Action plan covering 2008 activities for the implementation of day-ahead implicit auction in Central-South Europe as a mean to allocate cross border capacity Milan – April 21th, nd Central South SG meeting

Action plan on day-ahead implicit auction: background During the 6th CS Implementation Group meeting PXs and TSOs were mandated by Regulators to provide an action plan for day-ahead market coupling that:  has a regional scope  follows a step-wise approach by identifying those borders where market coupling could be implemented at an earlier stage  is compliant with Regulation 1228/03

Action plan on day-ahead implicit auction: the content In the action plan, we use the term implicit auction instead of market coupling. The reason is that implicit auction refers not only to market coupling, but to a wider range of technical/legal arrangements (market coupling /market splitting / dome coupling) that integrate capacity allocation and energy trading, providing consistent price signals and ensuring that the available transfer capacity is fully used.  The action plan identifies the 2008 activities for the implementation of day-ahead implicit auction (market coupling / market splitting / dome coupling) in Central-South Europe as a mean to allocate cross border capacity  The time schedule proposed is indicative and may be subject to changes on the basis of the needs and the scope of each action.

Action plan on day-ahead implicit auction: the steps WhatWhoWhen [indicative deadlines] 1.Study on the existing methods for day-ahead allocation of interconnector capacity in the region GME and, if other borders are added to the study, in collaboration with the relevant PXs and TSOs 2nd SG meeting, April Assessment of differences in market designs in the CS region and identification of coordination requirements with other relevant regions Working groups[by end of June 2008] 3.Preliminary feasibility study, part 1: Identification of general features for implicit auctions models in the Central-South region and identification of the borders where implicit auctions can be developed at an earlier stage IG[by July 2008] 4.Preliminary feasibility study, part 2: Development of possible implicit auction models for the borders where implicit auction can be developed at an earlier stage (pilot project) Involved PXs, TSOs and Regulators[by October 2008] 5.Development of a proposal for MoU and definition of timetable for implementation Involved PXs, TSOs and Regulators[by end of 2008]

Action plan on day-ahead implicit auction: step 1 WhatWhoWhen 1.Study on the existing methods for day-ahead allocation of interconnector capacity in the region GME and, if other borders are added to the study, in collaboration with the relevant PXs and TSOs 2nd SG meeting, April The study will focus on the Italian borders. The aims of the study are:  to identify the potential for efficiencies gains from the adoption of implicit auctions instead of explicit auctions as a mean to allocate interconnector capacity at day-ahead stage  to give, where possible, a quantitative background to assessment of the superiority of implicit auctions in short term trading;  to give, where possible, a quantitative background to the evaluation of the opportunity to adopt implicit auction mechanisms for each of the analyzed borders.

WhatWhoWhen 2.Assessment of differences in market designs in the CS region and identification of coordination requirements with other relevant regions Working group[by end of June 2008] The study will be divided in two parts:  The first part should highlight and compare the features of the day-ahead markets in the CS region that have an impact on the implementation of implicit auction mechanisms  The second part should highlight and compare the features of those day-ahead implicit auction mechanisms for the congestion management that are already in place or that are on the way to be developed in other European regions. It should also assess the opportunities offered in terms of interregional integration between the Central-South region and other regional initiatives. Action plan on day-ahead implicit auction: step 2

WhatWhoWhen 3.Preliminary feasibility study, part 1: Identification of general features for implicit auctions models in the Central-South region and identification of the borders where implicit auctions can be developed at an earlier stage IG[by July 2008]  Special focus to the identification of the requirements for an efficient coordination with the “auction office project” that the TSOs of the pentalateral group are developing.  Implicit auction models should be “implementable” in all the borders of the CS region either directly or subsequently through, e.g. explicit auctions / market coupling /dome coupling/ market splitting or similar procedures. IG should identify those borders where implicit auctions could be implemented at an earlier stage Action plan on day-ahead implicit auction: step 3

WhatWhoWhen 4.Preliminary feasibility study, part 2: Development of possible implicit auction models for the borders where implicit auction can be developed at an earlier stage (pilot project) Involved PXs, TSOs and Regulators [by October 2008] PXs, TSOs and Regulators involved in the borders where implicit auctions can be established at an earlier stage should develop feasible implicit auction models.  Models should identify the general technical (market and grid model) and legal/governance aspects.  The detailed description of technical and governance aspects of the models is a task to be carried out during the design phase of the project (after the MoU is signed). Action plan on day-ahead implicit auction: step 4

WhatWhoWhen 5.Development of a proposal for MoU and definition of timetable for implementation Involved PXs, TSOs and Regulators [by end of 2008] PXs and TSOs and Regulators involved in the borders where implicit auction can be established at an earlier stage will present to Regulators a draft proposal of MoU. The MoU:  shall be open to the participation of PXs and TSOs of the borders not initially involved in the project  shall include a timetable for the implementation that shall be agreed upon by interested parties prioritizing the implementation on the basis of the results of the above mentioned preparatory studies, feasibility studies and models Action plan on day-ahead implicit auction: step 5

The proposed action plan has been agreed by:  GME, Terna (Italy)  Powernext, RTE (France)  EXAA (Austria)  E.ON (Germany)  Borzen (Slovenia)  HTSO (Greece) SwissGrid (Switzerland) agreed only to step 1 and 2