Regulations Regarding Certification of a Transmission System Operator

Issued pursuant to
Section 8, Paragraph six,
Section 11.¹, Paragraphs four and ten,
Section 12, Paragraphs three and four and
Section 21.¹, Paragraphs three, four and five
of the Electricity Market Law

I. General Provisions

1. This Regulation prescribes:

1.1. what documents and information shall be submitted by an electricity transmission system operator (hereinafter - transmission system operator) to the Public Utilities Commission (hereinafter - the Regulator) in order to demonstrate the compliance of the transmission system operator with the certification requirements specified in Section 11.¹, Paragraph two and Section 12, Paragraph three of the Electricity Market Law;

1.2. what documents and information shall be submitted by an electricity system owner (hereinafter - system owner) to the Regulator in order to demonstrate the compliance of the system owner with the independence requirements specified in Section 21.¹, Paragraphs two and three of the Electricity Market Law;

1.3. what documents and information shall be submitted by the transmission system operator to the Regulator in order to demonstrate the ability of the system owner to comply with the obligations under Section 21.² of the Electricity Market Law;

1.4. the procedures by which the transmission system operator shall submit to the Regulator a report on the compliance of the transmission system operator with the certification requirements;

1.5. the procedures by which the system owner shall submit to the Regulator a report on the ability of the system owner to comply with the obligations under Section 21.² of the Electricity Market Law;

1.6. the procedures for the submission, publication and evaluation of a report of the system owner on the compliance thereof with the independence requirements.

II. Certification of a Transmission System Operator and Evaluation of the Independence of a System Owner

2. In order to demonstrate the compliance of a transmission system operator with the requirements specified in Section 12, Paragraph two of the Electricity Market Law, the transmission system operator shall submit the following documents and information:

2.1. a confirmation that the shareholder of the transmission system operator is not a direct or indirect shareholder of the system owner or a shareholder of such undertakings which perform activities of electricity generation, trade and distribution. A decision of the Cabinet on appointing a shareholder of the transmission system operator and information regarding such undertakings in which the shareholder of the transmission system operator is a direct or indirect shareholder shall be attached to the confirmation;

2.2. a confirmation of the shareholder of the transmission system operator that the person who appoints council or board members of the transmission system operator may not directly or indirectly appoint council or board members of the system owner or council or board members of such undertaking which carries out activities of electricity generation, trade and distribution. Documents determining the rights and duties of the person who appoints council or board members of the transmission system operator shall be attached to the confirmation;

2.3. articles of association of the transmission system operator and employment contracts of board members of the transmission system operator or other civil agreements on the basis of which board members are employed in the transmission system operator and which demonstrate that the same person cannot simultaneously occupy a position of a board member of the transmission system operator and a position of a board member in a capital company carrying out activities of electricity generation, trade or distribution. If a council is established for the transmission system operator, the transmission system operator shall submit documents which demonstrate the fulfilment of this Paragraph with respect to council members.

3. To demonstrate the compliance of the transmission system operator with requirements specified in Section 11.¹, Paragraph two, Clause 2 of the Electricity Market Law, the transmission system operator shall submit the following documents and information:

3.1. information regarding the personnel (the number of employees and their qualification) and technical resources at the disposal of the transmission system operator in order to perform each relevant duty of the transmission system operator specified in the Electricity Market Law. If the transmission system operator uses outsourcing to perform any duty of the transmission system operator specified in the Electricity Market Law, the transmission system operator shall attach a list of outsourced services to the information specified in this Paragraph indicating the service provider and substantiating the selection of the service provider;

3.2. information regarding the financial resources at the disposal of the transmission system operator and their sufficiency to perform the duties of the transmission system operator specified in the Electricity Market Law, including replacement of the existing assets of the transmission system and development of the transmission system. A description of how the necessary financial resources for carrying out the duties of the transmission system operator are evaluated, as well as documents which substantiate the sufficiency of financial resources at the disposal of the transmission system operator, for example, the financing plan of the activities of the transmission system operator, assessment of financial risks shall be attached to the information specified in this Paragraph. The transmission system operator shall submit the opinion of an independent auditor on the assessment of financial risks of the transmission system operator;

3.3. a confirmation that in accordance with Section 11, Paragraph three of the Electricity Market Law the transmission system operator ensures the confidentiality of such commercial information which it has received from system participants and market participants while carrying out its duties. A description of activities performed by the transmission system operator to ensure the confidentiality of commercial information, as well as a document (for example, instruction) describing the rights and duties of the employees responsible for handling commercial information shall be attached to the confirmation. If the transmission system operator purchases information technology services, an opinion of a certified auditor of information technologies (systems) that the provided outsourced service ensures the confidentiality of such commercial information, which the transmission system operator has received from system participants or market participants while carrying out its duties, shall be attached to the confirmation;

3.4. a confirmation that in accordance with Section 13, Paragraph one of the Electricity Market Law the transmission system operator ensures fair and equal treatment towards electricity system participants and electricity market participants under equivalent actual and legal conditions. A description of activities performed by the transmission system operator to ensure equal treatment towards electricity system participants and electricity market participants, as well as such sample contracts which are concluded with electricity system participants and electricity market participants shall be attached to the confirmation.

4. For the transmission system operator to conform to the requirements specified in the Electricity Market Law, including the requirement to ensure the confidentiality of commercial information which it has received from system participants and market participants while carrying out its duties, the transmission system operator itself shall provide at least the following services or ensure that at least the following services are not purchased from undertakings performing activities of electricity generation and trade and the related undertakings thereof:

4.1. business planning and analysis service;

4.2. risk management and insurance service;

4.3. legal support service;

4.4. service of regulatory issues co-ordination;

4.5. service of provision and management of financial resources.

5. In order to demonstrate the compliance of the transmission system operator with the requirement specified in Section 11.¹, Paragraph two, Clause 3 of the Electricity Market Law, the transmission system operator shall develop and comply with a transmission system development plan in accordance with the regulations regarding an electricity transmission system development plan issued on the basis of Section 15.¹, Paragraph two of the Electricity Market Law.

6. In order to demonstrate the compliance of the transmission system operator with the requirement specified in Section 11.¹, Paragraph two, Clause 4 of the Electricity Market Law, the transmission system operator shall submit information regarding fulfilment of the duties of the transmission system operator specified in Articles 4, 11, 12, 14, 15 and 16 of the Regulation No 714/2009 of the European Parliament and of the Council on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation No 1228/2003 (hereinafter - Regulation), as well as Annex 1 to the Regulation.

7. The confirmation of the system owner which is submitted by the transmission system operator to the Regulator in accordance with Section 11.¹, Paragraph three of the Electricity Market Law shall include:

7.1. information and substantiating documents thereof regarding the ability of the system owner to ensure financing for operation and development of the transmission system;

7.2. information regarding contracts concluded by the system owner and the transmission system operator on financial investments in the transmission system and a sample contract of financial investments in the transmission system;

7.3. information and substantiating documents thereof as to how the transmission system operator and the system owner shall mutually cooperate so that the transmission system operator would fulfil its duties specified in the Electricity Market Law and the Regulation. A description of how the transmission system operator and the system owner shall agree on financial investments in the transmission system shall be attached to the information.

8. In order to demonstrate the compliance of the system owner with the independence requirements specified in Section 21.¹, Paragraphs two and three of the Electricity Market Law, the system owner shall submit the following documents and information:

8.1. articles of association of the system owner and employment contracts of board members of the system owner or other civil agreements on the basis of which a board member is employed in the system owner and which demonstrate that the same person cannot simultaneously occupy a position in bodies of a vertically integrated electricity undertaking which are directly or indirectly responsible for activities of electricity generation, trade and distribution in their day-to-day operations;

8.2. a confirmation that the system owner uses only such services of a vertically integrated electricity undertaking which ensure the confidentiality of the commercial information which the system owner has received from electricity system participants and market participants while carrying out the duties thereof. A list of such services which the system owner receives from the vertically integrated electricity undertaking, as well as a document (for example, instruction) describing the rights and duties of employees with respect to handling commercial information shall be attached to the confirmation. If the system owner receives information technology services from the vertically integrated electricity undertaking, an opinion of a certified auditor of information technologies (systems) on the sufficiency of activities performed to ensure the confidentiality of commercial information shall be attached to the confirmation;

8.3. a confirmation that the system owner is provided with rights to take decisions independently from the vertically integrated electricity undertaking. Substantiating documents (for example, remuneration policy of the system owner) shall be attached to the confirmation.

III. Reports of the Transmission System Operator and the System Owner

9. In accordance with Section 11.¹, Paragraph ten and Section 12, Paragraph four of the Electricity Market Law, the transmission system operator shall, each year by April 1, submit a written report to the Regulator on the compliance of the transmission system operator with the certification requirements in the previous calendar year. Documents and information shall be attached to the report in accordance with Paragraphs 2, 3, 4, 5 and 6 of this Regulation.

10. In accordance with Section 11.¹, Paragraph ten of the Electricity Market Law, the system owner shall, each year by April 1, submit a written report to the Regulator on the ability of the system owner to comply with the obligations under Section 21.² of the Electricity Market Law in the previous calendar year. Documents and information shall be attached to the report in accordance with Paragraph 7 of this Regulation.

11. In accordance with Section 21.¹, Paragraph three of the Electricity Market Law, the system owner shall, each year by April 1, submit a written report to the Regulator on the compliance of the system owner with the independence requirements and fulfilment of the compliance programme in the previous calendar year. Documents and information shall be attached to the report in accordance with Paragraph 8 of this Regulation.

12. Within five days from submitting the report specified in Paragraph 11 of this Regulation to the Regulator, the system owner shall publish it on the Internet home page thereof.

13. If the documents and information submitted by the transmission system operator and the system owner are insufficient or inaccurate, the Regulator may request additional information.

14. The Regulator shall evaluate the reports specified in Section 11.¹, Paragraph ten, Section 12, Paragraph four and Section 21.¹, Paragraph three of the Electricity Market Law within a time period and in accordance with the procedures specified in the Administrative Procedure Law and shall provide an opinion on the compliance of the transmission system operator and the system owner with the certification requirements and the sufficiency of measures taken to ensure independence of the system owner.

IV. Closing Provisions

15. Concurrently with the first application for certification of the transmission system operator, the transmission system operator shall submit to the Regulator a transmission system development plan developed in accordance with Paragraph 5 of this Regulation.

16. When submitting the first application for certification of the transmission system operator, the transmission system operator shall submit a description regarding the process of unbundling of the transmission system operator from the vertically integrated electricity undertaking in addition to the information specified in Sub-paragraph 3.3 of this Regulation. Information on how in accordance with Section 11, Paragraph three of the Electricity Market Law it was ensured that the commercial information which was acquired by the transmission system operator from electricity system participants and electricity market participants was not transferred to the undertaking performing activities of electricity generation and trade as result of unbundling shall be attached to the description.

17. This Regulation shall come into force on the day following the publication thereof in the newspaper Latvijas Vēstnesis [the official Gazette of the Government of Latvia].

Informative Reference to the European Union Directives

This Regulation contains legal norms arising from Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC.

Member of the Board of the Public Utilities Commission,
on behalf of the Chair of the Board G.Zeltiņš

Translation © 2013 Valsts valodas centrs (State Language Centre)