CMP294: National Grid Legal Separation changes to CUSC Section 14. CUSC Modification Proposal Form

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1 CUSC Modification Proposal Form CMP294: National Grid Legal Separation changes to CUSC Section 14 At what stage is this document in the process? Proposal Form Workgroup Consultation 03 Workgroup Report 04 Code Administrator Consultation Draft CUSC Modification Report Final CUSC Modification Report Purpose of Modification: This proposal seeks to modify the CUSC to reflect the creation of a new National Grid Electricity System Operator (NGESO) that is legally separated from National Grid Electricity Transmission Limited (NGET). The specific CUSC references have been updated in order to ensure the System Operator and Transmission Owner obligations are clear. The Proposer recommends that this modification should be: Proceed to Consultation with an opportunity for an industry webinar prior to the consultation to provide feedback on the draft legal text This modification was raised 18 April 2018 and will be presented by the Proposer to the Panel on 27 April The Panel will consider the Proposer s recommendation and determine the appropriate route. High Impact: National Grid Medium Impact: None Low Impact: Generators and Suppliers CMPXXX Page 1 of all rights reserved

2 Contents 1 Summary 4 2 Governance 5 3 Why Change? 5 4 Code Specific Matters 5 5 Solution 6 6 Impacts & Other Considerations 6 7 Relevant Objectives 6 8 Implementation 6 9 Legal Text 8 10 Recommendations 8 Timetable The Code Administrator will present a timetable to CUSC Panel on 27 April 2018 for their approval. Industry Webinar Workgroup Consultation issued to the Industry Code Administration Consultation Report issued to the Industry Draft Final Modification Report presented to Panel Modification Panel decision Final Modification Report issued the Authority Decision implemented in CUSC Any questions? Contact: Joseph Henry joseph.henry2@ nationalgrid.com telephone Proposer: John Martin John.martin2@nation algrid.com National Grid Representative: John Martin John.martin2@nation algrid.com CMPXXX Page 2 of all rights reserved

3 Proposer Details Details of Proposer: (Organisation Name) Capacity in which the CUSC Modification Proposal is being proposed: (i.e. CUSC Party, BSC Party or National Consumer Council ) Details of Proposer s Representative: Name: Organisation: Telephone Number: Address: Details of Representative s Alternate: Name: Organisation: Telephone Number: Address: National Grid Electricity Transmission CUSC Party (System Operator) John Martin National Grid Electricity Transmission John.martin2@nationalgrid.com Bec Thornton National Grid Electricity Transmission Bec.thornton@nationalgrid.com Attachment: CUSC Section 14 Impact on Core Industry Documentation. Please mark the relevant boxes with an x and provide any supporting information BSC Grid Code STC Other Although this modification proposal does not directly impact other industry codes, other proposed modifications to industry codes (Grid Code, BSC, DCUSA, Distribution Code, Grid Code, SQSS and STC) are being raised in parallel to this modification proposal as a result of creating a legally separate system operator. CMPXXX Page 3 of all rights reserved

4 1 Summary Defect To amend the CUSC to account for the legal separation of the system operator and transmission owner within National Grid Group on 1st April The CUSC modification is to ensure that the correct obligations are on both The Company (NGESO) and NGET (Transmission Owner). What It is proposed to amend the CUSC definition of The Company to the new NGESO legal entity and create a new Onshore Transmission Licensee definition which encompasses all onshore transmission owners including NGET. Why Changes are required to NGET s existing licence required to implement legal separation; all system operator obligations will be transferred into a new transmission licence for the NGESO and as such need to be reflected accordingly within the electricity codes. The licence changes are the subject of ongoing consultation 1. How NGET published an open letter on its approach to modifying the relevant Industry Codes on 22 September 2017 stating that NGET intended to raise one Code Modification proposal for each Industry Code, but further work into assessing the changes required means that for the CUSC, two modifications need to be raised. CMP294 is one of these. The definition of The Company is being retained as the badge for NGESO and we are proposing the creation of a new definition Onshore Transmission Licensee which covers all onshore transmission owners. The introduction of the new NGESO entity into the CUSC is achieved through a novation agreement for each code. The novation agreement will be entered into by NGET and on behalf of the CUSC parties. The authority for NGET to do this is given through the provisions to be introduced in to the respective Code (CUSC Section 10) as part of the code modification. The intended form of novation is included within the draft legal text. 1 CMPXXX Page 4 of all rights reserved

5 2 Governance Justification for Normal Procedures We would like to request for this modification to be progressed through the normal route. We do not believe that it can come under the self-governance route as the modification is going to have a material effect on The operation of the National Electricity Transmission System and The CUSC s governance procedures. Also we would like to request that the modification proceeds to Consultation with an opportunity for an industry webinar prior to the consultation to provide feedback on the draft legal text. Requested Next Steps This modification should: proceed to industry webinar proceed to consultation 3 Why Change? Following the joint statement titled Statement on the future of Electricity System Operation issued by BEIS, Ofgem and National Grid on 12 January 2017 and consequential consultation response by Ofgem on ESO separation on 3 August 2017, the obligations in the CUSC will need to be modified to reflect the System Operator requirements and to place the current Transmission Owner requirements on NGET as a Transmission Owner. NGET and NGESO will become separately licensed entities as a consequence of NGET partially transferring its existing licence to NGESO (the System Operator elements only) to NGESO under section 7A Electricity Act 1989 and NGET will retain the Transmission Owner elements. 4 Code Specific Matters Technical Skill sets N/A Reference Documents Please refer to Section 3 above for further information. CMPXXX Page 5 of all rights reserved

6 5 Solution The definition of The Company is being retained as the badge for NGESO and we are proposing the creation of a new definition Onshore Transmission Licensee which covers all onshore transmission owners. Within the solution we have included a transitional section which includes reference to a novation agreement that will come into place when the licence comes into place for NGESO as the System Operator. The novation agreement will transfer all rights, obligations and liabilities under from the CUSC from NGET to NGESO. There is also confirmation of the signing process for existing Site Responsibility Schedules. For further detail please see the attached draft legal text for the proposed solution. 6 Impacts & Other Considerations All parties to the CUSC will be impacted by the contractual change in the underlying party to their contracts signed under the CUSC changing from NGET to NGESO. Does this modification impact a Significant Code Review (SCR) or other significant industry change projects, if so, how? N/A Consumer Impacts N/A 7 Relevant Objectives Impact of the modification on the Applicable CUSC Objectives (Charging): Relevant Objective (a) That compliance with the use of system charging methodology facilitates effective competition in the generation and supply of electricity and (so far as is consistent therewith) facilitates competition in the sale, distribution and purchase of electricity; (b) That compliance with the use of system charging methodology results in charges which reflect, as far as is reasonably practicable, the costs (excluding any payments between transmission licensees which are Identified impact None None CMPXXX Page 6 of all rights reserved

7 made under and accordance with the STC) incurred by transmission licensees in their transmission businesses and which are compatible with standard licence condition C26 requirements of a connect and manage connection); (c) That, so far as is consistent with sub-paragraphs (a) and (b), the use of system charging methodology, as far as is reasonably practicable, properly takes account of the developments in transmission licensees transmission businesses; (d) Compliance with the Electricity Regulation and any relevant legally binding decision of the European Commission and/or the Agency. These are defined within the National Grid Electricity Transmission plc Licence under Standard Condition C10, paragraph 1 *; and (e) Promoting efficiency in the implementation and administration of the CUSC arrangements. Positive None None *Objective (d) refers specifically to European Regulation 2009/714/EC. Reference to the Agency is to the Agency for the Cooperation of Energy Regulators (ACER). The Proposer believes that this change will better facilitate relevant objective (c), by attributing the appropriate obligations to NGESO as System Operator and the Transmission owners in accordance with the new NGESO Transmission Licence and modified NGET Transmission Licence obligations. 8 Implementation & Transition Legal text for CMP294 has been drafted using the baseline of March 2018 text and as the modification progresses through the governance process, the text may need to be revised in light of other ongoing CUSC Modifications. The Code Administrator will ensure that the Proposer is aware of the approval of any of the other CUSC Modifications and the Proposer will take into account any relevant amendments to the CMP294 that may need to be made prior to a final decision and notify the Modification Panel should anything in CMP294 require further change as a result of this. CMP294 together with the other associated CUSC Modification proposal and the associated CUSC novation agreement in respect of National Grid s legal separation are all interdependent and as such, are all required to be implemented as a single update to the CUSC. The CUSC changes once approved will be introduced but suspended, apart from the implementation/transitional provisions in the corresponding provisions within CUSC Section 10, until the transfer of the transmission licence to NGESO. In this way the codes, once amended for separation, can form the baseline for any modifications going CMPXXX Page 7 of all rights reserved

8 forward before the transfer helping to manage the interaction between this forward facing change and the fact that the codes are live documents and subject to ongoing open governance. 9 Legal Text Text Commentary An explanation of the legal text is provided within section 5 of this form. This can be found in a separate zip folder, Annex Recommendations Proposer s Recommendation to Panel Panel is asked to: Agree that Normal governance procedures should apply Proceed to Consultation with an opportunity for an industry webinar prior to the consultation to provide feedback on the draft legal text CMPXXX Page 8 of all rights reserved