S.2. Internal Energy Market

D.2.7. EU Network Codes

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ACER publishes first Report on implementation of CACM and FCA Regulations

Wednesday, January 30, 2019

The Report recommends significant changes to the way that TSOs approach the harmonisation of rules relating to long-term transmission rights and the identification of the need for hedging instruments, as well as the process of conducting a structured bidding zone configuration review, among other things.

ACER published its first monitoring Report on the implementation of the Regulation containing Guidelines on Capacity Allocation and Congestion Management (CACM Regulation) and the Regulation containing Guidelines on Forward Capacity Allocation (FCA Regulation), which set binding guidelines for the implementation and operation of single market coupling in the day-ahead and intraday timeframes, and the rules on cross-zonal capacity calculation and allocation in the forward timeframe, respectively. The CACM Regulation came into force on 14 August 2015 while the FCA Regulation has been applicable since 17 October 2016.

The Report finds that the implementation of the Regulations can generally be considered successful and a decisive milestone in the development of fully integrated electricity markets across the EU. Single day-ahead coupling is almost complete, mainly as a result of early and voluntary initiatives. These initiatives still need to be transformed into single day-ahead coupling as formally established by the CACM Regulation.

The Report further concludes that many new detailed terms and conditions or methodologies have been adopted either at EU- or regional-level, although most of them still need to be implemented. This process, though legally and organisationally complex, can be considered a successful approach to developing ​and defining all the necessary design elements for an integrated electricity market.

There are, however, a number of challenges that need to be addressed in the coming years. For the FCA Regulation, there are a few instances where rules relating to long-term transmission rights have been applied at regional-level in ways that deviate from harmonised allocation rules or even from the FCA Regulation itself. ACER recommends that national regulatory authorities (NRAs) jointly develop harmonised criteria and metrics based on which the need for hedging instruments issued by TSOs may be objectively identified.

For the CACM Regulation, ACER has identified undue discrimination between internal and cross-zonal exchanges, which is not appropriately addressed by TSO proposals. This applies, in particular, to the methodologies related to capacity calculation, re-dispatching and countertrading. Furthermore, ACER recommends improvements in the governance and the methodology applied to the periodic review of bidding zone configuration, given that the first bidding zone review failed to deliver its objectives according to CACM.

ACER also notes that the Market Coupling Operator (MCO) Function, for which the legal framework is complex and suboptimal, should be revised, including with regard to the governance of algorithms and of associated cost recovery. Furthermore, ACER considers that the CACM Regulation does not clearly define the design for intraday coupling. This has resulted in a risk that the single intraday market may become fragmented in terms of timeframe, design and geography. TSOs and NRAs should bear this in mind when designing intra-day coupling mechanisms.

In addition to technical issues, ACER recommends possible improvements to the Network Code implementation process, so as to avoid unnecessary delays in the adoption and implementation of coupling frameworks.