Frequently asked questions on the procurement of electricity to cover grid losses

1) What are grid losses?

During the transport of electric power through an electricity grid, power is lost due to physical reasons, i.e. less energy is received than was fed into the grid. The difference is called energy grid losses. These are referred to as electricity to cover grid losses.

2) Who procures the electricity to cover grid losses?

Every grid operator is responsible for compensating the grid losses that occur within its grid. In the future the electricity to cover grid losses will be procured jointly by means of tenders through Austrian Power Grid AG (APG) for most grid operators in Austria.

3) Why is a tender conducted to electricity to cover grid losses?

A market-oriented, transparent and non-discriminating procedure must be applied for the procurement process. This legal requirement is complied with by means of the public tenders, which are carried out on an electronic platform.

4) How much electricity is needed to cover grid losses?

The electricity required to cover grid losses is proportional to the square of the energy transported. The losses is from 1% to 7% of energy transported, depending on the structure of the net and its voltage level.

Local grid operators have to cover grid losses in an amount of about 3.5 TWh per year for the Austrian transmission and distribution grid. In the frame of the common concept to cover grid losses, approximately 85% will be procured by APG.

5) Which documents and contracts are to be provided for an auction?

Apart from the Austrian Market Rules (Other Market Rules, Chapter 8), two documents concerning auctions for grid losses by APG have to be respected (those documents are available for download on the page Participation Rules for Offerers):

The first document is the General Terms and Conditions which shall be understood as the general terms and conditions for the procurement of grid losses.

By signing the sheet Expression of Interest (Annex 1) the participant confirms his interest in participating to the auction and accepts the terms and contracts on which the auction is based (i.e. the Austrian Market Rules, Other Market Rules, Chapter 8, the General Terms and Conditions and the EFET Contract, Version 2.1(a)/September 21, 2007 with the corresponding Election Sheet to the EFET General Agreement).

The data in Annex 3 "Membership of an Austrian Balance Group" are required for the physical energy transfer following the award.

A Letter of Comfort (Annex 5) may be provided to increase the available trading limit after the evaluation.

The second document is the EFET Contract, Version 2.1(a)/September 21, 2007 with the corresponding "Election Sheet to the EFET General Agreement" already pre-filled by APG.

Both of General Terms and Conditions and the EFET contracts do not (necessarily) have to be signed by the participants when these terms and conditions have already be accepted in the signing of the "Expression of Interest" (Annex 1).

6) How to register for the tender?

Bidders who want to participate in the tender have to register with APG.

Chapter 3 of the General Terms and Conditions defines the requirements for evaluation of the bidder.

In order to fix the trading limit, the following documents are required:

  • Annual Reports of the past three years
  • Official documents of rating agency (optional, if available)
  • Registration documents of Power Exchanges and traded volumes, especially for Futures (optional, if available)

Based on these documents APG determines the (maximum) trading limit of the bidder.

In case of tender award, an Austrian Balance Group is defined as the physical location of supply or service provision. (Therefore the sheet in Annex 3 has to be filled in.)

Those having already registered with an Austrian Balance Group may send this sheet together with the other documents by post to:

Austrian Power Grid AG
UMM/Electricity Procurement
Subject: Grid-Losses
Wagramer Straße 19, IZD-Tower
1220 Wien
AUSTRIA

In addition it is possible to send the documents by e-mail (as pdf, see contact box in the right column) or fax (+43 (0)50320-156477) to APG to allow for faster handling reasons.

Those not already having access to an Austrian Balance Group will not be able to completely fill the Annex 3. How to get an Austrian Balance Group is described under "Registering a balance group in Austria".

As soon as APG has received the documents for registration, you will get the confirmation of receipt. The documents are forwarded to the convenient departments and the bidder will be informed of the outcome of the evaluation.

7) Will an unrestricted Letter of Comfort be considered when fixing the trading limit?

Yes, unrestricted comfort letters will be considered. Once signed by the parent company, they may be considered in the credit assessment. The required document is on the page Participation Rules for Offerers available for download.

8) Which auction-related costs are to be borne by the bidder?

According to Chapter 4.2 of the General Terms and Conditions the bidder has to bear all costs and expenses in relations to the auctions. This, of course, only refers to the costs directly arising to the bidder from the participation (expenditure of time, IT resources, bank fees, schedule management).

9) How to assess the financial soundness of the bidders following the registration?

The bidder has to provide for continuously updated versions of the documents forwarded to APG for registration (minimum one update per year, e.g. through current Annual Reports). If there is a change in the trading limit, the bidder will be informed by APG (if the trading limit remains unchanged, there will be no information by APG).

10) What’s the amount of my available trading volume?

In the course of the registration, a (maximum) trading limit is allocated to every bidder. When the bidder participates in a tender and his bid is awarded, the available trading volume is reduced and an open position arises (future supply obligation).

This open position is evaluated every day in a mark-to-market process and the available trading volume is recalculated. The available trading volume is daily updated in the bidding system. Upon fulfilment of the supply obligation at the end of each calendar month, a corresponding trading volume is released (i.e. available for new bids).

The available trading volume in the bidding system can only be seen by registered employees of your company.

11) When is APG allowed to cancel an auction?

APG plans to have weekly auctions. Should the amount to be auctioned not be sufficient, it may be transferred to the following week. Traders will be informed at least 24 hours prior to the new auction date. As in this case the auction is not yet performed, it also cannot be cancelled.

In exceptional cases APG may be forced to interrupt on-going auctions (see Chapter 4.4 of the GTC). Possible reasons might be an insufficient amount of participants, an outage or technical defect of the electronic platform. In such case participants do not receive a confirmation of accepted bids.

APG is entitled to cancel auctions without giving reasons but will however - for transparency reasons - publish the relevant information.

12) Registering a balance group in Austria

Information on the registration of a balance group in the APG control area can be found in our section  electricity market.