the role of esco in wholesale trade of electricity (capacity) ( review of wholesale trade of...
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The Role of ESCO in Wholesale Trade of Electricity (Capacity)
(REVIEW OF WHOLESALE TRADE OF ELECTRICITY)
KUTAISISeptember, 2012
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MAIN LEGAL ACTS THAT REGULATE WHOLESALE TRADE OF ELECTRICITY (CAPACITY)
LAW OF GEORGIA ON “ELECTRICITY AND NATURAL GAS”
“ELECTRICITY (CAPACITY) MARKET RULES” (ORDER No:77 OF THE
MINISTER OF ENERGY DATED AUGUST 30, 2006)
GNERC RESOLUTION No:33 ON “ THE ELECTRICITY TARIFFS”,
DATED DECEMBER 4, 2008
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ELECTRIC ENERGY SECTOR PLAYERS
MINISTRY OF ENERGY
GEORGIAN NATIONAL ENERGY AND WATER REGULATORY
COMMISSION
ELECTRICITY SYSTEM COMMERCIAL OPERATOR
DISPATCH LICENSEE
TRANSMISSION LICENSEE
QUALIFIED ENTERPRISES
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QUALIFIED ENTERPRISES
ELECTRICITY SYSTEM COMMERCIAL OPERATOR;
GENERATION LICENSEE;
DEREGULATED POWER PLANT;
– SMALL CAPACITY (UP TO 13 MW) POWER PLANT;
– POWER PLANT BUILT AFTER AUGUST 1, 2008;
DISTRIBUTION LICENSEE;
DIRECT CONSUMER;
IMPORTER;
EXPORTER.
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GENERATION LICENSEE
REGULATORY POWER PLANT;
PARTLY DEREGULATED HYDRO POWER PLANT;
PARTLY DEREGULATED THERMAL POWER PLANT;
GUARANTEED CAPACITY SOURCE.
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GENERATION LICENSEE — REGULATORY POWER PLANT
The activity is subject to licencing (Generation Licence).
The Committion determines fixed selling tariff of electricity.
Sells the electricity for fixed tariff based on the direct contract.
Regulatory power plants are Enguri HPP and Vardnili HPP.
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GENERATION LICENSEE — PARTLY DEREGULATED HYDRO POWER PLANT
The activity is subject to licensing (Generation License).
The Commission determines fixed upper marginal selling tariff.
Sells the electricity within the rate of upper margin of generation tariff,
based on the direct contract.
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GENERATION LICENSEE — PARTLY DEREGULATED THERMAL POWER PLANT
The activity is subject to licensing (Generation License).
The Commission determines fixed upper marginal selling tariff.
Sells the electricity within the rate of upper margin of generation tariff,
based on the direct contract.
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GENERATION LICENSEE – GUARANTEED CAPACITY SOURCE
The activity is subject to licensing (generation license).
The commission determines:
- Guaranteed capacity cost;
- Upper margin of electricity generation tariff of the
guaranteed capacity source;
Sells the electricity within the rate of upper margin of
generation tariff, based on the direct contract.
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DEREGULATED SMALL CAPACITY POWER PLANT
The activity is not subject to licensing.
The Commission does not determine the tariff of electricity sale.
Sells the electricity:
- Based on the direct contract — for a free price;
- Directly to the retail consumer.
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DISTRIBUTION LICENSEE
The activity is subject to licensing (Distribution License).
Has upper marginal tariff on selling the electricity to the retail customer.
Buys and/or receives the electricity:
- From other qualified enterprises, based on direct contracts, for the
contract price;
- ESCO;
- From own means of generation.
Is obliged to transmit the electricity through own grid for those individuals,
who are entitled to selling the electricity directly to the consumers (making the
grid available for the third party).
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DIRECT CUSTOMERS
The activity is not subject to licencing.
Shall be allowed to wholesale trade of electricity (capacity) if annually consumes
not less than:
- 7 M kWh electricity - 2010-2012;
- 3 M kWh electricity – 2013-2015 ;
- 1 M kWh electricity - 2016-2017;
- 1 M kWh electricity – 2017.
Buys and/or receives the electricity:
- From other qualified enterprises, based on direct contracts, for contract
price;
- From ESCO;
- From own means of generation.
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IMPORTER
The activity is not subject to licensing.
Possession of the direct contract, registered with the dispatch
licensee, on selling the imported electricity to the other qualified
enterprise or consuming for own needs is necessary for starting the
activity.
The Commission determines fixed upper marginal tariff for selling the
electricity.
The importer:
• Sells the imported electricity to other qualified enterprise, based on
the direct contracts, within the rate of import tariff.
• Uses the imported electricity for own needs.
• Sells the imported electricity to ESCO.
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EXPORTER
The activity is not subject to licensing.
Possession of the following contracts, registered with the dispatch licencee:
- Direct contract on buying the electricity, intended for the export
qualified enterprise(s) or the application on exporting own electricity;
- Direct contract on transmitting the electricity and dispatch service.
Electricity selling (for export) tariff is not established.
Buys and/or receives the electricity:
- From other qualified enterprises, based on direct contracts, for the
contract price;
- From ESCO;
- From own means of generation.
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SYSTEM COMMERCIAL OPERATOR
ESCO was founded on August 7, 2006 and started functioning on
September 1, 2006.
ESCO represents Entrepreneur Legal Entity of Private Law.
Organizational-legal form — Joint Stock Company.
ESCO is 100% state owned. The Ministry of Energy of Georgia manages
the share, based on Presidential Decree No:1051, dated November 10, 2010.
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ESCO FUNCTIONS
Selling/buying balancing electricity (capacity);
Signing medium and long-term contracts on import/export;
Trading with guaranteed capacity;
Registering qualified entreprices;
Creating and maintaining unified database on wholesale selling/buying;
Determining the quantity of sold and purchased electricity and submitting the
information for settlement;
Creating and maintaining unified register of accounting;
Inspecting the metering system;
When performing its activities, ESCO is guided by main principles of state policy.
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MAIN SOURCE FOR FINANCING ESCO
ESCO service fee is determined by GNERC Resolution No:33 «About the
Tariffs of Electricity», dated December 4, 2008.
ESCO service fee is 0,019 Tetri per kWh.
Every Qualified Enterprise pays the service fee — per generated,
consumed, imported and exported kWh.
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MODELM MODEL OF WHOLESALE ELECTRICITY TRADE
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GENERATION
DISPATCHER
DISTRIBUTION
DIRECT CUSTOMER
TRANSMISSION
WHOLESALE TRADE OF ELECTRICITY
BASED ON DIRECT CONTRACTS
• BILATERAL DIRECT CONTRACTS ARE SIGNED BETWEEN THE QUALIFIED
ENTERPRISES
• CONTRACT PRICE DEPENDS ON STATUS OF QUALIFIED ENTERPRISES (REGULATORY,
PARTLY DEREGULATED AND FULLY DEREGULATED)
• DIRECT CONTRACTS REQUIRES REGISTRATION BY THE DISPATCH LICENSEE
THROUGH ESCO (BALANCING ELECTRICITY)
• ESCO TRADES THE BALANCING ELECTRICITY WITH STANDARD CONDITIONS OF
DIRECT CONTRACT, WHICH:
• IS REGISTERED WITH DISPATCH LICENSEE
• REPRESENTS PUBLIC DOCUMENT
• IS STANDARD FOR ALL THE PARTICIPANTS
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MAIN PRINCIPLES OF WHOLESALE TRADE OF ELECTRICITY
Calculation period is one calendar month.
Only the generator and the importer are the electricity sellers.
The electricity is sold on the seller's busbar. Accordingly, the transportation
related expenses are imposed to the electricity buyers. Transportation related
expences are:
Dispatch service fee;
Transmission service fee ;
Transit (if applicable) service fee;
Actual average loss in the network.
Only distribution licensee, direct customer and exporter are the electricity
buyers. The generator represents the electricity buyer only for ensuring own
consumption.
Balancing electricity trade is possible only through ESCO.
Re-selling the balancing electricity to ESCO by distribution licensee, direct
customer and exporter is prohibited.
Balancing electricity trade is not a profit-making activity for ESCO. 20
FINANCIAL MODEL OF WHOLESALE ELECTRICITY TRADE
21DIRECT CONTRACT
ESCO
BALANCING ELECTRICITY
GENERATION
IMPORTER
DISTRIBUTION
DIRECT CONSUMER
EXPORTER
BALANCING ELECTRICITY Balancing electricity represents:
In case of electricity buyers:
- Is the difference between the electricity delivered by the
electricity generator to the busbar and the electricity sold (delivered) by the electricity generator,
based on the direct contract (except, when ESCO exports this electricity).
- Is the difference between the electricity imported by the
importer (including ESCO) and the electricity sold (delivered) by the importer, based on the
direct contract.
- The quantity of electricity delivered to the busbar by the newly
constructed hydro power plants and bought by ESCO as an obligation (except, when ESCO
exports this electricity).
In the event of electricity purchaser:
- The difference between the electricity consumed (including the
actual average loss) by the distribution licensees, direct customers and exporters and the
electricity purchased by them based on the direct contracts.
COST OF THE BALANCEING ELECTRICITY SOLD TO ESCO
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NEWLY BUILT POWER PLANT
DURING THE GUARANTEED PURCHASE PERIOD – FOR THE PRICE CONTRACTED WITH ESCO
PARTLY DEREGULATED THERMAL POWER PLANT
WITH UPPER MARGIN OF GENERATION TARIFF
ESCO IMPORTER
WITH UPPER MARGIN OF IMPORT TARIFF
RAGULATORY POWER PLANT
WITH THE TARIFF FIXED BY THE COMMISSION
COST OF THE BALANCING ELECTRICITY SOLD TO ESCO
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IMPORTER
MAY-AUGUST
FOR THE LOWEST PRICE OF GENERATION
SEPTEMBER-APRIL
FOR THE HIGHEST TARIFF OF BALANCING ELECTRICITY SOLD TO ESCO BUT NOT MORE THAN IMPORT TARIFF
SMALL CAPACITY POWER PLANT
MAY-AUGUST
FOR THE LOWEST PRICE OF GENERATION
SEPTEMBER-APRIL
FOR THE HIGHEST TARIFF OF BALANCING ELECTRICITY SOLD TO ESCO
PARTLY DEREGULATED HYDRO POWER PLANT
MAY-AUGUST
FOR THE LOWEST PRICE OF GENERATION
SEPTEMBER-APRIL
WITH UPPER MARGIN OF THE TARIFF ESTABLISHED BY THE COMMISSION
COST OF THE BALANCING ELECTRICITY SOLD TO ESCO
GUARANTEED CAPACITY SOURCE
GENERATED ELECTRICITY
WITH THE UPPER MARGIN OF ELECTRICITY
GENERATION OF THE GUARANTEED CAPACITY
SOURCE
THE ELECTRICITY GENERATED DURING THE TESTING
TESTING REQUESTED FROM THE PLANT
WITH WEIGHTED AVERAGE PRICE OF THE BALANCING ELECTRICITY
BOUGHT BY ESCO, BUT NO MORETHE UPPER MARGIN OF
ELECTRICITY GENERATION OF THE GUARANTEED CAPACITY SOURCE
TESTING REQUESTED FROM THE DISPATCHER
WITH THE UPPER MARGIN OF ELECTRICITY GENERATION OF THE GUARANTEED CAPACITY
SOURCE
PRICE-FORMATION OF BALANCING ELECTRICITY SOLD BY ESCO
Selling price of balancing electricity is formed with the Weighted Average Price of
balancing electricity bought by ESCO
The Annual Weighted Average Price of Balancing Electricity Sold by ESCO (2007-2011)
26
0.0000
1.0000
2.0000
3.0000
4.0000
5.0000
6.0000
7.0000
8.0000
9.0000
10.0000
7.13717.7337
6.84425.9077
8.0521
2007 2008 2009 2010 2011
Tet
ri/k
Wh
COST OF THE BALANCING ELECTRICITY BOUGHT FROM ESCO
27
EXPORTERMAY-AUGUST
WITH WEIGHTED AVERAGE PRICE OF THE BALANCING ELECTRICITY BOUGHT BY ESCO
SEPTEMBER-APRIL
WITH THE HIGHEST TARIFF OF BALANCING ELECTRICITY SOLD TO ESCO
ESCO EXPORTER
WITHIN THE LIMITS OF CONTRACTED PRICE ON EXPORT, WITH THE HIGHEST TARIFF OF BALANCING ELECTRICITY SOLD TO ESCO
DIRECT CUSTOMER
WEIGHTED AVERAGE PRICE OF THE BALANCING ELECTRICITY BOUGHT BY ESCO
DISTRIBUTION LICENSEE
WEIGHTED AVERAGE PRICE OF THE BALANCING ELECTRICITY BOUGHT BY ESCO
INDICATORS OF WHOLESALE ELECTRICITY TRADE
28
2007 2008 2009 2010 2 011
1386.14 1386.14 1210.56 1434.632159.15
7238.94 7542.31 7347.62
8706.558223.99
M kWh
BALANCING ELECTRICITY DIRECT CONTRACTS
TRADE WITH GUARANTEED CAPACITY
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The players of guaranteed capacity trade are:
Guaranteed capacity sources;
ESCO;
Guaranteed capacity buyers.
Guaranteed capacity sources are determined by the Decree No: 193 of July 15, 2010 of the Government of Georgia.
Guaranteed capacity provides for the stability, safety and reliability of electric energy system.
Electricity delivery-consumption is balanced (when required) by guaranteed capacity.
Guaranteed capacity trade is carried out in a centralized manner through ESCO, by standard condition of the contract:
With the registered dispatch licensees;
Represents public document;
Is standard for all the players;
Selling of guaranteed capacity is not profit oriented activity for ESCO.
GUARANTEED CAPACITY TRADING MODEL
30
GC Source ESCO GC Purchaser
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SOURCES OF GUARANTEED CAPACITY
GAS TURBINE NO: 3 UNIT OF GARDABANI TPP
NO: 4 UNIT OF GARDABANI TPP
NO: 9 UNIT OF GARDABANI TPP
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GUARANTEED CAPACITY PURCHASERS
DISTRIBUTION LICENSEE
DIRECT CONSUMER EXPORTER
Guaranteed capacity buyer is obliged to compensate the cost of
guaranteed capacity in proportion with its actual consumption in total
consumption or export.
SUPPORT OF CONSTRUCTION OF NEW POWER PLANTS
33
– According to the Law of Georgia «On Electricity and Natural Gas», the agreement
about the construction of new power plant(s) is signed between the Georgian
Government, the investor and ESCO:
– The agreement defines the obligation of ESCO on guaranteed purchase of
electricity
The agreement also defines the price of the electricity to be bought
SUPPORT OF CONSTRUCTION OF NEW POWER PLANTS
34
The Decree No:107 (dated April 18, 2008)of Georgian Government «State Program «Renewable
Energy 2008» about the Approval of Rule on Construction of New Sources of Renewable
Energy in Georgia»:
Applies to the power plant (cascade of power plants) with less than 100MW capacity as well as to the power plants that are not included in the list of potential sources of renewable energy.
The Memorandum of Understanding about construction of new power plant is signed between the Government of Georgia, the investor and ESCO.
During the winter period (three months) within ten years after putting the power plant into service, the electricity generated by the power plant remains in the country.
The electricity shall be sold by the investor choice:
To any buyer available in Georgia — with free tariff or
To ESCO – with the price determined by the Memorandum
According to current information, signed 20 memorandum, where the ESCO represents the third side of memorandum and undertakes to purchase electricity generated by the compulsory purchase of newly built power plant.
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