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Christiane Sykes Trading Arrangements David Halldearn Director - Scotland and Europe Office of Gas and Electrcity Markets (Ofgem) 9 Millbank London SW1P 3GE 14th March 2003 Reference Dear David Response to the first consultation on the electricity generation, distribution and supply licences under BETTA Thank you for the opportunity offered to Powergen to comment on the proposed changes to the electricity generation, distribution and supply licences under BETTA. The amendments and powers introduced through the E(TT) Bill provides the opportunity to take a fresh look at the current arrangements in England and Wales and ensure that many of the shortcomings of NETA are not transferred through to BETTA. We recognise that it is appropriate that the scope of the Secretary of State’s powers to designate relevant industry codes is limited to that ‘necessary and expedient to implementing the GB trading and transmission arrangements’. In our view this should not prevent the Secretary of State from seeking to simplify the current contractual and licensing frameworks that exist across GB electricity markets. We accept that many of the licence changes made are consequential changes of developing GB-wide arrangements and so it follows that definitional changes such as BSC to GB BSC, can go ahead without the need for any detailed consultation. We have attempted below to confirm our viewpoints on some of the less obvious amendments to the current licences. Security Arrangements In those licences, which relate to security arrangements for England and Wales and Scotland it is sensible that those referring to security arrangements in Scotland be removed and those relating to England and Wales remain, but are amended to reflect a harmonised GB Fuel Security Code (FSC). We welcome the review of the FSC to bring it more into line with the more comprehensive arrangements that have been developed for England and Wales Powergen UK plc Westwood Way Westwood Business Park Coventry CV4 8LG T +44 (0) 24 7642 4000 F +44 (0) 24 7642 5432 Powergen UK plc. Registered office: 53 New Broad Street, London, EC2M 1SL. Registered in England and Wales No.2366970 www.powergen.co.uk Compliance with Pooling and Settlement Agreement and NETA Those licence conditions, which relate to the implementation of NETA, should be removed in the event that they are spent by the time BETTA is implemented. Certain run-off provisions could allow for this. We fully support such streamlining of the licences through the removal of redundant clauses, thereby creating more relevant and lucid documents. The importance of streamlining the current processes should not be underrated. Whilst the E(TT) Bill seeks provisions to establish a GB BSC, GB CUSC and GB Grid Code this could be taken further to combine the commercial codes, that is the BSC and CUSC and their ancillary documents into one Code. One other perhaps more pragmatic method of streamlining the process might be simply to provide one overarching panel to govern the BSC and CUSC and their ancillary documents. This would, at least, ensure greater efficiency in the requirements to tie in one code with another and facilitate more co-ordinated arrangements. Clearly, this would also involve amending the Licensing arrangements requiring the GB SO to establish particular codes, statements, charging methodologies etc. Such arrangements would allow market participants to propose changes to all aspects of electricity trading arrangements and not just those defined under the BSC and CUSC. Currently, even if Ofgem support suggested industry changes to various statements and connection and use of system charging methodologies they cannot implement such changes without the supporting recommendations of NGC. Compliance with SAS and with the Trading Code in Scotland In considering the supplementary standard conditions for Scotland, as we have previously stated in our response to the impact of BETTA on the SAS, the SAS ought to exist as a stand-alone agreement until final reconciliation, with run-off operations managed by the GB BSCCo. For completeness, the agreement should be modified by deleting sections and terms that are not relevant to past business. The advantages of this are that it helps to keep costs separate, enabling BETTA implementation costs to be budgeted and allocated appropriately. Furthermore, we concur that this approach would mean run-off terms would not have to be included in the GB BSC. Potential issues arising in relation to Scottish and English law would also be avoided, and it would ensure clear demarcation between the licence responsibilities of SPDL and SHEPDL in the pre-BETTA world and the System Operator in the post-BETTA world. It is reasonable, therefore, that certain provisions, appropriately amended, need to remain in place in the supplementary SLCs in relation to any arrangements, which are relevant only to past business in the SAS. We concur that the licence condition relating to the Trading code is removed under BETTA. The special licence conditions in the licences of SPDL and SHEPDL will also have to be amended to reflect the obligation on these two licensees to provide the SAS only for the run-off period. Powergen are happy to discuss any of the above issues raised in this document. Yours sincerely Christiane Sykes.