Environmental Engineering Reference
In-Depth Information
known as Electricity Forward Agreements (EFAs). These could be bought and sold on power
exchanges. In this way, suppliers and generators could buy and sell in a
forward trading
market. The importance of such contracts became apparent when the independent supplier
Independent Energy lost its credit rating and could not obtain an EFA, fi nally becoming
bankrupt due to excessively high generation prices in September 2000.
Deregulation
Immediately following privatization, consumers could still only buy their electricity from
their local REC. However, in 1992, consumers with an average demand of greater than 1 MW
could choose a supplier outside their local area. In 1994, the demand threshold was reduced
to 100 kW. Eventually, in 1999, all consumers were able to choose their supplier.
At the same time, small independent generators and
second tier
suppliers entered the
market, breaking the monopoly of National Power, Powergen, Nuclear Electric and the RECs
(which latterly became known as Public Electricity Suppliers or PESs). This gave an oppor-
tunity for renewable energy generators and specialist renewable energy suppliers (such as
unit[e] and Ecotricity) to enter the market. In addition, the PESs have been unbundled so that
supply, distribution, metering and meter reading have all become separate businesses. Over
time the larger suppliers like National Power and Powergen have become fragmented and
taken over so that they bear little resemblance to the companies they were at privatization.
In addition, the National Grid Company, still the system (and transmission line) operator,
became an independent company.
The New Electricity Trading Arrangements ( NETA )
The electricity pool system was felt to have played its part in the successful deregulation and
opening up of the ESI. However, criticisms were made of the way in which pool prices could
be manipulated by a few key generators bidding into the pool. In fact, it was considered that
this 'rigging' of pool prices was keeping wholesale electricity prices artifi cially high. In addi-
tion, it was felt that generators and suppliers should be free to enter into
bilateral
agreements
instead of also buying from the pool, albeit with a bilateral hedging contract sitting on top.
Furthermore, it was seen as benefi cial that third parties could enter the market to trade in
physical electricity much as they had been doing in CFDs and EFAs. For this reason, the
New Electricity Trading Arrangements (NETA) were introduced in March 2001.
Buying and Selling Electricity Under NETA
Generators and suppliers (above a certain size) are obliged to notify their position for each
half-hour in terms of generation and demand for the day ahead to the National Grid as system
operator. This allows the NGC to carry out its balancing of supply and demand much as
before. Generators now
self - dispatch
rather than wait to be dispatched by the NGC, although
they can alter their output when requested to do so or if they participate in the balancing
market (see below). Generators still self-dispatch in a very similar order to the merit order
under the CEGB regime, but this time the order of dispatch is dictated solely by price. In
addition, suppliers and generators notify what contracts they have struck to the NETA central
