An Overview of Current Cross-border Congestion Management ... · Congestion Management which entered the Comitology Procedure for final adoption on January, 25, 2006. The document

An Overview of Current Cross-Border Congestion Management Methods in Europe

May 2006 1 / 31 ETSO

An Overview of Current Cross-border Congestion Management Methods in Europe

ETSO, May 2006


May 2006 2 / 31 ETSO

Table of Contents

I. SCOPE.......................................................................................................................................................... 3 II. CURRENT IMPLEMENTATION OF CONGESTION MANAGEMENT IN EUROPE................. 4 III. CURRENT CROSS-BORDER CONGESTION MANAGEMENT IN EUROPE:

DESCRIPTION OF EACH INTERCONNECTION............................................................................ 11 1 CENTRAL EASTERN – 5 TSO AUCTION.......................................................................................... 11 2 CONGESTION MANAGEMENT IN THE NORDIC REGION........................................................ 12 3 BORDERS OF THE NETHERLANDS – TSO AUCTION OFFICE................................................. 12 4 AUSTRIA................................................................................................................................................... 12 5 BELGIUM.................................................................................................................................................. 14 6 CZECH REPUBLIC................................................................................................................................. 14 7 DENMARK................................................................................................................................................ 15 8 FINLAND................................................................................................................................................... 16 9 FRANCE .................................................................................................................................................... 16 10 GERMANY................................................................................................................................................ 19 11 GREECE .................................................................................................................................................... 21 12 HUNGARY ................................................................................................................................................ 21 13 ITALY ........................................................................................................................................................ 22 14 THE NETHERLANDS............................................................................................................................. 24 15 NORWAY .................................................................................................................................................. 24 16 POLAND .................................................................................................................................................... 24 17 PORTUGAL .............................................................................................................................................. 25 18 SLOVENIA................................................................................................................................................ 26 19 SPAIN ......................................................................................................................................................... 26 20 SWEDEN.................................................................................................................................................... 28 21 SWITZERLAND....................................................................................................................................... 28 22 UNITED KINGDOM................................................................................................................................ 29 IV. REFERENCES.......................................................................................................................................... 31 V. APPENDIX: MAIN FEATURES OF THE CURRENT CROSS-BORDER CONGESTION

MANAGEMENT METHODS IN EUROPE ......................................................................................... 32


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I. Scope The Regulation 1228/2003 of the European Parliament and the Council of 26 June 2003 on “Conditions for access to the network for cross-border exchanges in electricity” clearly states that the implementation of market based congestion management methods are preferred and should be in force no later than the 1st of July 2004. In this Regulation, the European Commission has laid down preliminary guidelines for the implementation of cross-border congestion management method that should include “non-discriminatory market-based solutions that give efficient economic signals”. In the end of 2005, the EU-Commission provided a new draft for Guidelines on Cross-Border Congestion Management which entered the Comitology Procedure for final adoption on January, 25, 2006. The document at hand has the three following objectives:

- Present an overview of the methods and processes currently in application in the European interconnections for transfer capacity allocation and congestion management.

- Describe the main features of each one of those methods, and analyse whether they comply or not with the criteria expressed in the Regulation 1228/2003 of the European Parliament and the Council of 26 June 2003 and its Guidelines.

- Provide some information regarding the works (in progress or foreseen) for modifying or substituting the methods currently applied, especially those not complying with the Regulation 1228/2003 and/or its Guidelines to some extent.

The main part of this document is a comprehensive overview of the methods currently in use in most of the European interconnections (in the forms of a map, a comparative table and a description by country). Further extensions shall cover the south-east European countries as well as the Baltic region. Descriptions of current developments in new capacity allocation methods are not in the scope of this paper.


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II. Current implementation of congestion management in Europe The following two graphs show the currently implemented congestion management methods in Europe. Graph 1 shows the allocation in the day-ahead timeframe Graph 2 shows the longer term timeframe, i.e. allocation resp. hedging products for month, quarter of a year, year. Two arrows appearing in the same sense of allocation in a certain interconnection mean that, for that interconnection in that allocation sense, there is not a unique capacity allocation method or congestion management mechanism jointly applied by the two TSOs involved. Underlying transparent rectangles indicate a joint allocation by more than two TSOs. The rectangles‘ colours have no relation to the CM method applied.


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F

IRL

B

NL

CH A

DL

DK (E)

S FI

N

Pl

CZ

SK

H

DK (W)

SL

UK

IP EG

MO

R

Day ahead allocation

graph 1: day-ahead allocation method

COLOURS CODE

Access limitation

Priority list

Pro-rata

Explicit Auctions

Implicit Auction

See section 17.2.1

See section 18.2

See section 19.2.1

No congestion

Legal framework different from EU


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F

IRL

B

NL

CH A

DL

DK (E)

S FI

N

Pl

CZ

SK

H

DK (W)

SL

UK

IP EG

MO

R

Long term allocation/hedging tools

graph 2: long term allocation/hedging

COLOURS CODE

Pro-rata physical transmission rights

Explicit Auctions of physical trans-mission rights

Financial Contracts for Difference

Auction of financial transmission rights

See section 18.2


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A detailed description of each individual method, including the existing particularities for each case, is provided in section III, ‚Current cross-border Congestion Management in Europe: Description of each interconnection.‘ The following Table gives an overview over the borders dealt with in more detail in the descriptive section III of this document.

Table I: Congestion management methods in Europe (by country)

COUNTRY INVOLVED INTERCONNECTIONS

COORDINATED WITH THE

OTHER TSO

JOINT WITH THE

OTHER TSO

METHOD TIME FRAMES*

CENTRAL EASTERN 5

TSO

CZECH REPUBLIC GERMANY

(Vattenfall, E.ON) POLAND

SLOVAKIA

Yes Yes Explicit Auctions Y, M, D

NETHERLANDS (TSO Auction)

BELGIUM GERMANY

(RWE, E.ON) NETHERLANDS

Yes Yes Explicit Auction (TSO Auction

Office) Y, M, D

NORDIC REGION

DENMARK (East & West)

FINLAND SWEDEN NORWAY

Yes Yes Market Splitting

D, I (In and between DK-E,FI and SE)

TIRAG (internal) Yes Yes no congestion

VKW-UNG (internal) Yes Yes no congestion

CZECH REPUBLIC Yes Yes Explicit Auction Y, M , D

GERMANY no congestion

HUNGARY Yes Yes Explicit Auction Y, M, D A: Explicit

Auction Y, M , D ITALY Yes

(50% split) No I: implicit auction1 D

A: Explicit Auction Y, M , D

SLOVENIA Yes (50% split) No SI:

prorata/explicit (see section

18.2.1)

AUSTRIA

SWITZERLAND Yes Yes Explicit Auctions M, D

FRANCE see ‚France‘ BELGIUM

NETHERLANDS see ‚Netherlands (TSO Auction)‘

CZECH GERMANY see ‚Central Eastern 5 TSOs‘

1 Upon Italian Regulator’s mandate and with reference to the Italian part of ATC, the Italian TSO has auctioned Financial Transmission Rights (FTRs) aiming at hedging the risk of volatility of the day-ahead differential price between each “virtual” market zone, representing one of the Italian neighbouring countries, and the zone of the Italian market adjacent to said virtual zone. TERNA assigns FTRs to hedge risk of differential price for both import direction to the Italian system (CCCI, assigned on a yearly basis) and export direction from the Italian system (CCCE, assigned on a monthly and/or weekly basis).


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OTHER TSO

JOINT WITH THE

OTHER TSO

METHOD TIME FRAMES*

POLAND SLOVAKIA REPUBLIC AUSTRIA see ‚Austria‘

GERMANY see ‚Germany‘ DENMARK NORWAY

SWEDEN see ‚Nordic Region‘

NORWAY SWEDEN see ‚Nordic Region‘

FINLAND RUSSIA Yes Yes Access Limitation Y

BELGIUM Yes Yes Explicit Auction Y,M, D

GERMANY Yes Yes Explicit Auction Y, M, D F=>IT: Explicit

Auction (F), FTR+Implicit (I)

Y, M, D

ITALY Yes (50% split) No I: No ex-ante allocation (F)

FTR + Implicit Auction 2

D

SPAIN Yes Yes Explicit Auction Y, M,D,I

F=>CH: priority list (legal

framework different from

EU)

D, I

SWITZERLAND Yes No

CH=>F: No ex ante allocation

mechanism

FRANCE

UNITED KINGDOM Yes Yes Explicit Auction Y, S, Q, M, D

AUSTRIA no congestion CZECH REPUBLIC

POLAND see ‚Central Eastern 5 TSOs‘

DENMARK EAST Yes Yes implicit auctions D

DENMARK WEST Yes Yes Explicit Auction Y, M, D

FRANCE see ‚France‘

NETHERLANDS see ‚Netherlands (TSO Auction)‘

SWEDEN Yes Yes Access Limitation (merchant line) D

GERMANY

SWITZERLAND Yes Yes Explicit Auction M, D

AUSTRIA see Austria HUNGARY

SLOVAKIA Yes (50 % Split) No H: Explicit Y, M 2 See footnote 1


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OTHER TSO

JOINT WITH THE

OTHER TSO

METHOD TIME FRAMES*

Auction

SL: Explicit Auction Y, M

H: Explicit Auction ROMANIA Yes (50 % Split) No

RO: Explicit Auction

Y, M

H: Explicit Auction SERBIA Yes (50 % Split) No

SRPRORATA Y, M

H: Explicit Auction CROATIA Yes (50 % Split) No

CR: PRO RATA (?)

Y, M

AUSTRIA see ‚Austria‘

FRANCE see ;France‘ I. implicit auction3 D

GREECE Yes (50% Split) No G: Explicit

Auction Y

I: implicit auction4 D

SLOVENIA Yes (50% Split) No SI: prorata/explicit

(see section 18.2.1)

I. implicit auction5 D

ITALY

SWITZERLAND Yes (50% Split) No CH: Other legal

framework

NETHERLANDS BELGIUM GERMANY see ‚Netherlands (TSO Auction)‘

NORWAY NORDIC REGION

(DENMARK WEST, SWEDEN, FINLAND)

see ‚Nordic Region‘

BELARUS No No see section 16.2.1 CZECH REPUBLIC

GERMANY SLOVAKIA

see ‚Central Eastern 5 TSOs‘

SWEDEN Yes No access limitation (merchant line)

POLAND

UKRAINE No No see section 16.2.6

PORTUGAL SPAIN Yes No*** see 12 in annex***

3 See footnote 1 4 See footnote 1 5 See footnote 1


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OTHER TSO

JOINT WITH THE

OTHER TSO

METHOD TIME FRAMES*

SI: see 13 in annex

Y, Q,M,W, D AUSTRIA Yes (50% Split) No

A: Explicit Auction Y, M,D

SI: see section 18.2.1

Y, Q,M,W, D ITALY Yes (50% Split) No

I: Implicit Auction6 D

SI: see section 18.2.3

Y, Q,M,W, D

SLOVENIA

CROATIA Yes (50% Split) No HR: Prorata M

FRANCE Yes Yes Explicit Auction Y, M, D, I

MOROCCO Yes No see section 19.2.3 D, I, RT SPAIN

PORTUGAL Yes No7 see section 19.2.2 D, I, RT

GERMANY see ‚Germany‘ NORWAY

DENMARK FINLAND

see ‚Nordic Region‘ SWEDEN

POLAND see ‚Poland’

AUSTRIA see ‚Austria’

FRANCE see ‚France’

GERMANY see ‚Germany’ SWITZERLAND

ITALY see ‚Italy‘

FRANCE see ‚France‘ UNITED KINGDOM IRELAND Yes Yes Explicit Auction Y

(*) Time Frames: Y: Yearly; S: Seasonal; Q: Quarterly; M: Monthly; W: Weekly; D: Daily; I: Intradaily; RT: Real-time.

6 See footnote 1 7 A new coordinated method is foreseen in the short term


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III. Current cross-border Congestion Management in Europe: Description of each interconnection

This section provides a description of each one of the congestion management methods currently applied in the international interconnections between European countries, along with particular conditions and procedures applicable in each case. First, there is a description of supra-national initiatives. These are identified by:

- more than two countries involved - one common auction office - common auction rules, time frames, etc

Then, the respective methods are presented successively in a list alphabetically ordered by the name of the country (in English). When there is joint/coordinated congestion management at one single interconnection, it is described only once per interconnection. In those cases where the methods applied by the TSOs at both sides of the interconnection are different or non-coordinated, this is explicitly indicated, and the descriptions of the different methods are provided separately in the subsections corresponding to both TSOs.

1 Central Eastern – 5 TSO Auction In the Central Eastern Europe (CEE) Region, five TSOs from the Czech Republic (CEPS), Germany (Vattenfall Europe Transmission and E.ON Netz), Poland (PSE-Operater) and Slovakia (SEPS) are operating joint auctions since January, 1st, 2006. These joint auctions imply co-ordinated capacity calculation/definition and joint capacity allocation through an auction office that is currently located in Prague. The main features of these joint auctions are: - yearly, monthly, daily basis - Capacity is offered in yearly and monthly auctions, the yearly part being the larger one in

most cases; not utilized long-term capacities and capacities released at short notice are offered in daily auctions

- Capacity acquired in the yearly and monthly auctions can be resold on an hourly basis – capacity transfer through internet based application. Market participants without access to the system may transfer the capacity on weekly basis.

- Registration for 1:1 system only in one place – auction office. - Use it or lose it imposed before daily auctions - sold capacity is firm - Efficient price signals to market players - linked bids are possible, i.e. the bidder can require that a capacity attribution depends on a

capacity attribution on a different border during the same time frame - similarily bidders can link several consecutive hourly bids to ‚block bids‘ in case of daily

auction


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2 Congestion Management in the Nordic Region Denmark East, Denmark West, Finland, Norway, and Sweden interconnections are between price-areas in the NordPool area. The exchange capacity is allocated as an integral part of the day-ahead spot price calculation. Congestion on an interconnection between two price-areas results in price-differences between the areas. When there is no congestion the spot-prices in the two areas will be equal. The simultaneous allocation of energy and capacity ensures maximal utilization of the exchange capacity from low- to high-price areas. Other main characteristics of this method are: - Netting. - Firmness in sold capacity. - Cross-border redispatch. - Price reflects the value for the market players. - Efficient price signals to market players. - Congestion rent gives TSO's a clear signal on the demand for capacity, and TSO's shall act

according to social welfare criteria with respect to investments (congestion rents are used to finance costs for interconnector capacity plus redispatch).

3 Borders of the Netherlands – TSO Auction Office The involved TSOs are: TenneT (Netherlands), E.ON Netz, RWE Transportnetz Strom (both from Germany) and Elia (Belgium). In autumn 2000 an independent body called “TSO Auction BV” was set up in order to carry out yearly, monthly and daily explicit auctions of all cross border interconnectors around the Netherlands (see website: www.tso-auction.org). Some of the main features of the method are: - The "Use it or lose it" principle is applied. - Capacity is offered on a firm basis. - Capacity is provided at the price of the lowest accepted bid. - Joint Auctions, run by TSO Auction Office. - TSO Auction Office is jointly financed by and acting on behalf of the mentioned involved

TSOs. - Capacity is auctioned on a yearly, monthly, daily basis. - Secondary trade is accepted, capacity can be resold either amongst holders of transmission

rights or it can be resold to the Auction Office. - The available capacity for the auctions is jointly determined by the involved TSOs and given

to the TSO Auction Office.

4 Austria (Information provided by TSO: Verbund-APG)

4.1 Involved interconnections First of all, it is necessary to know that in Austria there are three control zones (the latter two of them are part of the German control block): Verbund-APG TIRAG VKW-UNG The latter two of them are connected to the German control block Besides, there is no tie line between Austria and Slovakia. Therefore, this Section will cover the following interconnections: • Austria (APG) - Czech Republic


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• Austria (APG) - Germany • Austria (APG) - Hungary • Austria (APG) - Italy • Austria (APG) - Slovenia • Austria (APG) - Switzerland • Austria (APG) - Austria (TIRAG) • Austria (APG) - Austria (VKW)

4.2 Description for each interconnector

4.2.1 Austria (APG) – Czech Republic: Explicit auctions The capacity at the border is auctioned by an Auction Office (year, month) and by the Czech TSO (daily explicit auction) for both the Austrian and the Czech side (see 6.2.4).

4.2.2 Austria (APG, VKW, TIRAG) – Germany (E.ON, RWE, EnBW): Priority list (APG) / No allocation method (E.ON, RWE, EnBW)

Since no congestion problems between APG and Germany have been experienced so far, there are no limitations and priority list is the used allocation method between both control blocks from the Austrian side.

From the German side, all nominations that comply with valid rules are accepted. Insofar, there is no allocation method for scarce capacity (see also 10.2.1).

4.2.3 Austria (APG) – Hungary: Joint method Between Austria and Hungary there is a Common joint explicit auctioning method. The yearly and monthly auctions are executed by the Austrian APG Auction Office, while from the beginning of 2006 the daily explicit auction is made by the Hungarian MAVIR Auction Office.

4.2.4 Austria (APG) – Italy: Non-joint method Between Austria and Italy, the NTC is divided 50/50. APG is then responsible for the 50 % of the NTC, for which applies explicit auction with different time horizonts. The method applied by TERNA for the other 50% is described in Section 13.2.3.

4.2.5 Austria (APG) – Slovenia: Non-joint method This case is similar to the Austria-Italy above. Between APG and Slovenia (ELES), the NTC is divided 50/50, being then APG responsible for the 50% of the NTC, for which applies expicit auctions with different time horizonts. The method applied by ELES for the other 50% is described in Section 18.2.1.

4.2.6 Austria (APG) – Switzerland: Joint method The involved parties are: ETRANS AG (Switzerland) and APG (Austria). The coordinated capacity allocation method started with the beginning of 2006 (see websites: www.etrans.ch and/or auction-office.at). Some of the main features of the method are: - Monthly and daily explicit auctions - Joint Auctions - Interconnection Capacity jointly offered in form of Physical Transmission Rights (PTRs) - The "Use it or lose it" principle is applied. - Capacity is actually not resellable - Capacity is provided at Clearing Price


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- intraday capacity is allocated on a first-come first-served basis.

4.2.7 Austria (APG) – Austria (TIRAG): Priority list There are no congestion problems between APG and TIRAG. Therefore there are no limitations and priority list is the used allocation method between both control blocks.

4.2.8 Austria (APG) – Austria (VKW): Priority list There are no congestion problems between APG and VKW. Therefore there are no limitations and priority list is the used allocation method between both control blocks.

5 Belgium (Information provided by TSO: ELIA)

5.1 Involved interconnections • Belgium - France • Belgium - the Netherlands


5.2.1 Belgium – France There are joint, co-ordinated auctions between Belgium and France. For description see 9.2.1

5.2.2 Belgium – the Netherlands: Explicit auctions Congestion management at this interconnection is managed in the frameworg of the ‚TSO Auction Office‘, see section 3

6 Czech Republic (Information provided by TSO: CEPS)

6.1 .Involved interconnections • Czech Republic - Germany • Czech Republic - Slovakia • Czech Republic – Poland • Czech Republic – Austria


6.2.1 Czech Republic – Germany: Explicit auctions Congestion management at this interconnection is managed in the framework of ‚Central Eastern – 5 TSO Auction‘, see section 1

6.2.2 Czech Republic – Slovakia: Explicit auctions Congestion management at this interconnection is managed in the framework of ‚Central Eastern – 5 TSO Auction‘, see section 1


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6.2.3 Czech Republic – Poland: Explicit auctions Congestion management at this interconnection is managed in the framework of ‚Central Eastern – 5 TSO Auction‘, see section 1

6.2.4 Czech Republic – Austria: Explicit auctions The involved TSOs are: APG (from Austria) and CEPS (from Czech Republic). The capacity at the border is auctioned for both the Austrian and the Czech side. Currently there are explicit auctions in yearly, monthly and daily horizons. These auctions are carried out on behalf of both TSOs by EXAA (yearly, monthly auction) and by CEPS (daily auctions) - for more information, see also www.ceps.cz and www.auction-office.at). CEPS furthermore carried out settlement of payments for capacity reservation. Some of the main features of the method are: - Capacity acquired in the yearly and monthly auctions can be resold: reselling of yearly and

monthly capacity on a weekly base - Use it or lose it imposed before daily auctions. - Firmness in sold capacity. - Efficient price signals to market players.

7 Denmark (Information provided by TSO Energinet.dk

7.1 Involved interconnections Two different zones must be distinguished within Denmark: Denmark East (synchronous with Nordic region) Denmark West (synchronous with Continental region) As a consequence of that, this Section covers the following interconnections: Denmark East - Germany Denmark West - Germany Denmark East - Nordic region (Sweden) Denmark West - Nordic region (Norway, Sweden)


7.2.1 Denmark East – Germany (Vattenfall Europe): Implicit Auctions

see section 10.2.3

7.2.2 Denmark West – Germany (E.ON Netz): Explicit auctions see section 10.2.4

7.2.3 Denmark East – Nordic region (Sweden) and Denmark West – Nordic Region (Norway, Sweden): Market Splitting

Congestion management at this interconnection is managed in the framework of ‚Congestion Management in the Nordic Region‘, see section 2


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8 Finland (Information provided by TSO: Fingrid)

8.1 Involved interconnections Finland - Nordic region (Norway, Sweden) Finland - Russia


8.2.1 Finland – Nordic region (Norway, Sweden): Market Splitting Congestion management at this interconnection is managed in the framework of ‚Congestion Management in the Nordic Region‘, see section 2

8.2.2 Finland – Russia: Access limitation Fingrid's cross-border services from Russia to Finland employs three 400 kV transmission lines. The total capacity of these interconnections is 1400 MW, of which 100 MW has been reserved for the management of the power system.

Five customers have reserved 1,300 MW of Fingrid's cross-border transmission capacity between Finland and Russia through fixed transmission contracts during 2006,.

Capacity which becomes available at the turn of the year together with the terms of transmission are informed to the market parties by the end of the preceding June. The transmission contracts are signed well before the end of the year. The final use of the customer-specific capacity is determined on the basis of purchase contracts signed between electricity importers and the Russian exporter.

The transmission programme is agreed upon between the importer, Fingrid, and the Russian parties through a weekly preliminary programme. The import programme for the next day is confirmed on the preceding day before the reservation moment for the next day on the Nordic electricity exchange.

9 France Harmonised auction rules and auctioning tool (e.g. auction office using identical bidding principles) exists in interconnections between France and Belgium-Germany-Itlaly-Spain.

9.1 Involved interconnections • France - Belgium • France - Germany • France - Italy • France - Spain • France - Switzerland • France - United Kingdom


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9.2.1 France – Belgium: Explicit Auctions The involved TSOs are: RTE (France) and Elia (Belgium). In December 2005 yearly, monthly and daily explicit auctions for all cross border interconnectors between France and belgium were set up (see website: www.rte-france.com/htm/fr/offre/offre_inter_acces_BEL_RTE_ELIA.jsp#IFB). Some of the main features of the method are: - The "Use it or lose it" principle is applied. - Capacity is offered on a firm basis. - Capacity is provided at the price of the lowest accepted bid. - Joint Auctions, run by the Joint Auctions Office. - The Joint Auctions Office is jointly financed by and acting on behalf of the mentioned

involved TSOs. - Capacity is auctioned on a yearly, monthly, daily basis. - The available capacity for the auctions is jointly determined by the involved TSOs and given

to the Joint Auctions Office. Subject to regulatory approval, day-ahead market coupling should replace the current day-ahead explicit auctions on this interconnection in September 2006.

9.2.2 France – Germany (RWE, EnBW): Explicit Auctions The involved TSOs are: RTE (France), EnBW TNG, RWE Transportnetz Strom (both from Germany). The single-sided capacity allocation introduced in April 2005 was developed further into a coordinated allocation procedure with the beginning of 2006 (see websites: www.rwetransportnetzstrom.de and/or rte-france.com for further details). Some of the main features of the method are: - Yearly, monthly and daily explicit auctions - Joint Auctions, run by RWE Transportnetz Strom and RTE - Interconnection Capacity jointly offered in form of Physical Transmission Rights (PTRs) - The "Use it or lose it" principle is applied. - Capacity is presently not resellable, secondary trading is envisaged be introduced in 2006 - Capacity is provided at Clearing Price. - Netting in daily auctions

Intra-day access is also provided by RTE through 12 allocation gates. When intra-day access requests exceed the available capacity, prorata is applied.

9.2.3 France – Italy: Explicit Auctions on 50 % of the available capacity

Two parallel but consistent mechanisms for the allocation of capacity on the French-Italian border in 2006 have been implemented.

The capacity allocation mechanism managed by RTE on this border is explained in the Access Rules for Imports and Exports on the French Public Power Transmission Network version 2 available at www.rte-france .com.

RTE allocates 50% of the total available capacity on the France Italy border with explicit auctions. For the RTE part of the export capacity (France Italy), RTE manages yearly, monthly and daily


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explicit, one round, sealed auctions. For the RTE part of the import capacity (Italy France), RTE accepts nominations of import programmes, which must be made on D-1.

In case the sum of nominations exceeds capacity actually available at D-1 level, RTE accepts the programmes nominated by reducing them according to a proportional algorithm.

9.2.4 France – Spain: Explicit Auctions REE and RTE have jointly implemented annual, monthly, daily and intraday explicit auctions on the Spanish-French interconnection from 1st June 2006. More information can be found at www.rte-france.com or www.ree.es.

Some of the main features of the method are:

- Joint auctions run by REE and RTE.

- Capacity is auctioned on an annual, monthly, daily and intraday basis. From the beginning two intraday explicit auctions will be carried out. No later than 15th November 2006, the number of intraday auctions will have been increased up to six.

- Maximization of the use of interconnection capacity, through the application of "Use it or lose it” rule and netting principle.

- Capacity is provided at the price of the lowest accepted bid.

- Capacity allocated is firm unless force majeure. A system for guaranteeing the allocated capacity in case of a reduction of capacity after the nomination of the transactions is established, together with a compensation method for the capacity reductions prior to the nomination.

- Secondary trade of capacity through monthly auctions (only for annual capacity holders) or bilaterally until the firm nomination before the daily explicit auction on condition of the communication to the TSOs of the change of capacity holder.

- The available capacity for the auctions is jointly determined and published by the involved TSOs.

9.2.5 France – Switzerland: Different but consistent method The capacity from France to Switzerland is usually fully blocked by long term contracts, which are currently prioritised. Capacity from Switzerland to France is unconstrained, no congestion management methods are applied.

Intra-day access is also provided by the TSOs. On the French side 12 allocation gates are organised by RTE and, when intra-day access requests exceed the available capacity, prorata is applied.

9.2.6 France – United Kingdom: Explicit auctions In both directions France - United Kingdom and United Kingdom - France the capacities are jointly allocated by RTE and NGT via a coordinated on an auction mechanism for the following products: year (calendar & financial), season (winter/summer), quarter, month, weekend, day. Please also refer to section 22.2.1.


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10 Germany (Information provided by TSO: EnBW, E.ON, RWE, Vattenfall Europe)

10.1 Involved interconnections In Germany, there exist four control areas, managed by the following TSOs: RWE Transportnetz Strom GmbH Vattenfall Europe Transmission GmbH E.ON Netz GmbH EnBW Transportnetze AG So far, no internal congestion between the control areas have been declared. This Section will cover the following interconnections: • Germany (RWE/EnBW/E.ON) - Austria • Germany (E.ON/Vattenfall Europe Transmission) - Czech Republic • Germany (Vattenfall) - Denmark East (NORDEL Area, TSO: Energienet.dk) • Germany (E.ON) - Denmark West (UCTE Area, TSO: Energienet.dk) • Germany (RWE/EnBW) - France • Germany (RWE/E.ON) - The Netherlands • Germany (Vattenfall Europe Transmission) - Poland • Germany (E.ON) - Sweden • Germany (RWE/EnBW) - Switzerland


10.2.1 Germany (E.ON Netz, RWE, EnBW) – Austria (APG, TIRAG, VKW): no allocation method

No congestion. See Section 4.2.2. On the German side, since no congestions have been experienced as defined in the German Transmission Code, all nominations are accepted. No allocation method that effects in a selection of nominations is applied.

10.2.2 Germany (E.ON Netz and Vattenfall Europe Transmission) – Czech Republic: Explicit Auctions

Congestion management at this interconnection is managed in the framework of ‚Central Eastern – 5 TSO Auction‘, see section 1.

10.2.3 Germany (Vattenfall) – Denmark East (Nordic): Implicit Auctions

The involved TSOs are: Energinet.dk and Vattenfall Europe Transmission (from Germany). On this interconnection, implicit auctions has being applied since Januar 5 2006. Some of the main figures and features of the method are: - The trading capacity on the interconnector is allocated to Nord Pool Spot and used between

the price areas East Denmark and Kontek - Price reflects the value for the market players - Efficient price signals to market players. - Auction revenue gives TSO's a clear signal on the demand for exchange capacity, and TSO's

shall act according to social welfare criteria with respect to investments (congestion rent shall balance costs for interconnector capacity plus redispatch).


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10.2.4 Germany (E.ON) – Denmark West (Continental): Explicit Auctions

The involved TSOs are: Energinet.dk (from Denmark West) and E.ON Netz (from Germany). In this interconnection, yearly, monthly and daily explicit auctions are being applied since 2000. Some of the main figures and features of the method are: - Approximately 25%, 50% and 25% of capacity (D -> DK)is offered in the yearly, monthly

and daily auctions, respectively. (DK -> D: 29% 38% 33%) - Capacity acquired in the yearly and monthly auction can be resold on a weekly basis. - Use it or lose it imposed before daily auctions. - Complete netting in daily auctions. - Firmness in sold capacity. - Cross-border redispatch/countertrade if curative measures are necessary - Efficient price signals to market players. - Auction revenue are used according to EC Regulation 1228/2003. See also respective

Statement in 2.

10.2.5 Germany (EnBW, RWE) – France: Explicit Auctions See Section 9.2.2.

10.2.6 Germany (E.ON, RWE) – The Netherlands: Explicit Auctions See Section 3.

10.2.7 Germany (Vattenfall Europe Transmission) – Poland: Congestion management at this interconnection is managed in the framework of ‚Central Eastern – 5 TSO Auction‘, see section 1

10.2.8 Germany (E.ON Netz) – Sweden: Access limitation Baltic Cable: Link owned by private companies, both not owner or affiliated to the adjoining TSOs. E.ON Netz and Svenska Kraftnät are not involved in capacity allocation. Baltic Cable AB exclusively sets the commercial conditions for the cable. Baltic Cable offers, in case of free physical capacity, on request, transmission short term on the link on a day-by-day basis.

10.2.9 Germany (EnBW, RWE) – Switzerland: Explicit Auctions

The involved parties are: ETRANS AG (Switzerland), EnBW Transportnetz, RWE Transportnetz Strom (both from Germany). The coordinated capacity allocation method started with the beginning of 2006 (see websites: www.enbw.com and/or rwe.transportnetzstrom.de). Some of the main features of the method are: - Monthly and daily explicit auctions - Joint Auctions - Interconnection Capacity jointly offered in form of Physical Transmission Rights (PTRs) - The "Use it or lose it" principle is applied. - Capacity is actually not resellable, secondary trading is envisaged be introduced in 2006 - Capacity is provided at Clearing Price. - intraday capacity is allocated on a first-come first-served basis.


May 2006 21 / 31 ETSO

11 Greece (Information provided by TSO: HTSO)

11.1 Involved interconnections Greece - Italy Greece - Albania Greece – Bulgaria Greece – FYR of Macedonia


11.2.1 Greece-Italy In 2006, for the direction Greece to Italy, HTSO manages the allocation of 50% of the available capacity, following the method based on the explicit auctions. In this allocation procedure the eligible participants are the owners of either production or supply licenses.

TERNA manages the remaining 50% of the available capacity. The available capacity for exports from Greece to Italy allocated on a long-term basis is varied by month, day and time of the period. This capacity is calculated by HTSO for meeting the security of supply requirements of the Greek System and it is approved by the Regulatory Authority for Energy.

On 10th of March 2006, HTSO launched the short-term (daily) electronic allocation of the remaining available capacity, which varies by the month, day and time of the period.

11.2.2 Greece – Albania, Bulgaria, FYROM In 2006, for the direction from either Albania, or Bulgaria, or FYROM, to Greece, the available capacity is 600 MW, of whom 20 MW is allocated to the Public Power Corporation (PPC) and 200 MW is allocated to the other Eligible Market Participants by a long-term explicit auction. The remaining 180 MW is allocated to PPC (150 MW) and to the other Eligible Market Participants (30 MW).

On 10th of March 2006, HTSO launched the short-term (daily) electronic allocation of the available capacity for exports from Greece to Albania, Bulgaria, Fyrom.

12 Hungary (Information provided by TSO: MAVIR)

12.1 Involved interconnections • Hungary - Austria • Hungary – Slovakia • Hungary – Croatia • Hungary – Romania • Hungary – Serbia • Hungary – West Ukraina


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12.2.1 Hungary – Austria: Coordinated joint method See Section 4.2.3.

12.2.2 Hungary – Slovakia: No joint method The NTC is divided 50/50 % between SEPS and MAVIR. On both sides there is a yearly and monthly explicit auction.

12.2.3 Hungary – Croatia: No joint method The NTC is divided 50/50 % between HEP-TSOCRO-ISMO and MAVIR. On Hungarian side there are yearly and monthly explicit auctions. Croatian side: Pro rata.

(There are negotiations on a coordinated joint monthly explicit auction)

12.2.4 Hungary – Romania: The NTC is divided 50/50 % between TRANSELECTRICA and MAVIR . On both sides there are yearly and monthly explicit auctions.

12.2.5 Hungary – Serbia The NTC is divided 50/50 % between EMS and MAVIR respectively. On Hungarian side there are yearly and monthly explicit auctions. Serbian TSO EMS (Elektromreža Srbije) applies pro-rata rationing on monthly basis for its fraction of ATC with Hungary. ATC values and allocation results are regularly published at: http://www.ems.co.yu/atc_en.htm

12.2.6 Hungary – West Ukraina: No congestion

13 Italy (Information provided by TSO: TERNA)

13.1 Involved interconnections • Italy - France • Italy - Switzerland • Italy - Austria • Italy - Slovenia • Italy - Greece


13.2.1 Italy – France (RTE): TERNA and RTE apply a different method of capacity allocation, as approved by the relevant National Institutions. TERNA has managed the allocation of the 50% of the available transmission capacity in import direction, calculated after substracting the capacity reserved for long term contracts and reserves. RTE has managed the other 50% of capacity (see Section 9.2.3).


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The allocation method for 2006, approved by the Italian Energy Regulator (AEEG) via decision 269/05, envisages for the F-I border: - the resolution of cross-border congestion through an implicit auction system between the

virtual zone representing France and the adjacent Italian market zone, contextually to the clearing of the day-ahead Italian zonal market.

- the assignment of the cross-border financial transmission rights (FTRs) in import direction (CCCI) in each of the interconnections through a mechanism of yearly explicit auction (Euro/MW). CCCI aim at covering the risk of volatility of the differential zonal prices between the single virtual zone representing the neighbouring systems and the adjacent Italian zone in import direction to Italy.

- the assignment of the cross-border FTRs in export direction (CCCE) in the amount defined by TERNA, through a mechanism of explicit auction (Euro/MW) at monthly and/or weekly level. CCCE aim at covering the risk of volatility of the differential zonal prices between the single virtual zone representing the neighbouring systems and the adjacent Italian zone in export direction from Italy.

- The results of the FTRs auction on F-I border8 are published on TERNA website.

13.2.2 Italy – Switzerland (ATEL, BKW, NOK, EGL, EOS): On the Swiss-Italian border, TERNA and the Swiss TSOs (ATEL, BKW, NOK, EGL, EOS) apply a different method of capacity allocation, as approved by the relevant National Institutions. TERNA manages the allocation of 50% of the available transmission capacity in import direction, once substracted the capacity reserved for long term contracts and reserves. The other share of 50 % of capacity is managed directly by the Swiss TSOs based on ownership rights (see Section 21.2.2), who give the information to TERNA. The allocation method of the Italian part of capacity is the same described in section 13.2.1, referring to the CH-I border. The results of the FTRs auction on CH-I border are published on TERNA website.

13.2.3 Italy – Austria (APG): TERNA and Verbund-APG apply a different method of capacity allocation. TERNA has managed the allocation of 110 MW, equal to 50 % of the available transmission capacity in import direction. Verbund-APG has managed the other 50%. (see Section 4.2.4). The allocation method on the Italian part of capacity is the same described in section 13.2.1, referring to the A-I border.

13.2.4 Italy – Slovenia (ELES): TERNA and ELES apply a different method of capacity allocation. TERNA has managed the allocation of 215 MW, equal to 50 % of the available transmission capacity in import direction. ELES has managed the other 50% (see Section 18.2.2). The allocation method on the Italian part of capacity is the same described in section 13.2.1, referring to the SI-I border. The results of the FTRs auction on SI-I border are published on TERNA website.

8 The results of CCCI assignment on F-I border are provisional and subject to the resolution of the different treatment of LTC on F-I border; in fact, LTC validity has been recognised by the Italian Ministry and Regulator, whilst it has been not considered valid by the French Regulator. In order to guarantee the efficient utilisation of the transfer capacity, TERNA and RTE have concluded a specific mutual agreement.


May 2006 24 / 31 ETSO

13.2.5 Italy – Greece (HTSO): TERNA and HTSO apply a different method of capacity allocation. TERNA manages the allocation of 200 MW, equal to 50 % of the available transmission capacity in import direction, and 250 MW, equal to 50% of the available transmission capacity in export direction. HTSO manages the other 50% (see Section 11.2.1) of the available capacities. The allocation method on the Italian part of capacity is the same described in section 13.2.1, referring to the GR-I border. The results of the FTRs auction on GR-I border are published on TERNA website.

14 The Netherlands (Information provided by TSO: TenneT)

14.1 Involved interconnections • The Netherlands - Belgium • The Netherlands - Germany

14.2 Description for each interconnector Congestion management at these interconnections is managed in the framework of the ‚TSO Auction Office‘, see section 3

15 Norway

15.1 Involved interconnections Norway - Nordic region (Denmark West, Sweden, Finland)

15.2 Description for each interconnector Congestion management at these interconnections is managed in the framework of ‚Congestion Management in the Nordic Region‘, see section 2

16 Poland (Information provided by TSO: PSE)

16.1 Involved interconnections Poland - Belarus Poland - Czech Republic Poland – Germany (Vattenfall Europe Transmission) Poland - Slovakia Poland - Sweden Poland - Ukraine


May 2006 25 / 31 ETSO


16.2.1 Poland – Belarus: No joint method Between Poland and Belarus there is no synchronous operation, but only a separate single 220kV line subject to island operation. The flow is predictable based on schedule and contract.

16.2.2 Poland – Czech Republic: Explicit auctions Congestion management at this interconnection is managed in the framework of ‚Central Eastern – 5 TSO Auction‘, see section 1

16.2.3 Poland – Germany: Explicit auctions Congestion management at this interconnection is managed in the framework of ‚Central Eastern – 5 TSO Auction‘, see section 1

16.2.4 Poland – Slovakia: Explicit auctions Congestion management at this interconnection is managed in the framework of ‚Central Eastern – 5 TSO Auction‘, see section 1

16.2.5 Poland – Sweden: Access limitation see 20.2.3

16.2.6 Poland – Ukraine: No joint method Between Poland and Ukraine there is no synchronous operation, but only a separate single 220kV line subject to radial operation. The flow is predictable based on schedule and contract.

17 Portugal (Information provided by TSO: REN)

17.1 Involved interconnections Portugal - Spain


17.2.1 Portugal – Spain: The congestion management method currently in application for this interconnection from the Portuguese side is based on the following aspects:

1. The exporting country, Portugal or Spain, is responsible for the resolution of the

congestion; 2. In case of transit flow from Spain to Portugal the adopted method is as described in

Section 14.2, except for the explicit auction mechanism that is not applied for Physical Bilateral Contracts (PBC);

3. In case of transit flow from Portugal to Spain, the established schedules are reduced pro-rata.

The considered time stages are in accordance with the information provided by REE (Section 19.2.2).


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As of the kick-off date of the new Iberian Market (MIBEL), initially foreseen for the 20th April and finally delayed for some time, it is foreseen to adopt a new method with the following main features: - Coordinated between both TSOs (REN and REE). - Providing an efficient economic signal. - Firmness of transactions from the scheduling issuing from the daily market (through

coordinated balancing actions in both systems, e.g. coordinated redispatch or counter-trading). The definition of this future method is still pending of the modification of current Portuguese and Spanish legislations, being possibly applied a mechanism combining Market Splitting (see general description in Section 7.2.3) with Counter Trading.

18 Slovenia (Information provided by TSO: ELES)

18.1 Involved interconnections Slovenia - Austria Slovenia - Italy Slovenia - Croatia


18.2.1 Slovenia – Austria: No joint method As explained in Section 4.2.5, between Austria-APG and Slovenia (ELES) the NTC is divided at 50%. For its 50%, APG applies the method described in Section 4.2.5, while for the other 50% ELES is currently applying: - In the long term: prorata - In the short term: explicit auctions .

18.2.2 Slovenia – Italy: No joint method Between Slovenia (ELES) and Italy (TERNA), the NTC is divided 50/50. ELES is responsible for the 50 % the NTC, for which applies: - In the long term: prorata - In the short term: explicit auctions

18.2.3 Slovenia –Croatia : No joint method Between Croatia (HEP) and Slovenia (ELES) the NTC is divided at 50 %. For its 50 % HEP applies the pro rata method on monthly basis, while for the other 50% ELES is currently applying: - In the long term: prorata - In the short term: explicit auctions

19 Spain (Information provided by TSO: REE)


May 2006 27 / 31 ETSO

19.1 Involved interconnections Spain - France Spain - Morocco Spain - Portugal


19.2.1 Spain – France: Explicit Auctions see France (9.2.4)

19.2.2 Spain –Portugal:

The method currently in use for congestion management in the Spanish system consists of the following stages:

• Congestion management in the day-ahead market:

- First of all, market bids/offers are submitted to the market, including energy to be delivered/consumed outside the Spanish system by External Agents, and physical bilateral contracts (PBCs) are communicated (the agents wishing to declare an international PBCs have to make specific offers for the allocation of capacity, in case of congestion);

- A first matching process is developed by the Spanish Power Exchange, OMEL, considering “infinite“ capacity values in all interconnectors;

- Once this first iteration is completed, OMEL compares the cross-border schedules resulting from adding the matching process results to the communicated PBCs in each interconnector with the available commercial capacity values agreed by both TSOs (RTE and REE): if congestion appears in any interconnector, then the available capacity is split into two blocks, one for the matched market transactions and one for PBCs, prorrata to the total net balance of each type of of each type of transactions (market bids vs bilaterals) in the flux congested direction;

- Then the capacity for market transactions is allocated by OMEL in a second step of the matching process according to the priority order of bid/offer prices, without a further charge for the agents who obtain capacity;

- And finally the capacity for PBCs is allocated by REE through an explicit auction (involving thus a specific charge at the auction marginal price for those PBCs obtaining capacity) in case of congestion.

• Congestion management in the intradaily market:

In this market, the matching of bids and offers in the market is restricted according to available capacity value, in order not to cause congestions.

• Congestion management in real-time:

In case of congestion in real-time in an interconnector, the schedules established in this interconnector are reduced prorrata, being economically compensated for that schedule reduction, and being exempt of any imbalance payment.

Finally, the possible congestion rents collected from the Spanish side are applied for reducing the access tariffs.

Although the kick-off date of the new Iberian Market (MIBEL) is not specifically established at this time, both TSOs (REN and REE) are working together for the definition and introduction of a new congestion management method with the following main features:


May 2006 28 / 31 ETSO

- Coordinated between both TSOs. - Providing an efficient economic signal. - Firmness of transactions from the scheduling issuing from the day-ahead market (through coordinated balancing actions in both systems, e.g. coordinated redispatch or counter-trading).

19.2.3 Spain – Morocco: In Morocco there is one single buyer (ONE) who executes one single transaction in the Spanish market. In practice, ONE accepts the congestion management method applied from the Spanish side.

20 Sweden (Information provided by TSO: SvK)

20.1 Involved interconnections Sweden - Germany Sweden - Nordic region (Norway, Denmark East, Denmark West, Finland) Sweden - Poland


20.2.1 Sweden – Germany: Access limitation see Germany (section 10.2.8)

20.2.2 Sweden – Nordic region (Norway, Denmark East, Denmark West, Finland): Market Splitting

Congestion management at these interconnections is managed in the framework of ‚Congestion Management in the Nordic Region‘, see section 2

20.2.3 Sweden – Poland: Access limitation There is one 400 kV DC interconnector owned by SwePol Link AB, who exclusively sets the commercial conditions for the cable. The company is owned by SvK (51 %), PSE (1 %) and Vattenfall (48 %). Free capacity is offered on an annual basis. The cable is connected to the National grid with ordinary tariff. SvK and PSE-O are not involved in capacity trade, but only to set technical limits. (See also Section 16.2.5).

21 Switzerland (Information provided by independent system coordinator: ETRANS)

21.1 Involved interconnections Switzerland - Austria Switzerland - France Switzerland - Germany Switzerland - Italy


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21.2.1 Switzerland - Austria: Explicit auction See section 4.2.6. Capacity is allocated in coordinated explicit auctions in both directions (monthly, daily). The monthly auction is organised by APG, the daily auction is organised by ETRANS. Intraday capacity is made available to the market intraday on a first-come first-served basis.

21.2.2 Switzerland - France: other legal framework See section 9.2.5. The capacity from France to Switzerland is usually fully blocked by long term contracts, which are currently prioritised. Capacity from Switzerland to France is unconstrained, no congestion management methods are applied.

Intra-day access is also provided. RTE organizes 12 allocation gates and, when intra-day access requests exceed the available capacity, prorata is applied.

21.2.3 Switzerland - Germany: Explicit Auction See Section 10.2.9. Capacity is allocated in coordinated explicit auctions in both directions (monthly, daily) by EnBW. Any remaining capacity is made available to the market intraday on a first-come first-served basis.

21.2.4 Switzerland – Italy: Other legal framework (CH)/Implicit Auction (I)

See section 13.2.2.TERNA and the Swiss TSOs allocate each 50% of the capacity. The Swiss share is allocated by the Swiss TSOs based on ownership rights. The Italian share is allocated by TERNA, see section 13.2.2.

22 United Kingdom (Information provided by TSO: NGT)

22.1 Involved interconnections United Kingdom - France United Kingdom - Ireland

The above two interconnectors are the only ones that link the UK with other Member States (i.e. France and the Irish Republic). There is however, a further interconnector within the UK, linking Scotland with Northern Ireland.

The Scotland – Northern Ireland link (Moyle) is a DC sub-sea cable, whose capacity is allocated by explicit auction.


22.2.1 United Kingdom – France: Explicit auctions The England-France interconnector is a DC sub-sea cable with a total capacity of 2 GW. This capacity is allocated jointly by National Grid and RTE through explicit auctions. Capacity in each direction is sold separately for simultaneous nomination, with physical flows calculated from netting of commercial nominations in each direction.


May 2006 30 / 31 ETSO

Auctions are held on a variety of timescales ranging from 1 year in advance to day-ahead. Succesful bidders in all auctions aquire a basic product which, is a daily right to nominate capacity for use up to the allocated volume. Allocated capacity that is not nominated is lost without compensation.

The nomination rights aquired by Users for the interconnector infrastructure are on a non firm basis because of the nature of DC interconnector technology, however, in practice availability of auctioned capacity is high with an auction product target availability of typically 97%. An availability reconcilliation process exists which refunds capacity charges to Users when the target availability is not achieved.

Access to the UK Transmisson infrastructure is a firm right.

(See also Section 9.2.6).

22.2.2 United Kingdom – Republic of Ireland: Explicit auctions The interconnection used for trade between Northern Ireland (UK) and the Irish Republic consists of two double-circuit 275 kV AC lines. North-to-South capacity is auctioned by the Northern Irish TSO (SONI), currently annually. Secondary trading is permitted.

Currently, no physical South-to-North capacity is available for most of the time, so no auctions are held in this direction. There is, however, a superposition arrangement whereby South-to-North transactions can usually be accommodated by netting them against nominated North-to-South flows.


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IV. References - Directive EC/54/2003 and Regulation EC/1228/2003, of 26th June 2003

- “Cross-border electricity exchanges on meshed AC power systems” (ETSO, April 2004)

- “Flow-based Market Coupling: A joint ETSO-EuroPEX proposal for cross-border congestion management and integration of electricity markets in Europe, Interim Report” (ETSO-EuroPEX, September 2004)

- “Decentralised Using Implicit Auctions to Manage CB Congestion. Decentralised Market Coupling’ (EuroPEX, July 2003)

- “ETSO position on the “Co-ordinated Cost +” cross-border capacity allocation proposal” (ETSO, February 2003)

- “Co-ordinated congestion management. An ETSO vision” (ETSO, February 2002)

- “Definitions of Transfer Capacities in liberalised Electricity Markets” (ETSO, April 2001)

- “Key concepts and definitions for transmission access products” (ETSO, April 2001)

- “Evaluation of congestion management methods for cross-border transmission” (ETSO, November 1999)

- Information provided by the ETSO TF NACM members and other ETSO members

- Information published in ETSO website: www.etso-net.org


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V. Appendix: main features of the current cross-border congestion management methods in Europe

Method Description Analysis, Observations & Financial Implications

Access limitation

Access rationed. The instances still present in the list, consist of DC links with ownership different from linked networks.

• No economic signal • Not market based • Absence of efficient cross-border economic signals for generation/transmission investment • No pan European incentive for social welfare maximisation and least-cost operation • A few users may retain benefits from cross-border trade

Priority List (First-Come First-Served)

The marketer gets capacity in a priority order until the whole ATC is allocated.

Examples of priority criteria are: chronological order, past use of capacity, etc.

Transparency limited by confidentiality of trade

• Selection based on capacity used ratio and not on economic efficiency • Not market based • New entrants less favoured (discriminated) although it can also help to mitigate market power

exercise if limitations (maximum purchase) are imposed • Absence of efficient cross-border economic signals for generation/transmission investment • No pan European incentive for social welfare maximisation and least-cost operation • Marketers capture congestion rent and pay capacity price (usually null or low) • Favours exporters (or importers) with a large portfolio of customers (suppliers) • Selection based on capacity used ratio and not on economic efficiency

Pro-rata Rationing

Capacity is allocated in proportion to requests if they exceed the announced ATC

• Non-discriminatory • Not market based • No economic signal • Transparent • Simple implementation when compared to other mechanisms • The capacity is arbitrarily priced by the Regulatory authorities at a level not equal to the

efficient economic value (which is the ‘opportunity cost’ of trading between the countries) • No efficient cross-border economic signals for generation/transmission investment • No pan European incentive for social welfare maximisation and least-cost operation • Marketers capture congestion rent and pay capacity price (usually low) • Individual size of transmission right delivered inconsistent with standard trading products • Open to abuse by submission of excessive requests • Selection based in proportion to requests (if they exceed the announced ATC) and not on

economic efficiency


May 2006 33 / 31 ETSO

Method Description Analysis, Observations & Financial Implications

Explicit Auctions (ATC based)

The seller (TSO) determines ex ante ATC considering security analysis, accepts bids from potential buyers and allocates the capacity to the ones that value it the most

• Economic signal • Non-discriminatory • Transparent • Often a joint co-ordinated mechanism between the concerned TSOs • implementation features: uniform clearing price(in most cases) vs. pay as bid • Different allocation products and frequencies (Y, M, D) • With perfect market assumption - price reflects cost of using capacity to the social welfare - internal and cross-border trade present the same profit opportunity for participants - efficient signals to market players for the operation and the value of the network

Implicit Auctions (Market Splitting; Market Coupling)

The energy markets provide initially a common clearing. If ATC reached, markets “split” into pre-determined price areas cleared individually at area prices.

• Economic signal • Non-discriminatory • Transparent • If multilateral, a joint co-ordinated mechanism between the concerned TSOs • If multilateral, requires homogenised energy markets • Requires centralised Power Exchange • Requires financial instruments for long term price-hedging and bilateral trade between price-

areas • Internal and cross-border trade present the same profit opportunity for participants • Efficient signals to market players for the operation and the value of the network

Different legal framework

CH, Russia, RO, SM, Cr and Morocco are not EU member states and EU legislation doesn’t apply to them.

In the CH case, current legislation is governed by ownership rights. A new legal framework (revision of the so called EleG) is proposed by the government and currently under consultation. It could come effective in 2005.

• The countries apply the methods accession according to the Regulation 1228 step by step.Not relevant

As a general remark on the above table, there are two common features for all mechanisms:

- ex ante ATC assessment may be inconsistent with market output due to volatility of prices, - ex ante ATC assessment may be inaccurate due to unpredictable trading patterns

Documents

An Overview of Current Cross-border Congestion Management ... · Congestion Management which entered the Comitology Procedure for final adoption on January, 25, 2006. The document