Electricity Regional Initiative Central South European Region Progress made and next steps for the CS Region By: Giusi Squicciarini AEEG 2nd Stakeholder Group Meeting Milan, 21 April 2008

2 ERI – Central South Region Stakeholder Group meeting, 21 April 2008 Agenda Progress made on congestion management Workstreams agreed in the RCC and IG:  Further harmonisation of explicit auction rules -Short tem view: what can be improved in the existing framework for explict auctions -Medium term view: the SAO project  Implict auctions for day ahead allocations  Transparency

3 ERI – Central South Region Stakeholder Group meeting, 21 April 2008 Progress on congestion management 1st SG meeting:  approach  Different allocation methods and rules  Swiss TSO not involved in the process 2nd SG meeting:  Joint allocations on all borders (including Italy-Slovenia border since September 2007, Italy-Switzerland border since January 2008);  Market based allocations for different timeframes on all borders  Nearly harmonised set of auction rules for all borders for 2008 allocations (including Italy-Swiss border): common core set of rules, same allocation method, same definitions, same products, one governing law, harmonized nomination procedures.

4 ERI – Central South Region Stakeholder Group meeting, 21 April 2008 Workstreams for the CS Region 3 workstreams were agreed upon in the January RCC and IG meetings : 1.Further Harmonisation and Improvement of Explicit Auctions:  Improvement of auction rules for 2009 allocations;  establishment of a Single Auction Office for the CS region. 2.Implicit auctions for day ahead allocations 3.Transparency

5 ERI – Central South Region Stakeholder Group meeting, 21 April 2008 Workstream 1 (short term view): Improvement of Explicit Auctions The regulators of the CS region have identified the following areas for improvement of the existing auction rules (see 5th IG October 2007):  Provision for A-to-N counterparty nomination in Daily Auctions on all borders (as from art of the CM guidelines);  Increase transparency on NTC calculation methodology;  Increase TSOs’ ability to trace capacity rights with a view of improving the functioning of secondary markets and making UIOGP/UIOSI.

6 ERI – Central South Region Stakeholder Group meeting, 21 April 2008 Workstream 1 (medium term view): Single Auction Office In the IG meetings discussions emerged that:  Further harmonisation of auction rules could not be achieved if allocating entities were kept separate;  Substantial improvements of auction rules (such as the development of a secondary market) are hindered by differences in IT systems/IT systems requiring significant changes. The CS region regulators proposed, therefore, the establishment of a Single Auction Office as a practical way to overcome such obstacles and achieve further harmonisation. TSOs agreed with this conclusion and are presenting their action plan today.

7 ERI – Central South Region Stakeholder Group meeting, 21 April 2008 Workstream 2: Implicit auctions for day-ahead allocations Rationale for implicit allocations:  Potential efficiencies gains from implicit allocations (GME has been asked to explore this issue and is presenting results today);  Implicit allocations recognised as the target model (EU Commission/ERGEG). Regulators are aware of the complexity of the project and of the fact that it takes time and work. All good reasons to start without further delays. PXs and TSOs have been requested to present their proposal for an action plan. Today they are presenting their plan for 2008 activities.

8 ERI – Central South Region Stakeholder Group meeting, 21 April 2008 Workstream 3: Transparency The RCC launched a workstream on transparency to:  create fair market conditions for all market players;  ensure the region is compliant to the transparency requirements in the Congestion Management Guidelines. For harmonisation purposes reports published in other regions have been used as a basis for the discussion on transparency in the Central South Region (CW report adapted to the region specific circumstances). The report drafted within the RCC will be published at the beginning of May and consulted for 4 weeks.