Regulator s 2015 National Report to the European Commission. Commission for Energy Regulation (CER) Ireland

Transcription

1 Regulatr s 2015 Natinal Reprt t the Eurpean Cmmissin Cmmissin fr Energy Regulatin (CER) Ireland August

2 1. Frewrd Intrductin t the reprt signed by the Cmmissiners Chairpersn Garrett Blaney Cmmissiner Paul McGwan Cmmissiner Aife MacEvilly The Cmmissin fr Energy Regulatin ( the CER ) is Ireland's independent energy and water regulatr. Since its establishment in 1999, the CER s remit has expanded significantly t encmpass a range f ecnmic, custmer prtectin and safety respnsibilities in bth the energy and water sectrs. As an ecnmic regulatr, the CER strives t ensure a stable and predictable regulatry regime in Ireland t supprt efficient investment, cmpetitin and cnsumer prtectin fr energy custmers. As the cuntry s energy safety regulatr ur cre fcus is n prtecting lives and having a wrld-class safety recrd. The CER s ecnmic rle and assciated energy plicy develpments are detailed in this annual reprt t the Eurpean Cmmissin. We reprt here n the prgress made in varius areas including whlesale and retail markets regulatin, netwrks regulatin and energy safety versight. Building n ur achievements t date and lking frward t new challenges, the CER will cntinue t endeavur t prvide a first-class regulatry service t all its custmers in a csteffective manner. Garrett Blaney Paul McGwan Aife MacEvilly Chairpersn Cmmissiner Cmmissiner 2

3 2. Main develpments in the gas and electricity markets 1 Electricity Netwrks Revenue Review Prject In 2015, the CER cmpleted its five-yearly review f electricity netwrk revenues and charges under the Price Review 4 (PR4) prject. The review included an examinatin f perating csts, capital expenditures, cst f capital, and depreciatin rates fr the netwrk cmpanies, which tgether cntribute t the allwed netwrk charges. The CER held a full public cnsultatin in 2015 and published a final PR4 determinatin in Q The CER engaged expert technical cnsultants t assist in the CER s public cnsultatin and the final PR4 determinatin. Electricity Netwrks and Renewable Issues The existing rules n cnnectin t the electricity grid is largely driven by the Gvernment s target fr Ireland t achieve 40% f electricity cnsumptin frm renewable surces by There are tw brad plicy appraches fr prcessing generatrs applicatins fr grid cnnectin: (1) the Grup Prcessing Apprach (GPA) and (2) the Nn Grup Prcessing Apprach. Under the GPA, the System Operatrs issue grid cnnectin ffers mstly t renewable generatrs in batches called Gates. The current Gate 3 prvided fr circa. 3,900 MW f renewable ffers t primarily wind generatrs. In 2015, the CER cntinued t wrk n plicies which underpin Gate 3 r that will facilitate successful Gate 3 utcmes, and achievement f the 2020 renewable targets. The CER reviewed the System Operatrs prpsals t amend rules fr the prgressin f subgrups under the GPA. The new rules managing subgrups as they mve t the cnstructin phase are set ut in CER/15/098A f May Further, the CER reviewed the existing prvisins n Maximum Exprt Capacity (MEC) Security, and will take a decisin n the matter in In additin, the CER launched a review f the current cnnectin plicy t ensure it is fit fr purpse fr future system requirements, and in line with the existing legal framewrk. At the end f 2015, the CER has published its initial thinking and high-level prpsals as t the future Enduring Cnnectin Plicy in a Cnsultatin Paper CER/15/284. In particular, the CER cnsiders that the apprach taken fr Gate 3 may n lnger be apprpriate, and that subsequent gates may need t be smaller, mre frequent, and nt fcused n specific technlgy types. The CER als cnsulted n a number f Transitinal Arrangements that culd be put in place during the interim perid in rder t prepare the grund fr the implementatin f the Enduring Cnnectin Plicy. Decisins n these plicies will be published in 2016 and Increasing levels f wind generatin n the system pses significant challenges t system peratin. In 2012, Transmissin System Operatrs (TSOs) in Ireland and Nrthern Ireland (EirGrid and SONI) began a multi-year prgramme, Delivering a Secure, Sustainable Electricity System (DS3 Prgramme). The aim f the DS3 Prgramme is t meet the challenges f perating the electricity system in a secure manner while achieving Ireland s target f 40% f electricity cming frm renewable surces by In general, the reprt shuld seek t cver develpments during the perid frm January 2015 t December 2015 and data shuld reflect this perid as far as pssible. Where data fr the calendar year is requested, 2014 is the apprpriate reference year. 3

4 One f the key prjects within DS3 is t reslve increased Rate f Change f Frequency (RCF) that may arise n the system fllwing large system disturbances. In May 2014, the CER apprved the TSO prpsal t intrduce a ROCOF Grid Cde standard f 1 Hertz per secnd (Hz/s) fr Ireland calculated ver 500 millisecnds (ms). This will be an imprtant aspect f the delivery f the 2020 targets as achievement f this standard will allw EirGrid t perate the system with higher levels f wind. The prgress f the ROCOF Implementatin Prject has s far been in general very psitive, and raised n significant technical issues. In additin, the CER as a member f the SEM Cmmittee delivered an imprtant decisin n the prcurement framewrk fr DS3 System Services in December This sets ut the framewrk mechanisms by which the System Operatr (EirGrid) will prcure the required system services in rder t supprt high levels f wind n the system. This decisin is a key stepping stne twards delivery f the renewable targets bth in Ireland and Nrthern Ireland. Electricity & Gas Security f Supply With reference t gas security f supply, the CER actively participated in EU Gas C-rdinatin grup meetings thrughut 2015, which resulted in the updating f Ireland s Natinal Preventive Actin Plan and Natinal Gas Supply Emergency Plan. Additinally, the CER submitted its Annual Reprt t the Minister fr Cmmunicatins, Energy and Natural Resurces regarding the CER s implementatin f Regulatin (EU) 994/2010. As part f the CER s rle in ensuring electricity security f supply, the CER launched a review f existing fuel stck bligatins n electricity generatrs perating in Ireland (CER/15/213). The bjective f the review is t assess whether changes t existing fuel stck bligatins (as specified in CER/09/001) are merited fllwing recent market changes including increased intercnnectins, new surces f indigenus gas and the pening and clsure f generatin plants. Fllwing the cnclusin f its review, the CER intends issuing a decisin paper in Additinally, during 2015, the CER inputted int the develpment f the EU Cmmissin s secnd Prjects f Cmmn Interest (PCI) list, and hsted Gas Electricity Emergency Planning Grup meetings in rder t facilitate a c-rdinated apprach t emergency planning by Ireland s gas and electricity Transmissin System Operatrs (TSOs). T facilitate the cming n stream f the Crrib gas field, the CER reviewed the gas netwrk entry tariff regime t facilitate changes t gas entry pints t the netwrk t mitigate against pssible increases in whlesale gas csts and significant price increases. Energy Retail Markets The CER further imprved the market mnitring framewrk t prvide greater versight f infrmatin f key market develpments. This will allw the CER t identify market issues where actin may be necessary in the interests f cnsumers in the cntext f falling whlesale prices driving lwer retail electricity and gas prices. The CER annually gathers the views f energy cnsumers thrugh a cnsumer survey t identify key issues and develp plicies t prtect the cnsumer. The 2015 survey shwed increasing satisfactin levels with suppliers, but an nging lw level f cnsumer awareness and engagement with the energy market. The CER maintained its mnitring and auditing f supplier cmpliance with cnsumer prtectin requirements and identified several areas where further develpment was required due t the 4

5 grwth f supplier s fferings and different marketing and advertising strategies. This initiated a review f the supplier handbk, which sets ut minimum service requirements that suppliers must adhere t in their dealings with energy custmers, and the assciated cmpliance audits t ensure greater prtectin f energy cnsumer rights. In partnership with the Utility Regulatr in Nrthern Ireland and thrugh the CER membership f the SEM Cmmittee, significant prgress was made in verseeing the regulatin f the existing single electricity market and the re-design f a mre cmpetitive, intercnnected and sustainable all-island electricity market. Significant cnsultatin and engagement with industry thrughut 2015 facilitated key decisins by the Single Electricity Market Cmmittee n the I-SEM and DS3 prjects. 3. The electricity market 3.1. Netwrk regulatin Unbundling Reprt n TSO certificatin, DSO prvisins regarding branding and resurces and new develpments regarding certificatin revisins Articles 10, /72/EC and Article 3 Regulatin (EC) 714/2009 Article Technical functining Balancing services (Article 37(6)(b), Article 37(8)) Security and reliability standards, quality f service and supply (Article 37(1)(h),) Mnitring time taken t cnnect and repair (Article 37(1)(m)) Mnitring safeguard measures (Article 37(1)(t)) RES regulatry framewrk: Reprt n cnnectin, access and dispatching regimes fr RES-E, in particular n pririty issues. Reprt als n the balancing respnsibility fr RES-E. (Article 11 Regulatin (EC) 713/2009) The CER sets the plicy fr a fair and nn-discriminatry access t the electricity netwrk in Ireland. Existing access plicy is captured under tw brad plicy appraches: (1) the Grup Prcessing Apprach (GPA) and (2) the Nn Grup Prcessing Apprach, and has been develped n ft f the Gvernment s target fr Ireland t achieve 40% f electricity cnsumptin frm renewable surces by Under the GPA, the System Operatrs (EirGrid and ESB Netwrks) issue grid cnnectin ffers mstly t renewable generatrs in batches called Gates. Eligibility fr inclusin in a Gate has been based n criteria set ut by CER in its decisins n each f the three Gates t date, Gate 1 in 2004, Gate 2 in 2006 and Gate 3 in 2008 and The current Gate 3 prvided fr circa. 3,900 MW f renewable ffers t primarily wind generatrs, but was als pen t cnventinal (nn-renewable) generatrs. Since then, the CER has remained fcused n ensuring that these 5

6 ffers are issued in an efficient manner and that assciated plicy allws fr develpers t accept their ffers and prceed t build. Successful delivery f Gate 3 will play a significant rle in the achievement f Ireland s 2020 renewables targets (40% f electricity cnsumptin frm renewable surces) whilst transitining Ireland s electricity sectr t a lw carbn mdel. Already abut 20% f ur electricity cnsumptin cmes frm renewable surces - mstly wind farms - ne f the highest levels in the EU, and this has been facilitated by the cnnectin f Gate 1 and Gate 2 renewable generatrs in recent years. The table belw shws the ffer acceptance status f Gate 3 at the end f 2015 indicating a significant psitive uptake: Gate 3 Offer Acceptance at the start f The nn GPA apprach relates t the prcessing f cnnectin ffers fr small, renewable and lw carbn generatrs that fulfil public interest criteria. Applicatins fr nn-gpa cnnectin ffers are reviewed by the CER n a case-by-case basis. T allw fr the cnnectin f all f these new renewable prjects, the CER has sanctined mre than a billin eur investment in the electricity transmissin system ver the years 2011 t This includes the cnstructin f new transmissin capacity as well as the upgrading f existing capacity t allw these renewable prjects t exprt their pwer. Delivery f this new infrastructure by the System Operatrs will be a key cmpnent f the success f Gate 3 and achievement f Ireland s renewable targets. In 2015, while cntinuing t mnitr the Gate 3 delivery, the CER launched a review f the current cnnectin t ensure it is fit fr purpse fr future system requirements, and in line with the existing legal framewrk. At the end f 2015, the CER has published its initial thinking and high-level prpsals as t the future Enduring Cnnectin Plicy in a Cnsultatin Paper CER/15/284. In particular, the CER cnsiders that the apprach taken fr Gate 3 may n lnger be apprpriate, and that subsequent gates may need t be smaller, mre frequent, and nt fcused n specific technlgy types. The CER als cnsulted n a number f Transitinal Arrangements that culd be put in place during the interim perid in rder t prepare the grund fr the implementatin f the Enduring Cnnectin Plicy. Decisins n these plicies will be published in 2016 and

7 In additin, the CER cntinued t wrk n plicies which underpins Gate 3 r that will facilitate successful Gate 3 utcmes. The CER reviewed the System Operatrs prpsals t amend rules fr the prgressin f subgrups under the GPA. The new rules managing subgrups as they mve t the cnstructin phase are set ut in CER/15/098A f May Further, the CER reviewed the existing prvisins n Maximum Exprt Capacity (MEC) Security, and will take a decisin n the matter in T ensure cntinuus stakehlder engagement in develping grid access plicies, the CER facilitates the Generatr Cnnectin Liaisn Grup. The Liaisn Grup cntinues t deal with a large vlume f Gate 3 issues and is wrking effectively as a cmmunicatins frum and infrmatin exchange between the CER, the System Operatrs and the electricity industry Netwrk tariffs fr cnnectin and access Article 37(1)(a), Article 37(6)(a), Article 37(8), Article 37(10), Article 37(12), art 37(3)(c) and (d) In 2015 the CER published decisins n the netwrk tariffs applicable fr 2015/2016 and the allwable revenue recverable by the netwrk cmpanies, these decisins replaced thse made in 2014 fr the tariff year 2014/2015. Preventin f crss-subsidies (Article 37(1)(f)) The CER carries ut a Price Review (PR) every five years setting revenues, separately, fr the transmissin and distributin netwrk cmpanies that can be cllected frm use f system custmers, via netwrk tariffs. PR3 cvered the perid 1st January 2010 t 31st December With 2015 being the final year f the PR3 perid, the CER engaged heavily with the netwrk cmpanies and cnducted public cnsultatins with regard t an ex-pst review f PR3 expenditure and an ex-ante review f PR4 frecast expenditure. The CER published decisins in Q4 2015, relating t the netwrk cmpanies allwed utturn revenues fr the PR3 perid and fr the revenues that the netwrk cmpanies, separately, shuld be allwed t earn fr the PR4 perid, frm 1st January 2016 t 31st December Revenues are set at a level that wuld allw an efficient business t finance its activities and are determined by a cmbinatin f benchmarking against rganisatins in ther cuntries and examining the specific underlying csts f the netwrk cmpanies. The nly csts that are allwable are thse that can be shwn t be required t carry ut the respective duties f the TSO, DSO and wners f the netwrks and that have been efficiently incurred. These csts are then recvered thrugh netwrk tariffs. In additin t the five year review, yearly revenue update reviews are carried ut whereby the netwrk cmpanies utturn csts, and frecasts, are assessed and apprved with the resulting netwrk tariffs being put in place fr the fllwing tariff year. The prcess utlined directly abve and the assciated methdlgy ensures that the activities f the netwrk cmpanies are funded in a cst-reflective manner and that crss subsidies are avided. 7

8 3.1.4 Crss-brder issues Access t crss-brder infrastructure, including the prcedures fr the allcatin f capacity and cngestin management (Article 37(6)(c), Article 37(8), Article 37(9), use f revenues fr intercnnectrs (article 37(3)(f)), With regard t the use f revenues fr intercnnectrs, the CER apprved the use f revenue statement fr the East - West intercnnectr fr 2014/15, indicating that revenues frm cngestin charges have been used in line with the requirements f Regulatin (EC) N. 714/2009. Nt applicable Mnitring technical c-peratin between Cmmunity and third-cuntry TSOs (Article 37(1)(s)) Mnitr TSO investment plans in view f TYNDP art 37(1)(g), PCIs, als natinal develpment plans The CER has put in place a Capex Mnitring Prcess which allws the CER t mnitr prgress n a quarterly basis by the TSO in delivery f its develpment plans. Furthermre, the CER carries ut a full review f efficiency f expenditures and delivery f netwrk develpment as part f its five year revenue review, in additin t yearly revenue update reviews (see sectin 3.1.3). Cperatin (Article 37(1)(c)) The CER cntinues t actively cperate with the Nrthern Ireland Utility Regulatr (UR) and the SEM Cmmittee in relatin t the develpment and mnitring f the Single Electricity Market. CER and UR als cperate n crss brder transmissin and distributin netwrk issues including the nging planning and develpment f the secnd nrth - suth intercnnectr and the DS3 prject. CER als engages with the British regulatr Ofgem n crss brder issues related t the East West intercnnectr and further prpsed electricity links between Ireland and Great Britain Cmpliance Cmpliance f regulatry authrities with binding decisins f the Agency and the Cmmissin (Article 37(1)(d)) and with the Guidelines (Article 39)) The CER mnitrs its wn cmpliance with the relevant Cmmunity legislatin. N cmpliance issues were identified in Cmpliance f transmissin and distributin cmpanies, system wners and electricity undertakings with relevant Cmmunity legislatin, including crssbrder issues (Article 37(1)(b), Article 37(1)(q), Article 37(3)(a),(b),(e) and Article 37(5) all but (a) and (c) + impsing penalties (Article 37(4)(d)) The CER mnitrs the perfrmance f the Transmissin and Distributin cmpanies and their cmpliance with the relevant Cmmunity legislatin. N cmpliance issues were identified in

9 3.2 Prmting Cmpetitin Whlesale markets This sectin prvides a summary f the key develpments in the Irish electricity and natural gas sectrs during It cvers many f the key issues requested in the CEER s paper detailing the structure f this reprt in 2015 thugh accunt is taken fr the specific structure f the Irish energy sectr and market. Oversight f Single Electricity Market During 2015, the CER cntinued t versee regulatin f the existing Single Electricity Market (SEM), the whlesale electricity market fr the island f Ireland, regulated jintly by the CER and its cunterpart in Belfast, the Utility Regulatr (UR), knwn tgether as the Regulatry Authrities (RAs). The fllwing items were identified as key tasks in the SEM fr 2015: A Decisin t apprve a mdificatin t the Trading and Settlement Cde relating t make-whle payments fr intercnnectr users that prtected cnsumers frm excessive payments but ensured efficient intra-day crss brder trade; An update f the Best New Entrant value fr the Capacity Payment Mechanism fr which resulted in a reductin f sme 60 millin in capacity charges t cnsumers fr 2016 cmpared t 2015 and A revisin t the definitin f generatin availability under the grid cde t imprve the efficiency f TSO and generatin utage planning. SEM Market Integratin Prject (I-SEM) During 2015 the CER cntinued wrking with the Utility Regulatr in Nrthern Ireland, Gvernment Departments and stakehlders t implement the High Level Design, develped in 2014, fr the Integrated Single Electricity Market (I-SEM). While the SEM has been a success since its inceptin in 2007, the market rules, including the capacity mechanism are being refrmed by the RAs t facilitate greater market integratin thrugh the applicatin f internal energy market rules in general, and specifically t fully meet the EU Target Mdel bligatins fr electricity by I-SEM is a new whlesale market t g-live in Q which will mre fully facilitate cupling with the electricity market in the rest f Eurpe, takes accunt f 2020 renewable targets, helps put dwnward pressure n Irish whlesale prices and facilitates transitin t lw carbn and sustainable pwer system. The prpsed I-SEM mdel include cmpetitive day-ahead, intraday and balancing markets and new capacity remuneratin mechanism based n Reliability Optins 9

10 This is illustrated belw, with the detailed rules set ut in a new Trading and Settlement Cde: The I-SEM detailed design prject plan was published in early 2015, utlining the key milestnes t achieve market g-live in In 2015 the I-SEM Prject has mved t its detailed design phase. This phase f the prject has five key RA wrk streams, namely the Energy Trading Arrangements, Capacity Remuneratin Mechanism, Market Pwer, Gvernance and Licencing, and Frwards and Liquidity. Under these wrk streams, the CER tgether with the Utility Regulatr in Nrthern Ireland, cntinued in 2015 t develp and publish plicy papers supprted where apprpriate by presentatins and wrkshps. Key utputs in 2015 included the publicatin f: A Decisin n the main detailed design elements fr I-SEM energy trading arrangements spanning three individual Decisin Papers (Energy Markets, Building Blcks and Agent f Last Resrt) all published in September 2015; A Decisin n I-SEM Rles and Respnsibilities in Octber A Cnsultatin Paper n I-SEM Market Pwer plicy in Nvember 2015; A Decisin n a number f key design features f the new Capacity Remuneratin Mechanism (CRM) design and a further cnsultatin n additinal key CRM detailed design elements in December 2015; A Decisin Paper addressing the plicy n crss-brder trading in the frm f Financial Transmissin Rights (FTRs) in December 2015; and 10

11 The CER, als develped during 2015 the prcess fr the implementatin f the I-SEM in relevant cdes and licences and published an implementatin plan in this regard. In additin, in 2015 the CER cntributed t the develpment f the Irish Department f Cmmunicatins, Energy and Natural Resurces (DCENR) apprach n changes required t the existing Renewable Energy Feed-In Tariff (REFIT) mechanism t facilitate the implementatin f the I-SEM and the electricity target mdel, ntably regarding the REFIT benchmark reference price and market issues related t the develpment f new supprt mechanisms. Eurpean Market Integratin The new whlesale electricity trading arrangements and the new capacity mechanism will be delivered by the end f 2017, the deadline fr Ireland t bring its market design in line with the EU Target Mdel. The new arrangements have been assessed as best delivering the benefits f Eurpean market integratin, by maximising the efficient use ff intercnnectrs and rendering the benefits t the end cnsumers. The impact assessment f the new market design indicates that it will deliver reduced curtailment variable generatin and mre efficient flws acrss the intercnnectrs, dictating by the price signals. This indicates that the new market will deliver mre cmpetitin and mre efficient prices resulting in increased scial welfare gains that wuld be the case under ther market designs. France-UK-Ireland (FUI) In rder t enable an efficient transitin t the single Eurpean market, a number f reginal initiatives were launched in These initiatives bring tgether Regulatrs, TSOs, the Eurpean Cmmissin, Member State Gvernments, industry and stakehlders t develp and implement cmmn plicies fr the trading f electricity acrss brders in each regin. Ireland is part f the France-UK-Ireland (FUI) regin. The SEM Cmmittee cntinued t prgress wrk related t increasing electricity market integratin with neighburing jurisdictins in the FUI regin thrughut In particular there was liaisn between regulatrs n prgress with implementatin f the Eurpean Target Mdel and ensuring crdinatin between develpments in energy and capacity market designs Mnitring the level f prices, the level f transparency, the level and effectiveness f market pening and cmpetitin Article 37(1)(i),(j) (k), (l) (u) and Article 40 (3) Reprt separately the three issues: prices, transparency and effectiveness f cmpetitin. In particular regarding prices reprt n fundamentals, price develpments and liquidity. Regarding transparency reprt n the access t prices and n hw rbust prices are and if at natinal level transparency bligatins regarding pricing exist Retail market (can be merged with retail sectin n gas) The CER is respnsible fr the prmtin and mnitring f cmpetitin in the electricity and gas retail markets. Cmpetitin is cntinuing t develp in the electricity and gas markets, and energy custmers have a range f suppliers, payment ptins and price plans t chse frm. 11

12 The CER will cntinue t mnitr the electricity and gas retail markets thrughut 2016 t ensure that cmpetitin cntinues t develp fr the benefit f cnsumers. In 2015 there were a ttal f 8 electricity suppliers and 6 gas suppliers. Since deregulatin f the electricity and gas markets, 3 new electricity suppliers and 1 new gas supplier have entered the electricity and gas retail markets. The summary belw prvides the key develpments in Switching rates in bth the electricity and gas markets were cnsistently abve 10% in bth markets fr There was grwth in the market share f a number f new entrants in 2015, fr example, PrePayPwer Ltd, wh perate nly in the prepayment sectr, entered the electricity market in 2012 and by 2015 held almst 5% f market share by cnsumptin. Energia Ltd, perated in the nn-dmestic sectr, entered the dmestic market in By 2015 it held 4.42% f market share by cnsumptin. Pinergy Ltd, als grew abve 1% f market share in the secnd quarter f Prices fell between 2014 and 2015 and again between 2015 and In electricity, standard dmestic prices fell between 2% and 4.57%, while in gas they fell between 2% and 5%. Price decreases were als seen acrss all discunted plans. In 2015, the difference between the highest priced standard plan and lwest priced discunted plan was arund, 235 fr dmestic electricity and 126 fr dmestic gas (based n typical cnsumptin f 5,300kWh fr electricity and 13,800kWh fr gas). The number f PAYG meters installed fr custmers experiencing financial hardship in 2015 declined cmpared t 2014 fr bth electricity and gas. This reductin was in line with a reductin in the number f discnnectins. Discnnectins f custmers fr nn-payment f accunt (NPA) declined significantly in 2015 cmpared t 2014; by 11% in electricity and 12% in gas. The ttal number f discnnectins between Q and Q was 7,783 fr electricity and 3,542 fr gas. In electricity, Electric Ireland remained the largest supplier in terms f custmers and MWhs acrss all segments. In 2015 Electric Ireland s cnsumptin market share decreased in the dmestic sectr by 1.61%. Between Q and Q4 2015, Energia shwed the highest gain in dmestic electricity cnsumptin with an increase f 1.22% f market share. In the gas market the biggest gain in dmestic market share was als seen by Energia with a 1.89% increase in terms f custmer numbers, while SSE had the largest lss with a decrease f 2.40%. Brd Gáis Energy remained the largest supplier in terms f custmers and cnsumptin and its market share cntinues t be mnitred. The CER cnsulted n a new electricity and natural gas retail market mnitring framewrk thrughut 2013 and 2014, with aim f intrducing a range f new market indicatrs t be cllected frm suppliers and netwrk peratrs. A Decisin Paper (CER/14/344) was published 12

13 in 2014 utlining the CERs and decisin n all prpsals based n cnsultatin with stakehlders. In 2015 the CER began t implement this enhanced market mnitring framewrk. The market indicatrs identified in this decisin paper prvide the required degree f versight f market cnditins t ensure the CER can identify any market issues and take any necessary actin in the interests f custmers. Data cllectin with suppliers began in July This data was cnslidated and checked fr accuracy acrss all suppliers and initial analysis fr internal reprting and presentatin was cnducted. Initial issues with data submissins were discussed thrugh a series f bilateral meetings and the prcess f mnthly supplier reprting under the market mnitring decisin paper is nw fully in place. During 2016 the CER will als cntinue t mnitr the market and cmpliance measure that need t be addressed Mnitring the level f prices, the level f transparency, the level and effectiveness f market pening and cmpetitin Market mnitring frms an imprtant part f the CER s activities. This infrmatin helps t infrm new plicy and in the assessment f existing regulatins. A suite f reprts n retail market peratins is published by the CER including mnthly switching reprts, discnnectins reprts, quarterly and annual reprts. The CER mnitrs the level f prices ver time alng with the level f transparency in the market, and uses a cmbinatin f indicatrs t mnitr cmpetitin in the electricity and gas retail markets. Prices The CER cnsiders that cmpetitin is cntinuing t develp in the electricity and gas markets, and that energy custmers have a range f chices in terms f supplier, payment ptins and price plans. There are a large number f tariff plans available t dmestic and business custmers that are prvided by electricity and gas suppliers in Ireland. These plans ffer custmers different tariffs cmprised f standing and unit charges (and in sme instances daily service charges). Suppliers can als ffer different rates depending n payment r billing methd (e.g. paperless, nline, direct debit etc.). All suppliers are required t publish details f the tariff plans that are available t dmestic custmers. This is set ut in the CER Supplier Hand bk. Suppliers f businesses ften prvide bespke plans t their business custmers and infrmatin n such plans is generally nt published by suppliers. In 2015, fur suppliers perated in bth the dmestic electricity and gas markets (SSE Airtricity, Brd Gáis Energy, Electric Ireland and Energia), and all actively prmted bundled dual fuel ffers with price discunts fr dmestic custmers that avail f bth services frm the same supplier. Prices fell between 2014 and 2015 and again between 2015 and In electricity, dmestic prices fell between 2% and 4.57%, while in gas they fell between 2% and 5%. In 2015, the price differential f ptential savings fr a dmestic electricity custmer switching t a discunted tariff was 235 and fr a dmestic gas custmer was 126. These changes in price were primarily driven by reductins in whlesale prices ver time; as can be seen in the graphs belw shwing SEM Spt Electricity Prices and Day Ahead NBP Gas Prices ver time. 13

14 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Gas Eur/therm Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 SMP Eur/MWh CER 2015 Natinal Reprt t the EC SEM Spt Electricity Prices SMP Eur/MWh 2012 average 2013 average 2014 average 2015 average 2016 average Day Ahead NBP Gas Prices Gas Eur/therm 2012 average 2013 average 2014 average 2015 average 2016 Average The changes in dmestic electricity and gas standard tariffs between 2013 and 2016 can be seen belw. Prices fr discunted tariffs als decreased fr this perid. 1, Dmestic Electricity Standard Tariffs 2013-May , , , , Electric Ireland Energia BGE SSE Airtricity Panda pwer PrePayPwer 14

15 Dmestic Gas Standard Tariffs, May , , Electric Ireland Energia BGE Flgas Between 2014 and 2016, there cntinued t be a range f ffers and tariff features being made available t custmers. This included new PAYG plans and apps, cash back ffers, level pay plans (which allw custmers t pay the same amunt every mnth fr their electricity, based n their cnsumptin in the previus year), green ffers and plans which include the prvisin f extra services and devices. The discunts that culd be availed f by custmers in 2015 cntinued t fcus n billing and payment methds. Acrss the majrity f suppliers, custmers wh pted t pay by direct debit and receive paperless bills were able t avail f the highest discunts. In 2015 the CER began t mnitr the features f price plans including exit fees, terminatin charges and clauses and payment methds. As part f its market mnitring activities the CER is als reviewing the reasns custmers d nt switch, and the actins taken by custmers pst expiry f their discunt tariff. Wrk began n the analysis f new market mnitring data received in 2015 frm suppliers and the develpment f additinal cntent fr the CER s retail market reprts. This data was validated with suppliers and will be included in enhanced mnthly and quarterly reprts in Transparency T enable custmers t cmpare ffers made by suppliers and understand their tariffs, all suppliers are required t publish details f the tariff plans that are available t dmestic custmers and prvide a breakdwn f the cmpnents f the prices. The requirements are set ut in the CER supplier hand bk. Suppliers f businesses ften prvide bespke plans t their business custmers and infrmatin n such plans is generally nt published by suppliers. In additin t the requirement fr suppliers t be clear and transparent abut the cmpnents f their tariffs, CER has accredited tw price cmparisn web-sites wh are required t display the tariffs based n set principles, which are aimed t make it easy fr custmers t cmpare ffers and savings they can make. This is discussed further in the paragraph belw. The fllwing tables utlines the price change annuncements by each supplier ver the past number f years fr electricity and gas. These changes relate t the changes t the standard tariff f each supplier. 15

16 The level and timing f reductins als varied by supplier. Electricity Price Changes 2012/13 change 2013/14 change 2014/15 change 2015/16 change SSE Airtricity 4.70% 3.50% -2% -4.17% Brd Gáis Energy 4.80% 2.20% -2.50% -4% Electric Ireland 5.90% 1.70% -2% -2.40% Flgas Na Na Na Na Pinergy Na 1.70% -2% -3% PrePayPwer Na 1.70% -4% -4.57% Energia Na NA - -2% Gas Price Changes 2012/13 change 2013/14 change 2014/15 change 2015/16 change SSE Airtricity 8.50% 2% -4% Na Brd Gáis Energy 8.50% 2.04% -3.50% -5% Electric Ireland 8.50% 2% -2.50% -4.20% Flgas 10.20% 1.95% -3% -5% Pinergy Na Na Na Na PrePayPwer Na Na Na Na Energia Na Na - -2% Market Structure There were 8 active suppliers in the electricity retail dmestic and business markets in 2015 and 7 active suppliers in the gas retail dmestic and business markets. In 2015, Panda Pwer entered the dmestic electricity market. Energia entered the dmestic market in 2014 and nw have 72,677 dmestic custmers in electricity and 38,348 in gas. A key develpment in the dmestic and nn-dmestic retail markets in the past number f years has been the grwth f suppliers wh entered the market since deregulatin. Cmbined, nn-incumbent suppliers nw accunt fr abut 45% f custmers in the dmestic electricity market and just ver 48% in the dmestic gas market. The main suppliers in the electricity and gas retail markets are identified belw. Dmestic Nn-dmestic Dmestic Gas Nn-dmestic gas Electricity Electricity Brd Gáis Energy Brd Gáis Energy Brd Gáis Energy Brd Gáis Energy Electric Ireland Electric Ireland Electric Ireland Electric Ireland Energia Energia Energia Energia SSE Airtricity SSE Airtricity SSE Airtricity SSE Airtricity PrePayPwer Vayu Flgas Flgas Pinergy Vayu Panda Pwer Gazprm 16

17 Overall, in the electricity market, the ttal number f custmers in 2015 was 2,241,399 and ttal cnsumptin was 25,072,268 MWhs. This represented an increase f 0.2% f custmer numbers and an increase f cnsumptin by 3.9% verall cmpared t In Q4 2015, Electric Ireland held the greatest dmestic market share with 54.71% f ttal cnsumptin. Hwever, its market share decreased by 1.61% between 2014 and 2015 in terms f cnsumptin and remains belw the 60% threshld at which it was deregulated. Significant gains have been made ver time by Brd Gáis Energy and SSE Airtricity and mre recently by PrePayPwer and Energia. Overall, in the gas market, the ttal number f custmers in 2015 was 668,788 and ttal cnsumptin was 19,760 GWhs. There was a large increase in cnsumptin fr the RTF market segment in particular in 2015, due t new cnnectins and meter upgrades in this segment. In Q4, Brd Gáis Energy held the largest share f the dmestic market by custmer numbers, with 51.26%. Hwever, it lst the 3.42% f market share between 2014 and 2015, the greatest amunt fr any supplier in this perid. Energia gained the mst with an increase f 4.08% f market share by number f custmers. Cmpliance The CER Supplier Handbk sets ut minimum service requirements that suppliers must adhere t in their dealings with energy custmers. It cmprises f individual Cdes f Practice that cver all key areas f custmer-supplier interactin, including: billing, discnnectins, marketing, vulnerable custmers and Pay As Yu G meters. These rules are in place t ensure, in line with CER s legislative duties, that custmers enjy a high standard f prtectin in their dealings with licensed suppliers. The requirements included in the Supplier s Handbk were reviewed in 2015 t take int accunt a wide range f issues pertaining t the supplier-custmer interactin arising frm varius surces, including legislative and cmpetitin develpments, the findings f regular cmpliance audits and Custmer Surveys and preliminary engagement with the energy industry and custmer prtectin agencies. The first stage in the cnsultative prcess has been cmpleted, with the publicatin f the Cnsultatin Paper Review f the Supplier s Handbk (CER/16/031A). The review prcess is nging, with the Prpsed Decisin Paper aimed t be published in late Q As part f its cmpliance mnitring activities, the CER cnducts regular and ad-hc audits t ensure that suppliers adhere t the requirements utlined in the Supplier s Handbk. One such audit is carried ut annually, where the CER examines suppliers cmpliance with the requirements f specific Cdes f Practice. In 2015 the CER cnducted an audit f cmpliance with the Cde f Practice n Vulnerable Custmers. The CER als cnducted a number f dedicated wrkshps with industry in relatin t vulnerable custmers thrughut 2014 and Suppliers are bligated t cmply with specific requirements as utlined in SI 463 f 2011 and t cmply with the CER Cde f Practice in relatin t vulnerable custmers. During r as a result f the audit where gaps r breaches f the Cde f Practice n Vulnerable Custmers were fund, the CER engaged with particular suppliers t remedy the breaches. A number f 17

18 regulatry gaps in the current prtectin framewrk fr vulnerable custmers were identified and were included in the Cnsultatin Paper Review f the Supplier s Handbk CER/16/031. In early 2015, the CER als cnducted a wrkshp n specific custmer facing arrangements pertaining t the PAYG lifestyle chice area. The wrkshp fcussed n gaps identified in the last audit and tk n bard feed-back received frm industry in relatin t the need t implement cnsistency acrss suppliers fr certain key prcesses in the PAYG lifestyle chice area, such as supplier switching prcess, remval and installatin f the PAYG meter and charges assciated with PAYG meters and custmer retentin practices. The utcmes f the wrkshp were reflected in the review f the Supplier s Handbk, where the CER put frward a set f cnsultatin questins related t the PAYG lifestyle chice. The issues cnsulted n will be prgressed in the next stages f the review. Tls t assist cmpetitin and custmer awareness The CER has accredited tw price cmparisn web site cmpanies. This is t address its view that t be able t identify the mst cmpetitive energy prices n the market, custmers need access t accurate, reliable and transparent infrmatin, prvided in an impartial manner by independent prviders f price cmparisn services. The CER has put in place an accreditatin framewrk fr price cmparisn websites (CER/11/144). This framewrk is based arund a set f principles, which are designed t ensure that the websites are easy t use, accurate and unbiased. T date tw price cmparisn websites have been accredited by the CER: bnkers.ie and Switcher. The CER mnitrs and audits these websites t ensure their cntinued cmpliance with the accreditatin rules. Thugh price cmparisn websites are very useful in assisting custmers in chsing the ffer that is right fr them, their reach is naturally limited by being web based Recmmendatins n supply prices, investigatins and measures t prmte effective cmpetitin As f July 2014, all prices in bth gas and electricity retail markets were fully deregulated. In April 2010, the CER published its Review f the Regulatry Framewrk fr the Retail Electricity Market. This set ut key cmpetitive milestnes that wuld mark the way t full deregulatin in all sectrs f the business and dmestic markets. The decisin paper stated that deregulatin culd ccur in a market if the fllwing criteria had been met (subject t all necessary legislative and licensing changes being implemented): (i) (ii) (iii) That at least three suppliers were active in the relevant market; and There was a minimum f 2 independent suppliers, each with at least 10% share f cnsumptin (GWh) in the relevant market; and ESB PES and ESBIE cmbined wuld serve within a specified perid a defined percentage f cnsumptin market share in a relevant market. Fr each f the Business markets, the percentage market share fr deregulatin was 50% r less. In the Dmestic market, the percentage market share fr deregulatin was 60% r less. There were tw additinal requirements fr the Dmestic market; the first being that switching rates wuld be greater than 10%. The incumbent supplier, ESB als had t prvide the Cmmissin with a satisfactry cmmitment fr the rebranding f ESB supply cmpanies prir 18

19 t the deregulatin f the dmestic market. Thus de-regulatin at a market share f 60% was cnditinal n ESB undertaking t remve the ESB brand frm the retail market. The electricity market is currently cmprised f fur different market segments: Dmestic market this cvers the residential/husehld end f the market including urban residential custmers and rural residential custmers that have a cnnectin t the lw vltage netwrk. Small-sized business market this cvers small businesses with a lw vltage nnmaximum demand cnnectin. Medium-sized business market this includes unmetered public lighting & ther unmetered cnnectins and businesses with a lw vltage maximum demand cnnectin. Large energy users (LEU) market this includes businesses cnnected t the medium vltage, 38kV and 110kV netwrk and thse cnnected t the electricity transmissin system. A similar prcess was fllwed fr deregulatin f the gas retail market. The CER decided that the fllwing criteria must be met in rder fr defined market sectrs fr gas t be deregulated: (i) That at least three suppliers were active in the relevant market; and (ii) That there was a minimum f tw independent suppliers, each with at least 10% share f vlume cnsumptin fr the FVT and NDM I&C markets r 10% share by custmer numbers in the Residential market. (iii) Fr the FVT and NDM I&C market sectrs Brd Gáis Energy s (BG Energy) market share by vlume culd nt be greater than 50%. There was ne additinal requirement fr the dmestic sectr, namely that the annual switching rate must be greater than 10%. The gas market is currently cmprised f fur different market segments fr reprting purpses: Dmestic market this represents nn-daily metered (NDM) residential custmers. Industrial and cmmercial (IC) market represents businesses with a supply pint capacity f belw 3,750kWh and cnsumptin level belw 73,000kWh. Fuel variatin tariff (FVT) market NDM gas custmers with a supply pint capacity f abve 3,750kWh and cnsumptin level abve 73,000kWh. Regulated tariff frmula (RTF) market annual cnsumptin f between 5.5GWhs and 264 GWhs. In 2015, price related cmpetitin intensified in the electricity and gas markets, with price reductins twards the end f 2015 and in the beginning f 2016 acrss all suppliers fr bth discunted and standard plans. In 2016 the CER will be cnducting a cnsumer-fcussed assessment f the electricity and gas retail markets and the develpment f cmpetitin ver time. The CER will use the mnitring and assessment cnducted t infrm areas that culd benefit frm imprvement and where further wrk is required t prmte cmpetitin and custmer prtectin. The tables belw prvide the annual average dmestic bill fr 2015 fr electricity and gas. These tables d nt include ffers such as cash back ffers r ther reward schemes that custmers may avail f. 19

20 Annual Average Dmestic Urban 24hr Electricity Bill, 2015 Supplier Standard Plan Discunted Plan Electric Ireland 1,211 1,061 Energia 1,253 1,099 Brd Gáis Energy 1,218 1,118 SSE Airtricity 1,271 1,036 Panda Pwer - - PAYG Lifestyle Chice Plans PrePayPwer 1,373 Pinergy 1,347 Electric Ireland PAYG 1,280 Annual Average Urban 24hr Dmestic Electricity Bill per Supplier, January 2015, including PSO, VAT & supplier service charges as applicable, typical cnsumptin f 5,300kWh Annual Average Dmestic Gas Bill, 2015 Supplier Standard Gas Direct debit & nline billing discunt plan Electric Ireland Energia BGE Flgas Annual Average Dmestic Gas Bill per Supplier in January 2015, including Carbn Tax and VAT, based n typical annual cnsumptin f 13,800kWh in gas Annual Average Dmestic Dual Fuel Bill, 2015 Supplier Direct debit & nline billing discunt plan Electric Ireland 1,949 Energia 1,944 BGE 2,027 SSE Airtricity 1,901 Annual Average Dmestic Dual Fuel Bill per Supplier in January 2015, including Carbn Tax, PSO and VAT where applicable, based n typical annual cnsumptin f 13,800kWh in gas and 5,300kWh in electricity 3.3 Security f supply (if and insfar as NRA is cmpetent authrity) The increase in renewable electricity generatin has reduced Ireland s use f fssil fuel. In 2015, apprximately 22.6% f electricity supplied in Ireland was renewable electricity. Despite the increased penetratin f renewable generatin, gas remains a cre cmpnent f Ireland s electricity fuel mix (apprximately 45.8%). The CER must emphasise that while use f gas has reduced in recent years (was 64% in 2010), Ireland is still highly dependent n gas as bth a surce f fuel fr pwer generatin, and as an immediate backup fuel in the event f shrtfall in intermittent renewable pwer generatin. In 2012, Ireland s TSO (EirGrid) cmpleted the installatin f the 500MW East-West Intercnnectr between Ireland and the UK. The cmpletin f this prject has significantly 20

21 increased Ireland s security f supply f electricity. Additinally the EWIC has prvided brader market access fr the Irish cnsumer and has cntributed t a reductin in electricity prices. Due t the imprtance f gas as a fuel fr electricity generatin the CER require that in the event f a gas supply disruptin base lad gas pwered plants are required t stck 5-days f secndary fuel while peaking plants are required t stck 3-days f secndary fuel. In its 2009 decisin paper n Secndary Fuel Obligatins, the CER cmmitted t keep secndary fuel bligatins under cntinuus review. Cnsequently, the CER is currently reviewing secndary fuel bligatins Mnitring balance f supply and demand Article 4 72/2009 The CER has a rle in mnitring security f supply/generatin adequacy and, tgether with EirGrid and the Department f Cmmunicatins, Energy & Natural Resurces (DCENR), putting in place apprpriate arrangements t ensure that a satisfactry generatin capacity margin is maintained and electricity supply is secured. In 2016, an assessment f Ireland s generatin capacity by EirGrid indicated that Ireland will cntinue t have surplus generatin capacity ver the next decade, with a peak generatin surplus f 1300 MW ccurring in 2018 (base case scenari). This begins t fall ff as lder plant is assumed t cme t the end f their lives. In additin t these plant shut-dwns, changes in adequacy are caused frm year t year by demand grwth, plant additins and increased wind penetratin. By 2025, the generatin adequacy supply in Ireland cmes clse t standard Mnitring investment in generatin capacities in relatin t SS Article 37(1)(r) Operatinal netwrk security Article /89/EC The CER has an verall mnitring and apprval rle regarding EirGrid s Grid Develpment Strategy (i.e. GRID 25). The GRID 25 initiative is a significant investment prgramme, which relates t the upgrading f existing infrastructure and the cnstructin f new statins and circuits where required. It represents an investment f apprximately 4 billin in the transmissin system, which will ensure that Ireland s Grid is future ready. There are specific investment prjects in place under GRID 25. These include new 110kV and 400kV transmissin lines and substatins in additin t the strengthening f existing circuits. The successful rllut f an upgraded electricity netwrk is a key requirement in achieving the ambitius renewable generatin targets and fr maintaining a secure and reliable system. T this end there will be significant investment in the transmissin and distributin netwrks in the 21

22 cming years. The timely rllut f GRID 25 and the develpment f the netwrk will require a jined up apprach and c-peratin between gvernment bdies, market participants and electricity custmers. Investment in intercnnectin capacity fr the next 5 years r mre Article /89/EC EirGrid are currently undertaking a feasibility study f a 700MW intercnnectr between Ireland and France. If this prject is t cmmence it wuld be expected t be cmpleted by apprx This prject has PCI status. Expected future demand and envisaged capacity fr the next 5 years and 5-15 years Article /89/EC Measures t cver peak demand r shrtfalls f suppliers Article 4 72/2009 Since Nvember 2007 the Nrthern Ireland Authrity fr Utility Regulatin (Utility Regulatr) and the CER, tgether referred t as the Regulatry Authrities (RAs), have jintly regulated the allisland whlesale electricity market knwn as the Single Electricity Market (SEM) cvering bth Nrthern Ireland and the Republic f Ireland. Since its cmmencement, the SEM has been gverned by the SEM Cmmittee, cnsisting f the CER and the Utility Regulatr, and an independent member, which has sle jurisdictin t make decisins n SEM n behalf f the RAs. The SEM includes a centralised all-island grss mandatry pl (r spt) market. In this pl electricity is bught and sld thrugh a market clearing mechanism, whereby generatrs bid in their marginal cst and receive the System Marginal Price (SMP) fr each trading perid fr their scheduled dispatch quantities, with the cheapest pssible generatrs run t meet demand acrss the island. Generatrs als receive separate payments fr the prvisin f available generatin capacity thrugh a capacity payment mechanism, and cnstraint payments fr differences between the market schedule and the system dispatch. Suppliers (t electricity custmers) purchase energy frm the pl and pay the SMP fr each trading perid alng with capacity csts and system charges. Wind farms are an example f electricity generatrs that have very lw SRMC (Shrt Run Marginal Cst) - the wind is free and s typically they receive a higher rate f infra-marginal rent than ther electricity generatrs, which in turn is needed t pay fr their much higher fixed csts. By clsely reflecting custmer demand and the underlying fuel csts assciated with pwer generatin, whlesale electricity prices in the SEM have been as wuld be expected in an efficient and cmpetitive market. The SEM is ensuring that the mst efficient plants are run and, thrugh the SMP, prvides a clear price signal fr new mre efficient generatrs t enter the market as needed. 4 The gas market 4.1 Netwrk regulatin Unbundling 22