1. MOD_05_19_V2
Amendment to Uninstructed Imbalance Charge (CUNIMB) to correct for negative price scenarios
11th April 2019

2. Summary Information
This proposal seeks to address an issue whereby Uninstructed Imbalance Charge (CUNIMB) calculations are resulting in payments rather than charges where PIMB and/or PBO are negative
This is where the (currently 20%)Premium for Under Generation and Discount for Over Generation charge for deviation from instructed dispatch outside tolerance is applied (not to be confused with any payment or charge for the actual energy payment or charge which was included in a single line item in SEM)
As such, this should always be a charge which decreases DBC representing an incentive to comply with dispatch; however, due the algebra not having treatments to address signage where prices are negative payments are made
An additional signage issue whereby adjustments for QABUNDELOTOL volumes were found to be in the wrong direction is also corrected in version 2 of this proposal

3. Summary Information Continued (V1)
We propose a correction in the algebra to address the negative price issue by introducing modulus signs to the prices and also introducing a simple binary operator which is required since taking the modulus of the prices means that the max/min around zero no longer works for the calculation of differences between PIMB and PBO for accepted bids/offers
The introduction of the binary operator also requires the inclusion of an if statement so that it is not applied where PIMB = PBO as it would result in a zero in the denominator making the resulting value indeterminate in that scenario
High level analysis indicates that the issue has a materiality of circa €5k - €10k of under charging per week (circa €114k from Market Start to late February) as an estimated figure based on looking at total payments of CUNIMB and assuming that impacts that were diminished charges as opposed to payments proper are minimal – this is likely to be a relatively accurate measure since CUNIMB values for each band are calculated separately and QAO/QAB at negative price is rare

4. Summary Information Continued (V1)
The proposed change results in the correct outcomes (application of the correct rate as a charging rate for all outside tolerance volumes whether they be non delivery of accepted bids/offer quantities at PBO where it is lesser/greater than PIMB or other non delivery volumes simply at PIMB)
This has been verified via rigorous testing of the algebra in excel against 34 different scenarios of relative position and signage of PBO and PIMB for various UI volumes and also via assessment of the theoretical approach
By this we mean that we can determine that the principles applied result in a calculation of the full outside tolerance volume at PIMB as a charge and then apply the difference between PBO and PIMB where this is positive for accepted bid quantities and vice versa for accepted offer quantities thus charging at PUG/DOG applied to the rate at which the volume was originally paid or charged

5. Summary Information Continued (V2)
The additional change proposed for QABUNDELOTOL adjustments simply seeks to remove a minus sign to change the signage of the adjustment where it applies
These adjustments are intended to reduce Uninstructed Imbalance Charges from a rate of PIMB to PBO where PBO is less than PIMB for an accepted bid quantity since the energy would have settled at PBO for this volume via CDISCOUNT
Due to a signage error that treats the volumes as positive (where they are negative due to being an offtake), these adjustments are currently increasing the charging rate beyond PIMB rather than reducing it back to PBO
This additional change proposed for QABUNDELOTOL adjustments for version 2 has undergone the same rigorous scenario testing through 34 different scenarios as the negative price change
The materiality of this issue has been estimated, by carrying out manual calculations for the affected charges, as circa €150k for the month of February 2019 and assessment of other single days indicates that this rate is likely to be reasonably representative, though there is some volatility here given the price and volume dependencies and potential inaccuracy due to QBOA defects
Separately, the 24th January was analysed as an outlier and the impact was circa €14k for a single day due to elevated imbalance prices.

6. Modification Proposal Justification and Implications of not Implementing
Proposal seeks to correct the calculation of CUNIMB where negative prices apply so that this always results in a charge, and therefore an incentive to comply with Dispatch Instructions governed by the appropriate energy price
This would also mean that CUNIMB appropriately always reduces DBC rather than increasing it where negative prices occur
An additional Proposal in version 2 is to correct an issue with the signage for QABUNDELOTOL whereby this currently increases charges beyond PIMB where PBO is lesser for accepted bid quantity rather than reducing them back to PBO
If this proposal is not implemented there will be a perverse incentive not to comply with Dispatch Instructions where prices are negative, this will also result in increases in DBC and therefore imperfections costs and the identified error with QABUNDELOTOL calculations would also remain

7. Legal Drafting (current)

8. Legal Drafting (proposed addition - V2)
We propose to address the negative price sign as above
A second issue with both the existing and proposed V1 formulation here was identified relating to signage for QABUNDELOTOLs
We propose an additional change in version 2 to address this by removing the highlighted minus sign

9. Legal Drafting (proposed addition continued - V2)
Version 2 also proposes changing the new variable for the adjustment values to UNIMBA and including this in the glossary list of variables for completeness as below

10. Example of Existing and Proposed Formulation (QAOUNDELOTOL)
NB error in version 1 proposal form for this example – Please accept my apologies!!
QUNDELOTOL = MWh
QAOUNDELOTOL = 3 MWh
PBOA = 50 /MWh
PIMB = -200 €/MWh
Directly using intuitive approach
Using Existing Formulation
Using Proposed Formulation
CUNIMB =
-(1×200×0.2)-(3×50×0.2)
(-4×-200×0.2)
[Min(-4,0)×(0.2×200)]
=-(40)-(30)
-(3×([50-(-200)]×0.2)
-[0.2×((50-200)×3
=-€70 =
×(Max(50-(-200),0)
=+€10
/(50-(-200)))]
(not €70 per version 1)
=(-4×0.2×200)-[0.2×-150×3× (250/250)]
=-160-(-90)×1

11. Example of Existing and Proposed Formulation-additional issue identified-(QABUNDELOTOL)
QUNDELOTOL = MWh
QABUNDELOTOL =
PBOA = 50 /MWh
PIMB = 100 €/MWh
-3 MWh
Directly using intuitive approach
Using Existing Formulation
Using Proposed Formulation
CUNIMB =
-(1×100×0.2)-(3×50×0.2)
(4×100×-0.2)
[Max(4,0)×(-0.2×100)]
=-(20)-(30)
-((-3)×(50-100)×0.2)
+[0.2×((50-100)×-3
=-€50
=-80-30
×(Min(50-(100),0)
=-€110
/(50-(100)))]
=(-4×0.2×100)+[0.2×-50×-3× (-50/-50)]
=-80+(+30)×1

12. Testing Scenarios

13. Testing Scenarios Continued

14. Testing Scenarios Continued

15. Testing Scenarios Continued