Auction of Interconnector Capacity on Moyle and North /South Links

05 February 2001

1. Trading via Moyle from 1 January 2002

1.1 The Moyle interconnector will be available for third party access from the first day of commissioning. There are, however, several issues which lead to the conclusion that an initial three month period should see the operation of a simplified form of interconnector access and allocation. The full impact on system costs will need to be established, especially as the interconnector may be the largest in-feed to the system, and hence may increase the level of spinning reserve needed. System charges from 1 April 2002 will be revised to more fully reflect the costs/benefits of the Moyle link. The interconnector will not be considered as firm in this three month period, ie NIE will not guarantee the availability of the capacity.

1.2 Ofreg proposes to hold an auction in February 2001 to allocate the ATC from 1 Jan 2002 to 31 March 2002. The NI Transmission System Operator has determined that the practical ATC for that period will be approximately 300MW. NIE has entered into a supply agreement with Scottish Power which will reserve around 125 MW of capacity (for 70 months), so there will be 175 MW of capacity available to third parties for that three month period. The figure of 175 MW may be reduced to 125 MW.

1.3 An auction will allocate capacity in tranches of 5 MW to qualifying bidders, with a reserve price of £1,000 per MW per month, and a pay as bid price will then attach to each capacity block. This will take place via a single sealed bid auction, with the auction proceeds set off against annual operating costs of the interconnector. There will be no separate use of interconnector charge levied for transit of electricity, nor for the transit of energy through the NI system to the RoI. Ofreg will consult later this year on whether such charges should be levied after 1 April 2002. Losses on the Moyle interconnector will be 4%, with a further 2% loss adjustment factor for transit flows on the NIE system.

1.3 NIE Power Procurement Business (PPB) has contracted with Scottish Power (SP) for an amount of energy which equates to an average of 125 MW of ATC. Were NIE not to pay an appropriate fee for use of the ATC, then it may be construed as anti-competitive or abuse of dominance. Therefore Ofreg propose an actual auction for 175 MW (possibly reduced to 125 MW as outlined above). NIE PPB will be required to pay the reserve price for it’s 125 MW of reserved capacity for the first 3 months of 2002. Options for the remaining 67 months of the contract will be discussed in the consultation to be published later this year.

The North-South Interconnector
The NIE-ESB interconnector capacity rights awarded in February 2000 will expire on 31 March 2001. Ofreg proposes to allocate capacity rights from 1 April 2001 to 31 March 2002.
For North-South (ie export) capacity this will be in the form of an auction for capacity, with a reserve price of £100 per MW per month. The capacity available will be 120 MW for the year. There will also be a daily allocation of any capacity not taken up, which will operate on terms similar to those applying from 19/02/00, with a daily charge being levied. Further details will be made available after the auction.

Capacity will be allocated in 1 MW tranches, and will be pay as bid.

Please contact the Commission for Electricity Regulation (CER) in Dublin for details of South-North interconnector capacity (Tel 00353 1 4000800).

Notes

1. Trading via Moyle from 1 January 2002

1.1 Interconnector trading has been under way between the two electricity systems in Ireland since the restoration of the North-South Interconnector in 1995. The mutual benefits in the period up to February 2000 comprised mainly of shared system reserve costs, rescue flows and a degree of trading between the utilities.

1.2 With the advent of the Internal Market in Electricity (IME) European Directive, and its focus on interconnectors as the means of developing the internal market in electricity within Europe, Interim Interconnector Trading Arrangements were agreed between NIE and ESB system operators and the two regulators, Ofreg and CER (Commission for Electricity Regulation). These arrangements have been in operation since market opening in the RoI in February 2000.

1.3 The construction of the Moyle interconnector will connect NI (and hence RoI) to the GB grid for the first time, and as a consequence there must be proper consideration given to the access and allocation arrangements which pertain.

1.4 In this respect it is useful to consider the issues in two separate stages (and timeframes). Firstly, the Moyle interconnector is expected to be fully commissioned and available for use on 1 January 2002. As the financial year which most suppliers and customers use is April-March there will be a 3-month period in which an interim strategy will be employed, with a fully defined system developed to be operational from 1 April 2002.

2. General

2.1 There will be a restriction of 60% of available net ATC which can be acquired by any single bidder in the auctions for either interconnector, (with net Moyle ATC being ATC after the 125 MW PPB capacity is excluded). Secondary trading of acquired capacity will be permitted subject to the terms of the Interconnector Capacity agreement which will be issued to bidders. Capacity not used or reassigned will be lost, and may be re-sold by the TSO.

2.2 In the event that the Moyle interconnector is completed ahead of the 1 January 2002 target date, an announcement will be made relating to access and allocation.

2.3 In the event that on any particular day the actual net (ie 175 MW) Moyle ATC is lower than the amount allocated to successful bidders at auction, then there will be a pro-rata reduction in the allocations of capacity holders in line with their percentage shares of net capacity holdings.

2.4 Bidders should make themselves aware of the arrangements in Scotland for transmission access. The acquisition of Moyle Interconnector access does not bring associated transmission access rights in Scotland.

2.5 Bid documents for both interconnector auctions will be made available to interested parties by Friday 2 February 2001 with bids to be received no later than 5 pm on Monday 12 February 2001. On Tuesday 13 February the bids will be opened and the auction results will be notified to bidders as soon as available. Invitations to Bid and copies of the Interconnector Capacity Agreements for each auction will be available by e-mail from the Transmission System Operator, from Friday 2 February. The contact address is : Brian Lunn, System Operator Northern Ireland, Castlereagh House Control Centre, 12 Manse Road, Belfast, BT6 9RT. Tel: 02890 661100.

2.6 Ofreg will consult further regarding more sophisticated Moyle interconnector access and allocation arrangements for the period beginning 1 April 2002.

Notes

1. Trading via Moyle from 1 January 2002

1.1 Interconnector trading has been under way between the two electricity systems in Ireland since the restoration of the North-South Interconnector in 1995. The mutual benefits in the period up to February 2000 comprised mainly of shared system reserve costs, rescue flows and a degree of trading between the utilities.

1.2 With the advent of the Internal Market in Electricity (IME) European Directive, and its focus on interconnectors as the means of developing the internal market in electricity within Europe, Interim Interconnector Trading Arrangements were agreed between NIE and ESB system operators and the two regulators, Ofreg and CER (Commission for Electricity Regulation). These arrangements have been in operation since market opening in the RoI in February 2000.

1.3 The construction of the Moyle interconnector will connect NI (and hence RoI) to the GB grid for the first time, and as a consequence there must be proper consideration given to the access and allocation arrangements which pertain.

1.4 In this respect it is useful to consider the issues in two separate stages (and timeframes). Firstly, the Moyle interconnector is expected to be fully commissioned and available for use on 1 January 2002. As the financial year which most suppliers and customers use is April-March there will be a 3-month period in which an interim strategy will be employed, with a fully defined system developed to be operational from 1 April 2002.

2.General

2.1 There will be a restriction of 60% of available net ATC which can be acquired by any single bidder in the auctions for either interconnector, (with net Moyle ATC being ATC after the 125 MW PPB capacity is excluded). Secondary trading of acquired capacity will be permitted subject to the terms of the Interconnector Capacity agreement which will be issued to bidders. Capacity not used or reassigned will be lost, and may be re-sold by the TSO.

2.2 In the event that the Moyle interconnector is completed ahead of the 1 January 2002 target date, an announcement will be made relating to access and allocation.

2.3 In the event that on any particular day the actual net (ie 175 MW) Moyle ATC is lower than the amount allocated to successful bidders at auction, then there will be a pro-rata reduction in the allocations of capacity holders in line with their percentage shares of net capacity holdings.

2.4 Bidders should make themselves aware of the arrangements in Scotland for transmission access. The acquisition of Moyle Interconnector access does not bring associated transmission access rights in Scotland.

2.5 Bid documents for both interconnector auctions will be made available to interested parties by Friday 2 February 2001 with bids to be received no later than 5 pm on Monday 12 February 2001. On Tuesday 13 February the bids will be opened and the auction results will be notified to bidders as soon as available. Invitations to Bid and copies of the Interconnector Capacity Agreements for each auction will be available by e-mail from the Transmission System Operator, from Friday 2 February. The contact address is : Brian Lunn, System Operator Northern Ireland, Castlereagh House Control Centre, 12 Manse Road, Belfast, BT6 9RT. Tel: 02890 661100.

2.6 Ofreg will consult further regarding more sophisticated Moyle interconnector access and allocation arrangements for the period beginning 1 April 2002.