Expert Commission on Energy Regulation: main report

Annexe A - International Regulation

A Scotland- rGB Electricity Market

As a starting point, the table below identifies the key statistics for the operation of a single electricity market between Scotland and rGB in the event of independence. ^[73]

	rest of Great Britain	Scotland
Population (thousands) [74]	55,240	5,222
Land Area (Sq km)	151,012	77,925
Installed Capacity ( MW) [75]	63,542	10,751
Demand ( TWh) [76]	330	37
Estimated Peak Demand ( GW) [77]	56	6
Renewable Electricity Target [78]	30% of generation from renewable sources	Equivalent of 100% of gross consumption from renewable sources
Transmission System Owners	National Grid	Scottish Power Scottish & Southern Energy
Transmission System Operators	National Grid	Scottish System Operator
Interconnectors [79]	2 GW to France ( IFA) 1 GW to the Netherlands (BritNed) 500 MW to the Republic of Ireland (East West) NB - there is also currently a little over 3 GW of transfer capacity available via the existing cross-border circuits between Scotland and England	500 MW to Northern Ireland (Moyle)

Electricity consumption in Scotland is a little over 11% of the demand in England and Wales. At present, Scotland has a transfer capacity to England and Northern Ireland of around 3.5 GW which represents approximately a third of Scotland's installed generating capacity. From upgrades to the transmission system, this transfer capacity will increase to 6.6 GW by 2016, or around 62% of the existing installed generating capacity in Scotland.

The Single Electricity Market ( SEM) -Republic of Ireland, Northern Ireland

The development of the SEM was based upon a strong foundation, comprising open and transparent memoranda of understanding between both the Regulators ^[79] and the UK and Irish Governments ^[80] . These established clear frameworks for the task to be undertaken and provided a platform for the engagement which followed. It seems to the Commission that the frequency of engagement is a key factor, and that meetings on at least a quarterly basis between the Scottish and rUK Government ministers and working parties would be a necessary component of success.

The SEM approach was built upon a clear statement from the outset regarding the intent and the nature of the relationship between the partners. The following sections provide further detail regarding how such relationships can be established, maintained and regulated.

Key statistics

	Republic of Ireland (RoI)	Northern Ireland ( NI)
Population	4.6 million	1.8 million
Land Area	54,421 km2	13,843 km2
GDP (2012)	E164 million	--
Installed Capacity ( MW)	7,135	2,592
Demand ( TWh)	26	9
Forecast Peak Demand ( MW) (2020)	5,210	1,915
Renewable Energy Targets	40% of generation by 2020	40% of consumption by 2020
Transmission Owner	ESB Networks	Northern Ireland Electricity
System Operator	Eirgrid plc	System Operator for Northern Ireland Ltd ( SONI)
Interconnections and Capacity	East - West (RoI to Wales) 500 MW	Moyle (NI to Scotland) 500 MW
	Three Electricity Interconnectors between RoI and NI. Two 275kV circuits of 600 MW, totalling 1,200 MW, plus two 110kV standby North-South Interconnectors with a capacity of 120 MW each Total RoI/ NI Interconnection is 1,420 MW

Demand in the Republic of Ireland is around three times that of its neighbour. Meanwhile, the existing transfer capacity of 1,420 MW between the two countries represents a little over half (55%) Northern Ireland's current installed generating capacity, and around 20% of the Republic of Ireland's.

The all-island Project is a joint initiative that has been run by the Commission for Energy Regulation ( CER) and the former Northern Ireland Authority for Utility Regulation ( NIAUR) - now known as the Utility Regulator for Electricity, Gas, Water, Northern Ireland ( UREGNI). The aim of the project was to create a single market for natural gas and electricity on the island of Ireland. The project was started following a joint policy decision by the Minister for Enterprise, Trade and Investment in Northern Ireland and the Minister for Communications, Marine and Natural Resources to create the all-island energy market. On 1 November 2007 the Single Electricity Market ( SEM) went live, commencing the trading of wholesale electricity in Ireland and Northern Ireland on an all-island basis.

As part of the establishment of the SEM activity, the Regulatory Authorities identified four areas as key SEM regulatory functions:

1. Trading and settlement code
2. Market monitoring unit
3. Market modelling group
4. Single market operator regulation

The single Irish market is regulated by the SEM Committee. Its powers are based on a memorandum of understanding between Ireland and Northern Ireland. The Committee consists of three UREGNI representatives, three CER representatives, an Independent Member and a Deputy Independent Member. Each regulator gets one vote with the casting vote from the Independent Member.

As recently as February 2014, the UREGNI and the Commission for Energy Regulation ( CER) signed a Memorandum of Understanding ^[81] that outlines how the two organisations will maintain and facilitate effective and beneficial cooperation and collaboration. This signifies the ongoing commitment of both regulatory authorities to work together to ensure the efficient delivery of both joint and separate statutory remits and for the customers of the energy and water sectors they regulate.

The SEM committee structure has provided a well-governed approach to joint regulation of the single market. However, it is acknowledged that from the outset, due in part to the set-up of the committee structure, it has had difficulty in addressing and resolving many issues that were outstanding at the time of implementation. Issues deemed to be 'too difficult' were assigned by both industry and regulatory groups as 'a SEM issue'.

The Committee meets once a month with the location alternating between Dublin and Belfast. The two Regulator bodies each have approximately 120 staff. CER is Ireland's independent energy regulator, with a range of economic, customer and safety functions though it primarily regulates electricity, water and gas. UREGNI regulates the electricity, gas, water and sewerage industries in Northern Ireland, promoting the short and long-term interests of consumers.

The Nordic Market - Norway, Sweden, Denmark, Finland, Iceland,

The national energy regulators of Norway (NVE), Sweden (Energy Market Inspectorate - Ei), Denmark (Danish Energy Regulatory Authority), Finland (Energy Market Authority) and Iceland (Orkustofnun - National Energy Authority) work co-operatively under the umbrella of NordREG. The vision of NordREG is that all Nordic electricity customers will enjoy free choice of supplier, efficient and competitive prices and reliable supply through the internal Nordic and European electricity market.

NordREG's mission is: to actively promote legal and institutional framework and conditions necessary for developing the Nordic and European electricity markets.

It's strategic priorities are: a truly common Nordic retail market with free choice of supplier; a well-functioning Nordic wholesale market with competitive prices; reliable supply; efficient regulation of TSO.

Its powers are based on a Memorandum of Understanding between the participating countries.

Key statistics ^[82]

	Norway	Sweden	Denmark	Finland
Population	5.019 million	9.517 million	5.590 million	5.414 million
Land Area	385,199 km2	449,964 km2	43,094 km2	338,424 km2
GDP (2012)	E385 million	E408 million	E245 million	E192 million
Installed Capacity ( MW)	32,512	37,353	14,020	16,947
Demand ( TWh)	128.2	141.7	33.8	82.9
Forecast Demand (2020)	120.2	138.8	31.7	84.4
Renewables Targets	113.6% of demand by 2020	62.9% of demand by 2020	51.9% of demand by 2020	33% of demand by 2020
Transmission Owner	Statnett SF	Svenska Kraftnät	Energinet.dk	Fingrid
System Operator	Statnett SF	Svenska Kraftnät	Energinet.dk	Fingrid

Taking demand and across the NordPool area as a whole, the proportion accounted for by each country, plus each country's total transfer capacity as a percentage of its total installed capacity, is as follows:

Norway - 33% / 15%

Sweden - 37% / 24%

Finland - 21% / 15%

Denmark - 9% / 25%

The NordREG Regulators

NVE

The Norwegian Water Resources and Energy Directorate (NVE) is subordinated to the Ministry of Petroleum and Energy, and is responsible for the administration of Norway's water and energy resources. The goals of NVE are to ensure consistent and environmentally sound management of water resources, promote an efficient energy market and cost-effective energy systems, and contribute to the economic utilisation of energy.

The sectors covered by NVE include: hydrology, landslides, flood and river management, licensing, electricity and gas. Overall there is a staff of 580 people, of which approximately 100 cover electricity, with a few on gas, and 50 are directly responsible for market and monopoly regulation. NVE has an annual budget of E58 million, of which E4.4 million is allocated to energy, and E4 million is for energy market regulation.

Ei

The Energy Markets Inspectorate (Ei) supervise the Swedish electricity, natural gas and district heating markets. The Inspectorate works for an improvement of the functioning and efficiency of these markets and has a staff of approximately 100, of which 23 cover licensing.

DERA

The Danish Energy Regulatory Authority ( DERA) regulates the infrastructure of the electricity and gas sectors as well as access to this infrastructure. For supply-obligation companies providing electricity, the Authority is also responsible for price control, partly based on requirements for security of supply. Furthermore the Authority carries out benchmarking of the regulated enterprises.

The purpose is to ensure that consumers - households and enterprises - are charged reasonable and transparent prices under reasonable, uniform and transparent terms of supply.

If it is a matter of transparency, DERA regulations can also apply for areas subject to competition, e.g. publication of prices and terms.

DERA's competence is laid down in the three energy supply acts - the Electricity Supply Act, the Natural Gas Supply Act and the District Heating Supply Act; and also the Energinet.dk Act.

Energiavirasto

The Energy Market Authority (Energiamarkkinavirasto), established in 1995, is an expert authority in the Ministry of Trade and Industry's field of administration. Its tasks are related to the electricity and natural gas markets as well as emissions trading.

Operating under the administrative sector of the Ministry of Employment and the Economy, the Energy Authority verifies the functionality of the converging electricity and gas markets, and the reasonableness of network service pricing. Functional emissions trading, the use of renewable energy and energy efficiency promote the fulfillment of climate targets in a cost-efficient manner.

The NordREG Board and Members

The main organisation of NordREG is a rotating Presidency whose appointment changes every year. The Board meets at least twice a year. The work in NordREG is organised through an annual Work Programme approved by the Board. Official Nordic cooperation is channelled through two organisations: the Nordic Council and the Nordic Council of Ministers.

NordREG Strategic Priorities
Strategic priorities	Objectives
A truly common Nordic retail market with free choice of supplier	To develop a common balance management and settlement system To ensure easy and harmonised switching procedures in the whole Nordic market To create harmonised criteria for unbundling to ensure neutrality
A well-functioning Nordic wholesale market with competitive prices	To promote competitive market structures To ensure smooth interaction with other European regions To ensure a well-functioning power exchange To ensure adequate level of transparency in the market
Reliable supply	To promote market-based or legal environment for security of supply To ensure harmonised procedures for handling extreme situations
Efficient regulation of TSO	To regulate and monitor the TSOs with focus on efficiency and Nordic harmonisation To promote adequate transmission capacity and efficient market-based congestion management methods

NordREG Memorandum of Understanding

• Promote the development of efficient electricity markets in the Nordic area, consistent with the development within the European Union
• Co-operate in order to promote a competitive Nordic market in electricity, in which the principles of transparency and non-discrimination are ensured. 'The Regulators' will monitor, reinforce and follow up these processes of liberalisation in the electricity market
• Co-operate in issues relating to energy markets in which 'The Regulators' have responsibilities according to respective national legislation
• Set up the appropriate mechanisms of cooperation, information exchange and assistance amongst 'The Regulators', and reinforce their level of common representation in the cooperation within the Council of European Energy Regulators and joint actions especially in connection with the cooperation among the Nordic transmission system operators (Nordel)
• Provide a framework for the discussion of regulatory issues and exchange of experience in order to facilitate convergence of views and common positions when appropriate
• Provide the necessary elements for the development of regulation and promote increased harmonisation and efficiency in the regulatory framework and processes
• Provide where appropriate the necessary elements for developing joint approaches vis-a-vis transnational energy utilities and companies that operate in separated regulated utility markets (multi-utilities)
• With due regard to national differences in the legal framework and responsibilities, work to establish common policies toward agreed issues

Iberian Market (MIBEL) - Spain, Portugal

The Iberian Electricity Market (MIBEL) constitutes a joint initiative from the Governments of Portugal and Spain, with a view to the construction of a regional electricity market. With the materialisation of MIBEL, it became possible for any consumer in the Iberian zone to acquire electrical energy under a free competition regime, from any producer or retailer that acts in Portugal or Spain.

Key statistics

	Spain	Portugal
Population	47.3 million	10.5 million
Land Area	505,992 km2	91,985 km2
GDP (2012)	E 1,029 million	E 165 million
Installed Capacity ( MW)	c 100,000	19,000
Demand ( TWh)	284	52
Forecast Demand ( TWh, 2020)	359	65
Renewable Electricity Targets	36% of generation by 2020	55% of consumption by 2020
Transmission Owner	Red Eléctrica de España	Rede Eléctrica Nacionais
System Operator	Red Eléctrica de España	Rede Eléctrica Nacionais
Interconnections	Currently seven lines between Spain and Portugal (four of 400kV and three of 220kV), creating capacity of between 2,000 and 2,400 MW. Two new lines planned which will raise capacity to 3,000 MW by 2015

Demand for electricity in Portugal is a little less than 20% of the equivalent in Spain. The transfer capacity between the two countries amounts to slightly more than 10% of Portugal's installed generating capacity, and between 2-3% of Spain's.

MIBEL's main goals are:

• To benefit the electricity consumers of both countries, through the integration of the respective electric systems
• To structure the market organisation based on the principles of transparency, free competition, objectivity, liquidity, self-financing and self-organisation
• To support the development of the electricity market of both countries, with the existence of a single reference price for the whole of the Iberian Peninsula
• To allow all the participants free access to the market, under equal conditions of rights and obligations, transparency and objectivity
• To promote economic efficiency of electrical sector companies, encouraging free competition amongst them.

When initially established, the Board of Regulators comprised of four representatives from the two jurisdictions, two from Portugal - the Portuguese Energy Services Regulatory Authority (ERSE) and the Portuguese Securities Market Commission (CMVM), and two from Spain - representatives of the Spanish National Energy Commission (CNE) and the Spanish Securities Market Commission (CNMV). Its powers are based on a memorandum of understanding between the participating countries.

The CNE employed a staff of almost 400 employees, but also covered a wider range of responsibilities to ERSE which justified the larger number of people involved. For example CNE were directly involved in renewable energy policy decisions, had capability to undertake direct audits and propose the regulated companies revenues settlement.

The Spanish regulator was restructured during 2013 enlarging its responsibilities for regulation from electricity, natural gas and fuel to a structure that today also involves the Competiveness authority and Telecommunications and Audiovisual, Rail and Air Transportation and Postal Services regulation - now referred to as CNMC (National Commission on Financial Markets and Competition). It is a public body independent of Government and is subject to parliamentary control. It became operational on 7 October 2013 and comprises 515 people.

CNMC has a Governance structure which includes a president, one vice president and a council of eight members elected by Parliament. The term of the members is restricted to six years, non-renewable, and they must operate under a strict policy regarding conflicts of interest. Organisationally, CNMC is structured into four groups: Competition, Energy, Telecommunications, Audiovisual, Transport and Postal Services.

ERSE has a staff of around 75 people and the regulator covers both electricity and gas within the structure outlined below. There are three functional groups: a central function dealing with regulation, and two support functions - Human Resources and administration, and Legal services. The central regulatory function is further divided as follows:

• Costs and Revenues - regulated accounts - which provides the definition of the annual revenues to be received by each regulated company
• Tariffs and Prices - defining infrastructures and network access tariffs
• Infrastructures and Networks - supervision of infrastructures and networks investments, planning, third-parties access, quality of supply and use and systems operation and
• Ancillary services, and
• Markets and Customers - supervision of markets and customer topics.