Group Processing Construction Phase Liaison Group 18 June 2014 - - PowerPoint PPT Presentation

Group Processing – Construction Phase

Liaison Group 18 June 2014

Context

• Bulk of Gate 3 offers accepted
• Group processing will throw up challenges
• Despite offer acceptance, some projects may fall out prior to

construction

• Many projects wish to modify
• Projects within groups may want to proceed at different times
• Need to optimise use of resources
• Need to consider outage constraints (mainly Transmission)
• Need to set out clearly what the process will be when various decision

points are reached

• Consultation Paper will set out position in relation to dedicated and shared

connections.

• Focus of this presentation is on issues which may arise at pre-construction

payment

One party in group accepts but does not wish to proceed to 2nd stage payment (SSP)

• No construction works continue for dedicated works for that party.

No materials ordered

• ESBN/EirGrid (SO’s) will seek to get group agreement on timing of

SSP for subgroup. Ideal scenario 

• If group agreement is reached on delayed timing:
• SO’s will work towards revised subgroup dates (albeit taking

account of longstop dates)

• If group is not agreed and SO’s are ready to invoice the SO’s will

look at the impact of shared works of that one party not ultimately proceeding - ‘materiality rules’ will apply

• Where impact is minimal, shared works will proceed
• Where impact is medium / significant, there are 2 options

Group Members wish to progress to construction at different rates- Option 1

Invoice and terminate

• SO works have received planning permission. At least 1 member of the subgroup is ready to

make SSP/CID payment, all parties in the subgroup will be invoiced for SSP

• All parties will be given a maximum of 6 months to pay.
• Where at least one group member makes their payment, any members who do not pay

within 6 months will have their connection agreements terminated.

• Where any CA’s within the group are terminated, the SO’s review the shared assets and will

consider whether the connection method should be re-optimised. Time impact will depend

• n
• Whether judgement as to need to re-optimise can be made without detailed studies
• Where ultimately it is determined that the shared assets need to be modified to minimise

the cost to the End-User, there may be a significant delay in revising designs; resubmitting planning permission; rescoping the works . The SO’s will always endeavour to minimise such delays.

• Please note parties who are not ready to make their full SSP, will be allowed to elect to pay

just for the second stage payment portion of the shared works and to put their dedicated works on hold – if they choose this option they will remain contracted until their longstop dates are reached (or their connections agreements are terminated for other reasons) . However they will be required to contribute towards shared assets at other stage payment milestones also.

Group Members wish to progress to construction at different rates- Option 2

Invoice and Wait

• As with option 1, once the first party is ready to make SSP/CID

payment all parties are invoiced

• Works on shared assets only progress when

– all members of the subgroup have paid their invoice(or at a minimum the shared asset costs elements of their invoice) or – as above a subset of the group has opted to cover the full shared cost of the works (i.e. covering the cost of non-paying parties) – the contracts of non-paying parties have been terminated due to breach of longstop dates (or any other relevant contractual provision).

• For clarity, in this instance the SO’s do not intend to exercise their
• ption to terminate the connection agreement for failure to pay

the SSP invoice

Points to note

• In some limited instances sufficient parties (a critical mass) may have

made SSP payments to progress

• the shared works. This would generally only apply where the non-paying

parties represent a small contribution to shared works and termination of those parties contracts would not change the shared works to be undertaken (on the basis that the principle of UoS picking up this costs already exists in the event of a termination).

• a sub-set of the elements of the shared works required to connect those
• parties. The SO will give consideration to progressing a sub-set of the

shared works if the overall End-User cost of progressing these works in stages is minimal and the impact associated with splitting the works on program and other projects are not material.

Points to note (contd)

Timing of what is referred to in the paper as the Second Stage Payment (SSP)

• ESBN contracts - the SSP is a Pre-Construction Payment (55% of connection charge)

and is invoiced on receipt of planning permission for Company’s Connection works.

• EirGrid contracts – the SSP is generally invoiced in two stages - 15% on submission of

planning permission application for transmission works and 45% on Consents Issue Date (CID). CID is defined as the date when the Company and the Customer have received consents for their works i.e. it is tied into the Consents of the Customer’s works and Facility as well as the transmission works.

• For the proposals above to work - and in particular Option 1 - it would be better if

CID for EirGrid Connection Agreements was based only on the Company’s works

• Furthermore,

– For group works it would be better to invoice for SSP once consents for shared works have been achieved – in order to minimise the delays caused by failure to make second stage payments and to flush out parties unwilling or unable to pay SSP, it may be better to invoice all parties the full SSP on planning lodgement for those shared works rather than on receipt of planning.

Questions

The SOs are seeking views on:

• Whether Option 1- Invoice and Terminate, Or Option 2 - Invoice and Wait is

preferable.

• Whether the definition of Consents Issue Date for EirGrid Connection Agreements

should be based only on the Company’s works

• Whether – for sub-groups – SSP payment should be linked to the status of consents

for the shared works only

• Whether (under option 1) 6 months is an appropriate length of time for the other

members of the subgroup to make payment after the ‘fast mover’ has paid?

• Whether the progression of the smaller group based on a subset of the full group

connection should be deemed to be temporary and treated accordingly in the context

• f Scheduling and Dispatch rules
• Whether – with a view to minimising delays – the pre-construction payment for

groups should always be requested at submission of planning permission for the plant with the longest construction lead time

Thank You !