European Energy Regulators’ News

Issue: February 2011

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Feature

- An end to electricity bottlenecks - ERGEG finalised its  framework guideline on capacity allocation and congestion management


Publications

-  ERGEG’s framework guideline on electricity capacity allocation and congestion management
- ERGEG’s GGP on Regulatory Aspects of Smart Metering for Electricity and Gas
- Summary of Member States' experiences on cost-benefit analysis of smart meters
- ERGEG's Amendment to the GGP of Storage System Operators (GGPSSO)
- 2010 Monitoring Report on Gas Capacity Allocation Mechanism and Congestion Management Procedures


Region in the Spotlight

-
  NorNed joins CWE-Nordic market coupling


Events

-
 follow the live webstrream of the second CEER  workshop on a target model for the future European natural gas market, 22 February, Bonn
- ACER's presentation of the draft framework guidelines on gas capacity allocation mechanisms, 7 March, Ljubljana

Editorial
2011 began with the CEER Board elections and appointments of the Working Group chairs.  Lord Mogg was re-elected as CEER President. 

Preparations are steaming ahead for the official start of our new Agency for the Cooperation of Energy Regulators (ACER). ACER has moved from its temporary location in Brussels to Ljubljana, Slovenia.  ACER’s official opening ceremony takes place on 3rd March.  On the 7th March, ACER will hold, in Ljubljana, its first workshop.  Click here to register for the ACER workshop on framework guideline on gas capacity allocation.  In addition, anyone interested in ACER's news may now register to become an online subscriber on ACER’s website.

The feature article below sheds some light on the process of developing EU-wide network codes based on ACER's framework guidelines, and on the current handover of the framework guideline process from ERGEG to ACER. It also features the latest frameworks guideline (on Capacity Allocation and Congestion Management for Electricity) which was submitted this month to the European Commission.

In terms of smart metering, the clock is ticking. EU Member States have until September 2012 to carry out a (non-mandatory) cost-benefit analysis (CBA) of the roll out of electricity smart meters (there is no deadline set for gas).  Thus far, 11 countries have done so for electricity, and 6 for gas. In an effort to share best practice, CEER/ERGEG has published a summary of Member States experiences in conducting the smart metering cost-benefit analysis. ERGEG’s GGP on Regulatory Aspects of Smart Metering for Electricity and Gas, published this month, sets out the basic services which, ERGEG considers, should be rendered to customers in the deployment of smart meters so that smart meters actually assist in the active participation of customers. These GGP serve as guidance for Member States, regulators and industry.

Also published this month is the 2010 Monitoring report on Gas Capacity Allocation Mechanism and Congestion Management Procedures on selected interconnection points. ERGEG prepared this report, at the request of the European Commission, as input into the Commission’s proposal (also launched for public consultation this month) to modify, via comitology guidelines, the gas congestion management procedures of the Gas Regulation (715/2010).

The main regional news is that NordNed -the cable connecting Norway and the Netherlands - has joined the interregional market coupling between the Central-West region and the Nordic market.

In terms of jobs, ACER is seeking a Head of Gas and officers for its electricity and gas departments.  The CEER is seeking an Administrative Assistant for its Brussels based Secretariat. 

  

Feature: An end to electricity bottlenecks - ERGEG finalised its framework guideline on capacity allocation and congestion management

Background
Europe’s (2009) 3rd Package of energy liberalisation laws provide for EU -wide network codes in 12 areas in electricity (and the same in gas).  These EU-wide Network Codes (which may become legally binding) will be drafted by the European TSO bodies (ENTSOs) in line with the framework guidelines set out by the Agency for the Cooperation of Energy Regulation (ACER). These EU-wide network codes are critical for an integrated EU energy market.

Working “as if” it were ACER (i.e. respecting the deadlines and procedures set out in the 3rd Package and following the step-by-step process which the regulators had developed), ERGEG “pilot tested” the framework guideline process during 2010 working on a total of 6 different framework guidelines in parallel in the following areas:
• electricity grid connection;
• electricity capacity allocation and congestion management;
• system operation;
• gas capacity allocation;
• gas balancing rules; and
• gas harmonised transmission tariff structures.

ERGEG’s framework guideline on electricity capacity allocation and congestion management
Following extensive consultation with stakeholders, on 9 February 2011, ERGEG formally submitted its framework guidelines on electricity capacity allocation and congestion management (CACM FG) to the European Commission.

The CACM FG addresses a central issue in completing the internal market in electricity, namely how (scarce) interconnection capacity is allocated and how bottlenecks in the networks are managed. The integration of national markets by means of efficient and effective use of interconnection capacity is a key step in the achievement of an internal electricity market in Europe. 

The draft framework guideline addresses three timeframes of capacity allocation: forward market, day-ahead market and intraday market. Additionally, it addresses capacity calculation which is crucial to the issue of capacity allocation and congestion management.

The CACM FG builds on the target model for electricity congestion management in Europe developed jointly by stakeholders (PCG) and elaborated through the Ad Hoc Advisory Group of stakeholders, both groups chaired by ERGEG. AHAG’s implementation groups provided input in areas of day-ahead, governance, intraday and capacity allocation. There was extensive consultation and discussion with key market participants in drafting the CACM FG. In Autumn 2010, ERGEG held a workshop and launched for public consultation its Initial Impact Assessment (IIA) and its draft framework guideline on CACM.

What problem does the Electricity Capacity Allocation and Congestion Management Framework Guideline (CACM FG) seek to resolve?
• Inefficient and sub-optimal use of transmission network capacity between and within the control areas
• Current CACM methods have not enabled market liquidity and formation of reliable prices in day-ahead & forward electricity markets
• Strong adverse incentives for the TSOs to underestimate commercial available capacity have been created
• CACM methods do not sufficiently account for large-scale variable generation (e.g. taking into account loop flows)

Who is most seriously affected by these problems?
Customers. Reduced efficiency directly reduces customers’ benefits.
Without action, these CACM problems will increase in the future as market integration evolves and the interdependencies between the different control areas grow.

What is the objective of the electricity CACM framework guideline?
The overall objective is an optimal use of power generation plants and transmission across Europe.  Sub-objectives:
• Optimal use of transmission capacity;
• Reliable prices and liquidity in the day-ahead market
• Efficient forward electricity market
• Efficient intraday market

When ACER takes over the framework guideline process – what happens next?
Under the 3rd Package, it is ACER who must submit the framework guidelines to the European Commission – the Commission will examine them to see if they meet the criteria of the Gas/Electricity Regulation, and it is the Commission who invites the ENTSOS to draft (within 12 months) the corresponding network code which must comply with ACER’s framework guideline. Indeed, ERGEG (the European Commission’s formal advisory group on internal energy market issues) will die shortly after ACER (which has the status of being an EU Agency) assumes its full responsibilities and powers in March 2011.

Already in December 2009, ERGEG finalised and submitted to the Commission two (pilot) framework guidelines – one on electricity grid connection, and the other on gas capacity allocation (see Feature Article of the December 2010/January 2011 newsletter).  Satisfied that ERGEG’s work meets the criteria of the Gas Regulation, the Commission has now invited ACER to formally submit (by 04 July 2011) the framework guideline on gas capacity allocation, and invited ENTSOG to submit to ACER (by 27 January 2012) a network code which must be in line with the framework guideline.  As required under the 3rd Package, ACER will run a (2-month) public consultation on the gas capacity framework guideline (eventhough it has already been subject to an ERGEG public consultation).  ACER’s first public workshop will be on the gas capacity allocation framework guideline.  The workshop will take place on 7 March in Ljubljana, Slovenia.

CEER/ERGEG Publications and Events

Publications:
•  ERGEG Final Draft Framework Guidelines on Capacity Allocation and Congestion Management for Electricity, (Ref: E10-ENM-20-03)
•  ERGEG Monitoring Report 2010 on Congestion Allocation Mechanisms and Congestion Management Procedures on selected interconnection points, (Ref: E10-GMM-11-05)
•  ERGEG  Guidelines of Good Practice on Regulatory Aspects of Smart Metering for Electricity and Gas,
(Ref: E10-RMF-29-05)
•  CEER/ERGEG Summary of Member State experiences on cost benefit analysis of smart meters, (Ref:C11-RMC-44-03)
•  ERGEG Amendment of the Guidelines of Good Practice of Storage System Operators (GGPSSO),
(Ref: E10-GST-14-04)

Events (see Events section of website for the new calendar of upcoming workshops)
•  Second CEER  workshop on a target model for the future European natural gas market, 22 February 2011, Bonn (also live webstream)
•  ACER presentation of the draft framework guidelines on gas capacity allocation meachanisms, 7 March, Ljubljana

Calendar of current and future public consultations

 
AreaIssueConsultation
publication date
GasCEER advice on NRA roles in implementing the SoS RegulationQ2
ElectricityCEER advice on the implications of non-harmonised renewable support schemesQ2
CustomerCEER GGP on retail market design, with a focus on supplier switching and billingQ2
 CEER advice on the take-off of a demand response electricity market with smart metersQ2
Cross SectoralCEER advice on the legal framework for sector - specific oversight regime - competences and cooperation of regulatorsQ2
 CEER advice on wholesale trading licensesQ2

The standard period for ERGEG public consultation is 8 weeks. See the public consultations section of the website.   

Events

See all dates of Regional Initiatives meetings (RCC, IG, SG) on the ERGEG online Calendar.  

Regional Initiatives Update

 

Region in the Spotlight - NorNed joins CWE-Nordic market coupling

 On 12 January 2011 the NorNed cable connecting Norway and the Netherlands has joined the interregional market coupling between the Central-West region and the Nordic market . The Central-West electricity region
includes France, Belgium, the Netherlands, Luxemburg and Germany on one side and the Nordic market includes Norway, Sweden, Finland, Estonia and Denmark on the other. NorNed, an undersea high voltage DC-link, will take part in the interim tight volume coupling between the Central-West region and the Nordic market operated by the European Market Coupling Company (EMCC).

The coupling between these two projects initially started on 9 November 2010 connecting the existing volume coupling between Germany and the Nordic market with the new price coupling initiative in the Central-West region. The market results following the market coupling have exceeded initial expectations with regards to price convergence and flows. It provides for an optimised, more efficient use of the power system as well as convergence of wholesale prices between the markets; increasing social welfare and security of supplies.

The inclusion of the NorNed undersea DC-link between Norway and the Netherlands is the final accomplishment of the interim tight volume coupling between the two regional markets. Based on the ambitious work and contribution of all iTVC-project partners on the one hand and thorough coordination and monitoring by all national regulatory authorities on the other hand, the iTVC market coupling has now been fully completed. This development proved again that comprehensive and considered guidance by regulators complemented by intense cooperation among stakeholders is a strong and effective instrument for the envisaged market integration across Europe. Building on this the TSOs and Power Exchanges will – with support of and under surveillance by the regulatory authorities – continue their work towards pan-European price coupling.

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