cer15017 cer annual report and accounts - 2013 (english)

8/21/2019 CER15017 CER Annual Report and Accounts - 2013 (English)

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A n n u a l R e p o r t 2

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Note to Minister (30th June 2014)

To: Mr Pat Rabbitte, T.D., Minister for Communications,

Energy and Natural Resources

In accordance with paragraph 25 (b) of Schedule 1 to the

Electricity Regulation Act, 1999, as amended by Section 10 Energy

(Miscellaneous Provisions) Act, 2006, we are pleased to present

to you the twelfth Annual Report of the Commission for Energy

Regulation, in respect of the period from 1st January 2013 to 31st

December 2013.

Garrett Blaney

Chairperson

Paul McGowan

Commissioner


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Table of Contents

Foreword by the Commissioners 02

Public Interest Statement 12

Energy Efficiency 2013 16

Statement of Best Practice 18

Background to the Annual Report 20

Key Task 1: Wholesale Market Integration 22

Key Task 2: Smart Metering Programme 28

Key Task 3: Petroleum Safety Project 32

Key Task 4: Water Project 36

Key Task 5: Key Operational Items 38

Key Task 5 (a): Retail Monitoring and Customer Protection 38

Key Task 5 (b): Energy Networks 44

Key Task 5 (c): Progress Existing Onshore Safety System 50

Key Task 5 (d): European Matters 56

Financial Statements 66


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COMMISSION FOR ENERGY REGULATION (CER)

Introduction

The Commission for Energy Regulation (“the CER”) is

Ireland’s independent energy and water regulator. The

CER was established in 1999. Since then its powers

and functions have expanded and it now has a wide

range of economic, customer protection and safety

responsibilities in energy. The CER has been given a new

role as the economic regulator of the Irish public water

and wastewater sector which took effect in early in 2014.

Below we provide a brief summary of our diverse roles

across energy and water.

Economic Regulation

Energy

Our aim is to protect the interests of energy customers,

maintain security of supply, and to promote competition

covering the generation and supply of electricity andsupply of natural gas. As part of this role, the CER jointly

regulates the all-island wholesale Single Electricity Market

(SEM) with its counterpart in Northern Ireland, the Utility

Regulator. The SEM is governed by a decision-making

body known as the SEM Committee, consisting of the

CER, the Utility Regulator and an independent member.

Water

The CER has recently assumed the role of economic

regulator for the public water and wastewater sector,covering the services provided by Irish Water. Our primary

aim is to protect the interests of customers of Irish Water.

This role will focus on water and wastewater charges and

customer protection.

Customer Complaints

The CER has an important related function in customer

protection by resolving complaints that customers have

with energy companies through its Customer Care team.This will expand to deal with Irish Water customers, in line

with legislation.

Energy Safety Regulation

In energy safety, the core focus of the CER is to protect

lives across a range of areas in the energy sector. This

includes safety regulation of electrical contractors and

gas installers (covering both natural gas and Liquefied

Petroleum Gas (LPG). In addition, the CER is the

safety regulator of the downstream natural gas industry(covering storage, transportation and supply) and LPG

piped distribution systems. It is also safety regulator of

upstream petroleum safety extraction and exploration

activities; this includes oil and gas activity both onshore

and offshore.

Purpose of this Document

This document details the CER’s Annual Report for 2013.

It outlines the key work items delivered by the CER during

2013, with reference to its stated Work Plan for 2013published in March 2013. It also briefly touches on some

of the key challenges ahead, which will be encapsulated

in further detail in the CER Work Plan for 2014.

Overview of this Document

Overview of Key Tasks Progress during 2013

In common with previous years, 2013 presented many

challenges and opportunities for the CER and its staff

across the range of its energy safety and energy andwater economic functions. To provide structure to our

reporting we establish a set of Key Tasks from the full

Foreword by the Commissioners

Chairperson Garrett Blaney Commissioner Paul McGowan


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range of operational functions and projects which we

undertake each year. The CER’s expanded functions in

the areas of both water regulation and petroleum safety

regulation were the subject of dedicated projects under

which significant progress was made in 2013, including

the enactment / commencement of significant new

pieces of legislation. Both the I-SEM (Integrating theSEM wholesale market into European markets) and the

National Smart Metering Programme represent major

transformational projects across energy wholesale and

retail markets; both of these projects also saw significant

progress in 2013. The operational aspects of the CER’s

functions are equally significant to delivering consumer

benefits across the energy market and in public safety

and we report here on the progress made in various

areas including wholesale and retail markets regulation,

networks regulation and energy safety oversight.

Below is a summary of the five keys tasks that were

outlined in the CER Work Plan 2013 and an overview of

progress against these tasks by the end of 2013. Further

detail for each key task is contained within the main

sections of this document.

1. Key Task 1 – Wholesale Market Integration

2. Key Task 2 – Smart Metering Programme

3. Key Task 3 – Petroleum Safety Project

4. Key Task 4 – Water Project

5. Key Task 5 – Key Operational Items:

(a) Retail monitoring and customer protection

(b) Energy networks

(c) On-shore safety

(d) European energy matters


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Key Task 1: Wholesale Market Integration

2013 Work Plan 2013 Annual Report

The CER will work with the Utility Regulator to carry out a detailed review ofthe High Level Design of the Single Electricity Market (SEM) to ensure thatthe SEM can meet the requirements of the EU Target Model for electricity by

2016.

During 2013 the SEM Committee developed a Consultation Paper on theHigh level Design of the SEM from 2016. There was significant stakeholderengagement in this process culminating in the publication of the Consultation

Paper on the Integrated SEM (I-SEM) High level Design Options in February2014.

In early 2013 the CER will also decide on the next steps in relation to all-island gas arrangements, following the completion of an analysis of all-islandgas balancing and a cost-benefit study.

In the light of the findings of these studies and, more particularly, developmentsat EU/ACER level on the application of network codes in areas such as capacityallocation congestion management, balancing, inter-operability etc. It wasdecided to focus on cooperation in developing these codes.

Key Task 2: Smart Metering Programme


The CER’s smart metering roll-out programme is an important nationalenergy infrastructure initiative and the focus of 2013 will be on firming-upon the high-level design and requirements for a roll-out programme, with theinvolvement of all relevant stakeholders. The current plan is for a nationalroll-out of smart meters from 2015.

Significant progress was made in 2013 with the CER publishing its proposeddecision on the High Level Design of the Smart Metering solution in December2013. The national rollout strategy will be decided upon post the publication ofthe decision paper on the High Level Design in 2014.


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Key Task 3: Petroleum Safety Project


In April 2010 the CER’s safety role was expanded with the enactment of thePetroleum (Exploration and Extraction) Safety Act, 2010 to include the safetyregulation of petroleum undertakings engaging in certain petroleum activities.

Specifically the CER is required to establish and implement a risk-basedpetroleum safety framework (the Framework) which is based on a safety caseregime. To this end, the CER established the Petroleum Safety FrameworkImplementation Project which involves the CER:

• implementing the provisions of the Act in full; and,

• putting in place the people, processes and procedures to enable theeffective operation and enforcement of the Framework once implemented.

In 2011 the CER publicly consulted on its proposed high level design of thepetroleum Framework (the High Level Design), with the final High LevelDesign itself published in 2012. Following consultation on the detailed policies,

procedures and guidelines which underpin the Framework in 2012 and into2013, the CER expects the Framework to come into full effect in November2013.

During 2013, CER put in place the people, policies and procedures to giveeffect to the final design of the petroleum safety framework.

The following detailed design documents were published as part of the

Framework development in 2013:

• Designated Petroleum Activities Regulations (S.I. 89 of 2013);

• Petroleum Safety (Petroleum Incident) Regulations (S.I. 004 of 2014)

• ALARP Guidance;

• Safety Case Guidelines;

• Compliance Assurance System, comprising:

o Audit & Inspection;

o Facilities and Well Verification;

o Independent Safety Case Review; ando Safety Performance Reporting.

On December 18th 2013, the remaining provisions of the Petroleum(Exploration and Extraction) Safety Act, 2010 were enacted and theresponsibility for Petroleum Safety Regulation under the approved frameworkin Ireland was conferred on the CER. At this point, the CER had in place thepeople, processes and procedures to enable it to carry out its new safetyregulatory functions.


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Key Task 4: Water Project


Subject to forthcoming legislation, the CER will create an economic regulatoryframework for the public water and waste water system. This f ramework willrequire Irish Water to provide a high level of services to water customers at a

regulated price.

In 2013, the CER published two documents, The CER and Water Regulation inIreland, an information paper, to introduce stakeholders to the expected futurerole of the CER in the public water services sector, outlining the CER’s values,

and the benefits that independent regulation can bring to the sector. Thispaper included indicative timelines for project deliverables in 2014.

In parallel to the information paper, the CER published a consultation on theEconomic Regulatory Framework for the public Irish water services sector.This consultation covered the workstreams that CER proposed to undertake inestablishing the economic framework and the work items pertaining to eachof these of workstreams.

Key Task 5: Key Operational Items



The CER’s core tasks in the retail markets will continue to be the promotion ofcompetition, leading to the full deregulation of all gas and electricity marketsand the implementation of additional measures to protect and empowercustomers in the competitive market. The CER will continue to monitorthe retail markets to ensure that suppliers comply with all relevant marketrequirements and that consumers are benefitting from competition.

The CER will also continue to resolve issues that customers have with theirnetwork operator or supplier through its Energy Customers Team.

In 2013, CER publicly consulted on the Market Monitoring Framework tosupport its role in promoting competition in the gas and electricity retailmarkets. The framework has been developed to provide the CER with effectivesight of the market.

The CER continued its work to assist customers in seeking out the best dealsand it accredited a second price comparison website, Uswitch.ie.

The CER also audited domestic suppliers to ensure that they were meeting theminimum requirements, as set out in the Supplier Handbook.

The CER continued its work in ensuring that customers enjoy a high level ofprotection, with a particular emphasis on customers having trouble payingbills, through support for installation of Pay As You Go meters.


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(b) Energy networks


With regard to electricity networks, the CER will continue the implementationand monitoring of the current price control (PR3) for ESB Networks andEirGrid which runs until end 2015. In addition to this, 2013 will be animportant year for the development of Gate 3 renewable connections withconstraint and curtailment reports from EirGrid to be prepared and issued. TheCER will continue to oversee Gate 3 and other connection matters includingpolicy in relation to non GPA (non Group Processing Approach) applicants. Thefurther integration of renewable energy onto the electricity system will also bea priority as the CER works with the Northern Ireland Utility Regulator and theTSOs on the DS3 project (Delivering a secure, sustainable power system).

In natural gas, with the completion of Price Control 3 in 2012, the CER will,during 2013, continue to ensure that gas is safely and securely delivered to

customers and that charges are efficient and customer service levels aremaintained to the best international standards. A key focus in 2013 will be thecertification of the Independent Transmission Operator. Subject to the outcomeof existing Judicial Review proceedings, the redesign of the TransmissionTariffing arrangements is expected to be ongoing through 2013.

For energy networks, European work is also a key focus – please see part (d)of this key task.

CER continued the implementation and monitoring of the current price control(PR3) for ESB Networks and EirGrid which runs until end 2015. In 2013EirGrid prepared and issued constraint and curtailment reports for most Gate3 renewable connections. These followed the SEM Committee’s decision onthe Treatment of Curtailment in Tie-Break situations (SEM-13010) which setthe framework which allowed constraint modelling to be completed. The CERcontinued to oversee Gate 3 and other connection matters including policy inrelation to non GPA (non-Group Processing Approach) applicants. CER workedwith the Northern Ireland Utility Regulator and the TSOs on the DS3 project(Delivering a secure, sustainable power system). CER supported the SEMCommittee in publishing a consultation paper on the TSOs’ recommendationsand its decision on the technical definitions of the DS3 services.

In natural gas, following the completion of Price Control 3 in 2012, the CERcontinued its operational focus to ensure that gas was safely and securelydelivered to customers and that charges were efficient and customer servicelevels were maintained to the best international standards.

In July 2013 the CER decided to grant BGÉ preliminary certification asan ITO, subject to the completion of all outstanding ITO items identified inthe CER’s preliminary certification decision. The rationale for the delay infull Independent Transmission Operator (ITO) certification was due to theimpending sale of Bord Gáis Energy, which would result in BGE becomingFully Ownership Unbundled (FOU). Specifically, the CER was of the viewthat the imposition of a full ITO model, such as rebranding, would impose

unnecessary transaction costs on BGE in the likely event that BGE becameFOU by 2014.

In December 2013, the Irish Government confirmed that a preferred bidderwas selected for the purchase of Bord Gáis Energy, with the final sale tobe concluded in 2014. Consequently, in 2014, the CER will be workingtowards reviewing BGE’s FOU certification application, and certifying BGEin accordance with Directive 2009/73/EC (concerning common rules for theinternal market in natural gas) and Regulation (EC) 715/2009 (conditions foraccess to the natural gas transmission network).

In December 2013, the High Court delivered its verdict on the Judicial Review

of the CER decision “The regulatory treatment of the BGÉ Interconnectors andfuture transmission tariff regime”. The High Court upheld the CER decision;further to this the CER will in 2014 commence the process of reform of thetariffing arrangements in line with the 2012 decision.


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(c) On-shore safety


During 2013 the CER will continue implementing its existing downstreamsafety obligations in electricity and gas safety. This includes continuing tomonitor the downstream gas and electrical safety frameworks.

The work plan for 2013 will focus on continuing the development of thenecessary process and procedures needed to give effect to the CER’s newlegal enforcement powers. This will ensure that identified breaches of thegas safety framework by natural and LPG gas undertakings are rectified. TheCER will also continue to monitor and enforce provisions of the 1999 Act (asamended by, inter alia, the Energy (Miscellaneous Provisions) Act, 2006),through the operation of the regulatory regime for gas installers and electricalcontractors. Investigations of gas safety incidents will remain an on-goingpriority.

Audits and inspections were carried out on natural gas undertakings, includingBord Gáis Networks, shippers and suppliers.

Initial work was carried out which will allow Liquefied Petroleum Gas (LPG)undertakings to be regulated under the Gas Safety Framework during 2014.

Two type B, one type C and 16 ‘reportable under guidance’ incidents werereported to the CER under the Gas Safety Framework.

The performance of the gas and electrical Safety Supervisory Bodies weremonitored by the CER through quarterly reporting, audits and inspections.

An individual was prosecuted in October 2013 for carrying out Gas Works,while not being registered as a Registered Gas Installer.


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The CER will continue to work at a European level on the development ofrelevant Agency for Co-operaton of Energy Regulators (ACER) FrameworkGuidelines and associated Network Codes (including task 1 for the “targetmodel”), as well as on the implementation of Regulation 994 (Gas Security ofSupply) and the EU Regulation on Energy Market Integrity and Transparency(REMIT).

Work will be advanced also on the implementation of the European FrameworkGuidelines and Codes at the gas interconnection points at Moffat and theSouth North Pipeline. Specifically, UK, Ireland and Northern Ireland workprogrammes will be finalised in 2013 and congestion management procedureswill be implemented.

One additional area is our interaction with stakeholders and European partners

on the completion of the CER’s list of Projects of Common Interest (PCIs) forboth gas and electricity.

During 2013, the development of a number of Framework Guidelines andNetwork Codes were progressed. The Capacity Allocation and CongestionManagement (CACM) Network Code moved into comitology phase with anumber of other network codes awaiting comitology phase.

Progress was made on the programme for implementation of the EUGas Network Codes in 2013. Support was provided to DCENR for thecomitology process on Capacity Allocation Management (CAM), Balancingand Interoperability Codes. In addition, the CER played a significant role inthe Agency for the Co-operation of Energy Regulators (ACER) developmentof the framework guidelines for tariffs. The CER worked closely with theTransmission System Operators (TSOs) and adjacent National RegulationAuthorities (NRAs) on the implementation of the CAM code and a series

of trilateral meetings were held towards the end of the year. CongestionManagement Principles were put in place at Moffat and South North Pipelineby 1st October as required by EU deadline.

The CER had a significant role to play in 2013 in progressing PCI (EuropeanProjects of Common Interest) applications under the European InfrastructureRegulation. The European Commission published the Energy InfrastructureRegulation and the list of PCI projects was finalised in October 2013.There are 14 Irish Electricity PCIs, ranging from a proposed France Irelandinterconnector and pumped hydro projects in Mayo, to the North AtlanticGreen Zone Smart Grid Project being conducted by ESBN and EirGrid inconjunction with the Northern Ireland System Operators (SOs). In 2013 the

CER continued its PCI work by contributing to:

• Input to European Commission and ACER on the development of theenduring arrangements for selection of projects of common interest andcarrying out the tasks assigned to NRAs

• Development of methodology and the criteria that will be used to evaluateinvestments in electricity and gas transmission projects and the higherrisks associated by them. The CER contributed to the development ofa Cross Border Cost Allocation methodology, and Cost Benefit Analysismethodology developed by ENTSO-E and ENTSO-G; the Europeanorganisations for the electricity and gas network operators,

• Input of CER’s evaluations on regional gas and electricity projects.


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Looking Ahead

The CER looks forward to the operational and project

challenges of 2014. It is a year in which we will see the

introduction of domestic water charges, the full operation

of the Petroleum Safety Framework, the expected

deregulation of the domestic retail market for gas and the

ensuing focus on market monitoring, and the finalisationof a high level design for the new Integrated Single

Electricity Market (I-SEM), amongst other things.

Building on our achievements to date and looking forward

to new challenges, the CER will continue to endeavour to

provide a first-class regulatory service to all its customers

in a cost-effective manner.


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Ireland’s Energy Regulator

In 2013 the CER commenced a review of its Strategic

Plan and priorities for the period 2014-2018. That work

is now nearing completion and our proposals in this area

are reflected in this report for 2013.

The Commission for Energy Regulation (CER) is theindependent body in Ireland with a mission of ‘regulating

water, energy and safety in the public interest’. Our vision

is as follows:

The short and long run interests of the public are protected

by ensuring:

• energy is supplied safely;

• the lights stay on;

• the gas continues to flow;

• a reliable supply of clean water and efficient treatment

of wastewater;

• consumer prices for energy and water are fair and

reasonable; and

• regulation is to best international practice.

In fulfilling our mission and our statutory functions, it is

vital that the CER develops and adheres to key values for

the organisation so that all stakeholders, and particularly

the public, trust us and have faith that we will serve them

properly as an independent regulator. In regulating we

stress that:

• We are committed to public service – we will always

act in the public interest

• We act with integrity in everything we do

• We are professional in our dealings with stakeholders

• We are accessible to stakeholders – we listen to what

people have to say

• We are proportionate and objective – we take balanced

decisions

• We are transparent – we are open to scrutiny and are

committed to explaining our decisions

• We are accountable for our decisions and for the way

we spend our resources

• We value and develop our staff – they are our chief

resource

For detailed information on our work please see our

website at www.cer.ie

Duties & Functions

The Commission for Energy Regulation (CER) is Ireland’s

independent energy and water regulator. The Commission

was established in 1999. Since then its powers and

functions have expanded and it now has a wide range of

economic, customer protection and safety responsibilitiesin energy. The Commission has also commenced its new

role as the economic regulator of the Irish public water

and wastewater sector which took effect in early 2014.

The Commission is financed by means of a levy on

industry. An overview of the Commission’s current (as at

June 2014) key functions are as follows:

• Economic Regulation of Energy: Our aim is to protect

the interests of energy customers, maintain security

of supply, and to promote competition covering the

generation and supply of electricity and supply of

natural gas. As part of this role, the Commission jointly

regulates the all-island wholesale Single Electricity

Market (SEM) with its counterpart in Northern Ireland,

the Utility Regulator. The SEM is governed by a

decision-making body known as the SEM Committee,

consisting of the Commission, the Utility Regulator and

an independent member.

• Economic Regulation of Water: The Commission has

recently assumed the role of economic regulator forthe public water and wastewater sector, covering the

services provided by Irish Water. Our primary aim is to

Public Interest Statement


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protect the interests of customers of Irish Water. This

role will focus on water and wastewater charges and

customer protection.

• Customer Complaints (Energy & Water): The

Commission has an important related function in

customer protection by resolving complaints that

customers have with energy companies through itsCustomer Care team. This will expand to deal with Irish

Water customers, in line with legislation.

• Energy Safety Regulation: In energy safety, the core

focus of the Commission is to protect lives across

a range of areas in the energy sector. This includes

safety regulation of electrical contractors and gas

installers (covering both natural gas and Liquefied

Petroleum Gas (LPG). In addition, the CER is the safety

regulator of the downstream natural gas industry(covering storage, transportation and supply) and LPG

piped distribution systems. It is also safety regulator of

upstream petroleum safety extraction and exploration

activities; this includes oil and gas activity both onshore

and offshore.

The following is an overview of the key legislation

underpinning CER’s duties and functions:

• The CER was established under the provisions of the

Electricity Regulation Act, 1999, and has taken onsignificant additional responsibilities since then under

various pieces of legislation. Responsibility for the

regulation of the natural gas market was conferred

upon the CER under the Gas (Interim) Regulation Act,

2002.

• The Energy (Miscellaneous Provisions) Act 2006

added to the role and functions of the CER, including

providing for additional responsibilities in natural gas

and electrical safety.

• The Electricity Regulation Amendment (SEM) Act,

2007 outlined the CER’s functions in relation to the

Single Electricity Market (SEM) for the island of Ireland.

The SEM is governed through the SEM Committee

consisting of the CER, the Utility Regulator in Belfast

and an Independent Member.

• In 2010 the CER’s statutory safety responsibilitiesexpanded significantly with the enactment of the

Petroleum (Exploration and Extraction) Safety Act,

2010. Further legislation has seen the Registered

Gas Installer scheme expand to include Liquefied

Petroleum Gas (LPG) installers and piped LPG

distribution systems that supply domestic customers.

• The Water Services Act (WSA) was enacted in March

2013. The Act empowered CER to commence

preparation for the role of Economic Regulator forpublic water and waste water services as provided by

Irish Water to domestic and business customers..

• The Water Services (No.2) Act 2013 was enacted on

25th December 2013. With effect, from 1st January

2014, the Act provides for the transfer of Water

Service functions from Local Authorities to Irish Water

and CER assumed the role of economic regulator for

the sector soon thereafter.

CER Organisation 2013The CER is headed by up to three Commissioners at

any one time. In 2013 the Commissioners were Dermot

Nolan, Chairperson, Garret Blaney and Paul McGowan

(who was appointed Commissioner in March 2013).

The Commissioners were assisted in their duties by a

staff of about 80, including 4 directors. The chart below

summarises the organisational structure from last year.

There were a number of organisational changes during

2013 including the appointment of Sheenagh Rooney as

Director of Energy Safety in May 2013, replacing PaulMcGowan who became Commissioner.


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Since last year Garrett Blaney has been appointed as

Chairperson (in February 2014) following the departure

of Dermot Nolan. Dermot left to become the head of

Ofgem, the British energy regulatory body, and his former

colleagues in the CER would like to thank him sincerely

for his significant leadership and contribution to the workof the CER during his tenure in the CER. There were also

a number of other organisational changes since last year

including the appointment of Laura Brien in February

2014 as Director of Energy Markets, replacing Eugene

Coughlan who retired at the end of 2013 - his former

colleagues in the CER would like to thank him sincerely

for his significant leadership & contribution to the work of

the CER during his many years’ service. These and otherorganisational changes in 2014 will be reflected in next

year’s annual report.

CER Organisation 2013

Dermot Nolan

Chairperson

Garrett Blaney

Commissioner

Paul McGowan

Commissioner

Cathy Mannion

Director of EnergyRetail & Water

Eugene Coughlan

Director of ElectricityMarkets

Eugene Coughlan

Director of Operations

Denis Cagney

Director of GasRenewables and Legal

Sheenagh Rooney

Director of Safety

Transmission

Distribution

Independent SystemOperator

Smart Metering

EW Interconnector

Electricity and GasRetail (Water)

Energy Customers TeamCEER / ACER

Market Modelling

Trading & SettlementCode

Joint Reg Arrangement

Electricity Generation

Security of SupplyGas & Electricity

Emergency ProceduresCEER / ACER

Human Resources

Finance

Business InformationCentre

I.T.

Networks - Technical

Networks - Commercial

Independent SystemOperator

All Island GasRenewables

CER Legal

CEER / ACER

Safety Supervision

Gas Safety Framework

Petroleum SafetyFramework

EUOAG / NSOAF


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Information Provision

The CER is committed to providing a high quality, user-

friendly and easily accessible service to our customers in

all of our areas of responsibility, as set out in its customer

charter which is available on www.cer.ie. An upgrade of

the CER website was initiated in 2013 and completed in

early 2014 with the launch of the enhanced website.

In making its decisions on policy matters, the CER regularly

carries out formal consultations with stakeholders over its

website www.cer.ie and the associated website for all-

island energy regulatory issues, at www.allislandproject.

org. Responses to these consultations are considered

in the formulation of decision papers. The CER also

regularly communicates and meets with industry and

customer stakeholders.

This process of formal consultation was in evidence during

2013 when the CER made public policy consultations

and decisions to achieve its mission (shown above) in

the public interest. This is detailed in the “5 Key Tasks” in

this Annual Report which focuses on the most important

strategic tasks that the CER set for itself for 2013 in

order to achieve its mission. For example:

• Key Task 1 (Wholesale Market Integration)

contributes to the lights staying on and the electricity

prices being fair and reasonable for customers.

• Key Task 2 (Smart Metering Programme)

contributes to electricity/gas prices being fair and

reasonable for customers and to the environment

being protected.

• Key Task 3 (Petroleum Safety Project) contributes

to energy being supplied safely.

• Key Task 4 (Water Project) contributes to a

reliable supply of clean water and efficient treatment

of wastewater and also contributes to ensuring that

customer prices for water are fair and reasonable.

• Key Task 5a (Retail monitoring and customer

protection) contributes to electricity/gas prices being

fair and reasonable for customers.

• Key Task 5b (Energy networks) contributes to

the gas continuing to flow, the lights staying on and

customers paying fair and reasonable prices for their

electricity/gas.

• Key Task 5c (On-shore safety) contributes to

energy being supplied safely.

• Key Task 5d (European energy matters)

contributes to achieving all elements of the mission

statement.

The CER also delivers energy information to the general

public and provides a dispute resolution service for

electricity and gas customers, through the CER websitesat www.cer.ie and www.energycustomers.ie and through

face-to-face meetings and through published documents.


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The CER, as a public sector agency, is fully committed to

playing its part in the achievement of energy efficiency

(reduction) targets – currently 33% - across the public

sector by 2020. Over the course of 2011 the CER

appointed its Energy Manager and established its Energy

Management Team. The team developed a CER Energy

Policy which was adopted by the CER in February 2011and has since been updated in April 2014.

The CER’s objective for 2013 in this area was: exemplary

performance in energy management and energy efficiency

in the public sector. In pursuance of this objective, the

CER put in place a number of initiatives, set out below.

The CER is participating in SEAI’s Public Sector

Programme “The Public Sector Energy Partnership”.

The CER is an active member of Sustainable Energy

Ireland (SEAI’s) Energy Consumption in the Public SectorProgramme.

With regards to awareness, the CER ran an Energy

Efficiency Competition between the different floors in the

office with weekly updates to encourage energy efficiency.

It also promoted awareness through the implementation

of signage and the installation of energy monitors.

Additional measures, not originally part of the 2013

programme, included a suggestion box for energy

efficiency ideas.

The results from the SEAI monitoring and reporting

system demonstrate the CER has made excellent

progress in terms of achieving our energy efficiency

target; we achieved 1st place in 2013. Our challenge now

is to maintain and improve upon this performance.

Energy Usage

The CER’s office accounts for 100% of its energy

usage. During 2013, a total of 181.6 MWh of energy wasconsumed, consisting solely of electricity. This represents

a small increase of 7.45 MWh on 2012.

The CER’s key performance metric is EnPI (please refer

to diagram above). On this measure the CER continued

to show improved efficiency in 2013.

Energy Efficiency – 2013


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We wish to state that the CER continues and will continue

to adopt best practice in the area of corporate governance

in carrying out its functions and duties. In this regard, the

CER is required to comply with the “Code of Practice for

the Governance of State Bodies” which was published by

the Department of Finance in October 2001 and updated

in May 2009. The CER is committed to complying withthe revised Code.

The CER is in compliance with the revised Code issued in

May 2009 save for a few generic elements which are not

relevant to an independent regulatory authority. The CER

has agreed with the Department of Communications,

Energy and Natural Resources on the extent to which

requirements are adapted to the CER.

Procedures that the CER currently has in place in this

regard include:

• A code of conduct for Commissioners and employees;

• Ensuring compliance with Irish and EU tendering and

procurement requirements;

• CER Corporate Procurement Plan;

• Procedures for the disposal of assets;

• Compliance with Government Policy on the

remuneration of Commissioners and members of staff;

• Provision of details of Members of the Commission’s

emoluments and details of the Chairperson’s

remuneration package within Financial Statements

published with the Annual Report;

• Submission of interim unaudited accounts to the

Department of Communications, Energy and Natural

Resources every six months;

• Appointment of external expertise to perform the

internal audit function. The report of the CER Audit

Committee is included in the Financial Statementssection of this Annual Report;

• Submission, to the Department of Communications,

Energy and Natural Resources, of a statement

confirming compliance with taxation laws and

confirming that all tax liabilities are paid on or before

the due date;

• Submission of “Report on Compliance with the Code

of Practice for the Governance of State Bodies” tothe Minister for Communications, Energy and Natural

Resources with the Annual Report and Financial

Statements;

• Completion of Strategic Plan - a new Strategic Plan

covering the period 2014 to 2018 was developed

in 2014. It is due to be finalised in mid-2014 after a

period of consultation.

• Development of an annual Work Programme to be

submitted to the Minister by 30 November each year.The Work Programme for 2013 was published on the

CER’s website on 8th March 2013;

• Implementation of a Risk Management Policy, which is

monitored by the CER;

• Establishment of a Risk Committee;

• Implementation of a policy on foreign travel; and

• Adoption of a policy for confidential disclosures

regarding possible irregularities in financial reporting.

The Commissioners met formally on 50 occasions in 2013,

and the number of Special meetings was 10. Chairman

Dermot Nolan attended 45 Commission meetings and 9

Special meetings, Commissioner Garrett Blaney attended

39 Commission meetings and 6 Special meetings and

Commissioner Paul McGowan attended 36 Commission

meetings and 10 Special meetings.

Statement of Best Practice


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Ethics in Public Office

We hereby confirm that we are not directly engaged in,

concerned in or interested in any electricity generating

business or in any electricity or natural gas transmission,

distribution or supply business or in any energy business,

whether as participator, investor, consultant or otherwise.

In addition, in respect of the period covered by this report,there are no registerable interests, as specified in the

Ethics in Public Office Acts 1995 and 2001 and the

Gas (Interim) (Regulation) Act, 2002, of our own, or, to

our actual knowledge, of a spouse or child, which could

materially influence us in, or in relation to, the performance

of the functions of our position.

Garrett Blaney

Chairperson

Paul McGowan

Commissioner


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Report Structure

This Annual Report provides an overview of the CER’s

key work items and achievements in 2013. While the

Annual Report is designed to provide an update on the

CER’s progress in achieving its strategic goals during

the year, many of the CER’s work items are ongoing and

will continue into and in some cases beyond 2014. Suchwork is generally mentioned here for completeness.

As part of the CER’s business planning process a large

number of work items were identified for commencement,

continuation or delivery during 2013. Of these, 5 were

selected as the CER’s “5 Key Tasks for 2013”. These key

tasks are distributed across the CER’s responsibilities

and were viewed as being the CER’s most important

strategic tasks for the year 2013 in order to achieve its

mission. While the main focus of the CER’s work during2013 was on these “5 Key Tasks”, each of the work items

contributed to the CER’s overall strategic objectives.

The following section of this Annual Report focus primarily

on the work carried out by the CER in meeting these 5

key strategic tasks, and related matters, in 2013. They

are discussed in the same order as listed below.

The Report then informs on the outcomes against the “Key

Performance Indicators” (KPIs) which were agreed with

the Department of Communications, Energy and NaturalResources as part of Department of the Taoiseach’s

“Better Regulation” drive.

Finally, the audited Financial Statements for the year

ended 31st December 2013 are provided at the end of

this Annual Report.

CER’s Five Key Tasks

In its work programme for 2013, published on the

CER’s website (8th March 2013), the CER identified

the following 5 key strategic tasks for commencement,

progression, or delivery during 2013, all of which would

help the CER to fulfil its mission statement. These tasks

are as follows, and are discussed in detail in the followingsections of the Report.

1. Key Task 1 – Wholesale Market Integration

2. Key Task 2 – Smart Metering Programme

3. Key Task 3 – Petroleum Safety Project

4. Key Task 4 – Water Project

5. Key Task 5 – Key Operational Items:


(b) Energy networks

(c) On-shore safety


Please see the CER’s 2013 Work Programme for more

detail behind each of these tasks.

Background to the Annual Report


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The following items were identified as key tasks in the all-

island Single Electricity Market (SEM) for 2013:

• Publish a decision paper outlining the SEM Committee

recommendations to the Departments, DCENR and

DETI, on the next steps in the process of implementing

the European Target Model in Ireland/Northern Ireland;

• Procure international market design experts to advise

the Regulatory Authorities (RAs - CER and NAIUR)

on the High Level market design changes required to

implement the European Target Model in SEM;

• Engage in an inclusive consultation process with all

stakeholders on the changes to the High Level design

and endeavour to publish a decision on same by end

2013;

• Progress annual work streams such as DirectedContracts and generator charges/losses;

• Complete Capacity Payments Review; and,

• Implement regulatory changes decided on from the

market power and liquidity review.

The end of this section of the report also covers

wholesale/generation issues relevant to Ireland only, i.e.

security of supply, generation licensing and the Public

Service Obligation (PSO).

SEM Background

The SEM is the wholesale electricity market for the island

of Ireland which was opened on 1st November 2007.

Comprising two separate jurisdictional electricity markets,

the SEM is one of the first markets of its kind in Europe.

It is designed to provide for the least-cost source of

electricity generation to meet customer demand at any

one time across the island, while also maximising long-

term sustainability and reliability.

The SEM includes a centralised all-island gross

mandatory pool (or spot) market. In this pool, electricity

is bought and sold through a market clearing mechanism,

whereby generators bid in their marginal cost and receive

the System Marginal Price (SMP) for each trading period

for their scheduled dispatch quantities, with the cheapest

possible generator run to meet demand across the island.

Suppliers (to electricity customers) that purchase energy

from the pool, pay the SMP for each trading period alongwith capacity costs and system charges. This is illustrated

below, with the detailed rules set out in the Trading and

Settlement Code.

Key Task 1

Wholesale Market Integration

GENERATORS

Wholesale

Market

Generatorssubmit bids Generatorsreceive SMP

Retail

Market

POOL

SUPPLIERS

CUSTOMERS

Suppliers take

power at SMP

Suppliers

pay SMP

Customers

consume power

Customers

pay supplier


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The SEM is regulated jointly by the CER and its counterpart

in Belfast, the Northern Ireland Authority for Utility

Regulation (Utility Regulator), and together referred to as

the Regulatory Authorities or RAs. The decision-making

body which governs the market is the SEM Committee,

consisting of the CER, the Utility Regulator as well as an

Independent Member (who also has a deputy), with eachentity having one vote.

During 2013 the Regulatory Authorities continued to

monitor and oversee the SEM and the suite of regulatory

rules governing it, actively supervising the SEM and

representing the interests of all-island consumers. Key

SEM updates for 2013 are shown below.

European Market Integration

At the February 2011 European Council meeting,Member States committed to deliver a fully-functioning,

interconnected and integrated internal energy market

by 2014. The Communication on the Internal Energy

Market published by the European Commission on

15th November 2012 highlighted the benefits of a truly

integrated European market and identified the need for

further action in a number of areas including consumer

protection, enforcing the existing rules and investing in

the modernisation of energy infrastructure.

In this context, a key focus for the CER during 2013

was to develop plans to integrate the SEM into this pan-

European electricity market to promote cross-border

competition and deliver significant benefits to consumers.

The EU “Target Model” for electricity evolved out of

the EU’s Third Energy Package in 2009, which is a

set of legislative measures that aim to create a single

competitive European energy market. The Agency for the

Cooperation of Energy Regulators (ACER), established

under the third Package of EU energy legislation, hasidentified a number of key elements to the design of

the Target Model to facilitate market integration. These

include methods for calculating interconnector capacity

available across borders and determining appropriate

market zones. These also include methodologies for

allocating cross border capacity in different timeframes

namely forwards, day ahead and intraday.

SEM Market Integration Project (I-SEM)Due to its centralised structure and gross mandatory pool

design, it seems likely that the SEM will require significant

modifications in order to implement the Target Model. In

recognition of this, the SEM market was granted a two-

year derogation, an additional two years to implement the

Target Model, i.e. from 2014 to 2016.

In January 2012, the SEM Committee published a

Consultation Paper seeking views on options for the

implementation of the Target Model in Ireland andNorthern Ireland in a manner that is consistent with

national and EU policy objectives. In addition, the RAs

hosted a number of industry workshops and engaged

with a wide range of stakeholders including Government

Departments, System Operators, Ofgem and ACER to

discuss the issues involved in integrating SEM into the

European market.

The SEM Committee published a proposed decision

paper on the next steps in the process of market

integration in November 2012 and a final decision paper

in February 2013. The main conclusions of this decision

paper include:

• The establishment of a set of high-level principles

which will govern the design and implementation of the

new market;

• The establishment of project governance arrangements

with strengthened stakeholder engagement to ensure

that consumer groups and market participants are

adequately involved in the project.

• A commitment to maintaining the current structure

of the SEM until 2016 and to carrying out an impact


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assessment on the new market design in line with best

practice; and,

• A working assumption that the new market will

continue to be based on transparent, centralised

trading arrangements with least-cost dispatch.

• The total remuneration from energy payments, capacitypayments and ancillary services will be sufficient to

ensure security of supply.

Following the publication of the Next Steps decision paper

the Regulatory Authorities (RAs) initiated the project

to develop a new SEM High Level Design. The RAs

procured consultancy support to advise the RAs on this

project in September 2013. As part of the development

of the Consultation Paper, the RAs established a High

Level Design (HLD) Review Group consisting of experts

from across the energy industry and consumer groups.

The HLD Review Group met on four occasions from

October 2013 to January 2014 and discussed various

elements of the European Target Model and how SEM

could be changed to meet its requirements.

In early February 2014 the SEM Committee published a

consultation paper on the ‘High Level Design for Ireland

and Northern Ireland from 2016’. This consultation

paper contains four distinct options for energy trading

arrangements, including a qualitative assessment of eachoption against the High Level Design criteria. These four

options allow full consideration of the choices facing

the SEM in achieving compliance with the European

Target Model. The consultation paper also contained

a description of possible approaches to the explicit

remuneration of capacity that can be used to support any

of the four proposed options for the high-level energy

trading arrangements. As per the Consultation Paper,

the SEM Committee has named the new market to be in

place from 2016 the Integrated SEM or I-SEM for short.

The SEM Committee l published a Proposed Decision on

the I-SEM High Level Design in June 2014. This will be

followed by a final Decision on the High Level Design in

August 2014, along with a full impact assessment. The

I-SEM Project will then move to detailed design phase

with go live of the new market planned for end 2016.

Framework Guidelines and Network

CodesThe detailed rules of the Target Model are developed by

the Agency for Cooperation of Energy Regulators (ACER)

and the European Network of Transmission System

Operators for Electricity (ENTSOE) and are finalised by

the European Commission.

ACER initiates the process by developing Framework

Guidelines. Based on these Framework Guidelines,

ENTSOE develops detailed Network Codes. This is all

done in consultation with interested stakeholders. Thefinal Network Codes will be made into binding Regulations

following a comitology process. More information on this

process and the individual Framework Guidelines and

Network Codes is available on the ACER and ENTSOE

websites.

There are nine proposed Network Codes on:

• Capacity Allocation and Congestion Management

• Requirements for Generators

• Electricity Balancing

• Forward Capacity Allocation

• Demand Connection

• Operational Security

• Operational Planning and Scheduling

• Load Frequency Control and Reserves

• High Voltage Direct Current

ACER finalised the last Framework Guideline in 2012

and therefore the focus during 2013 was on providing

Reasoned Opinions on ENTSOE Network Codes. In


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addition to this, a number of Network Codes have entered

the informal stages of the comitology process.

In March 2013 ACER issued Recommendations to the

European Commission to adopt the Network Code on

Capacity Allocation and Congestion Management, the

Network Code on Requirements for Generators, and the

Demand Connection Code. The Capacity Allocation and

Congestion Management Network Code entered the

comitology process in December 2013.

In September 2013 the final Network Code on Operational

Security and the final Network Code on Operational

Planning and Scheduling were resubmitted to ACER by

ENTSO-E, following amendments being made in light of

ACER’s opinions and stakeholder comments.

In September 2013 ACER issued a positive reasonedopinion and recommendation to adopt the Network Code

on Load Frequency Control and Reserves.

In October 2013 ENTSO-E delivered the Network Code

on Forward Capacity Allocation to ACER. In December

2013 ACER published its Opinion on this Code, outlining

a number of issues on which it considers adjustments

are required. The mains issues raised by ACER related

to firmness of cross border capacity and timelines

for implementation. ENTSOE is currently reviewing

ACER and other stakeholder comments with a view toresubmitting the code in 2014.

In December 2013, ENTSO-E delivered the Network

Code on Electricity Balancing to ACER. ACER has a

period of three months to provide a Reasoned Opinion.

EC Consideration of Generation

Adequacy in the EU

In late 2012 the European Commission (DG Energy)

published a Consultation Paper on generation adequacyin the EU in the context of their communication on the

Internal Energy Market.

In particular it had become apparent that there are plans

in some Member States to take steps to secure new

generation capacity to ensure security of supply. One

key message of that Communication is the importance

of allowing the market to work and ensuring that any

interventions are well designed and effective. The

consultation paper put forward for consideration potential

criteria on assessing capacity remuneration mechanisms

and other related interventions.

The EC subsequently published a Communication in

November 2013 entitled “Delivering the internal electricity

market and making the most of public intervention”. In

the communication, the EC assessed the main features

of public interventions to correct market failures and

considers how they can be designed or respectivelyadapted in order to increase their effectiveness. A key

message in the EC document was that Well-designed,

targeted and proportionate public intervention allows

the competent public authorities to achieve public policy

objectives without distorting markets beyond what is

necessary.

Also in later 2013, the EC (DG Competition) published

a Consultation Paper entitled “Draft Guidelines on

environmental and Energy State aid for 2014-2020”in late 2013. The paper was open for consultation until

14 February 2014. The draft guidelines consultation

sought to set out the conditions under which state aid

measures may be declared compatible with the internal

market. The EC are due to publish the final Guidelines on

environmental and energy state aid in April 2014.

France-UK-Ireland (FUI)

In order to enable an efficient transition to the single

European market, a number of regional initiatives werelaunched in 2006. These initiatives bring together

Regulators, TSOs, the European Commission, Member


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State Governments, industry and stakeholders to develop

and implement common policies for the trading of

electricity across borders in each region. Ireland is part of

the France-UK-Ireland (FUI) region.

The SEM Committee continued to progress work

related to increasing electricity market integration with

neighbouring jurisdictions in the FUI region throughout

2013. Key areas of cooperation include:

• Liaising between Regulators on progress with

implementation of the European Target Model and

ensuring coordination between developments in

energy and capacity market designs.

• Progress by TSOs in the region on developing more

robust countertrading and balancing arrangements in

region

• Approval with access rules for East West and Moyle

interconnectors including rules on curtailment and

auctioning of capacity

Treatment of Curtailment in Tie-Break

situations in the SEM

On 1 March 2013, the SEM Committee published its final

decision on the Treatment of Curtailment in Tie-break

situations (SEM-13-010). This important decision was

the culmination of a number of years work in developing

the policy framework to reflect the requirement for priority

dispatch for renewable generators in the SEM. Priority

dispatch for renewable generators is a requirement under

the 2008 Renewables Directive. The SEM Committee’s

decision on curtailment followed decisions made by the

Committee in SEM-11-062 and SEM-11-105 which build

the operational rule-set which the TSOs should operate

under when applying priority dispatch (and other matters)

in the SEM. This decision on curtailment provided that

the TSOs should curtail wind generators on a pro-rata

basis (i.e. turn wind generators down by proportionately

the same level) when a curtailment event occurs. The

paper outlined the basis for a curtailment event and

how it can be distinguished from other events on the

system which require the TSO to turn down generation.

The decision paper also outlined the SEM Committee’s

intention to protect consumers from the risk of rising

levels of curtailment by ceasing curtailment payments

to generators from the end of 2017. Further the paperalso discussed the importance of the DS3 programme

in reducing volumes of wind curtailment, which represent

and economic loss to generators and consumers.

Market Modelling Group

During 2013 the RAs’ Market Modelling Group (MMG),

based in the CER, continued to develop and monitor

various Contracts for Differences (CfDs) for participants

in the SEM. In particular the MMG set the price, quantity

and supplier eligibility of Directed Contracts (DCs), setthe reserve price for public Service (PSO)-related CfDs,

and monitored the volume and price of Non-Directed

Contracts (NDCs).

The MMG also modelled SEM outcomes for the RAs, to

feed into policy considerations.

DCs

As part of the SEM Market Power Mitigation Strategy

the MMG implements a suite of DCs on behalf of theSEM Committee. DCs are designed to significantly

reduce the incentive on the incumbent generators (ESB

Power Generation and NIE Energy Power Procurement

Business) to submit bids in the SEM above competitive

levels or withhold capacity in order to influence SEM spot

prices or future contract prices.

The quantities of DCs imposed on the incumbent

generators are set to achieve a desired concentration

level in the SEM which is measured by the Herfindahl-Hirschman Index (HHI). A HHI threshold of 1,150

was chosen by the RAs. At this level, only ESB Power

Generation (ESB PG) was required to sell DCs in 2013.


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The RAs required ESB PG to offer three types of DCs,

namely baseload, mid-merit and peak, in order to reduce

market concentration in each segment for each quarter.

Following public consultation, since Summer 2012 DCs

have been offered quarterly for a period up to five quarters

ahead, on a rolling basis. The number of DCs offered by

ESB to eligible suppliers from Q1 2013 to Q4 2013, as

modelled by the MMG, are shown in the table below.

ESB Baseload

MW

Mid Merit

MW

Peak MW

2013 Q1 643 - -

2013 Q2 788 19 -

2013 Q3 795 153 -

2013 Q4 868 142 51

Pricing of DCs

The price of DCs were determined each day during the

subscription periods using forward fuel and carbon prices

and regression formulae determined by the RAs through

econometric analysis. These formulae were designed to

mimic the results of the validated SEM PLEXOS model.

The price of DCs are published by the RAs on the All

Island Project website after each quarterly auction.

PSO-Related Contracts

In addition to the above contracts, ESB PG also offered

contracts associated with the Irish Public Service

Obligation (PSO). Using the validated PLEXOS model

and up-to-date forward fuel prices, the RAs determine the

reserve prices of the PSO related contracts, i.e. the price

at which they are offered to the market and auctioned off

to suppliers.

During 2013 the PSO-Related CfDs were offered on

a quarterly basis, with auctions occurring one monthahead of the quarter in question. The contracts were

being offered at monthly granularity and the types of

contracts offered include: baseload, mid-merit 1 and mid-

merit 2, thus providing a wide range of choice for market

participants.

Non-Directed Contracts

While the RAs’ legal remit on behalf of the SEM

Committee largely extends to DCs, licensed generatorscan also offer NDCs to the market. The RAs do not set

the price or quantity of NDCs. They do however take an

active role in the monitoring and development of the NDC

market in order to assist contract liquidity.

ESB Licence Change

In 2012 the SEM Committee issued, following a previous

public consultation, a decision on market power and

liquidity, which included a decision to allow the horizontal

integration of ESB generation units given the low marketpower risks involved. During the first half of 2013 ESB’s

Generation licence was amended to allow for horizontal

generation integration. This followed a public consultation

on the matter during which no objections to the proposed

licence change were received by the CER.

Irish PSO Levy 2013

The Public Service Obligation (PSO) levy is a subsidy

charged to electricity customers in Ireland. It is designed

by the Irish Government and consists of various subsidyschemes to support its national policy objectives related

to renewable energy, indigenous fuels (peat) and security

of energy supply. The proceeds of the levy are used to

contribute to the additional relevant costs incurred by

PSO-supported electricity generators which are not

recovered in the electricity market.

The CER calculates the PSO levy annually in accordance

with Government policy. Following consultation, the CER’s

decision paper on the PSO levy for the period 1st October2013 to 30th September 2014 was published on 31st

July 2013. The total levy set for this period amounted to

circa €210.9 million.


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Background

Smart meters are the next generation of meters, which

can replace existing electro-mechanical and diaphragm

meters. They offer a range of benefits for both the individual

electricity and gas consumer and for the electricity andgas systems in general. The implementation of a smart

metering system encompasses more than just metering.

It is essentially a hybrid technology consisting of three

high level layers; physical meters and associated devices,

communications layer covering data transport and

communications network management, and IT systems

which manage the data, applications, and services.

In particular, smart meters can provide customers with

more real-time energy consumption recording and

information services, with the following benefits:

• Better Customer Information and Choice: Smart

meters can record customers’ use of energy over short

intervals, for example every 30 minutes. Suppliers can

use this to provide customers with detailed information

regarding their actual electricity and gas consumption

and costs, through Smart Bills. In addition, an In-

Home Display screen can be used with smart meters,

providing customers with more real-time information

on their energy consumption. All of this informationwill empower customers to reduce their energy

consumption and manage their bills better.

• Lower Energy Bills: By recording electricity use over

short intervals, smart meters will allow suppliers to

charge varying prices to electricity customers, in what

is known as Time-of-Use Pricing. This reflects the fact

that electricity costs more at peak demand times, i.e.

from 5pm to 7pm on a weekday, when more power

stations are needed, and less at off-peak times. Byhaving lower electricity prices at off-peak times, smart

meters will encourage customers to move electricity

consumption to cheaper off-peak times, thereby

reducing their electricity bills.

• Greater Energy Efficiency and Reduced Costs: By

facilitating a reduction in energy usage, smart meters

will help improve energy efficiency and lower Ireland’s

CO2 emissions, which is good for the environment.

Smart meters will also allow the network operator to

be more efficient because it will not be necessary to

visit customers’ premises to read the meter, resulting in

cost savings which should be passed on to customers.

The CER, working closely with the Department of

Communications, Energy and Natural Resources

(DCENR), established the Smart Metering Programme.

The programme was structured in different phases

(see below). Phase 1 commenced in late 2007 with

the objective of setting up and running smart metering

trials and assessing their costs and benefits, in order toinform decisions relating to the full rollout of an optimally

designed universal National Smart Metering Programme.

The key deliverables of Phase 1, namely the comprehensive

electricity and gas smart metering trials findings reports

and cost-benefit analyses reports were published by the

CER during 2011/12. The rollout of smart metering

represents a major national infrastructure programme,

potentially requiring an investment of up to €1 billion. The

cost-benefit analyses show that the long-term benefitsshould clearly exceed these investment costs by around

€229 million net present value over a period of 20 years,

and that there are likely to be further non-quantifiable

Key Task 2

Smart Metering Programme


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benefits in terms of informed consumers, technological

innovation, and synergies with other areas.

Taking all this together, the case for proceeding with the

full-scale rollout seems very clear, and this is strengthened

further when relevant EU legislative requirements are

considered.Following the 2012 decision paper the CER has worked

with key stakeholders to formally mobilise and initiate

Phase 2 (High Level Requirements Definition) of the

National Smart Metering Programme.

In 2013, to facilitate the detailed requirements gathering

and definition required in Phase 2, the CER identified the

following work streams, which are ongoing and include

representation from Industry stakeholders:

• Time of Use Tariffs work stream – seeks to define the

mandate;

• Consumer Web Interface, Smart Billing and (Mandated)

In Home Display (Consumer Web Interface, Smart

Bill and In Home Display) – seeks to define the

requirements required to affect consumer consumption

behaviour and the optimal communication channel to

deliver these requirements;

• PAYG (Pay As You Go) – seeks to define the

requirements and optimal model for delivering thesmart PAYG consumer product;

• Retail Market Processes, is Networks Led – seeks

to define the core smart services to be delivered by

the networks organisations (i.e. ESB Networks and

Bord Gáis Networks) plus provide a high level impact

analysis on the Retail Market processes;

• Consumer Engagement – seeks to identify and

develop consumer interaction methods to enable the

realisation of the benefits of smart meters; and,

• Data Protection – seeks to ensure data protection

considerations are addressed in the design of the

integrated smart metering solution.

During 2013 the CER consulted on the High Level

Design of the Smart Metering solution. Consultation was

launched in Summer and Autumn 2013, with a Proposed

Decision published shortly before Christmas 2013.

PHASE 1

Trials & CBAs

Completed 2008-11

PHASE 2

Requirements Definition

& Procurement 2012-16

PHASE 3

Build & Test

PHASE 4

Deployment

Figure 1: Program Timelines


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Plan for 2014

The High Level Design requirements definition part

of phase 2 is expected to be completed in 2014 with

the publication of the final decision on the high level

requirements on the smart metering solution. Following this

ESBN and BGN will commence a range of procurement

activities to procure the relevant components of the smartmetering solution for which they are responsible. The

Network companies will also lead the detailed design of

the Market Systems changes required to support smart

metering. It is expected that the industry stakeholders will

actively participate in this process.

A range of activities will take place across various other

work streams (e.g., Consumer Engagement, Transition,

more detail on the Time of Use tariffs) and this detail

will allow suppliers to plan their own procurement andbuild activities. Pending the successful completion of

the design phase, CER intends to publish an information

paper detailing transition and rollout activities.


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This key task involved completion of the following

objectives by November 2013:

• Implementing the provisions of the Petroleum

(Exploration and Extraction) Safety Act, 2010 in full;

and

• Putting in place the people, processes and proceduresto enable the effective operation of a safety framework,

including its enforcement.

Background

The Petroleum (Exploration and Extraction) Safety Act,

2010 (the “2010 Act”) passed on 3rd April 2010 confers

upon the CER the role of safety regulator for designated

upstream petroleum activities. In essence this means that

specific exploration and extraction activities carried out

by petroleum undertakings in Ireland are subject to safetyregulation by the CER.

The key benefits that will be realised by the Petroleum

Safety Framework are:

1. The State has a risk-based system for regulating

designated petroleum activities with respect to

safety that is in line with best international practice;

2. It will engender confidence and assurance amongst

the general public and the industry that the safetyregulation of designated petroleum activities protects

the public and is in line with the public interest; and,

3. It will bring greater clarity and transparency to the

regulation of petroleum activities with respect to

safety in Ireland.

The 2010 Act required the CER to establish and

implement a risk-based safety framework. The resultant

Petroleum Safety Framework (the ‘Framework’)

comprises regulations and written regulatory documents,

which taken together describe the system that is used to

regulate, petroleum undertakings with respect to safety

while carrying out designated petroleum activities.

The Framework sets out the scope of the petroleum

activities and associated infrastructure that are

regulated by the CER. Together with the Act, it requires

petroleum undertakings to obtain permission from the

CER to undertake ‘designated petroleum activities’ by

submission and approval of a safety case that, amongst

other things, describes how risks have been reduced

to a level that is as low as is reasonably practicable

(ALARP). “Designated petroleum activities”, are defined

in regulation and include activities such as onshore and

offshore exploration (drilling) and extraction (production),

and decommissioning activities.

Carrying out a designated petroleum activity without a

safety permit from the CER will be a criminal offence thatcould result in a fine of up to €3 million and/or a term of

imprisonment of up to 3 years.

The Framework covers existing and future petroleum

developments in Ireland. The map below shows the

extent of the area in and around Ireland where petroleum

exploration and extraction can be licensed. Where

designated petroleum activities occur within this area they

are subject to CER petroleum safety regulation under the

Framework.

Key Task 3

Petroleum Safety Project


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The safety regulatory functions conferred on the CER

relate to ‘upstream’ activities, i.e. those onshore and

offshore activities involved in the exploration or extraction

of hydrocarbons and subsequent processing. The CER

also have a safety regulatory function with regard to

the downstream gas network, under the Gas Safety

Framework. The figure below illustrates where upstream

and downstream activities and infrastructure are divided:

the red pipes illustrate upstream infrastructure and

activities, while the yellow depict downstream.

The Framework is funded by way of a levy on the petroleum

industry. It became fully operational on December 18th

2013.

Framework Development

To enable the CER to carry out its new petroleum safety

regulatory functions, the Petroleum Safety Framework

Implementation Project was set up in 2010. The purpose

of this project was to ensure the CER had the people,processes and procedures in place to discharge its

petroleum safety functions under the 2010 Act.

In June 2012 the CER first consulted on the High Level

Design of the Petroleum Safety Framework . This paper

set out the CER approach to the Framework development

and informed the basis for the detailed and technical

regulatory documents that would follow. These included

the following documents which were completed as part

of the 2013 work plan:

• Designated Petroleum Activities Regulations (S.I. 89

of 2013) published February 2013. This document setin regulation the petroleum activities which require a

safety permit from the CER prior to commencement;

• Safety Permit Application Guidelines published

November 2013. These application guidelines were

published to assist petroleum undertakings in submitting

their application for a safety permit to the CER;

• Safety Case Guidelines published November 2013.

These guidelines set out the requirements for the

content of safety case to be submitted to the CER;

• ALARP Guidance published November 2013. This

paper provides detailed guidance to petroleum

Example of petroleum infrastructure and activities indicating upstream and downstream pipelines


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undertakings on the CER’s requirements concerning

the processes that must be used to determine whether

a risk is ALARP;

• Petroleum Safety (Petroleum Incident) Regulations (S.I.

4 of 2014) published January 2014. These regulations

set out petroleum incidents that must be reported to

the CER;

• Compliance Assurance System published November

2013. This paper defines how petroleum undertakings

must comply with their obligations under the Act with

regard to verification activities, safety performance

reporting and independent safety case reviews. It

also set outs the CER audit and inspect function on

petroleum undertakings; and

• High Level Design of the Petroleum Safety Framework

(Version 2) published December 2013;

The Framework entered the operational phase in

December 2013 following the enactment of the

remaining provisions of the 2010 Act. From this point, the

CER was ready to receive safety cases submitted from

petroleum undertakings for the purpose of issuing safety

permits. The operational PSF team is made up of in house

CER staff with technical support from external specialist

consultants.

Operational Work in 2013

The CER took receipt of two Well Work Safety Permit

applications in December 2013. The CER commenced

assessment of both of these Safety Permit Applications

in December. The safety permit applications related to

well work activities planned for 2014.

Currently in Ireland there is one production gas facility

located off the coast of Cork. This supplies approximately

5% of Ireland’s total gas requirement with the rest of thecountry’s gas demand imported from the UK. The Corrib

gas field which is under development also has a petroleum

authorisation from the Minister for Communications,

Energy and Natural Resources to extract gas. The Corrib

development will require a Production Safety Permit from

the CER in order to commence production operations.

The Kinsale development will also require a safety permit

from the CER to continue operating and this must be

submitted prior to November 29th 2014.

Onshore there are currently no petroleum extraction

activities ongoing. However, interest has been expressed

in recent years in exploration onshore by means of

hydraulic fracturing (also known as “fracking”). Should

such activities be authorised within Ireland, they would

also be regulated with respect to safety through the

Framework.

Operation of the Framework

The assessment of safety cases is one role of the CERPetroleum Safety Team. Following the issuance of safety

permits, the CER also has significant functions in relation

to monitoring the compliance of petroleum undertakings

with their requirements under the Act. As part of the

overall Framework, the CER will put in place an audit and

inspection programme for all petroleum undertakings

holding safety permits. Petroleum undertakings will also

be required to submit regular safety performance reports

to the CER to assist in their monitoring function. If the CER

deems that a petroleum undertaking is not in compliancewith its obligations under the Act or the Framework, it

may take enforcement against the petroleum undertaking.

This includes the issuance of an improvement notice or a

prohibition notice . Non-compliance with an improvement

notice or a prohibition notice is an offence that could result

in a fine of up to €3 million and/or a term of imprisonment

of up to 3 years.


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Background Information

In 2011, the Government embarked on a programme to

reform the public water and waste water sector in Ireland.

This reform is part of the programme for Government and

the programme of financial support for Ireland from the

EU/IMF/ECG.

The CER’s remit was expanded in legislation in 2013 to

prepare to become the independent economic regulator

for the public water sector and to advise the Minister for

the Environment, Community and Local Government on

matters related to the economic regulation of the public

water sector in Ireland.

2013 Activities

1. Water Establishment Project

The CER established an internal project to implement

requirements of the Water Services Act 2013 and

commenced putting in place people, processes and

procedures to enable domestic water charging in 2014.

2. Stakeholder Engagement

In 2013, the CER commenced engagement with

the relevant stakeholders to develop the role of the

independent economic regulator for the public water

sector. The primary stakeholders are:

• Irish Water

• Environmental Protection Agency

• Department of the Environment, Community and Local

Government

• Department of Communications, Energy and Natural

Resources

• Water Service Authorities

3. Publications

In October 2013, the CER published an information paper,

The CER and Water Regulation in Ireland, to introduce

stakeholders to the expected future role of the CER in the

public water services sector, outlining the CER’s values,

and the benefits that independent regulation can bring

to the sector. This paper included indicative timelines forproject deliverables in 2014:

• Economic Regulatory Framework (final advice to the

Minister)

• Domestic Tariff Structure

• Non Domesti

cer15017 cer annual report and accounts - 2013 (english)

Documents