Transcript Transmission Services Agreement

Transmission Services Agreement
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Agenda
 Why have a Transmission Services Agreement (“TSA”)?
 Where does the TSA fit within TWBP commercial arrangements?
 Content of TSA
 Next steps
2
pc
Why have a Transmission Services Agreement?
 KEPCO owns the electricity transmission assets…
 … and KPX, as system operator, operates these assets…
 … so some form of arrangement between KEPCO and KPX is needed
 “… to establish the contractual and operational framework under which
KEPCO provides transmission assets to KPX.”
3
pc
Why have a Transmission Services Agreement
(2)?
 We believe that the current MOCIE notification which requires KEPCO to
provide transmission assets to KPX will not be sufficient going forward – for
example, the current notification does not address
 roles and responsibilities for transmission system planning
 detailed provision of information and access to systems (e.g. SCADA,
analysis datasets, rating information)
 inspection of assets
 rights / obligations for testing of new infrastructure
 rights / obligations in force majeure situations
 performance and operating standards (other than for protection assets)
 general terms (e.g. modifications, disputes, confidentiality etc.)
 It does not provide for any incentive mechanism for asset availability
 The contents of the draft Korean TSA and concepts used are consistent with
international practice - in particular, we have drawn on the Australian and
Brazilian TSAs and on wider international experience on incentive regimes
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pc
Where does the TSA fit? (1)
The TWBP commercial arrangements are intended to conform to the best
practice document structure for a liberalised electricity market…
Legislative framework
Regulatory documents
Market agreements
Technical codes
5
pc
Where does the TSA fit? (2)
There are three key documents in the market agreements and technical
codes category…
T
Proposed changes to any
of the documents must be
reviewed to check for
inconsistencies, and must
be approved by MOCIE
SO
G PSB T
D SO
TSA
Market Code
• Bilateral governance
• Multilateral governance
• MOCIE approval
• MOCIE approval
• Provision of assets to
SO
• Maintenance /
inspection rights
• Physical operation of
network
• Co-ordination of
network expansion
• Availability incentives
• Market Governance
• Pool Rules
• System operation and
security
• Revenue and
operational metering
• Settlement rules
• Retail market
operations
G PSB T
D SO
Grid Code
• MOCIE approval
• Connection
• Network planning and
expansion
• Network pricing
Each agreement deals with a consistent set of commercial and technical issues
– e.g. the technical details of information to be provided by KEPCO to KPX on
transmission assets is set out in the TSA under which KEPCO agree to provide
the assets
6
pc
Where does the TSA fit? (3)
 The TSA is therefore a key part of the overall commercial
arrangements for the TWBP environment
 it provides the contractual framework for the provision of transmission
assets to the system operator
 its effective operation influences the overall efficiency of the operation of the
market
 As such, in common with the market code and grid code
 KEC / MOCIE have a valid interest in the terms of the TSA, particularly in
relation to the promotion of overall efficiency
 compliance with the terms of the TSA should be a legal requirement set
down by KEC / MOCIE
 modifications to the TSA going forward should be approved by KEC /
MOCIE
7
pc
Content and purpose
The Transmission Services Agreement:
 Lists the assets to be operated by KPX
 Sets out rights and obligations for maintenance and inspection
 Sets out rights and obligations for physical asset operation
 Defines rights and obligations for network planning and new
connections
 Sets out governance procedures
 Provides an incentive regime for asset availability
The current draft of the TSA represents drafting instructions to lawyers – it
is not the final version of the agreement
8
pc
Provision of relevant assets
 KEPCO agrees to provide all “relevant assets” for commercial use and
operational control by KPX, on an exclusive basis, subject to the terms
of the TSA
 The “relevant assets” are all transmission assets owned or maintained
by KEPCO save those listed in Schedule 1 of the TSA
 The relevant assets may be changed according to the procedure set
out in the TSA when
 new transmission assets are commissioned
 the capability of assets changes
 assets are retired
9
pc
Maintenance obligations and inspection rights
 KEPCO is required to
 maintain its relevant assets (and associated equipment) in accordance with
the technical requirements of the Market Code
 ensure all personnel are appropriately accredited
 KPX may inspect the KEPCO facilities according to the procedures set
out in the TSA to verify compliance
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pc
Physical operation of assets
 KEPCO must ensure that KPX always has access to information and
systems necessary for physical operation, including
 SCADA data
 analysis datasets
 technical asset information (set out in Schedule 3)
 KEPCO is required to comply with switching instructions (incl. for
reactive plant) from KPX in accordance with the Market Code
 KPX is required to set out standards / principles for protection system
configuration; for its own protection equipment, KEPCO is required to
implement these standards
 KPX, with KEPCO, must develop a black start plan, and comply with
the Market Code in the event of a total or partial shutdown
11
pc
Network expansion planning
The process of network expansion planning in the TSA is divided into
indicative planning and detailed planning
Indicative network planning
Detailed network planning
 Forecasting possible G & L growth
over next 10 years
 Development of detailed
requirements for transmission
augmentation
 Analysis of existing and future
transfer capabilities
 Statement of high level
requirements for transmission
augmentation
 Other operational and economic
information of use to prospective
market participants
 Analysis of technical options for
augmentation
 Full specification of detail of
optimal augmentation option
 Scheduling of augmentation
projects across system
This separation is consistent with international practice – e.g. the
processes followed by NEMMCO in Australia and NGC in the UK
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pc
Network expansion planning (2)
 KPX is required to
 ensure that, for long term planning purposes, KEPCO has access to system
models and information used for operational planning
 provide an indicative expansion plan to KEPCO
 KEPCO is required to provide justification where it has not taken into
account information provided by KPX in its detailed expansion plan
 KPX and KEPCO are required to publish their respective plans
13
pc
New connections
 KEPCO is required to
 provide information to KPX on proposed new connections, and provide
justification where it has not taken into account comments by KPX
 keep KPX informed of changes to existing connection details
 KPX must agree KEPCO proposals for testing of new assets prior to
their connection to the relevant assets
 programme of testing
 confirmation that assets meet performance / operating requirements
 confirmation of detail of safety measures
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pc
Governance and general terms
 KEC shall arbitrate between KPX and KEPCO in any disputes under
the TSA (assuming the dispute resolution procedures in the Market
Code do not apply)
 The TSA can only be modified following a proposal from KEPCO or
KPX, and proposed modifications must be approved by MOCIE
 The TSA contains force majeure and confidentiality conditions
15
pc
Incentive regime on asset availability
 The regime is intended to ensure that the assets are provided in a way
which is consistent with overall economic efficiency in the market
 provide incentives to ensure assets are available and well maintained
 provide incentives to commit to (and implement) timely outages
 ensure that some portion of the cost to the market of amending generation /
load schedules to manage transmission constraints resulting from
transmission outages is borne by KEPCO
The incentive regime in the TSA mirrors international practice
 UK: distribution companies
 Brazil: Transmission Concessionaires
16
pc
UK: Distribution incentive scheme
 Ofgem (UK regulator) recently introduced an incentive scheme for
distributors to penalise those companies which fail to meet targets for
 number of interruptions
 length of interruptions
 quality of telephone response to customers
 The scheme will initially run for 3 years (from April 2002)
 Discos can be penalised by up to 2% of their annual regulated revenue
(c. £4m per company per annum) for failure to meet targets
 They can earn additional revenue in the final year if they exceed
targets
17
pc
Brazil: ISO – Transmission owner scheme
 The TSA between ONS (the Brazilian ISO) and the Transmission
Concessionaire contains an incentive scheme for asset availability
 ONS pays the TC 1/12 of its annual allowed revenue per month - the
allowed revenue for transmission assets includes:
 Direct and indirect costs of transmission network services
 Availability of equipment to compensate reactive power
 Ancillary services
 The payment from ONS is reduced by a factor based on the duration of
planned and unplanned outages
 The per minute reduction in payments for unplanned outages is higher
than that for planned
 planned outages: R$ 10/minute
 unplanned outages: R$ 150/minute for first 300 minutes, R$ 10/minute
thereafter
18
pc
Brazil: ISO – Transmission owner scheme (2)
 No reduction is made for outages which





are less than one minute in duration
result from network improvements
are requested by ONS or third parties for operational or safety reasons
are caused unintentionally by ONS
result from force majeure
 The reduction in payments will be capped as follows
 for each year, the reduction will be no more than 25% of allowed revenue
 for each month, the reduction will be no more than 50% of the monthly
allowed revenue, with the remainder being carried over to the following
month (subject to the yearly maximum)
 The reduction rates per minute do note vary by time or asset class
 In the first 6 months of operation, ONS calculates the reduction in
payments, but it is not applied
19
pc
Detail of incentive regime in draft Korean TSA
 The TSA defines a concept of “permitted outages”
 notified to KPX at least 4 weeks prior to commencement
 end on time
 For each year, and for each class of asset, there is a maximum
duration and frequency of permitted outages
 Outages not notified more than 4 weeks in advance do not count
against this maximum duration / frequency but do count as nonpermitted
 For all non-permitted outages, KEPCO is required to pay KPX a sum
defined by a schedule to the agreement (to be defined)
20
pc
Incentive regime – worked example
Suppose for asset class j that the permitted off-peak outage duration was
10 hours and the permitted off-peak outage frequency was 5
Asset class J
Cumulative
duration for
threshold
purposes
Cumulative
frequency for
threshold
purposes
Penalty
incurred?
Outage of 2 hours notified on time
2
1
No
Outage of 1 hour notified on time
3
2
No
Outage of 2 hours not notified on time
3
2
2 x value
Outage of 10 hours notified on time
13
3
3 x value
Outage of 5 hours notified on time
18
4
5 x value
21
pc
Incentive regime options
There are a number of possible options around the incentive scheme as
currently specified – for example
 it could be “turned off” for the early period (e.g. first year?) of market
operation, particularly if the regulatory regime for transmission is not
well developed at that stage
 the specification of the outage thresholds and the penalty values could
be more or less detailed (e.g. by class of asset, by time period etc.)
 some types of outages could be taken out of the regime (e.g. outages
caused by KPX or resulting from force majeure)
 the regime could be “two sided” – it could offer KEPCO
 an upside if they take fewer outages than planned
 penalties if they take more outages than planned
22
pc
Next steps
 The current draft of the TSA
 has been developed by KPX / PwC
 represents drafting instructions to lawyers
 To reach a finalised and enforceable agreement
 the agreement will need to be reviewed by KPX, KEPCO and KEC / MOCIE,
and possible refined so that each are comfortable with its content
 the drafting needs to be legally reviewed
 KEC / MOCIE need to ensure that the legal market framework requires
compliance with the TSA
23
pc
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