participants in the balancing market will be able to update energy prices more often

Selected participants in the balancing market will be able to update the cost of the base fuel, e.g. coal, needed to calculate forced labor electricity prices on a monthly basis, according to the draft regulation published on Wednesday.

On Wednesday, the RCL website published a draft amendment to the regulation on the detailed conditions for the operation of the electricity system, prepared by the Ministry of Climate and Environment.

The Regulatory Impact Assessment emphasized that as a result of the war in Ukraine and the embargo imposed by EU Member States on imports of fossil fuels to Russia, the prices of these fuels are rising sharply. “This situation has a significant impact on the energy market in Poland due to the significant share of coal in the fuels used by electricity producers. As for the primary activities of producers, i.e. electricity generation and its sale on the electricity market, the change in costs is can be reflected in offers for the sale of electricity, which is reflected in the observed changes in prices in the futures and spot markets “- underlines.

The drafters added that the changes in fuel prices used by electricity generators can be analogously reflected in the electricity balancing market, where balancing market participants submit balancing offers that reflect their price and technical preferences for electricity supply. The balancing market is the so-called technical market. It is not an energy trading platform. In this market, the Transmission System Operator – PSE – buys or sells energy to balance the electricity system.”

“Within the balancing market, there are also fields of activity of producers, where transfer prices are not determined on the basis of prices from offers, but on the basis of variable costs of electricity generation. One of those areas is forced labour, i.e. the supply of electricity by producers at the request of the operator of the electricity transmission system due to system requirements “- was indicated.

As explained, the fuel costs for forced labor billing are reflected in the components CWD (electricity forced delivery price) and CWO (electricity forced exit price).

In accordance with the applicable regulations, these costs – and therefore the CWD and CWO prices – are updated quarterly, whereby the basis for the settlement of a certain period is the average costs of the previous period. “Given the rapidly and sharply rising fuel prices, these rules are insufficient for electricity producers to adequately pass on fuel costs in the labor billing in the forcing” – it was noted.

The draft amendment proposed the introduction of a monthly base fuel cost update cycle, which is taken into account when determining CWD and CWO prices, in terms of generating units using base fuels other than natural gas or lignite, as well as the application of CWD prices for these units work settlements in a given period and CWO determined based on the exported cost of the base fuel.

It has also been added that the principle is also introduced that “the settlement of forced supply of electricity and forced offtake of electricity for a given calendar month, determined on the basis of CWD and CWO, is corrected, in accordance with the rules included in the balancing conditions, determined by the application of CWD to this settlement and CWO taking into account the costs of the base fuel incurred in the calendar month to which the corrective settlement relates”.

The new regulations will also provide that the cost of the base fuel of the indicated type is determined on the basis of the average unit cost of the fuel used and the average unit cost of transport and storage.

“The above amendments apply to producers operating on the balancing market and using fuels other than gas and lignite, e.g. coal, fuel oil or biomass (… The expected effect of the amendments is a better reflection of fuel prices in particular coal prices as part of of CWD and CWO prices, and thus a better reflection of the fuel costs in the settlement of the operation of the centrally controlled generating unit, performed at the request of the electricity transmission system operator for reasons other than free balancing “- explained.

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