Meter auditing in a competitive market
In December 1998 a competitive electricity market, known as the National Electricity Market (NEM), was created across eastern Australia, covering five state jurisdictions and bringing together five separately managed transmission networks and twelve distribution networks. To provide a consistent approach to energy trading, a set of national metering standards has been established, which includes requirements for random periodic audits of metering installations.
A metering installation is required at each point where custody of energy is transferred between generators, regional transmission networks and local distribution networks. There are 20,000 metering points registered, with a further 4.7 million becoming eligible from January 2002.
The National Electricity Code provides the legal framework for the operation of the NEM. Within this framework the NEM metering processes have been developed across the Australian electricity industry.
An essential feature of these processes is the determination of a Responsible Person for each metering point and the use of competitive service providers. The Responsible Person is legally bound to ensure that each connection point for which he is responsible complies with the Code. To meet this obligation the Responsible Person must use service providers accredited by NEMMCO. The two principal service providers for metering are Metering Providers for the installation and maintenance of metering installations; and Metering Data Providers for the collection, processing, validation and delivery of metering data to NEMMCO for market settlement.
The service providers operate in a commercial and competitive environment, where accreditation, performance monitoring and field audits are key to ensuring that technical competencies are maintained, and that competitive drivers are not downgrading service delivery.
The audit programme’s objectives are to:
- Confirm adherence to required technical standards for a sample of metering installations.
- Validate end-to-end delivery of metering data from the primary conductor through to the settlement database.
- Review the oversight of service providers undertaken by Responsible Persons.
Audit reports are provided to the market auditor, who reviews all aspects of NEMMCO’s operations to reinforce participant confidence in the operation of the market.
Approximately 1,300 metered points are wholesale, representing the largest metering points within the NEM and hence the highest risk to accurate settlement. Typically these points have energy transfers from 100 GWh to more than 1,000 GWh per year. Metering errors here tend to lead to volume error in the settlement of the pool.
The initial audit focus was on 20% of wholesale metering points each year, until a trend could be established. Most of these sites are managed by five Responsible Persons and four Metering Providers.
The conduct of field audits has been entrusted to independent contractors with an extensive metering background. At each metering point they work through a broad checklist, which includes a section on business processes and relationships with other parties.
Because of the geographical spread of the NEM, the methodology developed by NEMMCO takes into account the cost of the audit process relative to the risks, and distributes the costs amongst those parties who benefit from the outcomes. The process follows the following steps:
- The field auditor is advised of the metering points selected for audit.
- The Responsible Person is informed of the selected metering points and the name of the auditor.
- The auditor contacts the Responsible Person and informs NEMMCO of the timetable.
- The auditor and Responsible Person conduct an office review of drawings, data sheets and any safety issues associated with the site.
- All sites are visited, allowing the Responsible Person to collect a ‘snapshot’ of metering data for use by the auditor.
- The auditor compares the data snapshot with a similar snapshot from the NEMMCO metering database.
- An exit meeting between the auditor and Responsible Person is held to share preliminary audit findings.
- NEMMCO receives a formal audit report on the metering points.
To help facilitate a consistent approach to reporting across different auditors and between different audit cycles, a standard for reporting non-conformities was established:
- Critical non-conformity: A non- conformance which results in failure to provide metering data in the format and/or to the accuracy required by the Code and/ or results in a breach of the Code.
- Major non-conformity: A non- conformance which demonstrates an occurrence, practice or deficiency in a Metering Provider’s systems, which could threaten the maintenance of the Metering Provider’s accreditation with NEMMCO and/or has the potential to escalate to a level at which it would become a Critical non-conformance.
- Incidental non-conformity: All non- conformances which are neither Critical nor Major.
Retail metering points – sites where the customer has selected a retailer on a competitive basis – are more numerous and can only be audited on a sample basis. Here the market risk is limited to misallocation of energy between retailers, and the energy volumes are typically between 160 MWh and 100 GWh per year. Site selection is based on a spread of all service providers and Responsible Persons over a number of years, with greater emphasis being placed on adherence to work procedures and the maintenance of work processes.
Since December 1998 40% of wholesale metering points have been audited and no critical non-conformity has been detected. Major non-conformities have been reported at a rate equivalent to ten per hundred sites. These have tended to be systematic and related to internal business processes, relationships with other parties and housekeeping matters. A single business system breakdown appears as multiple non-conformities in association with multiple metering points. Incidental non-conformities are high and are commonly systematic through a particular process or system, so they are reported against multiple metering points. They are typically associated with a lack of attention to detail – for example, cross-referencing of details across installation drawings.
Metering errors at retail sites tend to result in allocation errors between participants. Audits across 99 retail sites in four jurisdictions have identified two critical non-conformities, both relating to the misapplication of multiplying factors to transformer metered sites.
Audit findings indicate that a non-conformity recurring across a number of sites is due to a failure of a work procedure within the service provider.
A post-implementation review was undertaken after two years, to ensure that specific audit outcomes are not lost or degraded and that appropriate emphasis is given to the audit findings. The number of non-conformities identified relative to the small number of responsible persons and service providers audited led to a refocus on the split between wholesale and retail audits. The wholesale audits will be reduced by 25% to 15% of the installed metering points from 2002, with a corresponding increase in the number of retail audits.
The review also initiated further investigation of those installations where algorithms have not been verified or have not yet been calculated. In addition further follow-up was instigated to ensure that effective ‘house-keeping’ and data management processes are established and maintained.
The metering audit programme has introduced greater rigour and formality to the management of metering points within the Australian electricity market, and has shown that the technical capacity to install and manage quality metering installations is available. It has, however, thrown up evidence of process failures, and in some cases compliance with internal work processes is lacking. Overall metering errors are within regulatory requirements, although verification was often made more difficult by missing documentation.
The competitive nature of service provision in the metering area leads parties to push the boundaries of the regulatory envelope. This has, however, led to the introduction of noticeable efficiencies in the market and is seen as part of the competitive environment.