NC RfG and DCC - astonishing divergences in derogation procedures
Tuesday, 30 April 2013 09:19

 

It is probable that legislative efforts to elaborate on the two fundamental Internal Electricity Market network codes:

1) Network Code for Requirements for Grid Connection Applicable to all Generators (NC RfG), and

2) Network Code on Demand Connection (DCC)

will effect in the coming months in the adoption of regulations with European-wide binding force.

It merits noticing that both network codes impose sometimes strict technical and legal requirements on, respectively, Power Generating Modules and Demand Facilities.

 

 

ENTSO‐E Network Code on Demand Connection draft of 21 December 2012 (DCC)

 

ARTICLE 56
AMENDMENT OF CONTRACTS AND GENERAL TERMS AND CONDITIONS

All relevant clauses in contracts and/or relevant clauses in general terms and conditions relating to the Network connection of New Demand Facilities or a New Distribution Network Connection shall be amended to achieve compliance with the requirements of this Network Code.

The relevant clauses shall be amended within three years after the entry into force of this Network Code.

This requirement for amendment shall apply regardless of whether the relevant contracts or general terms and conditions provide for such an amendment.

 

ARTICLE 57 ENTRY INTO FORCE

This Network Code shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

With the exception of Article 7, which shall apply thirty months after the entry into force, all provisions of this Network Code shall apply as from the day of expiration of a 3 year period following its publication.

This Network Code shall be binding in its entirety and directly applicable in all Member States.

 

Those unable to meet these obligations are granted the possibility, under special procedure, to apply for derogation.

 

It appears, however, that the communication between the ENTSO-E task forces assigned with the relevant works has to some extent failed, since certain important aspects - generally similarly regulated in both network codes - diverge significantly and there seems to be no visible motivation to justify discrepancies in this regard.

 

Vivid example of the above assertion is Article 54 of the DCC. This provision stipulates that:

1. An Existing Demand Facility or Existing Distribution Network Connection, deemed significant in accordance with the procedure set forth in Article 36, which is not compliant with at least a requirement of the Network Code, shall apply for a Derogation from these requirements in accordance with Article 52, within twelve months from the date the requirement, with which it is not compliant, becomes applicable.
2. If one month before the expiry of the twelve‐month period set in paragraph 1, no application for Derogation has been received, the Relevant Network Operator shall, by formal notice, require the non‐compliant Existing Demand Facility or Existing Distribution Network Connection, to either conform with the requirement, or to apply for a Derogation.

 

ENTSO-E draft Network Code for Requirements for Grid Connection Applicable to all Generators8 March 2013 (NC RfG)

 

Article 62

AMENDMENT OF CONTRACTS AND GENERAL TERMS AND CONDITIONS

All relevant clauses in contracts and/or relevant clauses in general terms and conditions relating to the grid connection of New Power Generating Modules shall be amended to achieve compliance with the requirements of this Network Code. The relevant clauses shall be amended within three years after the entry into force of this Network Code. This requirement for amendment shall apply regardless of whether the relevant contracts or general terms and conditions provide for such an amendment.

 

Article 63

ENTRY INTO FORCE

This Network Code shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

With the exception of Article 3(4), which shall apply thirty months after the entry into force, and Title 6 , all provisions of this Network Code shall apply as from the day of expiration of a three year period following its publication.

This Network Code shall be binding in its entirety and directly applicable in all Member States.

 

Article 55

COMPLIANCE OF EXISTING POWER GENERATING MODULES

An Existing Power Generating Module which is not compliant with a requirement of the Network Code, that applies to it according to Article 3, shall apply for derogation from this requirement according to Article 53 within twelve months from the day the requirement, of which it is not compliant with, becomes applicable.

The Relevant Network Operator shall have the right to refuse the operation of the Power Generating Module, if the twelve months period terminates without an application for derogation.

 

3. If at the expiry of the twelve‐month period, the non‐compliant Existing Demand Facility or Existing Distribution Network Connection referred to in paragraph 1 has not applied for a Derogation, the Relevant Network Operator shall have the right to disconnect the Existing Demand Facility or Existing Distribution Network. The decision on disconnection shall be motivated.' (underlining added).

 

It is clear from the above language that Demand Facilities are given additional protection, resulting from the obligation imposed on the Network Operators, to be reminded of the expiry of the twelve‐month period - which lacks its equivalent with respect to Power Generating Modules in the NC RfG.

 

Maybe the reason for this was a belief that electricity generators are operated to a greater than Demand Facilities extent by professionals, but in the modern Internal Electricity Market such a distinctions appear no longer justifiable. In any case, on the ground of existing regulatory drafts electricity consumers are given more regulatory protections than electricity producers, while, pursuant to the network codes, both these groups sometimes provide equally important services for the electricity market (for instance demand side response).

 

Revoking the granted derogation under DCC - must the vested interests be reserved?

 

The said ambiguity arises from the wording of Article 54(11) of the NC RfG pursuant to which the 'National Regulatory Authority shall have the right to issue a motivated decision revoking the granted derogation under the conditions and pursuant to the provisions of national law reserving the vested interests of the concerned grid users, in the cases where the prerequisites for granting the derogation no longer exist for reasons attributable to the concerned grid users.' (underlining added).

 

The analogous Article 53(12) of the DCC states only that 'The Relevant National Regulatory Authority shall have the right to issue a motivated decision revoking the granted Derogation, in the conditions set forth in the national law, in cases where the prerequisites for granting the Derogation no longer exist.'

 

Assuming the lawmakers always act reasonably, the logic of the comparison of these formulations indicates that under DCC when revoking the granted derogation the vested interests of the owners of demand facilities do not matter.
But there are also serious grounds to believe that the above conclusion is false and the whole matter is merely a legislative omission.

If it weren't, it could be argued that under these network codes, the interests of generators' owners are much better protected than the analogous interests of owners of demand facilities. The only remaining issue to be resolved in that regard is what are the reasons for placing these groups - being in similar situation - in such divergent legal position. Generally, without objective justification, such unequal treatment seems to be unacceptable in the perspective of evenly significant roles of the above groups for the functioning of the Internal Electricity Market.
Moreover, the said reasons appear not to be documented taking into account the available ENTSO-E website resources

 

 

 

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