Notice of Reasons for Decision
1. Pursuant to section 172I of the Electricity Act 1992,
I notify the amendment of the Electricity Governance Rules 2003 (“Rules”) under section 172H of the Electricity Act 1992.
2. This amendment to the Rules is made pursuant to section 172D (1) (3) of the Electricity Act 1992.
3. A brief description of the nature of the amendments is as follows:
The procurement plan set out in Schedule C5 of Part
C of the Rules is to be replaced in its entirety with a
new procurement plan. The key changes between the existing procurement plan and the new procurement plan are set out below:
(a) Changes to assessment methodology for instantaneous reserve and frequency keeping and to the proposed contracting process that increase the latitude for the parties to negotiate terms and conditions as long as none are inconsistent with the key contracting terms set out in the procurement plan.
(b) Changes have been included for every ancillary service to make provision for the system operator
to enter into ancillary service procurement contracts with other providers at any time during the procurement plan period.
(c) A number of the key contracting terms have been inserted, largely relating to the monitoring and compliance arrangements, including:
(i) new provision for the system operator to terminate an ancillary service schedule if an ancillary service agent (ASA) commits a material breach of the contract in relation to that service and such breach, if remediable,
is not remedied to the reasonable satisfaction of the system operator within 10 business days
of the notice, or such longer period as the system operator may determine;
(ii) new provision for the system operator to make a claim that an ASA has failed or is unable to meet a performance requirement in the ancillary service procurement contract (ASPC) or cannot comply with a dispatch instruction. If the claim is accepted (either voluntarily or after dispute resolution), the system operator will not be liable to pay the ASA for the relevant period and the ASA will take remedial action;
(iii) new provision that makes it clear that some “baseline” tests may be required of ASAs for some ancillary services at their own expense;
(iv) new provision for the system operator to request ASAs carry out an “on-demand” test of the equipment used to provide or monitor any ancillary service and/or provide a statement of the capability and operational limitations of the equipment;
(v) new provision requiring the system operator
to pay an ASA’s reasonable costs of an
“on-demand” test unless the equipment fails the test or the sole reason for the test was to verify the success of any remedial action;
(vi) new provision that if any equipment used
to provide or monitor an ancillary service (except for non-mandatory frequency keeping or instantaneous reserve) fails to meet any test, the ASAs must re-test the equipment at their own expense until the equipment passes
the test, unless otherwise agreed with the system operator, and the ASAs will be deemed incapable of providing the ancillary service until the test is passed;
(vii) new provision for the system operator to inspect any equipment used by ASAs to provide or monitor an ancillary service upon at least five days’ notice of the intention to inspect the equipment, but may give less or no notice if
the system operator reasonably believes the equipment is being used in a manner inconsistent with the ASPC. The system operator must not interfere unreasonably with the ASA’s business in carrying out such an inspection; and
(viii) new provision for the system operator to assign its interest in the ASPC to another party taking over the role of system operator; otherwise, assignment by either party must have the consent of the other party.
(d) The frequency of system operator reporting of ancillary service settlement volumes, prices, costs, etc, which is currently unspecified, is to be carried out monthly.
(e) A number of changes to the performance requirements and technical specifications for various ancillary services:
(i) New requirement for ASAs to maintain their monitoring equipment in accordance with good industry practice (all ancillary services);
(ii) new requirement that the measurement of
time error must be performed with a global positioning system clock or agreed equivalent (associated with provision of frequency keeping);
(iii) new obligation on system operator to use reasonable endeavours to dispatch frequency keepers at least five minutes in advance of the start or end of the relevant trading period, as
the case may be;
(iv) new requirement that the control maximum be greater than, or equal to, the control minimum plus twice the range of the offered MW band for the frequency keeping site;
(v) description of the method the system operator will use to assess whether or not the ASAs have delivered a quantity of instantaneous reserve following an under frequency event that is consistent with the quantity dispatched;
(vi) new requirement that the relay equipment for over frequency reserve must immediately arm or disarm (as appropriate) when it receives a remote arming or disarming signal from the system operator’s co-ordination centre;
(vii) new requirement for the ASAs to provide voltage support equipment that will be available at all times to provide voltage support, is able to respond when dispatched, and is maintained in accordance with good industry practice;
(viii) new requirement for the ASAs to provide monitoring equipment that is available at all times and continuously monitors and transmits the reactive power being produced by the voltage support equipment to the designated interface points;
(ix) new requirement for the ASAs to ensure the black start equipment is able to start without power being obtained from the grid or local network at least once every six weeks unless the black start equipment has been generating for 66% or more of the time since the last test;
(x) new requirement that the system operator may require the ASAs to conduct a baseline test of the black start service no more than once during the procurement plan period to confirm the ASAs can meet the performance requirements;
(xi) new requirement for the ASAs to ensure
the black start equipment is able to achieve the response times specified in the ASPC; and
(xii) new requirement for the ASAs to ensure
the black start equipment is maintained in accordance with good industry practice.
(f) Changes to the offer period for the provision of voltage support, over frequency reserve, and black start provide the system operator with the ability to enter into new long-term contracts without limitation.
(g) Change to the pricing structure for voltage support drops the requirement for the system operator to purchase a mix of half-hour and long-term pricing.
(h) Change to the quantity requirements for voltage support drops the requirement for the system operator to use planning studies to justify the procurement of more voltage support.
4. Pursuant to section 172Z (4) of the Electricity Act 1992, the reason for my decision to amend the Rules is that the new procurement plan improves the process for making a net purchase quantity assessment so the system operator can better meet the principal performance obligations while also reducing the cost of the ancillary service purchases and meeting the requirements of Rule 4 in section IV of Part C of the Rules.
5. These Rules come into force on 1 November 2005.
6. Copies of the Rules may be inspected free of charge or purchased from the Electricity Commission, Level Seven, ASB Bank Tower, 2 Hunter Street, Wellington. The Rules can also be viewed on the Electricity Commission web site:
http://www.electricitycommission.govt.nz/rulesandregs/rules
Dated at Wellington this 26th day of August 2005.
TREVOR MALLARD, Minister of Energy.