Category: European Union Electricity Market Glossary

 

The analysis of firmness of allocated cross-zonal capacity can be perceived as a starting point and an input for developing electricity trading modelling tools as well as a solid foundation of advanced business models in the European Union Internal Electricity Market.

         
          
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The said problem is reflected in the entire spectrum of the network codes governing electricity trading in the European markets, in particular - depending on the respective market time-frame: 
- Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a Guideline on Capacity Allocation and Congestion Management (Regulation on market coupling or 'CACM Regulation'), Articles 2(44), 69 - 72, Recital 23,
- Network Code on Forward Capacity Allocation (FCA Regulation), Articles 53-56, Recitals 11 and 12.

Article 2(44) of the CACM Regulation defines firmness as "a guarantee that cross-zonal capacity rights will remain unchanged and that a compensation is paid if they are nevertheless changed". FCA Regulation in Article 2 refers to the above CACM definition.

The point in time delineating the respective compensation regimes is the day-ahead firmness deadline (DAFD):

- long-term transmission rights (LTTRs) curtailed before the DAFD are reimbursed or compensated by the Transmission System Operators (TSOs) to the LTTRs’ holders in accordance with the FCA Regulation,

- CACM Regulation establishes the DAFD and a related compensation regime for LTTRs curtailed after such deadline.

Article 16(3) of Regulation (EU) 2019/941 of the European Parliament and of the Council of 5 June 2019 on risk-preparedness in the electricity sector reads:

‘Transaction curtailment including curtailment of already allocated cross zonal capacity, limitation of provision of cross zonal capacity for capacity allocation or limitation of provision of schedules shall be initiated only in accordance with Article 16(2) of Regulation (EU) 2019/943, and the rules adopted to implement that provision’.

In, turn, according to the cross-referred Article 16(2) of Regulation (EU) 2019/943:

‘Transaction curtailment procedures shall be used only in emergency situations, namely where the transmission system operator must act in an expeditious manner and redispatching or countertrading is not possible. Any such procedure shall be applied in a non-discriminatory manner. Except in cases of force majeure, market participants that have been allocated capacity shall be compensated for any such curtailment’.

What is the scale of the issue? Is this something that deserves to be worrying about? The ENTSO-E indicated (Supporting Document for the Network Code on Electricity Balancing of 23 December 2013) that capacities between bidding zones are variable, but are generally of the order of a few GW.

 

 

Financial risk exposure of market spread compensation

 

Pursuant to ENTSO-E data the price spread between neighbouring bidding zones can be significant and can persist for significant periods of time.

Theoretical maximum price spread example:

NWE Region harmonized at +3000/-500 €/MWh (amounting to a theoretical maximum price spread at the level of €3500).

Large price spread in practice:

The price spread between France and Britain on 8th February 2012 due to a spike in the French day ahead prices (the French price reached 1938.5 €/MWh).

 

Hence, under market spread compensation, for a 3000MW curtailment and with a €3000 price spread, TSOs would be obliged to pay out €9million per hour.

Firmness of allocated cross-zonal capacity - who will earn 9 million per hourIt shows that the costs of market spread compensation can be considerable and have the ability to reach magnitudes of the order of €millions per hour, if the curtailment lasted a few hours/days/weeks/months. This, however, also evidences the scale of the potential market participants' risk on occasion where the compensation is capped.

 

Firmness of allocated cross-zonal capacity curtailed prior to the day-ahead firmness deadline

 

FCA Regulation establishes the following main points of the legal framework for the firmness of allocated cross-zonal capacity curtailed prior to the day-ahead firmness deadline: 
1. TSOs, in principle, are entitled to curtail long-term transmission rights, the reason for such a curtailment is to ensure operation remains within operational security limits,
2. long-term transmission rights may be curtailed prior to the DAFD, however, the concerned TSOs on the bidding zone border where long-term transmission rights have been curtailed must compensate the holders of curtailed long-term transmission rights,
3. compensation for the curtailed long-term transmission rights is equal to the market spread (with the reservation of curtailment due to force majeure where the compensation is equal to the amount initially paid for the concerned long-term transmission right during the forward allocation process),
4. a cap may be proposed by the the concerned TSOs on a bidding zone border with respect to the total compensation to be paid to all holders of curtailed long-term transmission rights in the relevant calendar year (or the relevant calendar month in case of direct current interconnectors),
5. the cap must not be lower than the total amount of congestion income collected by the concerned TSOs on the bidding zone border in the relevant calendar year (in case of direct current interconnectors, the cap must not be lower than the total congestion income collected by the concerned TSOs on the bidding zone border in the relevant calendar month).


Costs incurred from compensation mechanisms associated with ensuring firmness of cross-zonal capacities - irrespective of the market timeframe - are eligible costs in transmission tariffs provided that they are considered by regulatory authorities as reasonable, efficient and proportionate when fixing or approving such tariffs.

 

Firmness of allocated cross-zonal capacity curtailed after the day-ahead firmness deadline

  

If the allocated cross-zonal capacity is curtailed by the TSO after the day-ahead firmness deadline, the account of the two perspectives should be taken, depending on the market timeframe:

- firmness of intraday capacity, 

- firmness of day-ahead capacity.

 

 

Article 46
Provision of input data

 

1.   Each coordinated capacity calculator shall ensure that cross-zonal capacity and allocation constraints shall be provided to relevant NEMOs in time to ensure the publication of cross-zonal capacity and of allocation constraints to the market no later than 11.00 market time day-ahead.
2.   If a coordinated capacity calculator is unable to provide for cross-zonal capacity and allocation constraints one hour prior to the day-ahead market gate closure time, that coordinated capacity calculator shall notify the relevant NEMOs. These NEMOs shall immediately publish a notice for market participants.
In such cases, cross-zonal capacity and allocation constraints shall be provided by the coordinated capacity calculator no later than 30 minutes before the day-ahead market gate closure time.

 

 

As regards the former timeframe the rules are simple and clear - the intraday capacity is firm as soon as it is allocated.

With respect to the firmness of day-ahead capacity the CACM Regulation stipulates that:

- prior to the day-ahead firmness deadline, each coordinated capacity calculator may adjust cross-zonal capacity and allocation constraints provided to relevant Nominated Electricity Market Operators (NEMOs),

- after the day-ahead firmness deadline, all cross-zonal capacity and allocation constraints are firm for day-ahead capacity allocation "unless the requirements of Article 46(2) are met, in which case cross-zonal capacity and allocation constraints shall be firm as soon as they are submitted to relevant NEMOs".

 

Pursuant to the said Article 46(2) if a coordinated capacity calculator is unable to provide for cross-zonal capacity and allocation constraints one hour prior to the day-ahead market gate closure time, that coordinated capacity calculator is required to notify the relevant NEMOs and these NEMOs must immediately publish a notice for market participants (see the full content of the Article 46 of the CACM in the box). Compensation rules in the event of force majeure or emergency with respect to day-ahead market timeframe are more complicated than the FCA Regulation's set-up.

 

If allocated capacity is curtailed because of force majeure or an emergency situation invoked by a TSO, the TSO is required to reimburse or provide compensation for the period of force majeure or the emergency situation, in accordance with the following requirements:
(a) if there is implicit allocation, central counter parties or shipping agents shall not be subject to financial damage or financial benefit arising from any imbalance created by such curtailment;
(b) in the event of force majeure, if capacity is allocated via explicit allocation, market participants shall be entitled to reimbursement of the price paid for the capacity during the explicit allocation process;
(c) in an emergency situation, if capacity is allocated via explicit allocation, market participants shall be entitled to compensation equal to the price difference of relevant markets between the bidding zones concerned in the relevant time-frame; or
(d) in an emergency situation, if capacity is allocated via explicit allocation but the bidding zone price is not calculated in at least one of the two relevant bidding zones in the relevant time-frame, market participants shall be entitled to reimbursement of the price paid for capacity during the explicit allocation process.

 

Evolution of the legal framework 

 

The problem of the firmness regimes on bidding zone borders across Europe was the subject of the discrepancy between the ACER  (the EU Agency gathering the European energy market regulators) and ENTSO-E (representing the TSOs’ views):

1. ACER's preference was for TSOs to reimburse the day-ahead market spread, instead of the price paid at auction;

2. ENTSO-E argued that the day ahead market spread is unknown at the time of the cross-zonal capacity allocation and can be many times greater than the initial price paid at auction.

 

ENTSO-E argued, moreover, that the divergent position between ENTSO-E and ACER was due to a fundamental different perspective on the type of product TSOs offer to market parties: the ACER‘s conception that TSOs offer a financial hedge between bidding zones, and TSOs’ approach viewing capacity product reflecting the capability of the transmission network to transfer energy with the associated risks. Consequently, according to the TSOs’ stance, to the extent that the market spread exceeds the initial price paid at auction, the TSO has to cover the costs from elsewhere, be it congestion income from the current or other timeframes (congestion income being the TSO revenue derived from selling cross zonal capacity products) or from network tariffs (see: Supporting Document for the Network Code on Electricity Balancing of 23 December 2013).

TSOs believed that the risks should be shared between those using the interconnections and TSOs, whereas ACER believed that all the risk should be borne by TSOs. Different types of market spread compensation are referred to (quotations from the above ENTSO-E‘s Supporting Document) in the boxes below. It is noteworthy, Option A (firmness based on initial price paid) was the most common compensation arrangement across Europe.


Option A 

Firmness based on initial price paid

Initial price paid compensation gives transmission right holders compensation usually between 100% and 110% of the original price paid at auction, although this is border dependent. 

This was part of ENTSO-E's original position, however, responding to the stakeholders’ and the ACER‘s feedback, the ENTSO-E dropped the initial approach and provided a compromise solution.

Capped compensation variants set out by ENTSO-E are categorised into two families denoted as Option B1 and Option B2.

  

Option B1 

Firmness based on capped market spread compensation (congestion income cap)
Capped market spread compensation means that curtailed transmission rights holders are compensated on the market spread between bidding zones as long as there has been sufficient congestion income received by TSOs to pay out from. Compensation is capped by a predefined time period of congestion revenue (e.g. monthly or annual). Under this regime, market participants share the risks with TSOs. Under normal curtailment conditions, market parties receive market spread compensation. However when an extreme event occurs, the cap for the compensation may be reached so that market parties share some of the financial burden. Compared with initial price paid compensation (option A) moving to capped market spread is a significant increase in firmness costs compensation for many borders and TSOs.

Option B2  

Firmness based on capped market spread compensation (price cap)
Price capped market spread compensation means that curtailed transmission rights holders are compensated on the market spread differential as long as it is less than a predefined cap. This ensures that under normal system conditions, market spread compensation is paid. However when an extreme event occurs, the price cap may be reached. Under these circumstances, market parties would share some of the financial burden (similar as for option B1). TSOs envisage that price cap compensation could be implemented together with a congestion revenue cap, rather than being mutually exclusive. The reason for combining a price cap with a congestion cap is to avoid situations where extreme price differentials and multiple curtailments exhaust all congestion income leaving some parties uncompensated. This ensures that as many market parties as possible are compensated. 

 

 

Option C 

Firmness based on full market spread compensation

Market spread compensation means that curtailed transmission rights holders are compensated at the market spread between bidding zones. Under this regime, market participants do not share any of the risks and TSOs are exposed to the full risk and associated financial consequences which may impact network tariffs.

 

 

The final TSOs' proposition was a mixture of Options B1 and B2. It centered on the long term firmness deadline, which was the nomination deadline for physical transmission rights or between 19 and 2 hours before day-ahead market gate closure for financial transmission rightsFor curtailments between the auction and the long term firmness deadline, compensation, according to the ENTSO-E proposition, capped at the long term transmission rights' congestion income. For curtailments between the long term firmness deadline and the day-ahead firmness deadline, compensation was proposed to be capped at the total monthly congestion income. Where the compensation cap is hit, priority in compensation payments would be given to curtailments occurring between the long term firmness deadline and the day-ahead firmness deadline. This, according to the TSOs analysis, should increase the level of firmness market participants see the closer they get to real time and reflect the shorter time they have to react. ENTSO-E argued that under normal and severe system conditions ENTSO-E's proposal would give market parties a financial hedge for most curtailments and only in very exceptional circumstances would this be capped to avoid an excessive impact on end users via network tariffs. In all other cases, the risk would not be shared with market parties and would be born entirely by TSOs. This proposal, in the ENTSO-E view, was balanced in terms of risk sharing and introduced the incentives for market participants to support system security, hence it had been finally submitted to ACER.

The problem was appreciated by the industry and, consequently, more approaches were developed. EURELECTRIC in the document "Main issues with ENTSO-E Draft Allocation Rules for Forward Capacity Allocation (version of 03/12/2014) expressed the view that long-term transmission rights "should be financially firm ahead of nomination deadline and physically firm afterwards as is currently the case on many borders. Therefore there should be no provisions for financial firmness after day-ahead firmness deadline". The problem has been finally resolved in the aforementioned provisions of the FCA and CACM.

 

Winter Energy Package of November 2016

 

When it comes to the so-called Winter Energy Package of November 2016, Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast) (30.11.2016, COM(2016) 861 final 2016/0379 (COD)) refers to the firmness of the allocated capacity in Article 14(2) and 14(10).

The former stipulates that transaction curtailment procedures may only be used "in emergency situations where the transmission system operator must act in an expeditious manner and re-dispatching or countertrading is not possible." Any such procedure must be applied in a non-discriminatory manner.

The draft Regulation contains, moreover, the clear provision that "[e]xcept in cases of force majeure, market participants who have been allocated capacity shall be compensated for any curtailment." 

Article 14(10) of the said Proposal gives further clues how the compensation at issue should be calculated. According to this provision, if a transmission system operator does not fulfil its obligation, it shall be liable to compensate the market participant for the loss of capacity rights. Consequential losses shall not be taken into account for that purpose.

The key concepts and methods for the determination of liabilities that accrue upon failure to honour obligations shall be set out in advance in respect of the financial consequences, and shall be subject to review by the relevant national regulatory authority or authorities.

 

 

Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a Guideline on Capacity Allocation and Congestion Management - CACM (Regulation on market coupling or 'CACM Guideline'), Articles 2(44), 69 - 72, 79, Recital 23

 

Article 2(44)

‘firmness’ means a guarantee that cross-zonal capacity rights will remain unchanged and that a compensation is paid if they are nevertheless changed

 

CHAPTER 8
Firmness of allocated cross-zonal capacity

 

Article 69
Proposal for day-ahead firmness deadline 

By 16 months after the entry into force of this Regulation, all TSOs shall develop a common proposal for a single day-ahead firmness deadline, which shall not be shorter than half an hour before the day-ahead market gate closure time. The proposal shall be subject to consultation in accordance with Article 12.

 

Article 70
Firmness of day-ahead capacity and allocation constraints

1.   Prior to the day-ahead firmness deadline, each coordinated capacity calculator may adjust cross-zonal capacity and allocation constraints provided to relevant NEMOs.

2.   After the day-ahead firmness deadline, all cross-zonal capacity and allocation constraints shall be firm for day-ahead capacity allocation unless the requirements of Article 46(2) are met, in which case cross-zonal capacity and allocation constraints shall be firm as soon as they are submitted to relevant NEMOs.

3.   After the day-ahead firmness deadline, cross-zonal capacity which has not been allocated may be adjusted for subsequent allocations.

 

Article 71
Firmness of intraday capacity

Cross-zonal intraday capacity shall be firm as soon as it is allocated.

 

Article 72
Firmness in the event of force majeure or emergency situations

1.   In the event of force majeure or an emergency situation referred to in Article 16(2) of Regulation (EC) No 714/2009, where the TSO shall act in an expeditious manner and redispatching or countertrading is not possible, each TSO shall have the right to curtail allocated cross-zonal capacity. In all cases, curtailment shall be undertaken in a coordinated manner following liaison with all directly concerned TSOs.

2.   A TSO which invokes force majeure or an emergency situation shall publish a notice explaining the nature of the force majeure or the emergency situation and its probable duration. This notice shall be made available to the market participants concerned through NEMOs. If capacity is allocated explicitly to market participants, the TSO invoking force majeure or an emergency situation shall send notice directly to contractual parties holding cross-zonal capacity for the relevant market time-frame.

3.   If allocated capacity is curtailed because of force majeure or an emergency situation invoked by a TSO, the TSO shall reimburse or provide compensation for the period of force majeure or the emergency situation, in accordance with the following requirements:
(a) if there is implicit allocation, central counter parties or shipping agents shall not be subject to financial damage or financial benefit arising from any imbalance created by such curtailment;
(b) in the event of force majeure, if capacity is allocated via explicit allocation, market participants shall be entitled to reimbursement of the price paid for the capacity during the explicit allocation process;
(c) in an emergency situation, if capacity is allocated via explicit allocation, market participants shall be entitled to compensation equal to the price difference of relevant markets between the bidding zones concerned in the relevant time-frame; or
(d) in an emergency situation, if capacity is allocated via explicit allocation but the bidding zone price is not calculated in at least one of the two relevant bidding zones in the relevant time-frame, market participants shall be entitled to reimbursement of the price paid for capacity during the explicit allocation process.

4.   The TSO invoking force majeure or an emergency situation shall limit the consequences and duration of the force majeure situation or emergency situation.

5.   Where a Member State has so provided, upon request by the TSO concerned the national regulatory authority shall assess whether an event qualifies as force majeure.

 

Article 79
Costs of ensuring firmness

The costs of ensuring firmness in accordance with Articles 70(2) and 71 shall be borne by the relevant TSOs, to the extent possible in accordance with Article 16(6)(a) of Regulation (EC) No 714/2009. These costs shall include the costs from compensation mechanisms associated with ensuring the firmness of cross-zonal capacities as well as the costs of redispatching, countertrading and imbalance associated with compensating market participants.

 

Recital 23

Any costs incurred efficiently to guarantee firmness of capacity and to set up processes to comply with this Regulation should be recovered via network tariffs or appropriate mechanisms in a timely manner. NEMOs, including in performing MCO functions should be entitled to recover their incurred costs if they are efficiently incurred, reasonable and proportionate. 

 

 

 

 

Network Code on Forward Capacity Allocation (FCA), Articles 53-56, 61, Recitals 11, 12

 

CHAPTER 6
Firmness of allocated cross-zonal capacity

 

Article 53
General firmness provisions
1.   All TSOs shall be entitled to curtail long-term transmission rights to ensure operation remains within operational security limits prior to the day-ahead firmness deadline. Where TSOs curtail long-term transmission rights, they shall report this to the respective regulatory authorities and also publish the factual reasons that lead to the curtailment.
2.   The concerned TSOs on the bidding zone border where long-term transmission rights have been curtailed shall compensate the holders of curtailed long-term transmission rights with the market spread.

 

Article 54
Definition of caps
1.   The concerned TSOs on a bidding zone border may propose a cap on the total compensation to be paid to all holders of curtailed long-term transmission rights in the relevant calendar year or the relevant calendar month in case of Direct Current interconnectors.
2.   The cap shall not be lower than the total amount of congestion income collected by the concerned TSOs on the bidding zone border in the relevant calendar year. In case of Direct Current interconnectors, TSOs may propose a cap not lower than the total congestion income collected by the concerned TSOs on the bidding zone border in the relevant calendar month.
3.   In case of several interconnectors operated by different TSOs on the same bidding zone border and subject to different regulatory regimes overseen by regulatory authorities, the total congestion income used for calculation of capped compensation pursuant to paragraph 2 may be dissociated between each interconnector. Such a division shall be proposed by the concerned TSOs and approved by the competent regulatory authorities.

 

Article 55
Compensation rules
Where TSOs propose to apply a cap referred to in Article 54, they shall jointly propose a set of compensation rules with regard to the applied cap.

 

Article 56
Firmness in the event of force majeure
1.   In the event of force majeure, TSOs may curtail long-term transmission rights. Such curtailment shall be undertaken in a coordinated manner following liaison with all TSOs directly affected.
2.   The TSO which invokes the force majeure shall publish a notification describing the nature of the force majeure and its probable duration.

3.   In the event of curtailment due to force majeure the concerned holders of long-term transmission rights shall receive compensation for the period of that force majeure by the TSO which invoked the force majeure. In this case, the compensation shall be equal to the amount initially paid for the concerned long-term transmission right during the forward allocation process.

4.   The TSO which invokes a force majeure shall make every possible effort to limit the consequences and duration of the force majeure.

5.   Where a Member State has so provided, upon request by the TSO concerned, the national regulatory authority shall assess whether an event qualifies as force majeure.

 

Article 61

Cost of ensuring firmness and remuneration of long-term transmission rights

1. The cost of ensuring firmness shall include costs incurred from compensation mechanisms associated with ensuring firmness of cross-zonal capacities as well as the cost of re-dispatching, countertrading and imbalance associated with compensating market participants and be borne by TSOs, to the extent possible in accordance with Article 16(6)(a) of Regulation (EC) No 714/2009.
2. When fixing or approving transmission tariffs or other appropriate mechanism in accordance with Article 37(1)(a) of Directive 2009/72/EC, and having regard to Article 14(1) of Regulation (EC) No 714/2009, regulatory authorities shall consider compensation payments as eligible costs provided that they are reasonable, efficient and proportionate.
3. Within six months after the approval of the methodology for sharing congestion income referred to in Article 57, all TSOs shall jointly develop a methodology for sharing costs incurred to ensure firmness and remuneration of long-term transmission rights. This methodology shall be consistent with the methodology for sharing congestion income from forward capacity allocation as referred to in Article 57.

 

Recital 11

Commission Regulation (EU) 2015/1222 establishes a day-ahead firmness deadline and a related compensation regime for long-term transmission rights curtailed after such deadline. Similarly, long-term transmission rights curtailed before the day-ahead firmness deadline should be reimbursed or compensated by TSOs to the long-term transmission rights holders.

 

Recital 12

Caps on the compensation to be paid to holders whose long-term transmission rights have been curtailed before the day-ahead firmness deadline may be introduced, taking into the account the liquidity of the relevant markets and the possibility for market participants to adjust their positions. 

 

 

 

 

Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD), Article 8

 

Forward markets

 

1. In line with regulation (EU) 2016/1719, transmission system operators shall issue long-term transmission rights or have equivalent measures in place to allow for market participants, in particular owners of generation facilities using renewable energies, to hedge price risks across bidding zone borders.

2. Long-term transmission rights shall be allocated in a transparent, market based and non-discriminatory manner through a single allocation platform. Long-term transmission rights shall be firm and be transferable between market participants.

3. Subject to compliance with treaty rules on competition, market operators shall be free to develop forward hedging products including for the long -term to provide market participants, in particular owners of generation facilities using renewable energies, with appropriate possibilities to hedge financial risks from price fluctuations. Member States shall not restrict such hedging activity to trades within a Member State or bidding zone.

 

 

 

 

Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD), Article 14(1)(2) and (10)

 

General principles of capacity allocation and congestion management

 

1. Network congestion problems shall be addressed with non-discriminatory market- based solutions which give efficient economic signals to the market participants and transmission system operators involved. Network congestion problems shall be solved with non-transaction based methods, i.e. methods that do not involve a selection between the contracts of individual market participants. When taking operational measures to ensure that its transmission system remains in the normal state, the transmission system operator shall take into account the effect of those measures on neighbouring control areas and coordinate such measures with other affected transmission system operators as provided for in Regulation (EU) 1222/2015.
2. Transaction curtailment procedures shall only be used in emergency situations where the transmission system operator must act in an expeditious manner and re-dispatching or countertrading is not possible. Any such procedure shall be applied in a non-discriminatory manner. Except in cases of force majeure, market participants who have been allocated capacity shall be compensated for any curtailment.

...

10. The financial consequences of failure to honour obligations associated with the allocation of capacity shall be attributed to those who are responsible for such a failure. Where market participants fail to use the capacity that they have committed to use, or, in the case of explicitly auctioned capacity, fail to trade on a secondary basis or give the capacity back in due time, they shall lose the rights to such capacity and pay a cost-reflective charge. Any cost-reflective charges for the non-use of capacity shall be justified and proportionate. If a transmission system operator does not fulfil its obligation, it shall be liable to compensate the market participant for the loss of capacity rights. Consequential losses shall not be taken into account for that purpose. The key concepts and methods for the determination of liabilities that accrue upon failure to honour obligations shall be set out in advance in respect of the financial consequences, and shall be subject to review by the relevant national regulatory authority or authorities.

 

 

 

Articles 58 - 61 of the Harmonised allocation rules for long‐term transmission rights (HAR), as established in the Annex to the Decision of the Agency for the Cooperation of Energy Operators (ACER) No 03/2017 of 2 October 2017, stipulate the detailed firmness rules for the purpose of HAR.

 

 

Harmonised Allocation Rules (Annex I to the ACER Decision 03/2017)

 

Article 58
Day Ahead Firmness deadline

The Allocation Platform shall publish on its website and take into account for the calculation of compensation for curtailed Long Term Transmission Rights the Day Ahead Firmness Deadline which for the purpose of these Allocation Rules is set sixty (60) minutes before the respective Day Ahead Market Gate Closure Time, unless otherwise specified in accordance with the process described in Article 69 of the Commission Regulation (EU) 2015/1222.

 

Article 59
Compensation for curtailments to ensure operation remains within Operational Security Limits before the Day Ahead Firmness Deadline


1. In cases of curtailment to ensure operation remains within Operational Security Limits before the Day Ahead Firmness Deadline the compensation for each affected hour and Registered Participant shall be calculated as the Long Term Transmission Rights in MW per hour corresponding to the difference between the allocated Long Term Transmission Rights held by the Registered Participant before and after the curtailment multiplied by a price calculated as follows:


(a) the Market Spread at the concerned Bidding Zone border for the concerned hourly period only in case the price difference is positive in the direction of the curtailed Long Term Transmission Rights, and 0€/MWh, otherwise. If specified in the relevant annexes to these Allocation rules, this price may be adjusted to reflect Allocation Constraints on interconnections between Bidding Zones as defined in Article 23, paragraph 3 of Commission Regulation (EU) 2015/1222, where these Allocation Constraints are included in the day‐ahead Cross Zonal Capacity allocation process. The direction of the curtailed Long‐Term Transmission Right shall be determined by the destination and the origin Bidding Zones as defined in the Auction Specifications of the concerned Long Term Transmission Right; or


(b) the Marginal Price of the initial Auction if the day‐ahead price is not calculated at least in one of the two relevant Bidding Zones.


2. If specified in the relevant annexes to these Allocation Rules, a cap shall be applied to the compensations on specific bidding zone borders. The cap shall be determined as the total amount of Congestion Income collected by the concerned TSOs on the respective Bidding Zone border in the relevant calendar year, deducting all remunerations paid according to Articles 40 and 48 and compensations paid according to Article 60 and where applicable Article 61.


3. In case of Direct Current interconnectors, the cap shall be determined as the total amount of Congestion Income collected by the concerned TSOs on the Bidding Zone border in the relevant month, deducting all remunerations paid according to Article 40 and Article 48 and compensations paid according to Articles 60 and where applicable Article 61 for the considered month. The total amount of Congestion Income in one month is defined as the sum of a twelfth of the revenues raised at yearly Auction on the concerned Bidding Zone Border and the revenues generated by the monthly Auction and congestion income from other timeframes which occurred during this month on the concerned Bidding Zone border.


4. If, before application of the relevant cap described in paragraph 2 of this Article, the total calculated compensations of curtailed Long Term Transmission Rights exceed the relevant cap, the compensations of curtailed Long Term Transmission Rights shall be reduced on a pro rata basis. This will be based on the proportion of uncapped compensation of allocated Long Term Transmission Rights due to each Registered Participant in the relevant period (calendar month or calendar year). The compensations due to each Registered Participant will be calculated as follows:

[(Uncapped compensations of curtailed Long Term Transmission Rights due to Registered Participant)/(Total uncapped compensations of curtailed Long Term Transmission Rights due to all Registered Participants)] x (Relevant Cap as described in paragraph 2 of this Article)

 

Article 60
Reimbursement for curtailments due to Force Majeure before the Day Ahead Firmness Deadline


1. In the case of Force Majeure before the Day Ahead Firmness Deadline, holders of curtailed Long Term Transmission Rights shall be entitled to receive a reimbursement equal to the price of the Long Term Transmission Rights set during the Long Term Transmission Rights Allocation Process, which for each affected hour and Registered Participant shall be calculated as:


(a) the Marginal Price of the initial Auction; or


(b) in case the Marginal Price of the initial Auction cannot be identified, the weighted average of Marginal Prices of all the Auctions for which the Registered Participant holds Long Term Transmission Rights where the weight is given by Long Term Transmission Rights which the Registered Participant holds before the curtailment; multiplied by


(c) the volume in MW per hour corresponding to the difference between the Long Term Transmission Rights held by the Registered Participant before and after the curtailment.

 

Article 61
Reimbursement or compensation for curtailments due to Force Majeure or emergency situation after the Day Ahead Firmness Deadline

 

In the event of Force Majeure or an emergency situations after the Day Ahead Firmness Deadline, holders of curtailed Long Term Transmission Rights shall be entitled to receive a reimbursement in accordance with Article 72 of Commission Regulation (EU) 2015/1222.

 


 


Regulation (EU) 2019/943 of the European Parliament and of the Council of 5 June 2019 on the internal market for electricity (recast), Recital 27 

Uncoordinated curtailments of interconnector capacities increasingly limit the exchange of electricity between Member States and have become a serious obstacle to the development of a functioning internal market for electricity. The maximum level of capacity of interconnectors and the critical network elements should therefore be made available, complying with the safety standards of secure network operation including respecting the security standard for contingencies (N-1). However, there are some limitations to setting the capacity level in a meshed grid. Clear minimum levels of available capacity for cross-zonal trade need to be put in place in order to reduce the effects of loop flows and internal congestions on cross-zonal trade and to give a predictable capacity value for market participants. Where the flow-based approach is used, that minimum capacity should determine the minimum share of the capacity of a cross-zonal or an internal critical network element respecting operational security limits to be used as an input for coordinated capacity calculation under Regulation (EU) 2015/1222, taking into account contingencies. The total remaining share of capacity may be used for reliability margins, loop flows and internal flows. Furthermore, in the case of foreseeable problems for ensuring grid security, derogations should be possible for a limited transitional phase. Such derogations should be accompanied by a methodology and projects providing for a long-term solution.

  

 

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