15th Athens Forum

Wholesale Market Integration

SEE Wholesale Market Opening:
Electricity Industry Views
Tomaz Lajovic
Chairman of the Ad-hoc Group South East Europe
Athens, 26 November 2009

SEE Market Opening Study:

EURELECTRIC feedback (1)
Wholesale market reform will be a fundamental solution of the
main barriers to the market opening and investments climate
attractiveness.
Energy Community plays a key role in the harmonisation of the
market rules in SEE thus creating long term regulatory
predictability and visibility; however Governments and
Regulators commitment is essential.
Market design should provide for incentives to remunerate new
entrants and appropriately address the possibility of the existing
generation power plants (not committed to EU emission
standards) exercising dumping on the market.
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SEE Market Opening Study:

EURELECTRIC feedback (2)
Harmonisation of market rules and procedures, transparency,
definition of NTC (for the latter, coordination among TSOs,
including capacity calculation) have to be promoted and
enforced.
Coexistence of the region-wide implicit capacity allocations with
the explicit capacity allocations through the CAO project has to
be ensured in order to guarantee the two projects are not
undermining but mutually supporting each other.
Despite past market parties requests to the Athens Forum, the
Report does not addresses the CO2 perspective for the region,
fundamental to create a stable investment climate.
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Pre-requisites for SEE Market Opening:

Completing the Liberalisation process
Political commitment to market liberalisation both in legislation
and in implementation of best practices
Credible and stable regulatory framework to attract investors
Efficient market infrastructure to enhance liquidity and trade
End of price regulation (wholesale and retail) to give correct
price signals and stimulate competition
Abolishment of import/export and other transaction based fees
Non-discriminatory Third Party Access
Adequate transparency and customer information
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Price Regulation in SEE

Direct ways:
Regulation of price for end consumers (to end by 2015)
Regulation of producers sale price

Indirect ways:
Export/import restrictions to influence a national merit order
Decrease of ATC offered by TSO lowering the energy price in the local
market
Various transaction-based grid fees applied to wholesale transactions
Administrative measures impairing market access

Consequences: no liquidity increase, no price convergence

No Market Integration!
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Regulation 1228/2003 forbids improper

transaction based charges.
Preamble, point 13, states that import/export charges in addition to
appropriate use of system charges are to be avoided
Article 1 calls for harmonised principles on cross-border charges
Article 4, paragraph 1, requires network charges reflecting actual costs
incurred
Article 4, paragraph 4, forbids differentiation between internal and crossborder transactions
Article 4, paragraph 5, forbids charges for transits
Article 6, paragraph 1, allows only non-discriminatory market based
congestion management solutions

Charges for cross-border transactions can only be derived from

market based capacity allocation mechanism and scheduling.
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Amended Congestion Management

Guidelines provide detailed provisions.
Point 1.2 forbids restrictions to access to the network if
there is no congestion
Point 2.9 forbids any kind of reserve prices in capacity
allocation

Any kind of monetary pre-condition for execution of cross-border

transaction applicable in the cases of no congestion is forbidden.
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Transaction-based grid fees have to be

abolished!
Country 1
Trader
Trader A
A

Trader
Trader B
B

10 MWh

10 MWh
Country 2

Trader
Trader C
C

Trader
Trader D
D

Grid fees charged for

10 MWh injected +
10 MWh extracted
Flow = 0 MW

Nominations for the same hour

Transaction-based grid fees are not justified as they have no

direct influence on the flows, while reasonable scheduling fees
might be acceptable.
Regulation 1228/2003, Article 4/1
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Fees Applied to Wholesale Transactions in

SEE: Some examples (1)
Bulgaria: Export/import fees 8,97/MWh
Comment: These cross-border fees are transaction-based and applied to internal
metered injections/withdrawals as well

Greece: Import injection charges 2,5% (Athens Forum has been

addressed a letter by the Greek regulator justifying these fees)
Comment: These cross-border charges are transaction-based and applied to internal
injections scheduled via Greek pool as well; however a specific problem with these
charges is that they are applied retroactively in the form of pro-rata decrease of the
volumes paid for resulting from the Greek pools day-ahead matching

DISCLAIMER: The figures above may not be entirely accurate and we

apologise for any inconsistency; however, based on a thorough scrutiny of
the legal texts, we believe this is the best information market participants
can gather from existing provisions.
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Fees Applied to Wholesale Transactions in

SEE: Some examples (2)
Romania: Export/import fees 0,71/MWh 6,29/MWh
Comment: These cross-border fees are transaction-based and applied to internal
metered physical injections/withdrawals as well

Bosnia: Export fees 4,65/MWh

Comment: These cross-border fees are transaction-based and applied to internal
metered physical withdrawals as well

DISCLAIMER: The figures above may not be entirely accurate and we

apologise for any inconsistency; however, based on a thorough scrutiny of
the legal texts, we believe this is the best information market participants
can gather from existing provisions.

Any kind of grid fee has to be charged only for actual metered flows, as
wholesale transactions have no direct effect on the system.
Abovementioned practices limit market integration potential.
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Other relevant issues in SEE:

some conclusions
Legal reliability and long term regulatory visibility (including CO2
treatment and ETS Directive phase-in) required to guarantee security of
investments
Poor transparency of market rules and complexity of procedures (including
some licensing processes)
Interconnection capacity still low: need to maximise existing and
incentivise new grid investments
Powers and independence of regulatory authorities still insufficient
CAO is positive initiative but limited progress: participation of BG and SR is
crucial for success
Wholesale liquidity very limited: need to establish harmonised day-ahead
capacity allocation and scheduling processes, facilitate power exchanges
Progress in implementation of the EU acquis can be improved: more
enforcement needed