Energy companies are increasingly interested in expanding their distribution networks, due to the need to connect new customers. To achieve this, it is necessary to become a Distribution System Operator (DSO).
Let’s take a look at the key issues involved in such a process.
Who can become a DSO
In order to carry out the activity of distribution of electrical energy (‘EED’), companies must obtain the status of a Distribution System Operator.
The following entities can be DSOs:
- The owner of a distribution network who holds an EED licence to carry on a business using that network or installation, and
- An energy company holding an EED licence with which a network owner has entered into an agreement entrusting it with the tasks of a DSO for the use of the owner’s network or installation
This means that the owner of a distribution network can either become the operator itself or entrust this function to another entity holding an EED license.
The President of the Energy Regulatory Office (‘President of the ERO’) then designates the operator (for a specified period of time) at the request of the owner and indicates the area, networks or installations on which the economic activity may be carried out.
When to apply for DSO status
A network owner may delegate the function of a distribution system operator if the number of customers connected to the network does not exceed one hundred thousand.
When taking a decision on the DSO, the President of the ERO must assess whether the applicant has the means to ensure the effective management of the system or installation concerned.
The entity wishing to become a DSO must therefore have genuine and objective capabilities to perform its tasks effectively and reliably.
At the same time, the entrustment agreement should specify the tasks assigned to the operator and the functions reserved by the network owner.
In fact, the performance of the operator’s duties cannot be limited to purely technical activities, but should extend to the performance of all the tasks assigned to it, including but not limited to the following:
- Disposing of the network for the purposes of implementing the principle of Third Party Access (TPA) and non-discriminatory access to the network
- Carrying out repairs, within the framework of a financial plan agreed between the parties
In addition, the owner of the distribution network must cooperate with the operator and provide it with the information and documents necessary for the fulfilment of the operator’s tasks.
Procedure for the appointment of a DSO
The network owner is obliged to submit an application for the appointment of a DSO within 30 days of the conclusion of the entrustment agreement. In practice, such an application is made in consultation with the future DSO after the future DSO has obtained an EED licence and the entrustment agreement has been concluded.
When appointing an operator, the President of the ERO will consider, among other things, the candidate’s: [1]
- Economic efficiency
- Efficiency of the management of electricity systems
- Security of electricity supply
- The compliance of the DSO with the conditions and criteria of independence[2]
- The duration of the EED licence
- The ability to fulfil obligations for the proper operation of the distribution system[3]
- The ability to meet the certification criteria
Refusal to appoint a DSO
Depending on the results of the assessment of the candidate, the President of the ERO may refuse the appointment.
This will happen if the company: [4]
- Does not have adequate economic or technical resources
- Does not guarantee effective management of the system
- Does not meet the conditions and criteria for independence[5]
- Has not demonstrated the ability to fulfil its obligations under EU regulations[6]
And if:
- The agreement to entrust the function of operator does not ensure that the transmission system operator (TSO) will be able to fulfil its obligations with regard to the criteria for the designation of the DSO and the obligation to draw up a development plan to meet current and future electricity demand for a period of 10 years[7]
- The owner of the transmission network has not demonstrated its ability to fulfil its obligations with regard to the imposed restrictions on electricity consumption[8]
- The company does not meet the criteria for operator certification[9]
Documents required to become a DSO
The network owner, in consultation with the future operator, should submit:
- An application to become a DSO
- Annexes to the application
If the application does not contain all the information or documents required by the Act, the President of the ERO will request the applicant to supplement the application within a maximum of 30 days from the date of receipt of the request.
An application that is not completed by the deadline will not be processed.
Among other things, the application must be accompanied by documents demonstrating that the prospective operator fulfils the following conditions:
- Formal and legal
- Organisational and economic
- Technical conditions necessary for the proper conduct of business in this area
In practice, the procedure is not complicated, but success depends largely on the correct and complete preparation of all the documents, the entrustment agreement and possessing sufficient knowledge of the subject.
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[1] Article 9h(7) of the Energy Law
[2] As set out in Article 9d(1) to (2) of the Energy Law
[3] Arising from Regulation 2019/943 and obligations arising from legislation adopted pursuant to Articles 59 to 61 of that Regulation or Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005, and obligations arising from regulations adopted pursuant to Article 8 and Article 23 of Regulation 715/2009
[4] Article 9h(8) of the Energy Law
[5] Article 9d(1) to (2), subject to Article 9d(7) of the Energy Law
[6] Regulation 2019/943 and Regulation 715/2009
[7] Article 9c and in Article 16(2) of the Energy Law
[8] Paragraphs 11 and 12 of the Energy Law
[9] Article 3a of Regulation 715/2009
