Category: European Union Electricity Market Glossary

Published: 30 December 2016

Last Updated: 02 January 2022

 

'Market Coupling Operator (MCO) function' is the task of matching orders from:

 

- the day-ahead markets, and

 

- the intraday markets.

20 December 2021   ACER Recommendation on reasoned amendments to the Capacity Allocation and Congestion Management Regulation proposes changes to a wide range of topics, including: • market coupling governance and operations, • capacity calculation and bidding zone review.

 
The MCO function is performed for different bidding zones and simultaneously allocates cross-zonal capacities (Article 2(30) of the CACM Regulation).

 

According to the ACER Monitoring report of 30 January 2019 on the implementation of the CACM Regulation and the FCA Regulation (p. 5) “[t]he legal framework for the development, operation, governance and financing of the MCO Function for the single day-ahead and intraday coupling is complex and suboptimal. The main problem is that the responsibility for the development and operation is given to NEMOs, which may not have sufficient incentives to deliver an optimal setup of the algorithms and associated products, because (i) they compete with each other, while at the same time they need to cooperate and make decisions in the wider European interest to ensure a robust and reliable development and operation of the single coupling and (ii) they rely largely on TSOs to recover their costs, whereas TSOs are reluctant to cover those costs without being involved in the development and operation of those algorithms and products. Therefore, the Agency recommends a revision of the governance of the algorithms and of the associated cost recovery.”

See also: Nominated Electricity Market Operator (NEMO)

In the same vein. ACER Recommendation of 20 December 2021 on reasoned amendments to the Capacity Allocation and Congestion Management Regulation proposed changes to a wide range of topics within the scope of MCO’s interest, including market coupling governance and operations.

 

In particular, it was assessed in the said Recommendation that the MCO governance defined in the current CACM Regulation proved “to be a source of problems in terms of decision making and implementation of relevant features and projects”.

 

ACER, moreover, suggested a timeline for “an appropriate restructuring of the MCO governance”. 

Recitals 13 - 15 of the CACM Regulation in the wording proposed by the ACER Recommendation of 20 December 2021 13. The management of single day-ahead and intraday coupling should be organised by all NEMOs and all TSOs jointly. This Regulation specifies and tasks related single day-ahead and intraday coupling and designates different entities to perform these tasks. TSOs and RCCs are designated to perform the tasks related to capacity calculation. NEMOs are designated to perform the tasks related to single day-ahead and intraday coupling where competition is possible and allowed. These tasks are related to power exchange services towards market participants. The tasks related to single day-ahead and intraday coupling which are inherently monopolistic and where no competition is possible are the MCO tasks. These tasks are currently still performed by all NEMOs and this arrangement should continue until a single regulated entity is established which can become responsible for MCO tasks. 14. Establishment of such entity is needed to ensure better and faster development of single day-ahead coupling, in particular to be able to implement future requirements and improvements without delays and excessive burden. Such arrangement should also enable more effective regulatory oversight and enforcement, simpler and less costly operation, level playing field for competition among NEMOs, easier entry for new NEMOs, more coordinated development of solutions and higher level of continuity of the single day-ahead and intraday coupling. 15. As all NEMOs and all TSOs are jointly responsible for organising the management of the single-day-ahead and intraday coupling they should jointly establish an entity to perform the MCO tasks and jointly define all rules and requirements on the implementation and performance of MCO tasks. For this purpose all NEMOs and all TSOs should cooperate closely in a joint decision making body tasked to provide rules and requirements regarding the implementation and performance of MCO tasks.

 

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