Costs of GB participation in EU inter-TSO compensation

Ofgem consultation (9 pages, PDF) on the recovery of the costs of the participation of National Grid (as GB system operator) in a voluntary arrangement between European transmission system operators for mutual "compensation" in respect of cross-border flows. Ofgem proposes to allow net payments made by National Grid (estimated at more than £7 million a year) to be recovered through domestic price controls, but not to make adjustments for National Grid's own costs or exchange rate differences.

Neither this document nor the November 2007 board minutes (6 pages, PDF) recording consent in principle for recovery explain the benefits to GB system users of National Grid's participation in this voluntary inter-TSO scheme. The only explanation provided by Ofgem appears to be that the costs are warranted by its desire to support the development of a compulsory EU scheme. According to Ofgem:

The association of European Transmission System Operator ("ETSO") has developed the 2008/9 scheme for the two calendar years 2008 and 2009. The terms of the circulated agreement contained a clause with the effect that if one or more TSO did not receive the support of their national regulator for their participation in the 2008/9 scheme, then the scheme would become null and void for all signatories. We understand that only with full participation could ETSO and the EC be confident of progressing mandatory ITC [inter-TSO compensation] Guidelines within the two year timescale (i.e. for implementation from 1 January 2010).

Responses by Thursday 12 June 2008.

For further information or advice please contact Franck Latrémolière.

Filed under Electricity, Ofgem.

Reckon LLP is an economics consultancy with expertise in data analysis, economic regulation and competition law.

About Reckon