NIGERIAN ELECTRICITY REGULATORY COMMISSION AN OVERVIEW OF CONTRACT MARKET AND GENERATION ADEQUACY (NERC-MPSC PARTNERSHIP) DR HALIRU DIKKO June 2010

Transcription

1 NIGERIAN ELECTRICITY REGULATORY COMMISSION AN OVERVIEW OF CONTRACT MARKET AND GENERATION ADEQUACY (NERC-MPSC PARTNERSHIP) DR HALIRU DIKKO June 2010

2 CONTRACT MARKET AND GENERATION ADEQUACY AS PROVIDED BY NIGERIAN ELECTRICIY POWER SECTOR MARKET RULES

3 Stages of Market Development Pre Transitional Stage preparation will be made for physical unbundling and future privatisation of PHCN performance incentives for distribution and generation activities will be established the Grid Code and these Rules will be implemented and tested Transitional Stage Characterised by entry of new generation Contract based arrangements for electricity trading Introduction of competition Medium Term Market Introduction of generation competition Centrally administered balancing mechanism for the market

4 General Conditions for a Contract Market in the Market Rules In the transitional stage of the Market development, the Contract Market shall include: Bilateral Trading arrangement between participants within Nigeria. Bilateral Trading arrangements between participants in another electricity market or regional pool. The Market Operator is expected to prepare a Contract Market Procedure which shall include Format and mechanisms for exchange of information Timetable Contract Nominations Metering Market Procedure Settlement Market Procedure Payment Market Procedure

5 Other Requirements in the Contract Market the Market Operator may agree with Participants to implement a balancing mechanism to settle differences after: the Commission approves the mechanism necessary consequential amendments are made to the Market Rules to incorporate a balancing mechanism for the Market during the Transitional Stage. Contracts may incorporate availability performance incentives through a two-part design incorporating monthly generation capacity payments subject to target availability single price contract with energy payment reductions if performance is below target availability

6 Obligatory Conditions in the Contract All contracts for the sale and purchase of energy and ancillary services in the transitional Market must include the following provisions: Both parties to the contract are to be bound by the Market Rules and the Grid Code. The seller provides all ancillary services if the contracted generation has the technical capability to do so without going into an ancillary service contract or demanding additional payment. The parties to the contract accept to adopt the settlement data and quantities in the Market Operator s Settlement Statement as contract quantities. The parties to the contract adopt the procedures stipulated in market Rules for the review of the settlement data and documents and for the resolution of any dispute between the Market participants.

7 Other Requirements in the Contract Contract Register Market The MO shall maintain a contract register which shall keep records of generation capacity and contracted quantities in order to evaluate generation adequacy The register shall assist the Commission in evaluating the load covered by contracts entered into by each Distributor The register shall contain NO price or other sensitive commercial information. The register shall contain contracted power from generators and bought by distributors. It should contain information on contracting parties identifying 1. Seller and Purchaser, 2. duration of the contract,

8 Other Requirements in the Contract Market (cont..) 3. profile of the contracted generation capacity over the duration of the contract 4. profile of the contracted energy over the duration of the contract; 5. the mechanism or formula for calculating the contracted energy The register shall contain for each Generator or the Special Trader, total generation capacity sold in contracts; It shall also contain for each Distributor, Eligible Customer and the Special Trader total generation capacity bought in Contacts

9 Other Requirements in the Contract Market (cont..) For new entrants, each Participant must notify the Market Operator of the contract and request registration. A Participant shall notify the Market Operator of any Regional Trading contract that it entered into. Each Participant must notify the Market Operator of any modification to the contracted quantities stipulated in any registered contract The Market Operator shall publish on the Website, the form to be utilised by Participants in requesting registration of a contract or notifying the Market Operator of changes to a registered contract. The form shall include information on:

10 Other Requirements in the Contract Market (cont..) 1. the contracting parties, identifying Seller and Purchaser 2. duration of the contract 3. the mechanism or formula to be applied in determining the energy sold in the contract (the contract energy nomination) 4. The Contracted generation capacity nomination

11 The Contracted energy in the Transitional Market The contracted energy may be nominated as: a fixed quantity (MWh); a percentage of metered consumption, if the Purchaser is a Load Participant; or a percentage of metered generation of the Seller any other formula that clearly establishes the method of computation In case of regional trading, two parties to the contract may present a single notification, if both parties sign the notification, the MO would treat it as if both parties presented a notification with the same information.

12 Notifications The following Rules shall apply when one or both parties to a contract present a notification to the Market Operator. The MO acknowledges receipt and inform the applicant if the other participant has also submitted notification or request for registration. In case both parties have submitted a notification and there are differences, the MO rejects the applications until such differences are rectified amongst the participants. If one party signed the request, the MO should notify the other party and if there is any disagreement between the parties, the request should be rejected. Upon verifying that both parties agreed on the information and terms notified. The MO shall register the contract and notify all parties of the registration.

13 Vesting Contracts The MR states that if both parties to a Vesting Contract are owned by government, the Vesting Contract will be settled and invoiced by the Market Operator. The MO would design the Contract Settlement Agreement which would be signed by both Parties to the Vesting Contract. The Contract Settlement Agreement shall end when one or both have been privatised.

14 Special Contracts Special contracts are between generators/special traders and distributors. Each Special Contract shall define the procedure for administration and settlement. Special Contracts are designed to share Generation between all Distributors during the Transitional Stage and each Distributor will have its own contract with each Generator or the Special Trader. The calculation of the contract quantity for each Distributor shall be administered by the Market Operator as part of the Market settlement process administered.

15 Special Contracts (cont..) All contracts with each Generator or the Special Trader will have the same conditions and pricing system. Each Special Contract shall define the manner in which contract quantities shall be calculated for the purpose of novation at the start of the Medium Term Market Contract quantities sold to each Distributor shall be calculated by assigning energy Generated by the Generator to each Distributor s contract proportionally to the total energy requirements of each Distributor

16 Generation Adequacy Annual Load Projection Report To be prepared before the end of October each year by the System Operator. It should contain monthly energy and system peak load forecast for the next ten (10) years. It should identify projections for each Distributor and total for the system under three growth projection i.e expected (average) scenario; low growth scenario; and high growth scenario.

17 What to Consider When Preparing Load Project Report? Data and hypotheses provided by Load Participants. Historical data and trends with respect to Load growth; Past trends, day type, and special events Other variables (economic growth, weather forecast, and macro economic parameters, etc.) and hypothesis that may affect load the System Operator will publish the preliminary Load Projection Report on the Website for consultation with participants.

18 What to Consider When Preparing Load Project Report (cont..) The System Operator must define the reserve requirement in MW that will ensure adequacy of Generation in the Market. The System Operator shall review the transmission system plan and projected new connections, taking into consideration transmission constraints and weaknesses The Commission would review the preliminary Load Project Report and approve before publication each year. The System Operator shall publish the approved Annual Load Projection Report on its website and send it to the Market Operator

19 What the Load Projection Report Should Contain? Forecast system peak load and energy consumption for each month of the year; The system generation capacity requirement for the forecasted system peak load, including reserves; Forecast energy consumption of each Distributor; Expected new connections Need for generation capacity reserve, if any, in each region due to expected transmission constraints; Best location for new generation capacity; and Available free capacity in international Interconnectors.

20 Generation Adequacy Report To be prepared before the end of November each year. The Generation Adequacy Report shall describe for each month of the next 10 years the forecasted monthly generation capacity requirement; for each Distributor and total for the system the generation capacity bought in contracts by each Distributor, Eligible Customer and the Special Trader the generation adequacy, reflecting any expected shortfall or available reserve, The Market Operator shall submit the preliminary version of the Generation Adequacy Report to the Commission for review and approval. The approved report shall be published on the Website.

21 New Contracts Based upon the Generation Adequacy Report, the Commission shall evaluate the need for additional generation capacity. The commission shall perform a tariff affordability test and estimate the impact on tariffs of new power procurement. Before the end of each year, the Commission shall notify the Market Operator and the Special Trader of the quantity authorized for new power procurement by each Distributor The Market Operator shall inform the System Operator and all Participants of the authorization given by the Commission for new power procurement. The Market Operator shall collect and summarise the comments and recommendations received on alternatives for new Generation or regional imports. The MO then submit the summary to the Commission and the Special Trader.

22 Competitive Procurement Upon authorisation by the Commission, the Special Trader can initiate a procurement process for additional power. The Commission shall define procurement procedures or regulations to govern the competitive procurement process. the Commission shall be entitled to review the procurement documentation and power procurement contracts before it is published. the Special Trader shall initiate a competitive power procurement process following the competitive procedures or regulations established and supervised by the Commission. The award criteria shall be based on selection of the least cost bid. The Commission shall certify that the competitive procurement solicitation and the bid selection criteria are based on selection of the least cost bid

23 New Contracts by the Special Trader The Special Trader shall inform the System Operator and the Market Operator of its proposal for generation capacity development the Special Trader shall consult with Distributors on tender design and power procurement contracts, and will request certification of the procurement process by the Commission The Special Trader shall procure new power and ancillary services in an open, transparent, and competitive manner, and shall evaluate procurement bids and prepare a bid selection report in accordance with the competitive procedures defined by the Commission

24 New Contracts by the Special Trader (cont..) The Special Trader shall inform the Commission and Distributors of proposed generation projects and shall provide them with details of the financial proposals for the tendered power procurement contracts, including the sales prices to Distributors. On receiving this information from the Special Trader, one or more Distributors may request the Commission to approve bilateral contracts for additional power procurement The Commission shall ensure that the competitive procurement After the initiation of the Medium Term Market, the Special Trader will start the novation to Distributors or eligible customers of its purchasing contracts agreed during the Transitional Stage, and shall not enter into any new contract

25 Bilateral Contract by Distributors A Distributor may purchase Embedded Generation to provide local reliability reserves due to transmission constraints. A Distributor shall not enter into a bilateral contract with a Generator unless Upon receipt of a proposal for power procurement by the Special Trader, the Distributor, acting alone or in conjunction with other Distributors, proposes an alternative bilateral contract at lower prices than the prices of the new power procurement proposed by the Special Trader and the Distributor(s) s proposal is approved by the Commission or There are transmission constraints that cause shortages in the Distributor(s) coverage area and it is expected that such constraints will remain for at least five years, and the Distributor follows a competitive process, within the guidelines established by the Commission and supervised by the Commission, to procure generation installed or connected in its region.

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