1 Report on the implementation of CBT mechanism in SEE region Alexandru Ionescu – CN Transelectrica SA (Romania) Silvio Brkic – HEP (Croatia) subgroup.

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Report on the implementation of CBT mechanism in SEE region

Alexandru Ionescu – CN Transelectrica SA (Romania)

Silvio Brkic – HEP (Croatia)

subgroup ERCBT co-convenors

SETSO Task Force

4th Athens Forum, 4th June, 2004

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1. Present situation

2. Report on the SEE CBT virtual phase

3. SEE CBT project design for real implementation

4. Conclusions and next steps

ETSO Report, Athens, 4th June, 2004

Summary

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a dry-run CBT mechanism on a virtual basis is being operated since January 2004, involving most of the countries of 2nd synchronous zone, in accordance with ETSO CBT 2003 principles.

classical transit contracts are still in force following few preferred commercial routes.

GR

H

B&H

HRI

A

SLORO

TR

BG

MK

AL

SCG/S

SCG/CG

UA

Mol

ETSO CBT 2004 mechanism

CIS system

Virtual SEE CBT 2004 mechanism

Non-participating CBT area

Turkey system


Present situation in SEE region

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A CBT mechanism in the SEE region: an option or a necessity?

All SEE TSOs networks are used for technical and commercial cross border exchanges

Only few TSOs receive revenues for transit services, even the flows pass other neighboring networks without being remunerated for the additional costs incurred by transit

In 2002, SETSO TF was mandated to define and implement an inter-TSO compensation mechanism for cross border trade in SEE region

The operational proposal for dry-run SEE CBT mechanism operation, during the first half of 2004 was adopted during the 3rd Athens Forum in view of its real implementation



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SETSO ERCBT ESG elaborated the operational proposal for real implementation in the second half of 2004, based on ETSO CBT 2004 principles

Following the good results of the virtual SEE CBT phase, a feasible operational proposal for a CBT schema implementation is now on the table of Energy Community of SEE

7 SEE TSOs are invited to adopt this operational proposal for real implementation from 1st July 2004



6ETSO Report, Athens, 4th June, 2004

Summary





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Report on the SEE CBT virtual phase

Lessons learned from the virtual SEE CBT process

• The application of SEE CBT 2004 virtual mechanism, following ETSO 2003 one, implied a large contribution from “Declared Exports” part of the fund

• Shortcomings and discrepancies of the SEE CBT Agreement are identified in order to improve the real contract

• Pancaking effects on the southern interface with Greece and on the western interface within B&H network were identified and solved

• Financial issues were detected and analysed

• Solutions were identified in order to eliminate the negative impact after the UCTE zones reconnection


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Good results of the virtual CBT phase

• proper functioning of data collection procedure and CBT settlement procedure

• extended co-operation of SEE TSOs with ETSO ERCBT TF

• increased expertise of the CBT specialists from SEE TSOs, following ETSO experience

Shortcomings of the virtual phase

• principles of real SEE CBT mechanism are different than the virtual one, alternative settlements for the same period are under the preparation according to the new CBT mechanism design

• certain TSOs are concerned on the results of virtual monthly inter-TSOs payments in comparison with the existing revenues from traders


Report on the SEE CBT virtual phase


Summary





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The present operational proposal evaluates the participation of 7 SEE countries according to 3 scenarios depending on B&H network participation due to the current operation in two synchronous zones :

1st scenario: only eastern part of B&H network is included in the SEE CBT area like in the current dry-run phase

2nd scenario: entire B&H network is included in the SEE CBT area

3rd scenario: without B&H network in the SEE CBT area

Croatia was not considered to take part in the expected real SEE CBT mechanism during the second half of 2004


SEE CBT project design

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GR

H

B&H

HRI

A

SLORO

TR

BG

MK

AL

SCG/S

SCG/CG

UA

Mol

ETSO CBT 2004 mechanism

CIS system

SEE CBT 2004 mechanism

Non-participating CBT area

Turkey system

Results of calculations for 2nd scenario (all B&H network) are shown in the following



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Geographical parameters of SEE CBT area:



SEE CBT country

Neighboring countries Neighboring perimeter countries

within ETSO CBT area

out of ETSO CBT area

AL SCG/CG, SCG/S, MK GR -

B&H SCG/CG, SCG/S - HR

BG MK, RO, SCG/S GR TR

MK BG, SCG/S, AL GR -

SCG/CG AL, B&H, SCG/S - -

RO BG, SCG/S HU UA, MD

SCG/S AL, B&H, BG, MK, RO, SCG/CG HU HR

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Adoption of the ETSO CBT 2004 mechanism principles

a) Identification of the horizontal network using ATF methodology

b) Estimation of transits share and cost claim using transit keys

c) “Edge country” concept is considered

d) Estimation of SEE CBT Fund is based on the second half of 2003 year data set

e) Contributions for the financing of SEE CBT Fund:

- Imports from perimeter countries: 1 EURO/MWh

- Net flows for exporting and importing directions: equal fees



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Differences between ETSO and SETSO CBT 2004 mechanisms

a) Consideration of 110 – 150 kV networks in HN, partially in line with ETSO criteria

b) Consideration of HN costs using the standard assets

c) Network losses are not included in the expected cost claim

d) Tie-lines operating in island mode are considered (both for imports from perimeter countries and for exchanges within SEE CBT area)



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Identification of the HN in SEE CBT area

– Each party defined the model of its network based on a reference model in normal operation, excluding maintenance works

– For the tie-lines operating in island mode, the islands were virtually connected with the synchronous system

– The models were converted to UCTE format and forwarded to NEK (acting as Simulation Administrator) for the identification of HN

– The same software package implementing the ATF approach was used, as in ETSO

– It was considered all the possible ‘one to one’ transit patterns with entering and exiting flows of 100 MW

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Country(Company)

Circuits 400 kV Circuits 220 kV Circuits 110-150 kVOverall Network

Horizontal Network

Overall Network

Horizontal Network

Overall Network

Horizontal Network

km km % km km % km km %

Albania (KESH) 124 124 100 1147 1147 100 1312 562 42.8Bosnia and

Herzegovina (ZEKC)766 761 99.3 1507 1368 90.8 3596 3117 86.7

Bulgaria (NEK) 2263 2239 98.9 2693 2420 89.9 9678 5640 58.3FYR of Macedonia

(ESM)395 395 100 170 170 100 1670 1541 92.3

Montenegro (EPCG) 263 263 100 410 410 100 575 575 100Romania (TEL) 4397 4333 98.5 5291 4541 85.8 18054 5736 31.8

Serbia (EPS) 1673 1654 98.9 2320 2115 91.2 4987 4314 86.5

Horizontal network identification (circuits)

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Horizontal network identification (transformers) Transformers 400/220 kV Transformers 400/110 kV Transformers 220/110 kV and 150/110 kV

Country (Company)

Overall Networ

k

Horizontal Network Overall Network

Horizontal Network Overall Network

Horizontal Network

MVA MVA % MVA MVA % MVA MVA %

Albania (KESH)

1*120 1*100

600 600 2*300 100 150 150 1*150 100 1590 730 3*90 45.9 3*60 2*30

Bosnia and Herzegovina

(ZEKC)

2800 2800 7*400 100 2100 2100 7*300 100 2250 2250 15*150 100

3*800 1*399 29*200 Bulgaria (NEK) 4474 4474 1*630 100 4399 4149 15*250 94.3 8320 6160 2*180 84

2*722 FYR of

Macedonia (ESM)

2100 2100 7*300 100 450 450 3*150 100 100 100 2*50 100

Montenegro (EPCG)

800 800 2*400 100 600 600 2*300 100 700 700 2*125 100 3*150

Romania (TEL) 39*200 8800 8000 20*400 90.9 5250 2500 10*250 47.6 15325 7925 1*125 51.7

2*100 4000 4000 10*400 100 3150 2850 9*300 90.5 6100 4550 2*200 74.6

Serbia (EPS) 1*150 27*150 1*100

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Horizontal network costs (general)

On CEER/SEEER WG meeting in Athens (25.02.2004) it was proposed to use the dry-run standard costs for the real implementation, already used for the virtual phase: Average replacement standard costs as computed by CEER Standard costs for lines, defined per voltage level and per km Standard costs for transformers, defined per installed capacity

(MVA) according to the typologies presently operated in SEE Polynomial dependency of transformers’ price with the installed

capacity, for deducting construction costs for machines of different size (basic size: 400/220 KV, 400 MVA, 3 Mil. €)

HN annual costs to be determined by applying an annuity factor = 9%

The SEE TSOs agreed to adopt the standard costs proposed by SEEER as appropriate for remuneration of HN usage

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Horizontal network costs (standard costs)

Lines

Cost

Euro/km

400 kV 205,000

220 kV 125,000

150 kV 80,000

110 kV 70,000

Transformer type

Installed capacity

Costs Cost/MVA

MVA Euro x 1.000.000

EURO / MVA

400/220 kV

800 5.04 6,300722 4.67 6,500630 4.22 6,700400 3.00 7,500300 2.43 8,100

400/110 kV

400 3.00 7,500300 2.43 8,100250 2.10 8,400150 1.44 9,600

220/110kV

200 1.78 8,900180 1.65 9,200150 1.44 9,600125 1.25 10,000100 1.06 10,600

150/110kV50 0.63 12,60040 0.53 13,300

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Total Overall and Horizontal Network annual costsType of grid element

Country

Overall Network Horizontal Network

Annual costs Annual Cost

Total costs TSO Euro Euro

(1) (2) (3) (4) (5)

Total costs of overall

network and horizontal network

(Circuits + Transformers)

KESH Albania 25,618,194 20,041,470

ZEKC Bosnia & Herzegovina 59,106,150 54,432,450

NEK Bulgaria 144,786,832 114,694,990

EMS FYR of Macedonia 21,917,475 21,104,775

EPCG Montenegro 14,678,550 14,678,550

TEL Romania 276,585,300 180,817,200

EPS Serbia 98,695,350 90,195,750

Total ON and HN annual costs 641,387,851 495,965,185

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Transit and transit keys calculation

Transit formula:

Transit key formula:

Calculation of the transit for a CBT party:

Period: second half of 2003 year

Real Flows: all tie-lines with the neighbouring CBT parties and the perimeter countries participating in the

identification and calculations of HN (parallel and island)

Load: national electrical consumption, according to the UCTE definition

kmhkmhmh

km IFEFT ,min

100011

1

M

mkm

M

mkm

M

mkm

km

LT

T

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Transit key and expected cost claim for SEE CBT parties

Country TSO/Company

Consumption in the 2nd half

of 2003

Transit in the 2nd half of 2003

"transit key"

Cost of the HN

Expected cost claim

MWh MWh % Euro Euro

Albania KESH 2,730,615 28,701 1.04 10,020,735 104,231

Bosnia & Herzegovina ZEKC 5,093,361 810,904 13.73 27,216,225 3,737,933

Bulgaria NEK 17,493,637 234,015 1.32 57,347,495 757,019

FYR of Macedonia ESM 3,606,600 269,163 6.94 10,552,388 732,840

Montenegro EPCG 2,157,016 347,191 13.86 7,339,275 1,017,540

Romania TEL 24,512,000 587,864 2.34 90,408,600 2,117,460

Serbia EPS 16,403,779 1,998,630 10,86 45,097,875 4,897,944

TOTAL 71,997,008 4,276,468 5.61 247,982,593 13,364,966

SEE CBT Fund is estimated on a six-month basis, according to the ETSO CBT 2004 financing principles.

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SEE CBT Agreement and SEE Business Process Description

based on the experience achieved in the dry-run phase, the documents shall be negotiated by the signatories CBT parties

first proposal of BPD was drafted by EKC, which shall continue to act as Data Administrator for entire 2004 year

first draft of contract is under preparation to be submitted by next week

planned meeting for the negotiation of final documents in Sofia, 14-15 June 2004

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Financial & legal issues: 1. VAT and other taxes Non-harmonized national legislations in the SEE countries to

exempt VAT and other taxes related to the inter-TSO CBT schema Additional costs for invoiced or invoicing parties could increase the

amount of money exchanged among the SEE TSOs A proposal in the hands of ECSEE: to facilitate SEE CBT process

by inviting to a removal of all VAT and taxes in implementing of a CBT mechanism

Financial & legal issues: 2. netting/compensation Clarification achieved on the final position to be invoiced by the

CBT parties ETSO supported SEE TSOs by providing right explanations from

their financial consultants



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Financial & legal issues: 3. financial guaranties

Certain TSOs asked for introducing of financial guaranties among SEE CBT parties

The right understanding of above issue:

o A CBT schema could be seen as a never-ending process which shall be run without interruption

o A bilateral financial guaranty could cover the risk for a limited period, but can not protect the continuous functioning of the CBT process

o A feasible solution is to reach the existing ETSO trust among the SEE TSOs



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Commercial issues (transit contracts between TSOs and traders)

Certain TSOs were concerned on interrupting the existing transit contracts with traders due to the possibility to be charged by traders for damages

One solution both for traders and TSOs is to amiable agree to cease the transit contracts after starting CBT mechanism keeping the ATC rights (for entering and exiting TSOs networks)

No damages should be charged since the electricity trades are not to be affected

A discriminatory treatment of the traders by the TSOs, both charging transit fees and applying a CBT schema, should be avoided



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ETSO – SETSO CBT interface issues


Current status for the second semester of 2004:

ETSO shall charge imports from SETSO area with 1 Euro/MWh

SETSO shall charge imports from ETSO area with 1 Euro/MWh

For 2005, few solutions are under investigation by (S)ETSO:

An injection fee on physical flows between ETSO and SETSO neighboring CBT parties

Gradual integration of SEE TSOs into the ETSO CBT mechanism

One single CBT area in a single synchronous European zone



Summary





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Conclusions and next steps


The implementation of the inter-TSO compensation mechanism in SEE region, starting from 1st July 2004 is a priority for the Energy Community of South East Europe.

Based on the real experience we shall achieved this year, the integration of the ETSO and SEE CBT mechanisms in 2005 may be investigated.

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Alexandru IonescuCN TRANSELECTRICA SA33, Gen. Ghe. Magheru Blvd., Bucharest - 1, RO - 010325 Planning and Marketing DivisionHead of Dept. for Operations on the Regulated MarketPhone: +4021 303 57 32Fax: +4021 303 56 70E-mail: [email protected]://portal.transelectrica.ro

THANK YOU to all experts from SEE TSOs, EKC, ETSO secretariat and ETSO

ERCBT TF for their support in elaboration of this operational proposal

Silvio BrkicHEP – Transmission Ltd.Ulica grada Vukovara 37 10 000 Zagreb – CroatiaPhone: +385 1 6322 625Fax: +385 1 6322 277E-mail: [email protected]


1 Report on the implementation of CBT mechanism in SEE region Alexandru Ionescu – CN Transelectrica SA (Romania) Silvio Brkic – HEP (Croatia) subgroup.

Documents

cbt specialists

cbt agreement

cbt virtual phase slide

cbt mechanism operation

cbt project design etso

etso cbt area alscgcg

cbt area croatia

cbt schema implementation