RESS

auction.

The monitoring year should be timed to coincide with such a period, and would currently be

estimated to start in the period from December to June. Given that the timing of future RESS

auctions are indicative at the time the Terms of Reference (ToR) being set, the ToR should specify

the auctions to be covered in their entirety by the Monitor.

4.5 Scope of RESS Auction Monitors role

The tasks for the RESS Auction Monitor include:

• Monitoring the Qualification process to ensure that the RESS operator have complied with

the RESS Terms and Conditions and Agreed Procedures;

• Being present at the auctions, with full read access to all key software, including access to

all bids and all communications between Eirgrid and all bidders;

• Reporting on whether it considers that Eirgrid have conducted the RESS auction in

accordance with the RESS Terms and Conditions and Agreed Procedures;

• Identifying any actual or potential breach of the rules and regulations or other actual or

potential irregularities in the conduct of the RESS Auction by Eirgrid and an assessment of

the consequences; and

• Making recommendations on the changes to the RESS Terms and Conditions and Agreed

Procedures.

The Monitor will check that the version of software used for the qualification and auction processes

is the correct version as implemented in accordance with RESS Terms and Conditions and Agreed

Procedures.


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5. Next Steps

This information paper sets out the proposed Terms of Reference for the RESS Market Auditor and

Auction Monitor. The CRU is happy to receive feedback on these proposed Terms of Reference

and will take this on board.

Following this information paper, the CRU will finalise the Terms of Reference for the RESS Market

Auditor and Auction Monitor. In conjunction with this process the CRU is initiating and progressing

a procurement process to appoint a RESS Market Auditor and RESS Auction Monitor.