Our organization has an electronic accounting workflow. This is critical for efficient handling of accounting records with a territorially dispersed PSE structure. The solution supporting the workflow of accounting documents was extended with functions enabling automatic linking of electronic invoice workflow with the ERP system (Enterprise Resources Planning).

The pandemic caused by corona virus (COVID-19) has helped to accelerate the digitization of PSE processes. In the area of the strategic course of action the digitalization and virtualization of the office, activities are implemented, as a result of which the traditional workflows are replaced by electronic ones. The conventional signature is replaced by electronic approval or e-signature, and the distribution of records is conducted through electronic channels. The digitization of processes to date has resulted in significant reductions in paper and consumables use. As much as nearly 70 percent less printer paper was used compared to the state of paper use at the beginning of the pandemic outbreak. Such activities benefit to the environment around us. Saving paper, using less printer toner and ink, and reducing the use of multifunctional devices (printers, faxes, copiers) not only adds to the financial benefits for PSE (energy savings, reduced waste generation), but also has a positive impact on the environment.

The purpose of this course of action is to implement solutions that will serve to ensure that PSE can provide the required electricity quality (JEE) parameters and, if necessary, provide the information necessary to determine the source of JEE disturbances and implement corrective measures.

The main objective of the course of action, i.e. the construction of a electricity quality management system in the NPS, will be achieved through the implementation of the following specific tasks:

• monitoring of electricity quality of all places of electricity supply to consumers and all substations of the TSO - so that monitoring covers each voltage level in at least one measuring point;
• implementation of the master electricity quality measurement and billing system (SPRJEE), which integrates measurement data from SMJEE systems and is used to process, report and make available JEE indicators and information on JEE parameters to the CSIRE system.

The electricity quality monitoring system in place (SMJEE) consists of 167 metering devices (analyzers) and covers about 39 percent of the required metering points. Implementation of the investment task entitled Extension of the electricity quality monitoring system will enable electricity quality monitoring to be carried out at all transmission grid facilities.

As a result of this task, 2 monitoring systems will be implemented, each covering 130 metering points (260 metering points in total). Upon completion of the task, monitoring of the electricity quality parameters will be carried out at a total of 427 metering points. Additionally, the implemented SMJEE systems will meet very high IT security standards and will implement a number of additional functionalities in line with the standards applicable at TSO. As part of the task implementation, in 2020 the documentation was prepared and agreed upon, and a tender procedure was announced, and in 2021 agreements with contractors were signed and implementation of works planned for the next 3 years began.

The SPRJEE system will make it possible to identify predominant sources of disturbance, determine the parties' contribution to their introduction, and determine discounts, and in the future - if regulated by law - also penalties for exceeding the level of permissible individual parameters. Implementation of the works associated with this task will begin after the IT portion of the SMJEE system is implemented as part of the SMJEE expansion.

Electricity quality management in the target system will be based on the following key systems:

• SMJEE - performing data reading from the metering devices installed in the transmission network facilities and serving for their verification,
• SPRJEE - performing the integration of data from the SMJEE systems and responsible for processing, reporting, and sharing JEE indicators and JEE parameter information with the CSIRE system.

Implementing an electricity quality management system in the NPS will bring benefits and opportunities such as:

• verification of compliance of power quality parameters with the requirements of the system regulation and other applicable regulations at all facilities,
• verification of relevance of applications, claims and notifications of end users, DSO and other NPS users concerning non-compliance with electricity quality parameters, including those related to discounts and network events,
• identification and prevention of new sources of disturbances within the completed connections of RES generators and customers to the transmission grid,
• issuing opinions on wind farm impact test reports on the power system in terms of electricity quality parameters,
• identification of causes of disturbances for electricity quality parameters and identification of the entity responsible for their introduction,
• using the collected measurement data to determine corrective measures and eliminate identified disturbances,
• collecting information on the electricity quality status to determine appropriate requirements for future connections,
• provision of data and recorded events for the evaluation of operation of the equipment in substations and switching operations within the scope of the work of the Commission for Investigation of Disturbances and evaluation of their impact on the plants of entities connected to the transmission system,
• evaluation of applied control automation systems operation - analysis of problems concerning the maintenance of voltage levels and voltage imbalance in the power system.

Cybersecurity plays ─ due to its significant impact on the security of the national power system ─ a key role in PSE's business strategy. Activities to repel external threats are carried out through projects, ongoing tasks and initiatives aimed at improving the security. They are designed to manage the risk of losing the ability to control the operation of the NPS associated with cyberattacks on the IT (Information Technology) / OT (Operational Technology) systems of the transmission system operator and distribution system operators, generators, trading companies, exchanges or industrial customers. They take into account the inevitable and interdependent nature of the cybersecurity of our Company, its market partners at home and abroad, and entities of our Capital Group and subcontractors.

The measures taken are a response to the growing threats in the cybersecurity sphere. This approach is becoming increasingly important in light of the growing use of new technologies and communication methods. Recent years have seen an increase in threats accompanying new solutions and an increase in targeted attacks using dedicated tools to carry them out, especially on critical infrastructure. Phishing attacks are also becoming more frequent and sophisticated in response to growing user awareness, and ransomware attacks (aimed at extorting a ransom under threat or after making ICT systems or the data itself unusable). The increase in attacks is also related to the current pandemic situation, and the associated increased digitization of life opens up new opportunities to exploit weak points in new solutions and reduced user vigilance.

We have identified possible directions of the situation development, the growing number of cyberthreats and specialized tools for attacking have confirmed the correctness of the assumptions made and the need to continue efforts in this area.

In 2020, the ICT Department continued the activities outlined in the ICT Strategy (Information and Communications Technology) of the PSE Capital Group adequately and on time, building a portfolio of actions necessary to manage defined risks and current needs (including in the context of a pandemic). The pillar of the undertaken activities was ICT security, i.e. business continuity understood as availability and resilience of systems as well as integrity and confidentiality of data in IT solutions.

Key action areas and projects implemented in 2020:

• Network segmentation – projects aimed at ensuring adequate separation of resources with different levels of vulnerability, including ICT systems at the substations and central critical systems - both through actions at the level of technological standards (e.g. EAZ, SSiN), ICT architecture, high-level technical projects for rebuilding ICT network segmentation and appropriate shaping of business projects, and at the level of infrastructure itself;
• Workstation – projects that provide secure work tools to maintain performance and functionality according to business needs, with malware protection and control of permissions and data flow;
• Internet interface – a solution providing our employees and guests with functional and unified access to the Internet (including through a secure WiFi network, implemented both in the company's headquarters and in remote organizational units), taking into account the principles of separation and permission management as well as adequate and secure remote access.
• Detection and Response – To ensure ongoing IT security, a dedicated Security Operations Center (SOC) team performs 7/24 threat monitoring, taking applicable actions and countermeasures for both IT and OT network incidents. Another support line is the Computer Emergency Response Team (CERT), which was established in 2016, obtaining relevant certifications in subsequent years, thereby confirming that it meets the highest standards of operation. An important element of this direction is raising employees' awareness, publishing alerts and warnings about threats, reporting information about incidents and cooperation with external entities in the area of ICT security (including CERT NASK, CERT.GOV.PL, RCB).

The above technical actions and the organizational capacities for change at PSE allowed us to enter the pandemic period with minimal disruption - remote working could be implemented immediately. After the analyses, the missing elements were supplemented by purchases or processes were modified so that they could be implemented without the need for 80 percent of employees to be present in the offices.

As part of the measures undertaken we adapt organizational and technical solutions to legal requirements (Act on the National CyberSecurity System) and current ICT security standards, as well as industry standards.

Collaboration

We are working with our stakeholders to ensure an appropriate level of collective ICT security and to harmonize our efforts. We work in agreement with entities responsible for the cybersecurity of the power sector both domestically and internationally. To deepen this cooperation and to spread awareness of cybersecurity threats and jointly establish approaches to combat them, we actively participate - in 2020 mainly remotely - in numerous conferences and seminars as well as national and international sector cooperation forums. As part of ICT security promotion and enhancement of cooperation in the energy sector, since 2018 we have been organizing PolEx/Cyber Conference For Energy Sector (CC4ES) conferences with the participation of national and international industry experts. In June 2021, despite the difficulties associated with the pandemic, PSE organized another edition of CC4ES, ensuring continuity of experience and knowledge sharing with industry partners.

An important activity of CERT PSE is cooperation with the Ministry of Climate and Environment to run the CyberSecurity Team (ZCMK), which was created for the pandemic time. Its idea is to effectively support the crisis management system for organizations in the power sector in the field of CyberSecurity.

A key forum for international cooperation is the European Network of Transmission System Operators for Electricity (ENTSO-E), under which PSE representatives are involved in projects aimed at ensuring energy security in Europe, developing new solutions, concepts and rules for critical infrastructure. In doing so, they are active in various ENTSO-E working and project groups, including:

• Digital committee Cyber Security Task Force – the team responsible for ENTSO-E's cybersecurity strategy, led by the Director of PSE's ICT Department;
• ENTSO-E Cyber Security Working Group – a group that deals with ICT security issues. Its task is to monitor information about threats in the world and to cooperate in projects where it is necessary to take care of safety and shape rules for safe operation of systems and operators;
• Network Code for Cyber Security Regulation Development Working Group;
• ENTSO-E Working Group EDI (Electronic Data Interchange) – a group that has developed standards for electronic information exchange in the European electricity market.

PSE members also join the work of other groups, supporting them with their competence in the areas of IT interconnection management and designing future solutions that will be created to meet the growing needs of operator systems and the market. As part of this work, concepts are developed for new connections for data exchange between transmission system operators and existing connections are developed. Cooperation in these groups has a significant impact on the security and stability of the power systems in Europe. It also helps to improve staff competence and support partners in this process and fosters the exchange of knowledge and experience. Thanks to this activity, our employees have an impact on the formation of global standards in the field of IT security of industrial systems, as well as significantly improve their competence in this area. It also helps to more easily adapt the ICT environment to meet growing security requirements and improve resilience to threats.

In order to optimally maintain the network assets in a manner that anticipates the occurrence of failures and ensures high availability of the transmission grid, a project was launched to update the network asset management tools (Asset Management system). The project assumes future implementations of algorithms supporting the process of predicting and responding to needs based on cyclic device diagnostics. The planned update date is late 2021.

In 2020. PSE incurred expenditures of approximately PLN 1.1 billion for investment tasks. Major tasks completed by December 31, 2020 included:

• Construction of the Żydowo Kierzkowo - Słupsk 400 kV line,
• Construction of the Jasiniec - Grudziądz Węgrowo 400 kV line,
• Construction of a 400 kV line along with the change in the LV network system between Warsaw agglomeration and Siedlce (between cuts of the Stanisławów - Narew line, the Stanisławów - Siedlce Ujrzanów line, the Kozienice - Siedlce Ujrzanów line) - the line was commissioned (the conflict still needs to be altered),
• Construction of the Gdańsk Przyjaźń - Żydowo Kierzkowo 400 kV line with one circuit introduced to the Gdańsk substation (at voltage of 220 kV),
• Construction of the Mikułowa - Czarna 400 kV line,
• Modernization of the Kozienice - Rożki 220 kV line,
• Modernization of the Krajnik - Vierraden 400 kV line in order to adjust it to increased power transmission,
• Extension of the 400/220/110 kV Mikułowa substation for connection of the power unit No. 11 at the Turów Power Plant,
• Extension of the 220/110 kV Jasiniec substation with a 400 kV switching station,
• Extension and modernization of the 400/220 kV Krajnik substation,
• Extension of the 220 kV switching station at the 220/110 kV Piaseczno substation,
• Extension of of the 400/220/110 kV Wielopole substation for connection of 400/110 kV auto-transformer,
• Extension of the 110 kV switching station at the 400/110 kV Mościska substation for connection of 110 kV line of PGE Dystrybucja SA.

This course of action will become active following the establishment of the Energy Market Information Operator (OIRE) within PSE and the launch of the Central Energy Market Information System (CSIRE). Experience from the operation of CSIRE and the use of its functionality by external stakeholders will be able to form the basis of analytical and conceptual work aimed at defining value-added services provided by PSE acting as OIRE and using aggregated data.

The Company implemented a transparent commitment verification model to streamline and seal the process by transferring contracts, annexes and orders for cost liabilities to the SAP system in the form of contracts. Mechanisms for cyclical monitoring of financial utilization of contracts have also been implemented, which increases control over the company's outflows.

On January 1, 2021, we implemented Stage I of the balancing market (RB) reform in accordance with the document published on May 20, 2020 on the website of the Ministry of Climate ─ Polish Implementation Plan. Comprehensive implementation of these changes in the balancing market rules required adjustment of implementing acts to the Energy Law, i.e. Ordinance on detailed conditions for the operation of the power system, balancing conditions, Instruction of the Transmission System Operation and Maintenance, and adjustment of agreements between PSE and system users. The operationalisation of the changes of the first stage of the RB reform required significant changes in the IT systems of our company as well as, to a lesser extent, in the IT systems of the balancing market participants.

On the domestic front, the implementation of Stage I of the balancing market reform coincided with the full launch of the capacity market. This required adaptation of the processes of coordination planning and operation of the national power system and the information systems supporting their implementation. The implementation of the new coordination planning processes required by the capacity market and the balancing market has been carried out together with the implementation of new data exchange rules in accordance with Commission Regulation (EU) 2017/1485 of August 2, 2017 laying down guidelines for the operation of the electricity transmission system, which in terms of exchange of structural and planning data imposes new obligations on TSOs, electricity distribution system operators and significant network users.

Along with changes to operational processes and supporting IT systems, security requirements were implemented for newly built systems to reduce the possibility of a successful cyberattack on PSE's digital assets. This work included: division of IT architecture into security zones to ensure adequate security level of particular systems and applications used for accomplishing the tasks of TSO and creation of new runtime environments to build and test IT tools for TSO.

In addition to the implementation of Stage I of the balancing market reform and the full launch of the PSE capacity market, a number of European projects were implemented, including those resulting from the implementation of Commission Regulation (EU) 2015/1222 of 24 July 2015 laying down guidelines for capacity allocation and congestion management, Commission Regulation (EU) 2017/2195 of 23 November 2017 laying down balancing guidelines, and the implementation of the market coupling mechanism in the day-ahead market for the synchronous boundaries of the Polish market area. In 2020, the business capabilities in this area were achieved in: (i) handling of explicit allocation in the intra-day market at the Slovak border, (ii) LFC regulation in compliance with the Imbalance Netting rules (connection of NPS to the IGCC platform), (iii) publication of data on the ENTSO-E information platform using international EIC codes, and (iv) readiness to handle metering and settlement data for the purpose of interconnection exchange with a 15-minute resolution. As a result of intensive works in 2020, the functionality to support multiple NEMOs in the Polish market area (Multi-NEMO Arrangement - MNA) was launched on February 9, 2021.

Parallel to the implementation works carried out in 2020, pre-implementation works were carried out related to the launch of two projects of capital importance for the processes related to managing the operation of the NPS. The first one, scheduled to go live in the second half of 2021, is the purchase and commissioning of a new SCADA/EMS (Supervisory Control And Data Acquisition/Energy Management System). The objective of the project is to equip the dispatching services of PSE with IT tools enabling effective performance of tasks in the area of NPS operation, including monitoring of the system operation status, identification of threats to the operation of the NPS system, remote control of network facilities, exchange of real-time data with other transmission and distribution system operators. The system will be equipped with advanced EMS computational tools, performing tasks related to the execution of NPS safety analyses in real time and in the study mode on the basis of telemetric measurements derived from the SCADA subsystem.

Outage Planning Coordination (OPC) and Short-Term Adequacy (STA) are two of the five mandatory services provided by Regional Security Coordinators (RSCs) and Transmission System Operators (TSOs) for electricity under the European Commission regulation establishing guidelines for the operation of the electricity transmission system. They are intended to increase the operational security of Europe's power system. In March 2020, an IT tool was launched that enables Regional Security Coordinators (RSCs) and Transmission System Operators (TSOs) to coordinate Outage Planning (OPC) on a weekly basis and System Sufficiency Assessment (STA) on a weekly horizon.

In 2020, the Outage Management System - Outages solution design was developed as part of the Fundamentals Phase (OMS-W) and proceeded to the Evolutionary Development Phase (Increment 1). OMS-W will be a system for management of unavailability of power system elements, implemented on a modern IT platform due to the fact that the current system (SEW "Register") was created more than 20 years ago and in the long run, it is no longer possible to continue its operation, e.g. due to changing environmental conditions (e.g. new versions of MS Office packages or operating systems) or new challenges faced by PSE (e.g. international coordination of outages within the OPC process). The OMS-W system is therefore intended to replace the SEW system currently in use and will use the data on NPS system elements contained in the RBES database. In the OMS-W, the direct notifying parties of outage needs of NPS elements will be the respective OU in DE, CIU and DSO. At the PSE level, the OMS-W will be the next step towards future integration of the corporation's outage planning processes (with the AM system). Ultimately, the system will be equipped with a support module for the Shift Management sub-process (integrated with the OMS-R and OMS-OS system) and will have an additional module allowing for the creation of operating systems assigned to individual outage requests in the NPS.

In accordance with Commission Regulation (EU) 2015/1222 of July 24, 2015 establishing guidelines for capacity allocation and congestion management and Regulation (EC) 714/2009, a new methodology (FB) has been adopted for the designation of parallel exchange capacity in the Day Ahead horizon. In 2020, testing of the new capacity determination method was underway, as well as work to develop the tools needed for the productive deployment of the method on both the PSE and RSC sides.

In view of the implementation of the capacity market, the implementation of data exchange with network users in compliance with the requirements of the Grid Codes, the modernization and construction of systems supporting the area of coordination planning, the level of detail of acquired and processed data increases significantly, while ensuring its completeness and correctness.

The realization of the above, as indicated by examples of implementations at operators in the USA and Europe which are facing similar challenges, is possible through the use of NMMS.

On the basis of this system, adequate business processes related to structural data management will be defined and implemented according to SO GL requirements. This will achieve a coordination planning business capability based on a unified, centrally managed network model that is compliant with the CIM standard. Activities in this area are also necessary due to PSE's participation in the processes of Regional Security Center/Regional Coordination Center.

NRegardless of the ongoing activities undertaken in the organization as part of the risk management, PSE is engaged in tasks aimed at proper and timely implementation of the provisions of Regulation (EU) 2019/941 of the European Parliament and of the Council of June 5, 2019 on emergency preparedness in the electricity sector and repealing Directive 2005/89/EC.

The purpose of the aforementioned regulations is to implement measures aimed at preventing electricity crises, preparing for them and managing them in a transparent manner and with full regard to the requirements of a competitive European electricity market.

It defines an electricity crisis as an occurring or unavoidable situation:

• a significant electricity shortage identified by Member States and described in their emergency preparedness plans
  or
• inability to supply electricity to customers.

In order to ensure the implementation of the tasks resulting from the aforementioned regulations, a task force was established on January 28, 2020.

Following the definition by ENTSO-E of 31 regional power crisis scenarios the company evaluated the probability of their occurrence and the impact of their materialization in Poland. A summary of the assessment was provided to ENTSO-E.

PSE, in collaboration with the Ministry of Climate and Environment, participated in defining national scenarios for the electricity crisis. Out of 31 RKEE scenarios, 28 were found to be adequate and relevant to Polish conditions.

PSE is also involved in the work, carried out by the Ministry of Economy, to develop a national emergency preparedness plan for the electricity sector (its preparation is an obligation under Regulation 2019/941).

The implementation of solutions that make the records of fixed assets in 3 dimensions more consistent is part of a broader transformation, the primary goal of which is to create system solutions that use IT to support business processes. The development of IT tools to support the area of fixed assets will streamline and optimize operational activities related to the recording of accounting documents.

The fundamental objective of transmission grid development planning is to develop such a time and task schedule for the implementation of investment activities that, when completed, will allow the NPS to continue to operate in a reliable and economically justified manner in the future. The direct effect of development activities is to ensure a balanced development of the transmission infrastructure which, on the one hand, will increase the efficiency of the market by reducing the impact of technical constraints in the transmission network and, on the other hand, will not lead to an overinvestment in the transmission infrastructure and the creation of unjustified financial burdens for system users.

The extent of required investment in transmission infrastructure depends on a number of external factors, such as demand, supply, and economic and socio-political conditions, among others. Some of these factors are by their nature random. In the current realities of power system operation, there is an increasing demand to incorporate a probabilistic element in the grid development planning process that will allow a more accurate representation of the environment than with the deterministic approach used to date.

On the one hand, probability analyses better reflect reality, but on the other hand, they are characterized by a higher degree of complexity and time-consuming calculations. With this in mind, PSE recognized the need to develop a dedicated tool that would incorporate probabilistic elements into the transmission development planning process while doing so in an efficient manner. As a result of identifying the above mentioned need, a functional concept was developed, and then an IT tool called aPRSP was created. This tool is primarily designed to assist planners in selecting the most cost-effective schedule for implementing network investments while taking into account random factors affecting power system operations.

The aPRSP tool works in two stages. The first stage is the automatic identification of candidates (potential investments consisting of the construction of new or the modernization of existing network infrastructure elements), during which the potential market profits resulting from the construction of a new network element and the capital expenditures to be incurred are compared in a simplified manner. This stage analyzes a virtually unlimited number of candidates but allows the most promising solutions to be quickly identified for more detailed analysis. In the second stage, the narrowed candidate list forms the basis of the actual optimization process. The process is intended to determine the time and task schedule for the implementation of investment activities that minimize the total investment costs and the costs of market operations, while ensuring that the criteria for the safety of system operation are met.

PSE has its own aircrafts and a permit from the President of the Civil Aviation Authority to conduct high-risk operations for profit. Market analysis indicates that there is demand from other concerns and companies, including energy and raw material distributors and suppliers, to use aircrafts to monitor the infrastructure condition. PSE has the organizational and infrastructural potential to provide aerial monitoring services of transmission and distribution infrastructure facilities, including critical infrastructure belonging to other entities.

We have started activities to prepare for the current situation already in October 2019. PSE formed an organizational unit in the Department of Security called the Aerial Operations Support Division to prepare for and implement self-performed aerial operations. We purchased 3 new Robinson R66 helicopters, the parameters of which perfectly match the needs of our company, and additionally met the conditions for low purchase and operating costs. The preparatory work was completed at the beginning of 2021, and since February 5, 2021, we have been given the permit PL.SPO.058-HR by the President of the Civil Aviation Authority to carry out commercial high-risk specialized operations. This permit allows to patrol substations, power poles and lines, gas pipelines, other pipelines, and to fly for site inspection and strategic security patrol of the power infrastructure. We employ trained, experienced pilots and task specialists. Helicopters and crews are based in 3 locations around the country, allowing for quick access to all of the power lines. The aerial operations we have carried out have confirmed the high efficiency and speed of transmission infrastructure inspections.

Increasing the number of aircrafts and purchasing helicopters with more favorable maneuvering parameters will allow to: execute more complex aerial operations, use specialized on-board monitoring and reconnaissance equipment, expand tasks in the sphere of security performed in the situation of transmission line failures and unauthorized violation of power substation borders. The increased number of helicopters will enable an increase in the scope of tasks to include, among other things, inspection of the condition of investments and analysis of the terrain during the design and delineation of new lines. Increasing our aerial equipment resources will result in faster arrival of our specialists to failure/outage sites and enable faster response to the incident, thus reducing the time of power outage.

Following the extension of the transmission network for the connection of offshore wind farms (OWF) and HVDC Harmony Link, works were completed on the concept of operating the transmission network in the area of northern Poland (ZKO Bydgoszcz area). According to PSE's strategy, the company is to build its own operating services in the area, which will make our operations partially independent of the external market.

The concept of the transmission network operation assumes, among others, the establishment of the OWF/HVDC Division and defines the scope of the main tasks for this team. In order to provide the employees of the new Department with the necessary conditions and tools to perform their tasks, the company started reviewing office suits in the Trójmiasto area in order to select several preliminary locations. The team carrying out this task visited and reviewed the office suits. Technical analyses were also conducted dedicated to verifying the degree to which the selected office suits meet PSE standards. The next step will be to gather lease or sale offers on the selected office suits and analyze the cost of retrofitting and arranging to meet PSE standards.

All these activities are aimed at ensuring the possibility of operating the transmission network in the area of northern Poland (the area of ZKO Bydgoszcz) after the extension of the transmission network for the connection of offshore wind farms (OWF) and HVDC Harmony Link. The initiative to create and develop our own engineering and technical services, especially in the execution of the most complex tasks - installation and commissioning of secondary circuits of power substations and HVDC technology facilities - will allow us in the future to effectively manage the operation of facilities and incidents, i.e. efficiently remove faults and failures.

Polskie Sieci Elektroenergetyczne was established by the Act of May 20, 2021 on amending the Energy Law and certain other acts (Journal of Laws, item 1093) to act as the Energy Market Information Operator (OIRE), which will implement the Central Energy Market Information System (CSIRE) and will be responsible for supervising its operation.

To this end, the company is continuing the project to build and implement CSIRE - a centralized system for obtaining, collecting, processing and sharing electricity market information (including metering data), and is preparing to establish OIRE. Under the provisions of the Energy Law, CSIRE is expected to be launched in mid-2024. PSE - acting then as OIRE - will be responsible for managing CSIRE, including in particular for maintaining, operating and developing the information system.

As part of the OIRE Project, at the end of 2020 PSE announced a public procedure in the mode of negotiations with notice for the development, implementation and deployment of a central electricity market information system with supporting services. An ongoing procedure will result in the selection of a contractor for the system.

In Q4 2020 and Q2 2021, we published draft Central Energy Market Information System (SWI) Information Exchange Standards on the PSE website. Ultimately, the proposed document will define, among other things, how retail electricity market processes are to be conducted, communication rules, and the scope of information exchanged between individual market participants via CSIRE. It will also describe the model of roles and market participants and identify recommended scenarios for using the processes to achieve the goals of energy market actors, particularly electricity consumers. The Energy Market Information Exchange Standards will be approved by the President of the Energy Regulatory Office as part of the Transmission Network Code.

Works on the draft SWI have been carried out with respect to the opinions expressed by market participants, with whom PSE continues to cooperate within the Team working under the Minister of Climate and Environment, as well as in working groups established by PSE. The main addressees of the SWI are entities operating professionally in the retail electricity market. Implementation of the document will provide professional users - e.g. distribution system operators (DSOs) and energy sellers (ES’s) - with the possibility of communicating using standardized messages and executing business processes in a standardized manner.

The implementation of the OIRE project aims to achieve the objectives of the retail market stakeholders and the obligations indicated in the legislation, in particular to ensure an effective and secure exchange of information in the area of the retail electricity market, covering the acquisition, storage and sharing of energy market information (including metering data). The operation of OIRE and the functioning of CSIRE will support the implementation of statutory rights and obligations of individual entities operating in the retail electricity market. CSIRE will process, among other things, information on contracts functioning in the retail market and metering data from electricity meters. The processed information will be used to carry out processes such as changing the seller of electricity and making settlements for its sale and supply. With the launch of the system, energy market processes, including the switching of electricity sellers, will be simplified and their implementation time will be shortened.

In order to meet the dynamic changes in the functioning of the electricity market and the expectations of the stakeholders, the company undertakes a number of actions aimed at optimizing the process of acquiring input data necessary to develop and approve tariffs.

At the same time, in order to protect customers from excessive or abrupt increases in fee rates, work is underway to implement a cost adjustment account mechanism.

One of the superior goals of the PSE Strategy is preparedness and business continuity. The crisis caused by the SARS-CoV-2 virus pandemic poses additional challenges for PSE and has influenced the reformulation of priorities for the coming years. Accordingly, the company has decided to develop a supplement to the 2020-2022 Strategy. The document identifies 6 challenges and 8 strategic objectives.

The purpose of this course of action is to develop new rules for managing financial securities in the balancing market, which are planned to be implemented as part of Stage II of the balancing market reform. In the wake of new formal and regulatory conditions, there was a need to implement a new ICT tool to handle the above mentioned process.

The year 2020 was the last period of operation of the energy market in its current form (the first changes as part of the balancing market reform were implemented as of January 1, 2021). Measures have been taken to protect customers against excessive or abrupt increases of fee rates in subsequent tariffs, while mitigating the risks associated with deviations of revenues and costs from the planned figures included in the calculation of tariffs approved by the President of ERO.

As part of the cooperation with DSOs and public administration, principles were developed for the functioning of the mechanism of the so-called adjustment account, covering adjusted revenues of companies providing electricity transmission and distribution services. It consists in recovering in subsequent years the uncollected revenues or giving back the surplus of revenues obtained from the application of tariff rates in relation to the planned values, while maintaining the specified maximum level of variability of tariff rates in subsequent years.

The Company actively participated in the legislative process of agreeing on the mechanism and subsequent implementation of the agreed adjustment account model into regulations. The agreed provisions regarding the revenue adjustment account have been included in the Regulation of the Minister of Climate and Environment of November 13, 2020 amending the Regulation on the detailed rules for shaping and calculating tariffs and settlements in electricity trade.

In 2020, PSE also developed a concept for a model of the so-called cost adjustment account, which was submitted for consultation to the Energy Regulatory Office.

Member States were obliged - under the provisions of the Directive (EU) of the European Parliament and of the Council of June 5, 2019 on common rules for the internal market for electricity and amending Directive 2012/27/EU (hereinafter: Directive 2019/944) - to implement a mechanism for obtaining flexibility services from the distribution network and frequency independent services. This is aimed, among other things, at reducing the risk of blackout, as thanks to the increased participation of system users connected to the distribution network in the provision of system services and balancing of the NPS, system operators will have a wider range of options to ensure secure operation of the power system.

In 2020, the implementation concept for flexibility services and frequency-independent services provided by system users was developed, as well as proposals for appropriate provisions of legal regulations implementing the provisions of Directive 2019/944. The work took place with the participation of representatives of the Ministry of Climate and Environment, the Energy Regulatory Office and distribution system operators. In 2021, comments were prepared on the proposal to implement Directive 2019/944 (draft amendment to Law No. UC74) proposed by the Ministry of Climate and Environment.

At the same time, as part of the implementation of works related to broadly defined flexibility services, PSE joined the OneNet international research and development project, which received EU funding. The objective of the project is to formulate the execution concept for the project works and its implementation, with particular focus on the Polish demonstrator, i.e. to define, test and demonstrate the procurement of services from flexibility sources that can be used in the future to support network management by system operators. The OneNet project began on October 1, 2020 and will run through September 30, 2023. The products which PSE is interested in purchasing on a test basis from entities connected to the MV and LV distribution network have been identified.

In view of the possible effects of the COVID-19 pandemic, the company's investment plans for 2020-2024 were reviewed in terms of the business case for investment projects, in particular:

• addressing regulatory requirements (including CEPs and network codes),
• necessary for effective connection of new entities,
• supporting the transformation of the national electric power industry,
• providing remote control of NPS devices.

As part of the analysis of investments in the expansion and modernization of the national transmission network, a number of parameters defining the status of their implementation, their objectives, and the consequences of possible abandonment were determined. A 3-step verification was carried out where the necessary criteria were identified taking into account their relevance to the operation of the National Power System. All investments were also verified in terms of validity of business rationale and compliance with the course of actions defined in the Strategy of PSE S.A. for 2020-2030. The results of the analysis confirmed the rationale for the PSE capital tasks planned for 2020-2024.

The PSE’s development plan assumes dynamic expansion of the northern part of the NPS in terms of new transmission lines and links and new couplings between the transmission network and the distribution network. This is due to the currently anticipated system conditions, in particular the forecast increase in power demand and the planned connections of new generation sources and customers to the power grid. The above conditions result in the need to strengthen the capacity to regulate voltages in the northern area of the country. System analyses performed at PSE indicated that it is reasonable to install shunt reactors at the following substations within the next 5-7 years: Żydowo Kierzkowo, Gdańsk Przyjaźń, Dunowo, Baczyna, Pelplin, Gdańsk Błonia. The purpose of the installation is to maintain acceptable voltage levels occurring, among others, in the conditions of NPS load valley at low generation of wind power plants, without the necessity of switching off low-load EHV lines.

Based on the provisions of Regulation (EU) 2019/943 of the European Parliament and of the Council (EU) of June 5, 2019, by Decisions 23/2020 and 24/2020 of October 2, 2020 the ACER has enacted methodologies for determining the size of the VOLL, CONE and RS indices and for carrying out a resource adequacy assessment at the European level.
Methodology for determining VOLL, CONE and RS

The methodology provides guidance for determining the indices:

• VOLL (Value of Lost Load) – which determines the cost of a new unit going into effect. This index measures the alternative cost of acquiring capacity by building the generating unit with the lowest operating and capital fixed costs.
• CONE (Cost of New Entry) – określającego koszt wejścia w życie nowej jednostki. Wskaźnik ten określa alternatywny koszt pozyskania mocy poprzez budowę jednostki wytwórczej o najniższych operacyjnych i kapitałowych kosztach stałych.
• RS (Reliability Standard) – which defines the level of safety standard in the power system. The safety standard under the methodology is fundamentally determined as the ratio of the cost of entering a new unit to the designated value of energy not served. The standard is set in the form of the LOLE index.

ERAA Methodology

The methodology provides guidelines for conducting resource adequacy assessments at the European level (ERAA - European Resource Adequacy Assessment) based on a probabilistic approach. Analysis of its performance will be done on the basis of indicators:

• the expected amount of energy not served (Expected Energy Not Served – EENS),
• the expected time of power outage (Loss of Load Expectation – LOLE).

The ERAA will be based on, among other things, relevant central reference scenarios, electricity supply and demand forecasts, and an economic assessment of the probability of decommissioning generation assets, their temporary closure and the introduction of new generation assets.

Methodologies for foreign capacity participation in capacity mechanisms

ACER Decision No. 36/2020 of December 22, 2020 establishes the methodologies defining the rules for the participation of foreign capacities in Member States' capacity mechanisms. The scope of methodologies includes:

• determining the maximum generating capacity that can be used for the participation of foreign units in capacity mechanisms;
• revenue sharing from capacity allocation;
• rules for conducting availability checks on foreign capacity suppliers;
• the terms and conditions for charging an unavailability fee;
• rules for maintaining the European register of capacity suppliers;
• rules for identifying units eligible to participate in the various capacity mechanisms.

The methodologies are the first step towards a pan-European framework for cross-border participation in capacity mechanisms. Their goal is to ensure equal treatment of all entities participating in capacity mechanisms, regardless of their location. The content of the methodologies should be taken into account in both existing and planned to be introduced capacity mechanisms.

The company has made changes to streamline its financial and settlement processes. A systematic management of accounts receivable carried out by a dedicated team has been implemented, as well as cyclical monitoring of upcoming liability payment dates. The processes of account verification and settlements have also been improved.

As part of this course of action, set out in the business strategy for 2020-2030, a Team Availability Model (MDZ) has been developed to determine the required levels of redundancy for key teams in the company, ensuring business continuity also in emergency conditions.

The benefits of the above work include, among others, support for shaping the work organization and hiring plan in a way that ensures operation continuity of key teams, taking into account random events beyond the company's control and their possible impact on the availability of key team staffing.

In January 2020, the PSE Board of Directors established a Crisis Team to implement preventive actions and respond to the current situation related to the spread of corona virus (SARS-CoV-2). The Team's activities consisted, in particular, of monitoring risks and proactively implementing changes in the work organization, work planning and provisioning to minimize risks to the safe operation of the NPS. The Team also developed guidelines and procedures to minimize the risk of spreading the SARS-CoV-2 virus among employees and, if infections occur, to limit their impact on the company operations.