Guidelines on Congestion Management ERGEG Public Hearing 30 June 2005 EuroPEX

Key Messages Welcome the support in the Guidelines for the implicit auction approaches proposed by ETSO/EuroPEXWelcome the support in the Guidelines for the implicit auction approaches proposed by ETSO/EuroPEX Guidelines should, however, allow flexibility in terms of local and regional approachesGuidelines should, however, allow flexibility in terms of local and regional approaches Implicit auctions, flow-based transmission models and financial hedging should be clearly established as the longer term vision for the European electricity marketImplicit auctions, flow-based transmission models and financial hedging should be clearly established as the longer term vision for the European electricity market Good progress on local initiativesGood progress on local initiatives

Flexibility Local variation: a balance between existing local arrangements and European standardisationLocal variation: a balance between existing local arrangements and European standardisation –Essential European harmonisation only –Subsidiarity: build on existing local structures and regulatory arrangements Implementation: a phased approach will achieve the long term goal more quicklyImplementation: a phased approach will achieve the long term goal more quickly –Local market coupling initiatives –Local flow-based transmission model initiatives –Avoid rigid geographic definitions

Coordination Regions

Longer Term Vision Implicit auctions: both market coupling and market splittingImplicit auctions: both market coupling and market splitting –Efficient physical network use –Ease of access for all to a pan-European market –Strengthen development of liquid energy markets –Price difference bids/explicit auctions (firm flows) Flow-based transmission modelFlow-based transmission model –Improved network capacity availability Financial instrumentsFinancial instruments –Financial transmission rights –Efficient forward price difference hedging (CFD)

Local Initiatives Region Congestion Mgmt Approach Transmission Model Possible Launch Germany, Austria Market splitting (no congestion) 2005 Spain, Portugal Market splitting ATCs2005 Denmark, Germany Market splitting ATCs (HVDC) 2005 France, Belgium, Netherlands Market coupling, PTRs ATCs Early 2006 Central Eastern Europe Coordinated auctions Coordinated ATCs Early 2006 France, Spain Market coupling, PTRs ATCs2006 NorNed Market coupling ATCs (HVDC) 2007