Deputy Executive Director/IT Expert Implementation of FCA Network Code in SEE Dijana Martinčić Deputy Executive Director/IT Expert

Summary Introduction Coordinated Auction Office in South East Europe Forward Capacity Allocation Network Code Forward Capacity Allocation in South East Europe? Concusions SEE CAO FCA FCA SEE establishing an allocation office in the region of South East Europe has been facilitated by adoption of the Regulation (EU) 714/2009 on conditions for access to the network for cross-border exchanges in electricity in the EnC acquis communitaire. Which led to implementtaion of 714/2009 in non-EU countries, which is a proof of convergence of Balkan countries with the European Union and its legislative framework

Introduction Coordinated auctions  Regulation (EC) 714/2009, Third energy package EnC acquis (2011) Implementation in SEE TSOs through SEE CAO Forward Capacity Allocation FCA  Regulation (EC) 2016/1719 Early implementation through HAR (Harmonised Allocation Rules) by EU TSOs Implementation through SEE CAO by SEE TSOs establishing an allocation office in the region of South East Europe has been facilitated by adoption of the Regulation (EU) 714/2009 on conditions for access to the network for cross-border exchanges in electricity in the EnC acquis communitaire. Which led to implementtaion of 714/2009 in non-EU countries, which is a proof of convergence of Balkan countries with the European Union and its legislative framework

SEE CAO FCA FCA SEE establishing an allocation office in the region of South East Europe has been facilitated by adoption of the Regulation (EU) 714/2009 on conditions for access to the network for cross-border exchanges in electricity in the EnC acquis communitaire. Which led to implementtaion of 714/2009 in non-EU countries, which is a proof of convergence of Balkan countries with the European Union and its legislative framework

SEE CAO shareholders Shareholding TSOs: Croatia HOPS BiH NOS BIH Montenegro CGES Kosovo KOSTT Albania OST Greece IPTO Turkey TEIAS FYROM MEPSO It would not be humble to say that SEE CAO is first successfull.. Presents an emenrgence of a joint venture of 7... Politically sensitive region this success is a rare phenomenon and achievemnt as a sign of tentative convergence of separate countries and nations

SEE CAO organisation Coordinated Auction Office in South East Europe July 2012 – Project Team Company SEE CAO April 2014 – SEE CAO Go – Live (first auctions): November 2014 Podgorica, Montenegro Service providing company Organisation: Board of Directors - representatives of SEE TSOs Executive Director - Mr Aleksandar Mijušković 7 employees It would not be humble to say that SEE CAO is first successfull.. Presents an emenrgence of a joint venture of 7... Politically sensitive region this success is a rare phenomenon and achievemnt as a sign of tentative convergence of separate countries and nations

SEE CAO services Auctions of cross-border capacity rights: Explicit allocation NTC based method Marginal price algorithm Long term - Yearly, Monthly Day ahead - Daily auctions borders between SEE TSOs Collecting auction revenue from the Auction participants Distributing auction revenue to TSOs Providing data to ENTSO-E Transparency platform REMIT reporting as Registered Reporting Mechanism It would not be humble to say that SEE CAO is first successfull.. Presents an emenrgence of a joint venture of 7... Politically sensitive region this success is a rare phenomenon and achievemnt as a sign of tentative convergence of separate countries and nations

Auction Process Daily Auction Yearly Auction Monthly Auction Resale Monthly Auction Transfer Y, M Long Term Capacity Rights Nominations, UIOSI Daily Auction Use of PTR

SEE CAO’s accomplishments Coordinated auctions Common Auction Rules Synchronised auction timing New products Efficient utilisation of capacities Transparency (EMFIP, REMIT) SEE CAO acts as a complusory point for energy trading in SEE

Annex I of Regulation (EC) 714/2009 SEE CAO Step forward unilateral/bilateral auctions performed by each TSO  coordinated auctions performed solely by SEE CAO Annex I of Regulation (EC) 714/2009 establishing an allocation office in the region of South East Europe has been facilitated by adoption of the Regulation (EU) 714/2009 on conditions for access to the network for cross-border exchanges in electricity in the EnC acquis communitaire. Which led to implementtaion of 714/2009 in non-EU countries, which is a proof of convergence of Balkan countries with the European Union and its legislative framework

100% Efficiency Maximum possible scope of borders 2015 - Complete success in auctions 2016 - Successful ongoing auctions 2017 - Succesful commence with Yearly auctions No contestation Good cooperation with stakeholders

Auction participants 111 energy trading companies 17countries Positive feedback, good cooperation We have already earned trust of 100 registered traders from 16 countries. From all of them we have received positive reactions to our services. All auctions went smoothly and their results were published promptly. We have not received any contestation from the traders on the results. Unusual for this region, all payments were received in due time and there was no need for using risk management instruments.

Benefits for traders One-stop-shop Full transparency Synchronised auction and LT nomination timing Multiple bidding Better utilisation of capacities - UIOSI Efficient portfolio management

Regulations concerned EMFIP (REGULATION (EU) No 543/2013) on submission and publication of data in electricity markets REMIT (Regulation (EU) No 1227/2011) on wholesale energy market integrity and transparency TBD FCA (Regulation (EU) 2016/1719) on establishing a guideline on forward capacity allocation Registered reporting mechanism – testing in progress Also report Secondary rights time series in relation to the transportation of electricity for HOPS and IPTO borders Although Network Codes on Forward Capacity Allocation is not yet legally binding, because Commission Regulation (EU) establishing a guideline on forward capacity allocation (FCA) has not come into force in EU - it is expected to happen in 2016. For its acceptance in EnC acquis communitaire more time will be needed due to different legal mechanisms for non-EU countries. Nevertheless its (early) implementation should be one of the main future steps for SEE CAO. First step for SEE CAO should be complete taking-over and implementation of Harmonised Auction Rules, which is not foreseen for auctions for 2017. SEE CAO should start applying HAR as of 2018. Its scope of explicit daily allocations will gradually be reduced depending on the pace of the (early) implementation of Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a guideline on capacity allocation and congestion management (CACM) in the SEE region.. One of main preconditions for (early) implementation of CACM is existence of power exchanges as main tool for day-ahead market coupling. With introduction of such implicit allocations SEE CAO will remain focused on long-term (forward) auctions for the period depending on the time and way how FCA stipulations regarding Single Allocation Platform will be addressed by EnC acquis communitaire. Therefore SEE CAO has a minimum of few next years to continue its operation as Regional Allocation Platform for SEE.

SEE CAO FCA FCA SEE establishing an allocation office in the region of South East Europe has been facilitated by adoption of the Regulation (EU) 714/2009 on conditions for access to the network for cross-border exchanges in electricity in the EnC acquis communitaire. Which led to implementtaion of 714/2009 in non-EU countries, which is a proof of convergence of Balkan countries with the European Union and its legislative framework

Network Codes Third enegry package determines: establishment of ACER and ENTSO-E creation of Network Codes (NC) ACER drafts Framework Guidelines for NC ENTSO-E develops NC Adopted by European Comission through comitology procedure (legally binding for EU Member States)

Network Codes specific tools for implementation of a single energy market in the EU CACM Capacity Allocation and Congestion Management FCA Forward Capacity Allocation EB Balancing CACM Capacity Allocation and Congestion Management FCA Forward Capacity Allocation EB Balancing Grid connection System operation Market rules

FCA Network Code Rules on cross-zonal capacity allocation: Forward markets PTR or FTR (option/obligation) Explicit auctions, marginal price Creation of HAR by TSOs No daily allocation – subject of CACM Flow-based – if justified by increase in economnic efficiency, interconnection highly dependable

Harmonised Allocation Rules Long term explicit allocation (Y,M) Created by ENTSO-E Early implementation - HAR 2016 Further alignment with FCA - HAR 2017 Implemented in JAO from 2016 Border specific annexes Daily allocation rules (explicit)

COMMISSION REGULATION (EU) 2016/1719 FCA Network Code COMMISSION REGULATION (EU) 2016/1719 of 26 September 2016 on establishing a guideline on forward capacity allocation Binding for EU Member States from October 2016 Early implementation by TSOs with Harmonised Auction Rules (HAR) from January 2016 Non-binding for non-EU countries Once adopted in Energy Community acqui binding for EnC CPs

capacity allocation and congestion management CACM Network Code COMMISSION REGULATION (EU) 2015/1222 of 24 July 2015 establishing a guideline on capacity allocation and congestion management Day Ahead and Intraday markets Implicit allocation Capacity calucation regions Bidding zones Prerequisite for the full implementation of FCA CACM Capacity Allocation and Congestion Management FCA Forward Capacity Allocation EB Balancing

SEE CAO FCA FCA SEE establishing an allocation office in the region of South East Europe has been facilitated by adoption of the Regulation (EU) 714/2009 on conditions for access to the network for cross-border exchanges in electricity in the EnC acquis communitaire. Which led to implementtaion of 714/2009 in non-EU countries, which is a proof of convergence of Balkan countries with the European Union and its legislative framework

HAR in SEE CAO Early implementation: Decision of SEE CAO BoD Establishment of working group by SEE TSOs and SEE CAO Approval of HAR by SEE NRAs Allocation system setup

HAR in SEE CAO Main HAR document full transposition Border specific annexes to be prepared by TSOs Daily auction rules: special document current application of explicit daily auctions

Conclusion Adoption of FCA in EnC acqui Appliance of HAR in SEE CAO SEE CAO has shown its expertise and pivotal role in South East Europe electricity market

Thank you for your attention! Dijana Martinčić, dipl.ing.el. Deputy Executive Director/IT Expert Coordinated Auction Office in South East Europe   Moskovska 39, Podgorica, Montenegro +382 20 414 792   +382 67 000 404   dijana.martincic@seecao.com www.seecao.com At the end, I want to remind you that we had very successful year, with: Successfully performed auctions (including yearly auctions for 2016) And good cooperation with stakeholders SEE CAO has proven its role in opening of South East European electricity market and we can do even more, we are already prepared to welcome more borders, we would like them to experience the benefits of our work and products.