FAQ Single Price model
September 30 2020
Following the news of the updated go-live date, the Single Price model project has received some detailed questions and comments from stakeholders and we would therefore like to share the questions/comments and answers/responses with all interested parties.
The communicated delay of the Single Price Single Position go-live date
Stakeholder question: Why was it seen necessary to move the timeline forward in August, when it was already known in January that the Imbalance Settlement Harmonisation Proposal (ISHP) was referred to ACER for final decision by mid-July 2020, which was approved according to schedule?
Answer: When go-live of Single Price Single Position was confirmed for Q2-2021 in January 2020, the focus of the project had been on whether it would be possible to go-live in accordance with the expected original implementation date of the Imbalance Settlement Harmonisation Proposal (ISHP) related to the question of implementing an imbalance settlement model with dual pricing in diverging ISPs in the Nordics or not. We were at that time just aware that the ISHP had been referred to ACER but did not at the time foresee the full impacts of this. In addition, detailed national implementation plans and implementation requirements were not yet known in January. With hindsight, it is clear, that we should not have made the unconditional confirmation of the go-live date to Q2-2021 in January 2020.
The ISHP has undertaken some substantial changes during the ACER process (the coming not meant to be exhaustive). First of all, it now details the harmonisation rules already from 18 months after approval, while the initial all-TSO proposal was targeted for harmonisation from connection to the European platforms. The final methodology is more detailed and requires also a specific accommodation for the Nordics before ACE-based balancing to accommodate our frequency-based balancing. Finally, the terms for calculation of value of avoided activation was changed. All of this impacts on the detailed market design of imbalance pricing of the Nordics, even if the overall design of a single position and single price is unchanged. Furthermore, the detailed market design needs to be in place to start the formal processes of updating BRP terms and conditions.
Stakeholder comment: The announcement in late June that the go-live in Q2-2021 was at risk was a surprise to market participants, because it came shortly after one of the TSOs confirmed the target with a provisional date of 3 May 2021 during a local workshop.
Response: On the communication by Svenska kraftnät in a Swedish seminar of a possible go-live date of 3 May 2021: The local workshop took place as the timeline of the project was being verified and specified a possible go-live date in Q2-2021, if Q2-2021 would be feasible. This message was also accompanied with detailed information on the - at that time - identified challenges with the current timeline. The purpose was transparency and Svenska kraftnät regret if the elaborated communication was perceived as an unconditional confirmation of the timeline.
Stakeholder question: It is difficult to understand why this change cannot be introduced before and separately to other necessary changes to fully implement the ISHP?
Answer: The now communicated target go-live of 1 November 2021 is based on the consultation processes for updated BRP terms and conditions starting during October and NRA approvals being in place by end of June 2021 (six months approval process assumed). The timeline also accommodates mandatory national decision processes and publication periods that follows official NRA approvals. It is regretfully not possible to move the target go-live date to an earlier date.
The use of imbalance fees under the Single Price and Single Position framework
Stakeholder comment: There has been lack of engagement concerning the use of the imbalance fee under the single imbalance price and position framework.
If the imbalance fee is applied as a mitigation measure to limit self-regulation, this should be underpinned by evidence and, if confirmed, it should be time-limited and applicable only until the 15 minutes ISP is introduced.
The imbalance fee might be alternatively considered as a tool to ensure TSOs financial neutrality, but it cannot be considered a way to guarantee the TSOs profit obtained with dual imbalance pricing. In either case, alternative solutions to achieve fairness of imbalance pricing should be assessed transparently and the NBM program should provide the analysis to evaluate alternative options and potential impacts on market efficiency and consult stakeholders.
Response: The imbalance fee for consumption has been in place commonly in the Nordics since 2009 (also nationally before that). The potential use of this fee also as a mitigation measure (which relates to the level of the fee) has been communicated to all stakeholders since the beginning of this year, among other in an open telco for all interested parties in March 2020.
On the topic of the imbalance fee as a mitigation measure, we will return to this in our common communication to stakeholders and market participants, as we will present a Common Market Design document in the beginning of October 2020, which the Nordic TSOs will propose through the updated BRP terms and conditions (for Norway a slightly different process will take place due to the fact that the EB regulation has not yet been transposed into Norwegian law).
The overall credibility of the NBM roadmap and governance process
Stakeholder comment: We urge the NBM program and its governance to more open, transparent and participated decision-making to minimise the risk related to regulatory changes.
Lack of commitment on deadlines and the lack of open and transparent discussion on these key aspects are detrimental to producers and consumers which are subject to risk premiums to accommodate for the regulatory risk, thus distorting normal market functioning and creating inefficiencies.
Response: We regret if the delay of Single Price Single Position is understood as a lack of commitment on deadlines, which is not our intention. We appreciate the input and acknowledge stakeholders need for information on the timelines going forward. We intend to improve our aim to provide transparent communication at an early stage associated information about risks and prerequisites made in our planning, to help also stakeholders manage these risks.