4 Corporate governance and ethics

Risks of loss of continuity of electricity supply

The risks have direct and immediate impacts on consumers – such as a sudden blackout or recurring constraints in power supply, known as power rationing levels, imposed as a result of a persistent power shortfall in the PPS.

While a sudden blackout is usually caused by failures and damage to the PPS elements, including those caused by disastrous weather phenomena, the risk of load shedding is affected mainly by factors that determine capability to balance consumers' electricity demand.

They include mainly the size of generating capacity available to the system operator and increase in peak energy demand. The deterioration of the balance can be affected by shutdowns of currently operating generating units, delays in the commissioning of new capacities and untimely completion of network investments, as well as weather conditions (e.g. high temperatures, draughts, long periods of windless weather). 

In addition to the acquisition of regulation ancillary services, power supply continuity risk management includes coordinating optimal repair schedules with generators and entering into three types of agreements: for the Demand Side Response (DSR) service, the service non-centrally dispatched generating units (nJWCD) remaining at the TSO's disposal, and the provision of emergency support to operators of neighbouring transmission systems.

The risk of power shortfall is mitigated by payments in respect of operating power reserve and the purchase of cold intervention reserve. Investments are also made, aimed to increase the transmission capacity and improve the security of transmission networks.

Operational risks related to network operation and maintenance, and PPS balancing

Substation and line infrastructure is affected by natural factors, in particular abnormal weather conditions. Its state of repair is also affected by acts of vandalism and theft; in addition, it is subject to physical deterioration.

As part of measures preventing the depreciation of grid assets, we have developed and implemented a uniform maintenance model that allows us to assess the state of repair of devices and their operation environment in a cyclic, standardised and measurable manner. The most depreciated and oldest grid assets are preventively replaced. We enter into central support and maintenance agreements invoked in the event of failure of substation and line facilities and their basic equipment. In parallel, a maintenance development programme is in progress, which ensures the continuous competence building of the company's own maintenance personnel, including field personnel. We also undertake investments with a view to optimising transmission line loads, eliminating the overload of transmission system elements.

Our objective is to eliminate and reduce the number of contingencies of a technical nature. This allows us to take a new approach to the maintenance process, based, among other things, on the ongoing monitoring of the dependability of core network elements with preventive replacement of network equipment providing a potential source of emergency and fault conditions. The activities are supported by systematic standardisation of network equipment and creation of storage facilities supporting quick and cost-effective necessary replacements.

The target of our efforts is to put in place reliability based maintenance and reliability based inventory management, which will involve the standardisation of network equipment for the main classes of technical equipment.

Risks to the implementation of investment projects

Disruptions in the investment project implementation process have a negative impact on the PPS operation security level – they usually lead to delays which increase investment costs and create additional risks of transmission system contingencies.

Such situations are most often caused by conflicts with the local community at the project planning and implementation stages, as well as the lengthiness of the process of determining the legal status and acquiring legal title in land for existing and new-build power lines.

In mid-2017, the implementation of an effective investment management model was well advanced both in organisational, process and methodological terms. What also provides support in this respect is new legislation, especially the provisions of the so-called special Transmission Act.

Cyber security and IT infrastructure risks

The operation of the transmission system is supervised by many specialised IT and data communication systems that may be subject to cyber-attacks by third-party individuals or entities. Such attacks pose a direct threat to the operation of those systems and the PPS, and they affect the integrity, availability and confidentiality of the company's information resources.

In order to minimise the phenomenon described above, we have implemented the Information Security Management System based on ISO27001. What provides additional support are activities of the organisational units responsible security, technical tools implemented at each level of information processing, and physical protection systems in server rooms, electrical substations and offices. Under the projects, audit and advisory work is also performed, aimed to identify gaps in the protection system in place. 

Regulatory risks resulting from possible implementation of certain EU regulations under the Winter Package

We are an active participant of the process of identifying threats related to the planned EU regulations affecting the shape, security and costs of the internal electricity market model, as well as the capacity market being introduced. Therefore, we take measures aimed to change the final solutions so as to form a framework that will contribute to the improvement of Poland's short and long-term energy security. We attach special importance to an analysis of risks related to the EC's proposals contained in the Clean Energy for All Europeans package, including constraints concerning the ability to participate in the capacity mechanisms of coal-fired generating units and the transfer of certain operator rights from the national level to the regional level.

Conditions for participation in the procedure

The award of a contract from our company can be sought by contractors who meet the following conditions:

• have formal qualifications for the conduct of a specific business or activity, where required by Polish law,
• have knowledge and experience,
• have at their disposal the relevant technical capacity and personnel capable of performing the contract,
• are in a stable economic and financial position that guarantees the performance of the contract,
• are not excluded from the contract award procedure.

98.3 percent of contractors for works and services come from Poland, 0.3 percent from the EU countries, and 1.4 percent from non-EU countries. 

Our purchasing policy is pursued in compliance with the following legal acts

• The Act of 29 January 2004 – Public Procurement Law and implementing measures to the Act.
• Guidelines on the eligibility of expenditure under the European Regional Development Fund, the European Social Fund and the Cohesion Fund for 2014-2020.
• Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors.  
• Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security.  
• Commission Interpretative Communication on the Community law applicable to contract awards not or not fully subject to the provisions of the Public Procurement Directives (2006/C 179/02).

In working with contractors and suppliers, we care about building lasting links and partner relations. Importantly, all activities carried out by contractors are performed as PSE activities and affect the perception of our company's image as an investor. Therefore, it is so important to maintain high standards and coherent guidelines on the cooperation of contractors with local communities which we take care of every day.