THE GRID CODE UNDER BETTA

CONSULTATION ON THE DEVELOPMENT OF A GRID CODE TO APPLY UNDER BETTA - DECEMBER 2002

SCOTTISHPOWER RESPONSE

SUMMARY

ScottishPower welcomes the opportunity to comment on this paper. Our views on the issues for consultation are set out below. However, this paper is part of an overall consultation on trading arrangements, and our views are therefore dependent on progress in other related areas. We continue to support BETTA as part of a package that includes satisfactory proposals for transmission charging and losses in a GB market, treatment of the restructuring contracts set up in Scotland as part of the privatisation arrangements, and division of responsibilities between the GBSO and the Transmission Owners (TOs).

a) We would reiterate our view that the relationship between the SO and TO should be the same in all three licence areas, and that this relationship should be transparent and governed by contract.

b) ScottishPower supports the need for a GB Grid Code to be in place ahead of the opening of the BETTA market and favours joint governance of the Grid Code, with an obligation to have in force a Grid Code contained in all transmission licences. The Grid Code should be brought together by the two existing Panels in a manner similar to that used to bring the two Distribution Codes together.

c) The Grid Code has a wider remit than the technical interface between the GBSO and Users. The Code needs to reflect the role of the TOs in planning and connections and they must be fully involved in the governance of the Code. The GBSO should provide a permanent secretariat to the Panel, and the chair of the Panel should rotate among all the transmission licensees. Wider changes to the governance arrangements are desirable and are discussed below.

d) A Grid Code to which the TOs are equal party with the GBSO would allow the TOs the direct access they need to customers and to the data which they need for their main roles of planning and developing the transmission network.

e) The Grid Codes should be brought together in a manner which allows the existing Grid Code Panels to consider the GB implications of any changes approved between each revision of the Code.

f) There is a need to address the different treatment of 132kV connected generating plant between Scotland and England and Wales under a GB Grid Code, GB CUSC and GB BSC. Without a similar environment across GB 132kV system users in Scotland will be left at a significant disadvantage compared to their competitors south of the Border.

1.INTRODUCTION

1.1This consultation is one of a series including the CUSC, the BSC, the SAS and in particular the Regulatory Framework consultation. However the date for response to this consultation has not allowed for its detailed concurrent assessment with the Regulatory Framework consultation. There are clearly salient issues that are impacted both by the CUSC and the allocation of functions between the SO and the TO which are impossible to comment on fully at this stage. In undertaking their considerations, we would therefore encourage DTI/Ofgem to take account of further comments received on the Regulatory Framework and to adopt an issues based approach for future consultations.

1.2ScottishPower supports the implementation of a GB Grid Code ahead of BETTA, but with significant differences in implementation to the proposals made by Ofgem in the consultation paper.

2.CREATION OF A GB GRID CODE

2.1ScottishPower supports the principle of the creation of a new code, which must be in place for BETTA go live. The two Distribution Codes for Scotland and for England and Wales have recently been successfully merged by an agreed process which brought together the two Distribution Code Review Panels. ScottishPower supports this approach for the creation of the new GB Grid Code. A process of creation of a GB Grid Code from the two existing Grid Codes, controlled by the Panels will also allow for the better integration and consideration of ongoing changes to the existing Codes with the creation of a new GB Code.

2.2Clearly the core operational codes will be based upon the existing NGC balancing codes – but other codes, including planning, connection conditions and the operational codes can be best developed by taking the best from the two existing codes. Only this process will allow changes to the existing code to be monitored by both E&W and Scottish users. It will be important during this work to ensure that references to “NGC” or “Company” in the existing codes are correctly transcribed to refer to either the GBSO or the TO.

2.3Ofgem proposes that only those changes to support GB wide trading should be put in place. As the consultation paper notes, these are primarily the Balancing Codes and parts of OC2 (supported by Data Provision).

2.4While the two Grid Codes currently both cover the same general areas, there are significant differences between them. As one of the objectives of BETTA is to simplify transmission access arrangements, the opportunity should be taken to produce a user-friendly and readable Grid Code with a much improved literary style compared to the present NGC Grid Code. This can be achieved by a mixture of taking the best from both the two present Codes, and by leaving regional variations in as appropriate.

3.GOVERNANCE AND REPRESENTATION

3.1ScottishPower has two major concerns regarding the governance of the Grid Code, and the other codes, in England and Wales.

(i) The fragmentation of governance of the codes is such that none of the individual governance panels can consider issues which impinge on any other. We do not believe that this is an efficient way to govern the industry. We would prefer to see arrangements under the transmission licence which could consider the impact of proposed changes across all areas – connection and use of system, grid code, energy balancing and settlement, balancing services, transmission charging – and allow issues to be addressed holistically. We will return to the issue of governance arrangements under BETTA as part of our response on the Regulatory Framework consultations.

(ii) The involvement of Ofgem in the governance process means that, rather than giving strategic direction and leaving the industry to self-govern, Ofgem is forced into a micro-management role. It is thus acting as both the champion of change, which it cannot promote directly, and the final arbiter on the change proposals which the industry put forward. The inefficiencies which this creates can be seen in the number of recommendations which come forward from the industry and are then rejected by Ofgem.

ScottishPower would prefer that the governance arrangements for BETTA did not follow the current England and Wales model.

3.2Both the NGC and the Scottish Grid Codes comprise a number of technical sub codes detailing technical matters with regards to matters such as planning, connections, operations, balancing and scheduling. In the consultation, Ofgem suggests that since the GB Grid Code will set out technical matters that support the contractual interface with users, the GBSO should have the licence obligations to have in force the GB Grid Code. This conclusion is flawed for a number of reasons.

3.3Primarily, the Grid Code will have a wider remit than the technical interface between the GBSO and the user. The existing Grid Codes provide for technical requirements on the design of the system which will impact on design, planning and construction of both the system and user connections by the TOs. The GBSO will not necessarily have the full set of skills associated with the planning of the network that the TOs have. Clearly therefore the Grid Code also provides a technical interface between the TO and the user and TO representation will be vital to a single GB Grid Code Panel.

3.4ScottishPower believes that the contractual interface for connections should be with the TO who will be responsible for design and build of the network. This point is currently being consulted upon in the related CUSC consultation. It should not be taken as a “given” in the Grid Code consultation.

3.5The proposals that the Code Panels take on governance of standards, including potentially the transmission licence planning standards, further reinforces the point that the role of the Grid Code and the Panel are wider than the technical interface between the customer and the GBSO.

3.6There are two possible solutions. The first is to split the codes appropriately, with the GBSO looking after an operational grid code built around the Balancing Codes, while the TOs look after a planning grid code built around the appropriate planning sections of the code. However, this may lead to confusion between the remit of the two technical codes. It would exacerbate further the problems that the industry already has with respect to split governance between the BSC, the CUSC and the Grid Code where on a number of issues it has been unclear as to the appropriate forum to lead on a specific issue.

3.7The favoured alternative is for appropriate joint governance of the Grid Code, with an obligation to have in force a Grid Code contained in all transmission licences. The Grid Code Panel will require input and leadership from both the GBSO on operational issues and from the TOs on planning matters. It would be appropriate to rotate the chairmanship of the Panel between the GBSO and the TOs. To provide continuity, the GBSO could be tasked with providing a permanent secretariat to the Panel. To the extent that there remained regional issues within the Grid Code, the appropriate TOs could take the lead on any sub-Panels.

3.8We would thus propose that there should be one seat per transmission licensee with an extra seat for the licensee who currently holds the chair.

3.9We would support the view that the DNO representation should increase by one, with it being explicitly stated that this is for a DNO with Scottish interests. The proposal to add a representative for renewable generation as per the Scottish panel is to be welcomed, as is the proposal to include a specific Scottish generation representative. However, there should be further thought on the size of companies that are currently represented. The current 5GW limit for representation is perhaps a rather artificial limit from the days in England & Wales when there were three large generators. This number could usefully be reviewed.

3.10Ofgem/DTI propose to hold a series of consultations on the GB Grid Code with each consultation consulting specifically on any changes which have been made to the Grid Codes since the time that the previous consultation was written. As we envisage the Grid Code being brought together by the existing Grid Code Panels, we do not support this method of change managing the development of the GB Grid Code. Instead, we would agree that the existing Grid Code Panels be allowed to consider the GB implications of any changes approved between each revision of the Code.

4.THE ROLE OF DATA

4.1The TOs are the parties charged with planning and developing the Grid. Data is crucial if they are to carry out this role. It is therefore essential that the TOs have a direct relationship with the users. With a Grid Code appropriately framed to which both the GBSO and the TOs are party, the data requirements of both the GBSO and the TOs will be clear. In a complex market environment, system users should be capable of sending appropriate data directly to both the TOs and the GBSO. This proposal will also eliminate the GBSO from having to act as an unnecessary post box between the customer and the TOs – a role for which the customer would ultimately have to pay.

4.2Currently, data is not confidential to the “system operator” as suggested by the consultation paper. Rather, data under the Grid Codes is confidential to the “Transmission System Operator” who undertakes both the SO and the TO roles. It is clear that for the planning and connection processes to work, data will need to be shared between the TOs and the GBSO about connection applications.

4.3 The three transmission licensees have operated with strict data confidentiality obligations cited in licences, and subsidiary documentation such as Grid Codes and the British Grid Systems Agreement since vesting. These obligations cover commercial confidentiality and intellectual property rights etc and have been rigorously observed throughout the data exchange process for system planning.

5.SEPARATE TECHNICAL REQUIREMENTS

5.1We recognise that there have been separate technical requirements between the codes, and even between the two areas covered by the Scottish Grid Code. However the argument that separate technical requirements were maintained on information and despatch levels when the Scottish Grid Codes were merged does not support continuation of such differences into the future. The critical Scheduling and Despatch Codes have been common to the SPT Grid Code and the SHETL Grid Code since revised versions were approved by Ofgem in April 1998. Although the Codes have been fully merged since August 2002, the two Scottish markets have remained (and remain) separate – albeit closely linked. It is not appropriate that substantial technical operational requirements should remain different following the merging of the three markets.

5.2It is clear that there will be discrimination between users in Scotland who have generating units attached to the 132kV network and users in England & Wales attached to 132kV networks for as long as this voltage level is treated differently between the countries. It is ScottishPower’s view that the pursuit of a single set of trading and transmission arrangements for the whole of GB will be seriously compromised by the lack of recognition by Ofgem/DTI that the different treatment of 132kV in Scotland leads to similar generators with similar connection arrangements operating in completely different commercial and technical environments.

5.3In the particular case of the Grid Code the issues include the definitions of small, medium and large power stations and the MW levels for submission of physical notifications should the option to register in SMRS be denied through being classified as directly connected. Nowhere is this better illustrated than in the case of the wind farm which is proposed to be established offshore in the Solway Firth. Should the connection from the windfarm be landed on the English shore, the windfarm would be considered to be embedded. Should it be landed on the Scottish shore it would be directly connected. The consequences in terms of the different treatment under the Balancing and Settlement Code, the Grid Code, and the Connection and Use of System Code would be such as to leave it and similar 132kV system users in Scotland at a significant disadvantage compared to their competitors south of the Border.

5.4Harmonisation of the commercial and technical environment for 132kV across GB is we believe essential and alternative methods of achieving this should be explored. One way forward would be to amend the Electricity Act to redefine transmission, and to transfer the ownership and control of the 132kV networks in Scotland from the two Scottish Transmission Licensees to the associated Distribution Network Owners. In conjunction with such a transfer, the technical and commercial environment for active distribution networks will need reviewed to allow the DNO to maintain system security and quality of supply, while providing the maximum commercial freedom and operational flexibility to the generation attached to active distribution networks.

5.5We would agree that the broad requirements for Ancillary Services between NGC and the two Scottish Companies are at first sight broadly equivalent – although the NGC requirements are specified in more detail. There is however a significant difference in that many hydro plants in Scotland (which would be “small power stations in England and Wales”) are currently required to provide frequency control and voltage support. As the paper notes in paragraph 5.22, small power stations and hydro plants in England and Wales are generally exempted from these requirements. Since the objective of BETTA is to provide a “single set of arrangements for access”, the continued difference in arrangements between NGC and Scotland needs to be eliminated over time. However, existing generators should not be required to upgrade plant and equipment beyond their current connection conditions unless there is a demonstrable need to do so.

5.6It is important that the GB Grid Code contains appropriate requirements which strike the right balance between the needs of the network, the capabilities of renewable generation and the wider interests of all classes of network user. Such measures would promote the development and operation of renewable generation to achieve the Government’s climate change targets.

Planning Codes

5.7We would support the approach to the Planning Code to create a Planning Code with separate Appendices and Data Registration Codes (DRCs) on a TO by TO basis. Ofgem and members of the Scottish Grid Code Review Panel will be aware that work is already well advanced by the two Scottish Companies to bring forward proposals to merge the SPT and the SHETL DRCs.