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The practical importance of electric energy imbalance settlement agreement on the new electricity market for the electricity suppliers

Signing and execution of the Electricity Imbalance Settlement Agreement is one of the most important stages of the procedure for registration as a new electricity market participant.

No one is allowed to carry out any activities related to supply, trading or generation/production of electricity without this Agreement.

This publication will be especially useful to the entrepreneurs intending to enter the new electricity market of Ukraine and to avoid any potential problems related to the supply of electricity in the future.  

Related article: Our Lawyers Ensured Full Legal Support Of Client’s Entry Onto The Electricity Wholesale Market Of Ukraine

What is electricity imbalance?

Electricity imbalance (EI) is deviations between:

  • Actual volumes of electricity produced and consumed; 
  • Volumes of electricity imported and exported;
  • Volumes of electricity purchased and sold.

which arise for Balance Responsible Party within a certain period.

In terms of the Supplier, EI means deviations between the planned and actual volumes of electricity consumed by the Client (Сonsumer) with whom the Supplier has concluded an Electricity Supply Agreement. 

The Balance Responsible Party is a Supplier. 

Balance responsibility is the market participant obligation to report and comply with hourly schedules related to the volumes of electricity purchased/sold and consumed and to be financially liable in case of imbalance. 

The electricity consumption volumes should be planned as accurately as possible to mitigate or even avoid such imbalances.  

Imbalance Settlement Model 

In order to be able to settle electricity imbalances, the Supplier shall sign an appropriate Agreement. 

The Imbalance Settlement Agreement is a legal contract that regulates the electricity imbalance settlement through selling and purchasing electricity imbalance volume at the balancing market price. 

The imbalance price is calculated by UKRENERGO, NCP SE for each settlement period on the basis of the supplier’s imbalance amount and imbalance prices. 

Note! The price at which electricity is purchased to settle imbalances varies based on the time of day and volume. 

Purchase and sale of electricity intended for the imbalance settlement is carried out between the electricity supplier and the Transmission System Operator (TSO) under the abovementioned Agreement.

Related article: Electricity Market Reform: New Opportunities For Entrepreneurs In The Energy Sector

Can an electricity suppliers operate in a new electricity market without signing the Electricity Imbalance Settlement Agreement? 

No, they can’t. 

The Supplier shall report and fulfill its electricity hourly delivery schedules with reference to the amount of electricity purchased, and shall be financially responsible to the TSO for its imbalances.

In addition, the law of Ukraine clearly stipulates that all market participants, excluding consumers, shall conclude the abovementioned Agreement. 

Can the responsibility for the electricity imbalance be reduced or transferred to another person? 

Yes. 

The Electricity Supplier may transfer responsibility for imbalances to another market participant by joining the balance group of other suppliers. In this case, a respective agreement shall be signed.

Who does the Electricity Supplier sign the Electricity Imbalance Settlement Agreement with?  

The Electricity Imbalance Settlement Agreement is concluded by and between the Supplier and the Transmission System Operator (UKRENERGO, SE NPC.

However, to sign this Agreement the Supplier shall have an EIC code and an already signed Electricity Transmission Agreement, which are required at the preliminary stages of the registration as a new electricity market participant.

Related article: Obtainment Of EIC Code Of Type X For Electricity Suppliers And Traders On The Energy Market

Why do you need a lawyer when preparing a package of documents for signing the Electricity Imbalance Settlement Agreement? 

A lawyer will help you to clearly understand the requirements to be met before signing the Agreement. In addition, a qualified specialist will elaborate on the necessary steps to ensure that Ukrenergo, SE NPC makes a positive decision on signing the Electricity Imbalance Settlement Agreement.

In addition, the signing of this Agreement is the last stage of the registration of an electricity market participant. This means that you cannot sign the Electricity Imbalance Settlement Agreement immediately after obtaining the license without passing the previous stages of registration.

A qualified lawyer will help you to comply with all stages of registration, as well as to pass it quickly and efficiently.

Conclusion

It is impossible to become a full-fledged electricity market participant without signing the Electricity Imbalance Settlement Agreement! It will also be impossible to legally and efficiently supply electricity or carry on other activities in the market.

If you want to learn more about the procedure and requirements for signing the Agreement, or want to get legal support when registering as a new market participant, don’t hesitate to contact us by any convenient way for you.

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