Recognized International Partner

21 March 2006, 00:00

Recognized International Partner

We are part of the European interconnected system

Interview with Stefania KASPRZYK, Chairman of the Board, PSE-Operator SA

The Polish electricity system had become part of the West European interconnected electricity network nearly 10 years before Poland\'s accession to the European Union.

Yes, the synchronous connection of the Polish and the European electricity system took place in October 1995. The Polish grid became then part of parallelly operating and synchronous systems of the Union for the Coordination of Transmission of Electricity (UCTE).


What does it give you, apart from prestige?

It gives us above all greater security. Being part of an interconnected European power system with generating capacity of nearly 600 GW against the 34 GW of installed capacity in Poland, is not only beneficial for market participants but also offers greater operational security. Interconnected power grids ensure system reliability as transmission operators guarantee market participants access to the electricity market. The benefits of synchronous operation are above all export and import facilitations which allow us to maximise domestic generation capacities and ensure assistance in cases of emergency in the Polish grid.

Is this theory or practice?

For more than fifty years of its existence, UCTE has been coordinating safe operation of high-voltage power grids of synchronous systems in the continental Europe. The coordination has been carried out in accordance with operating standards by a variety of non-binding technical rules and recommendations. Following the adoption in 2003 of the European Commission\'s liberalization package, the power transmission sector underwent substantial changes. Under directive 2003/54/EC, Member States were obliged to designate within their electric power sectors independent transmission system operators. In effect, UCTE consists now of 33 transmission system operators which operate power systems in 22 countries. Participation in such a large group of operators, given their increasing cooperation, brings benefits in terms of greater security both in Poland and in other countries where transmission system operators joined UCTE.

What does it consist in? Mutual assistance obligations?

Yes. Severe weather conditions and unscheduled power flows are the major factors behind system failures. Among emergency tools available in such situations are assistance agreements which establish rules for mutual aid between operators. In June 2005, PSE-Operator SA signed its first mutual assistance agreement with the Czech operator CEPS, and we are now negotiating other agreements of this kind with neighbouring system operators. The agreement defines rules for cooperation in case of emergency events where measures offered in the electricity system concerned are insufficient and the affected operator is unable to repair the failure on its own. It also promotes solidarity among operators by fostering mutual electricity exchanges based on clearly defined financial conditions to both prevent and handle emergency situations.

In 2003, we have witnessed several major blackouts in Europe. These events have certainly had a major impact on the development of cooperation between European system operators.

Changes which are currently taking place in the power sector are a result of market liberalization. However, liberalization is only possible if system security is ensured. Recently, one of the major challenges for transmission system operators is wind power generation. In order to meet the Kyoto obligations for emissions reduction, the European Union began to support renewable energy, including wind energy. The rapid development of wind generation can be observed especially in Germany where in 2005 the wind power installed capacity reached 18.5 GW against the 34 GW of the total installed capacity in the Polish electrical system. The sudden growth in trade and the increasingly frequent unscheduled power flows, have led UCTE to review many formal requirements for the safe operation of interconnected power systems. Similarly to road traffic, also power transmission is regulated by a code of conduct (known as the grid code or the grid operation and maintenance manual). Grid codes stipulate when, how, on whose consent, in what order and what can be done on the grid. However, they still need to be harmonized at the European level.

How? We all know that making arrangements at the European level is not easy.

It seems to be easier for the electricity sector, although, obviously, conflicts of interests sometimes occur. As a result of the dialog launched within the Florence Forum with the European Commission and the Council of European Energy Regulators, UCTE received approval for drawing up of the Operation Handbook. The association is now finalizing the approval process for operation manuals. On 1 July 2005, the UCTE Multilateral Agreement signed by 33 system operators came into force. The Agreement, which tightens operation security requirements for interconnected grids, is the first instrument in the history of UCTE making operation manuals of interconnected systems legally binding. Moreover, in January 2006, the European Commission adopted the directive on measures to safeguard security of electricity supply and infrastructure investment. Each EU Member State is obliged to implement provisions of this directive into their national legislation within two years.

Will this be possible in such a short time?

PSE-Operator SA is well prepared to work on new legal regulations which need to be implemented into the national legislation within the time limit foreseen in the directive. We are participating in preparations of new regulations and assessments of EU legislation. As a result, we begin our preparatory works ahead of time. The best example in point is our realization the of directive 2003/54/EC which introduced the obligation for legal and functional unbundling of the transmission system operator. On 1 July 2004, Polskie Sieci Elektroenergetyczne SA unbundled the transmission system operator (PSE-Operator SA) - this was almost a year before amendments to Energy Law transposing the directive into the national legislation were approved (April 2005). PSE-Operator SA launched its activities in line with European Union regulations and ensured all customers connected or using the electricity transmission network transparent and indicriminatory treatment. Moreover, on 1 July 2004, PSE-Operator SA adopted the Cross-Border Tariffication mechanism, designed by the association of European Transmission System Operators (ETSO) and subsequently approved by the European Commission on an interim basis pending the development of the target mechanism. ETSO was established to respond to the need of harmonization of network access and conditions for usage of the transmission infrastructure with a view to development of electricity market in the EU, Switzerland and Norway. As a member of ETSO, PSE-Operator SA participates in several of its working groups; these are: balance management, security of supply, network access, electronic data interchange, renewable energy sources, tariffs and benchmarking.

According to market participants, unbundling of the transmission system operator was carried out properly.

The whole PSE Capital Group is very glad to hear that. Since PSE-Operator SA launched its operations, we have received support from a number of companies which are part of the PSE Capital Group. This helped us to become more independent and achieve good results.

Which of your successes do you consider the most important?

The most important thing is that despite the complexity of the process, unbundling of the transmission system operator did not create obstacles for market participants - even during the severe winter we have witnessed this year there were no major failures in the network. The demand for electricity, which peaked since 1989, was met with basically no reductions in export. We have even provided assistance to the Czech Republic and Slovakia where network failures occurred.

We are also involved in the creation of the regional electricity market and the year 2005 brought significant development of regional cooperation. The Polish power market forms part of the Central and East European electricity market made up of individual markets of the Czech Republic, Hungary, Slovakia, Austria, Slovenia and, partially, Germany. PSE-Operator SA has already cooperated with nearly all operators from these countries through a cooperation platform created to monitor safe grid operation. Moreover, as early as in 2004, the company developed jointly with a German and Czech operator a mechanism for coordinated congestion management in cross-border electricity exchange whereby transmission capacity is allocated among market players via annual, monthly and daily auctions. In 2005, transmission capacity was allocated through annual, monthly and daily auctions.

The capacity allocation solutions developed jointly with regulators in 2005, became the basis for the 2006 auction system which was approved by five regulators from the Central and Eastern Europe in November 2005. Apart from the Polish operator, participants of the auction are also two German operators, one Czech and one Slovak operator. Implementation of the 2006 auction system with five out of eight operators in the region is a major step forward in terms of market development. To facilitate creation of the regional electricity market, PSE-Operator SA cooperates closely with the Energy Regulatory Authority.

Moreover, the company achieves good economic results and has already repaid loans incurred at the beginning of the restructuring process; our income fully covers expenditure.

What are the most important issues for the future?

Apart from its day-to-day operations, PSE-Operator SA has been focusing on ensuring system reliability and future development of the transmission network. This is reflected in the completion of all scheduled maintenance works and, importantly, in the realization of investments, which were significantly higher in comparison to previous years. In 2005, total investments amounted to 506 million PLN, which represents a 46% increase against the previous year. The next step towards greater market cooperation and reliability of the National Electricity Network was the development of the Grid Code which includes i.a. the UCTE Multilateral Agreement standards. Also, a new electricity tariff was designed. These two documents were approved by the President of the Energy Regulatory Authority. The decision of the President of the Energy Regulatory Authority of 26 January 2006, under which PSE-Operator SA was reappointed as the electricity transmission system operator on the territory of the Republic of Poland till 31 December 2007, is a recognition of the company\'s successful functioning in the Polish electricity market.

Moreover, we are currently working on a modern technological system for our new seat in Bielawa. As well as that, we have developed and implemented a comprehensive risk management system for the company. By now we have also upgraded our web page - which is an important information channel for our customers and now we are developing intranet sites.

What are the main tasks for PSE-Operator SA this year?

This year we have to prepare for the transfer of shares to the State Treasury in line with the restructuring and privatisation programme for the electric sector. This will involve renegotiation of many contracts, organizational changes and maybe even transformation into a capital group of operating companies. We also have to supervise construction of the company\'s new headquarters (which will meet all EU safety standards) and arrange logistics for the change of premises of the national electricity dispatch centre. Obviously, we will also take active part in creation of the regional electricity market.

Thank you for conversation.


Energy - Environment - Infrastructure
Addition to \"RZECZPOSPOLITA\"
21 March 2006 r.