Renting the MDS operation – profit without worries

Author of the article Filip Choura, Electricity Distribution Manager

MDS, or local distribution systems, are used for the distribution and supply of electricity and natural gas in industrial parks, shopping malls, mixed-use and office buildings or residential zones.

To operate an MDS, it is essential that its operator has an electricity business licence, as required by current legislation. The operator may recharge its tenants (final consumers) without a permit, but without a profit. In both cases, however, the owner of the substation must ensure its safe operation, and the operating costs are far from negligible.

Often it is a more profitable solution for the owner of the substation to offer the operation of the MDS to an external company, which will take care not only of the technical provision of its smooth operation (revisions, reconstruction, modernization), but also of all the legislative obligations arising from the business.

What is the MDS?

MDS is the interconnection of power lines at different voltage levels (VVN/VN/NN) and power equipment that are necessary for the distribution of electricity. The MDS also includes all the equipment necessary for its safe operation (metering, control, signalling, communication…). In simplified terms, the MDS could be said to start at the entry point of the load boundary and end at the transfer points of the electricity to the final customers. The difference between a regional distribution system and a local distribution system is the maximum number of off-take points. In accordance with the Energy Act No 251/2012 Coll. no more than 100 000 points of consumption may be connected to the MDS.

5 reasons to look for an MDS partner

1. Necessary legal capacity of the operator and own professional team

As I mentioned above, not all substation owners have the ability to operate MDS (e.g. lack of a permit). However, it is important to emphasise that the operation of MDS cannot be technically ensured by one person and therefore it is necessary to create a professional team of people for this purpose. However, given the labour costs involved, the effectiveness of such a solution is questionable. This is also why cooperation with an external partner who has such an expert team with several years of experience is more advantageous.

2. High administrative burden – operational and legislative obligations

The operation of the MDS is associated with a heavy administrative burden. Throughout the year, the operator has to ensure compliance with a number of reporting obligations to various authorities, which are repeated daily, monthly or annually, or have a fixed deadline during the year. Failure to comply with the legislative and operational obligations is sanctioned by fines which can, in some cases, amount to tens of thousands of euros. If the operation of the MDS is outsourced to an external company, the latter contractually assumes all the risks of the business, i.e. including the aforementioned risk of fines associated with non-compliance with legislative obligations.

What are the obligations?

  • It is essential for the operator to follow the development of changes in legislation, it goes without saying to understand the legal interpretation and subsequent compliance with the mentioned obligations in practice.
  • In addition, it must report the measured electricity data to OKTE / SEPS / RDS on a regular basis (daily/monthly) in accordance with the applicable legislation.
  • As part of the certification guarantee, it must carry out the activities and registration of the points of consumption in accordance with the requirements of the SMU and supervise the timely provision of subsequent verification of the designated meters.
  • Elaboration/updating of operating rules and GTC.
  • Providing data communication management and data transfer from meters/gas meters to the information system, data processing, hardware parameterization to ensure reliable operation and many others.
  • Technical operation and digital data processing

3. Technical operation and digital data processing

The MDS consists of a number of technical devices that have a prescribed regular maintenance, in accordance with the applicable legislation. The external partner provides regular servicing or replacement of obsolete parts of the system. In addition, it remotely monitors the functionality of all equipment through the dispatching centre and ensures that the emergency standby is maintained 24/7 with the arrival of the intervention unit at a predetermined time. The operator also optimises costs through the correct setting and adherence to the input reserved capacity.

As part of digitisation, it regularly collects and processes energy consumption data through its own information systems. It provides billing to end-users and prepares the analysis of the loss balance and the annual economic analysis of the return on investment in the energy management.

4. Building MDS without equity

If you do not own the MDS, an external partner can arrange the construction of the technological equipment and distribution parts of the system for you. Specifically – HV and LV switchboards, transformers, meter switchboards, gas pipelines, natural gas control stations, HV and LV connections and other parts.

Owner’s capital is not required to construct or upgrade obsolete portions of the MDS. In case of an agreement, an external partner can provide the financial cover for the entire investment.

5. Renting MDS – profit without worries

The advantage of leasing MDS to an external operator is the profit that such an arrangement will bring to the owner. The operator pays the rent and all services related to its operation. In addition, it assumes responsibility for compliance with all legislative obligations. It is entitled to a share of the profits from the distribution and supply of energy in return for ensuring the operation. The remaining part of the profit remains with the owner of the MDS.

Why choose ENGIE Group to operate your MDS?

Because:

  • We are professionally qualified to operate the MDS.
  • We have our own expert team and nationwide coverage.
  • We are constantly monitoring legislative changes related to MDS operation and energy distribution.
  • Our administrative support teams ensure regular reporting and compliance with reporting obligations under the current law.
  • We are digitized, using our own software and an online platform for end-users with the ability to track energy consumption and billing.
  • We technically ensure the operation of MDS – maintenance, service, repairs, remote monitoring of equipment functionality, emergency…
  • We will design the project, prepare the project documentation and implement the construction or modernisation of the MDS, including pre-financing.

Moreover, due to the annual volume of our purchase orders, we are able to negotiate more favourable prices for commodities (electricity, natural gas).

As part of the MDS operation, we can provide not only distribution and supply of electricity, but also natural gas.

We have been operating on the electricity market since 2010. Since then we have implemented dozens of reference projects throughout Slovakia. We currently operate 10 different MDS, two of which are HV/LV/NN projects in the industrial parks in Senica and Velika Ida.

Are you interested in an offer?

If you are interested in learning more about the article, please fill out our Bid Form and we will contact you.

Find out more about our MDS projects:

110/22 kV transformer station Veľká Ida

110/6 kV Senica transformer station

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