NORDIC MARKET

Acando review of NordREG proposal
for Common Nordic end user market
Mathias Malm. August 2010.

© Acando AB

Contents

● Reason to Change
● Current Nordic Market trends
● Review of NordREG, Proposed Process…
● Suggested: Implementation approach
● Suggested: Time line for Change
● Suggested: Next step
● Acando

© Acando AB 2010-09-01 Common Nordic end user market - Acando review of NordREG proposal

Reason to Change (1)
Introduction

● Will Simplify entry of Suppliers from one region/country to new Nordic regions/countries
● Will be a cornerstone in a more efficient Market
● Will enhance Competition and entry of new Actors within the Nordic Market
● Will support improved Customer Orientation
● Is a step towards an integrated European Electricity Market


Simplify entry of Suppliers from one region/country to new Nordic regions/countries

● A common Nordic End User market will simplify the entry for Electricity Supplier companies
into new Nordic Regions and countries, who are currently present in one Nordic country.
● Lower thresholds for Suppliers within a Common Nordic End User Market
● A Common Nordic end user market will in addition to this improve efficiency for the Retailers
and lower the unit costs


Enhance Competition and entry of new Actors within the Nordic Market

● A larger market region will improve the interest for new Market Actors.
● New Actors as well as simplified “movement” of current country/region specific sales
companies will increase the competition.
● Lager competition will as such increase the Customer Orientation…

The market design of common Nordic end-user market should provide a harmonized
framework for the suppliers to operate in various Nordic countries.


Improved Customer Orientation

● Today, the Customer:
Has Two contracts and Two separate bills
Receive energy to one premise (site)
Receive Monthly information about consumption
Controls consumption based on Monthly information (readings)
Can not deliver energy
● In the future, the Customer needs:
Single Point of Contact and One bill
Receive energy to Several different premises (e.g. car, home and summer cottage).
Produce and Deliver energy (micro production) based on market need and receive payment for it.
Control his energy consumption and avoid large peak consumption, based on:
● more detailed information (hourly).
● actual current energy price as well as prospective energy price.

The common Nordic end-user market will be open to all customers and
it shall be safe for the customers to buy electricity from any supplier .


A step towards an integrated European Electricity Market

● The Energy Market is under influence of the European Union.
Electricity market liberalisation is a central and discussed subject
● A true European liberated energy market is based on a common European end user market.
Starting the work on a Nordic level will simplify the entry into the Common European user user market
for all Nordic Market actors as well as the Nordic end customers.


And for the DSO’s and TSO’s…

● Automated processes will increase the efficiency fro the DSO and TSO’s
● A Common Nordic end user market will decreased the risk, by:
More clear and more stable market regulations.
Taking one early step towards a common European end user market.
● Through improved processes and higher degree of automatisation, we expect to increase
the quality of data quality.
…which will increase the efficiency through less amount of manual work and re-work

© Acando AB 01/09/2010 Common Nordic end user market - Acando review of NordREG proposal

Contents

A base for the change…
Example on Future Nordic market interaction

● Acando


Current Nordic Market trends (1)

● Depending on Market Model which is specific for each country (and/or region), there are
different roles for different market actors which have impact on business processes, e.g:
DSO’s and TSO’s
Retailers
Central Node’s and Cont. Central Clearing house’s (specific for current regions)
● Various plans and regulations concerning the Measurement, Settlement and Billing of
energy in various countries
Finland and Sweden, about 100% AMR meters today, Finland in addition to this has
Hourly measurement.
Norway, AMR metering and Hourly measurement by 2016 (?)
Denmark (?)
When will Sweden comply to Hourly measurement for residential customers?

10 © Acando AB 2010-09-01 Common Nordic end user market - Acando review of NordREG proposal

Current Nordic Market trends (2)

● The Common Nordic end user market-scope include a lot of Business areas and Processes,
Customers, IT-systems and Formats as well as Countries.
● This Forces Business Processes and Market Communication to be different between
different markets and the common solution must manage the diverseness.
● In addition to this European and International trends must influence the common Nordic end
user market. To design the Common Nordic end user market with this in mind will decrease
future costs for all market actors within the Nordic.


Example on Future Nordic market Interaction
Focus on customer orientation together with new and improved services

● A common Nordic register with system operators and the other market participants is
operated by “NordREG”.
● A national register of who is the distributor for each premise, who is the retail company
etc is operated by the system operator in each country, e.g. “Svenska Kraftnät”.
● The distribution company maintain the premise in the national register
The distribution company updates the national register when the move-in, move-out or supplier
switch is done
Distribution companies sends aggregated values for settlement to other market players
● Each retail company requests meter values directly from each distribution company, and
the distribution company grant access to the information based on the contract with the
retailer
● Supplier Centric Model where all or most Customer communication go through the
Supplier/Retailer of electricity.


Contents

…towards a common Nordic end user market.
Recommendations based on experience

● Acando


Review of NordREG, Proposed Process… (1)
… towards a common Nordic End User Market

● Specification: Detailed specification regarding target Market Model.
● Design: Detailed specifications on common processes and systems will be developed and
changes in national regulations should be adapted.
● Implementation: Phase, including coding, testing and deployment o systems.


tf Market Model

● Large impact of the proposed analysis from tf Customer Interaction!
● Good conclusions reagarding Customer and Market Actor needs and behaviour.
● National hubs/databases which stores a large amount of meter values are a good short term
solution, but not recomended as a long term solution. This based on:
Possibilities to increase Energy efficiency by ongoing development within Smart grids.
Needs for Single point of Contact
Increased drawback in cost and data quality, when the amount of duplicate databases
increase.
● Tight but posible schedule, regardless of which Market communication path that is chosen.

A use of a federated model where Structural premise data is stored centrally (in one
or regional hubs) with bilateral data trafic between Market Actors will simplify the long term
development within Customer Orientation, Smart Grids and Single Point of Contact.


tf Customer Interface

● Supplier Centric Model (CSM) will support a Customer Oriented Approach, Acando think this
is a cornerstone in a succesfully implementation of a common Nordic end user market.
Outside in thinking (from Customer and society) will promote the long term success!
Tele Communication market may be an example on a predecessor…
● Much correlation between design of customer interface, data exchange and the market
model is needed, this will have impact on the schedule presented.
Final implementation of a Supplier Centric Model by 2015 is not realistic, according to
the findings from the Task Force.
● We think ”SCM” is a long term lucrative model for all Market Actors, even if we support
further investigations (according to the Appendixes) to enhance a succesfully
implementation.

Acando support the propsal of NordREG to perform further analysis regarding “SCM”.


tf Data Exchange

● Large impact of the proposed analysis from tf Customer Interaction and close relationship
with Market Model findings.
● Critical area for success with large amount of data, which most likely will increase in the
future (dependent on trends within Energy efficency and Customer orientation).
● A Long term model is essential to keep the overall cost low, current Euopean as well as
future trends must be considered.
● Tight schedule to define a detailed design by 2012!



● Well defined and important Task forces, the result of which must be established within the
project.
● Three essential (but not exhaustive) steps for a successfully implementation of common
Nordic end user market suggested by NordREG (Specification, Design and Implementation).
● Based on this as well as on experience, we suggest a iterative process focusing on the need
of the End User (Customer), the Task Forces and a “Plan-Do-Check-Act approach”:
Plan: Include the two essential steps defined by NordREG (Design). This step include
overall planning for all iterations as well as for the scope of the
Do/Implement: Realization of the Business and System changes needed to fulfil the
scope of the iteration.
Check: Crucial evaluation of the iteration and created results.
Act: Transfer knowledge and learning's to other iterations.

These iterations can will support a successful implementation as well as decreasing the
overall cost of a common Nordic end user market for all involved market actors
(incl. Customers) and can to a defined level be executed in parallel.



Iterations which have a clear focus within a individual possible area is important, such as:
● Common Nordic Retailer Market, available for all Customers:
For a subset of Nordic Countries/Regions
For all Nordic Countries
For Additional Countries, a subset of Europe (possibly)
● Hourly consumption values to residential Customers (Information)
● Hourly pricing to residential Customers (Billing and Settlement)
● Single Point of Contact and Overall improved Customer Orientation, e.g. regarding:
Supplier change and Information Exchange
● Increased Customer Control over energy consumption



● The Proposed end date (2015) is excellent but unfortunately not realistic based on:
The Scope of Change
The number of Market Actors and their various interest
Market Regulators in several countries
Needed Changes in Business as well as IT
Current degree of Data Quality
● …based on this as well as our overall knowledge about the Utilitiy sector, we suggest to
move this taget date to 2017 (with partial implementation by 2015).
This will create a realistic time-line to implement a Customer focused Common Nordic
end user market.

This work must be based on the current findings from the three (by NordREG) well defined Task forces!


Suggested: Implementation approach (1)
For all or a subset or countries/regions, focused on customer orientation

● Phase one - Hourly consumption values to residential customers
two contract model
to control his energy consumption based on hourly consumptions values

● Phase two - Hourly pricing to residential customers
Two contract model
to control his energy consumption based on energy price
to control his energy consumption based on peak consumption
to deliver surplus energy and get paid for it

● Phase three – Single point of contact
one point of contact
energy from several different premises
to produce extra energy based based on market need

● Phase four – Increased Customer Control over energy consumption
to control energy consumption based on energy prices

22 © Acando AB 01/09/2010 Common Nordic end user market - Acando review of NordREG proposal

Phase One - Hourly consumption values to residential customers

Residential customer

Hourly Hourly
meter meter
values values

Retail company System operator

Monthly Monthly
meter values Meter values

Distribution company

Hourly meter values

Existing UTILTS messages * Distribution Company, Retail Company
New message format and Balance provider are the same Entity


Phase Two – Hourly pricing to residential customers


Price per Hourly Hourly
KWh meter meter
values values

Spot price

Hourly Hourly Energy
meter values meter values Demand


Limit energy
Hourly meter values
consumption



Phase Three – Single point of contact and residential customer produces energy


Hourly Meter Hourly
values and meter
Price per values
KWh
Spot price

Hourly Hourly Energy


Limit energy Hourly meter Needed
consumption values energy
production



Phase Four – Control energy consumption from price perspective and smart meters


Hourly Meter Hourly
values and meter
Price per values
KWh
Spot price

Sport price Hourly Hourly Energy


Spot Price Limit energy Hourly meter Needed
consumption values energy
production



Contents

● Suggested: Time line for changes
● Acando


Suggested: Time line for changes
Based on common Nordic end-customer market

• Hourly consumption • Hourly pricing to • Single point of • Increased Customer
values to residential residential customers contact Control over energy
customers consumption
• Customer need to
produce energy based
on market need

• Customer need energy
• Customer need to from several different
distribute his energy premises
surplus

2012 2014 2015 2017 2018 2019
Updated Nordic Common Nordic
regulations end user market

• Network owner need to
control consumption
based on demand


Contents

● NordREG, Proposed Process towards…
● Suggested: Time line for changes
● Acando


Suggested: Next step (1)
Based on Customer orientation

● Initiate with the Specification step according to NordREG proposal
Including further analysis regarding SCM.
Large degree of coordination between the NordREG task forces required.

● Define a End date when the all Changes are supposed to be active
Based on the scope discussed previously in this documentation, Acando suggest 2017.

● Define Customer focused Business areas (incl interfaces) for Project iterations, in
collaboration with:
Market Actors.
Customer representatives
Market regulators.
Market experts (Business processes and future trends experts).
IT-solution vendors (Meter Data Management, Collection System, CIS and Billing/Settlement).

● Base the processes on well documented present frameworks as much as posible:
ITIL.
Current Market models within the Nordic as well as European Countries.


Based on Customer orientation

● Define Iteration roll out, in cooperation with the defined actors (above)
● Define roll out plan related to countries/region based on feedback from:
Market Actors
Customer representatives
Market regulators

● Provide a a deatiled implementation plan to Nordic ministers (2010).
Tight schedule for this detailed planning


Define Common Processes and Communication

● Specification (Plan) step should, be aimed to:
Define the overall project goal as well as the goals for the specific iterations (incl. taget dates).
• Acando proposal: (overall) by 2017.
Define the overall structure for common Nordic Market Communication
• Acando proposal: Federated market model.
Define the common Business processes.
• Acando proposal: Customer oriented

Market communication Customer focused business processes


Simplified roll-out of well defined packages

Implement
(Do)

Design Follow-up
Specification Close
(Plan) (Check)

Improve
(Act)


Contents

● NordREG, Proposed Process towards…
● Suggested implementation approach
● Time line for changes
● Next step
● Acando


Acando
Experience from Utilities sector

● Acando has substantially knowlege from the Utility sector within the Nordic Countries,
where we over many years have been working in close co-operation with several
Market Actors; Retail/Supply, Distribution as well as Production and Wholesale.
● We have experience from working with strategic as well as working hands on with
detailed business and technical questions.
● We hold experience from (among others) Meter Data Management, Market
Communication, Outside-in Customer Orientation, Nordic as well as European Common
end user markets, Utility IT-landscape Architechtureas well as IT-Solution vendors
● We have insight in Nordic, European as well as International Business and IT
development/trends for Utilities!


Acando
in brief…

Acando is a consultancy company that in partnership with its clients identifies and
implements sustainable business improvements through information enabled by
technology. Acando provides a balance of high business value, short project times and low
total cost. Acando creates measurable improvements through the development of
processes, organisations and IT systems that strengthen and support each client’s
operations. Acando’s task is to acquire a comprehensive view of the client’s business and
ensure that each project yields rapid and improved results. The client-base is broad, and
includes small businesses, large corporations and public authorities.
Acando’s most important business partners are Microsoft and SAP. Annual turnover
exceeds EUR 135 million and the Group employs approximately 1,100 professionals in six
European countries. Acando is listed at NASDAQ OMX Nordic. Acando’s corporate culture
is based on three core values: Team spirit, Passion and Results.


NORDIC MARKET

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