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Cornwall Insight Ireland comments on the proposed increase to Imperfections Charge

23 July 2019

A proposed increase to the Imperfections Charge* (and Incentive Outurn) has been discussed in a consultation paper that has been issued by the SEM Committee (SEMC). This was in response to the transmission system operator’s (TSO’s) submission – where they proposed an increase of 53% on the 2018-19 tariff year

SEMC instead proposed a revised requirement of €256.97m, which represents a 37% (rather than 53%) increase on last year’s tariff.

Evie Doherty Senior Consultant at Cornwall Insight Ireland, said:

“The proposed increase is multifaceted and includes the addition of new items related to the market, the increase in the amount of priority dispatch generation captured in the model, increases in wholesale fuels costs and gas transportation charges, and funds to cover exposures to the imbalance price design in the new market.

“One of the core ideals of the I-SEM project was to reduce costs to consumers. Suppliers typically pass on charges such as imperfections charges to consumers, and should they be increased, this is likely where the cost will be recovered.

“The Regulatory Authorities (RAs) have an obligation to reduce costs to consumers as much as possible, and it may well be a high-wire act trying to keep the still relatively new market operating as needed while trying to keep the costs down.

“Perhaps this substantial increase will be a one-off, but it is likely to create some discussion in the market, nonetheless. In combination with relatively high-power prices compared with the rest of Europe, issues around extreme balancing prices and exposure to reliability options, participants are likely to be asking when will the market settle.”

–Ends

Notes to Editors

*Imperfections charges are levied on suppliers by the Single Electricity Market Operator (SEMO) to recover costs, mainly Dispatch Balancing Costs (DBC) incurred in operation of the market. The transmission system operators (TSOs) in Ireland and Northern Ireland submit a forecast for required cost recovery based on analysis done using a PLEXOS® model, which is then assessed by the Regulatory Authorities (RAs) who make up the SEMC. These costs are usually ultimately recovered from consumers.

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