Commencement and Duration of Agreement

Under Section 2.1.1 the contract states that Agreement shall commence on the Effective Date and shall continue in full force and effect until the date of the day before the 6th anniversary of the Target Go-Live Date. Within the consultation document it is stated that the proposed extension to the maximum period from the Effective Date to the Target Go-Live Date from 33 to 36 months “does not prohibit projects connecting earlier and taking advantage of longer contract duration periods.”

For the avoid of doubt, can it be confirmed that a Service Provider whose Go-Live Date is in advance of their contract’s Target Go-Live Date will be under contract from their Go-Live Date through the sixth anniversary of the Target Go-Live Date i.e., the contract duration will be extended by the period by which the project connected and begins to deliver early?

Under section 2.3.3 it is set out that that prior to the Effective Date, the Service Provider shall have received Planning Consent for the Providing Unit and shall provide a copy of it to the TSOs, however under the proposed procurement design planning permission is a pre-requisite at the Request for Proposal stage. On the basis that this requirement is adopted the requirement under section 2.3.3 would be redundant.

Under section 2.6.1 it is set out that during the term of the Agreement, where there is a requirement for the Service, the TSOs may require the immediate provision of the required Service by the Service Provider. For clarity it is requested that this section is updated to explicitly reflect this obligation is subject to the Service Providers availability declarations for the relevant period.

Under section 2.7.1 it is set out that that unless otherwise directed by the Regulatory Authority, the Service Provider will not enter into a System Services Agreement pursuant to which the Providing Units provide or make available any Related System Services for duration of the term of this Agreement. ESB GT understands that this section in conjunction with section 2.7.2 are intended to give effect to the proposal to exclude LCIS contracted Service Providers from the provision of related System Services.

ESB GT does not support this proposal, it is accepted that the LCIS framework is intended to enable investment in the availability of Synchronous Inertia, Reactive Power Support and Short-Circuit Contribution. Service Providers who are contracted under the LCIS framework should have access to the DS3 framework but on a different basis to other service providers. However, ESB GT believes that it must be a fundamental tenet of the wider system services framework that service provision that delivers value to the TSO in securing the system would be reward appropriately and in line with the level of their service delivery. ESB GT believes that were the excess capability of a LCIS Providing Unit is relied upon within the TSO’s scheduling and dispatch procedures this capability should be renumerated in these periods through the DS3 framework and later SSFA.

Under section 2.8 Service Providers are required to acknowledge that they may be required to participate in future System Services arrangements as may directed by the Regulatory Authority. ESB GT does not support the use of the LCIS contract to act as a proxy for appropriate licensing arrangements. ESB GT would welcome engagement with the RAs on the development of appropriate licensing arrangements for LCIS Providing Units. ESB GT is concerned with the implications of this section given there is no clarity on the operational practices that will applicable be to the LCIS Providing Units or the cost/incentive structures that will be in place under the SSFA.

Provision and Purchase of the Service

Section 3.1.2 brings through several conditions that ESB GT would expect to see under relevant Grid Code conditions. Rather than duplicating these conditions under the LCIS contract terms, ESB GT proposes that the adoption of the required Grid Code modifications be prioritised so that they are in place in advance of the Request for Proposal process. This would give potential Service Providers certainty on their Grid Code compliance requirements and the related costs, de-risking their projects and therefore acting to reduce their bid prices.

Under Section 3.4.2 Service Providers are required to provide Technical Offer Data to the TSOs in accordance with the TSC. Clarity is sought on where there will be a requirement on the Service Provider to provide Commercial Offer Data, clarity on this point is material as there are significant costs relating to changes to trading system where Commercial Offer Data submission is required.

Under Section 3.5 it is proposed that a Shortfall Charge be applied where the Installed Capability of the Providing Unit is less than the Contracted Maximum Available Volume at a level of €106k per MVA.s. Also, the Contracted Maximum Available Volume would be reduced to the Installed Capability reducing the contract value for the Service Provider. This represents a very significant risk to the Service Providers particularly as testing procedures to be applied during commissioning have yet to be defined by the TSOs.

ESB GT propose that to reflect this uncertainty a tolerance band of 5% would be applied in the case that the Installed Capacity outturns at less than the Contracted Maximum Available Volume before any Shortfall Charge would be applied and further that the basis of the charge would be the lesser of the €105k and the Payment Rate*Contract Term express in hours.

Performance Security

Under Section 4.1.3 it is proposed that the Service Provider would be committed to use best endeavours to achieve each of the Performance Milestone and Additional Reporting Milestone by the relevant Milestone Dates. This is a highly onerous obligation for the Service Provider to undertake and should instead be replaced with an obligation to make reasonable endeavours. This is particularly the case where the Service Provider will have posted a significant Performance Bond. Placing disproportionate burdens on the Service Provider which the Service Provider will then need to pass through to equipment manufacturers and contractors could lead to reduced options at procurement and increase the cost of delivery.

Under Section 4.1.5 it is proposed that the TSOs would have the authority to make a demand for payment under the Performance Bond where the Service Provider fails to achieve a Performance Milestone or fails to report the information required in relation to the Performance Milestone by the Milestone Deadline. Also, were either of these events to occur it would be an Event of Default under Section 9.2 which would give the TSOs the right to terminate the contract.

ESB GT understands the need for the TSOs to seek to ensure the timely delivery of the contracted services in line with the established implementation plans but putting payment of performance bond and contract termination as the primary incentive for timely delivery is high disproportionate. Under the capacity market framework, it is recognised that the completion of complex construction and commissioning projects entails significant risk to timelines through the longstop mechanism. Under this mechanism new capacity can be delivered up to 18 months after the start of contract period. This recognises that the erosion of the contract term acts a powerful incentive to deliver. ESB GT believes that a similar approach should be adopted under the LCIS framework as the delivery programmes for the Providing Units will be of a similar degree of complexity as that of new capacity but the Target Go-Live Date under the LCIS is limited to 36 months after the Effective Date.

ESB GT welcomes the inclusion of the provision under section 4.2.1 that delays in the connection of the Providing Unit will result in the Milestone Dates and the Target Go-Live Date being extended. Can it be confirmed that where the Target Go-Live Date is adjusted under this section it would result in the contract commercial term being preserved as 6 years as provided for under section 2.1.1?

Similarly, under section 4.2.2 where, because of a Force Majeure event, the Target Go-Live Date will be adjusted to consider the period of the Force Majeure event. Can it be confirmed that this section is applicable during the commercial term of the agreement after the Providing Unit has been commissioned and is delivering the contracted service? In the case of Force Majeure event where there is an inability of the Transmission System to be capable of lawfully or safely importing Synchronous Inertia, Short-Circuit Contribution and Reactive Power from the Providing Unit will the Target Go-Live Date be adjusted so that the contract commercial term will be preserved as 6 six years in duration?

Consultation on Contractual Arrangements for the Procurement of a Low Carbon Inertia Service (LCIS) - Submissions

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