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Explanatory Memorandum to Electricity (Single Wholesale Market) (Northern Ireland) Order 2007

Background and Policy Objectives

10.There are currently geographically distinct markets for the sale of wholesale electricity in Northern Ireland (“NI”) on the one hand and the Republic of Ireland (“ROI”) on the other. These two markets are governed by separate legislative provisions and are constituted by separate contractual and regulatory arrangements. In November 2004, the Department in NI and the Department of Communications, Marine and Natural Resources in ROI (“DCMNR”) published a paper entitled “All Island Energy Market Development Framework” setting out a joint commitment to the establishment of unified markets in NI and ROI for electricity and gas and setting out a schedule for implementation of these proposals. The first step proposed by this paper was the introduction of a unified electricity market which was considered to require the following main elements;

(a)

The removal of physical constraints in the networks linking the electricity networks in NI and ROI, in order to facilitate cross-border trading in electricity;

(b)

The establishment of a single electricity transmission system for NI and ROI, operated by a single system operator; and

(c)

The establishment of a single market for the sale by electricity generators in NI and ROI and the legacy Power Procurement Business (the “PPB”) of NIE plc to suppliers of electricity (“wholesale electricity”) in NI and ROI (the “Single Electricity Market” or “SEM”), and measures to ensure effective and co-ordinated regulation of the market.

11.The Order sets out the legislation required to facilitate implementation of element (c) above in accordance with the proposals for the reform of the wholesale electricity market in NI and ROI, as set out in Memorandum of Understanding (the “MOU”) between the United Kingdom Government and the Government of ROI in relation to the establishment and operation of the SEM signed on behalf of the United Kingdom Government on 6 December 2006, and on behalf of the Government of ROI on 5 December 2006.

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