The proposal is a Total Bid Price Cap of €500/MWh, and the £/MWh equivalent for Northern Ireland, to be distributed across the FFR, POR, SOR, TOR1, TOR2 and RR services.

We disagree with Price Caps as they undermine efficient market price/value discovery associated with competitive markets. They are ostensibly there to protect the consumer from high pricing. However, we would remind that in the energy market the same consideration is not shown to the risk faced by the participant where the Administered Price (ASP) Curve reflects the Minimum price in such scarcity, a directly contrasting, loaded against the investor. The ASP is circa €4,000/MWh as a floor and with a cap of multiples of that. In the context of this response, price caps should only be for protecting consumers to mitigate against extreme price events.

Secondly, we disagree with the approach to distributing a total price cap across products. ‘Spreading' the price across products assumes a bundle of services can be secured, but bundling or linked bidding is not a feature in the design. All providers will not have capability across all services but will see the same signal from the wholesale market, and without explicit bundles being available to participants there is disproportionate risk placed on participants.

As an alternative to the proposed approach of spreading a single total price cap across all services we recommend setting independent price caps per product. Where the provision of the service competes with the provision of MW for energy, then the cap per service could be at least the max (DAM in that day, RO Strike Price). Total Scarcity Price should be determined as the maximum of the DASSA Total Bid Price Cap and the DAM Clearing Price, subject to implementation considerations (fallback is that the DASSA Scarcity Price will be set to the Bid Price Cap for DASSA go-live).

Thirdly, the reason for a Price Cap is normally to protect against market power where there is a high probability of scarcity pricing. However, the concurrent TSS consultation analysis and related conclusions run contrary to any assertion that the DASSA auctions will be undersupplied or offer opportunity for the exercise of market power. Instead, it highlights the significant oversupply of reserve services – and that this oversupply will increase in parallel with the increasing amount of storage MW on the system.

In the context of a well-supplied market, we do not understand the rationale for the introduction of a bid cap on the DASSA. The SEMC in their DASSA Design Decision asked that price caps be provided for within the design of DASSA. Regardless of the merits or otherwise of this recommendation, this does not, in our view, translate to a requirement to impose a price cap across all periods regardless of market conditions.

While not agreeing with the introduction of a price cap on principal if one is to be introduced, any cap should maintain an incentive to participate, directly related to wholesale market prices. There is no evidence that the €500/MWh price cap proffered is other than linked to the capacity strike price which is based on actual volumes (derated) and called for on the system, while the price cap proposed is linked to ‘available’ volumes, which may not be called for. There are pointers here that the €500/MWh price cap is much too low and needs to re re-evaluated if this proposal persists.

FASS: DASSA Parameters & Scalars - Submissions

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