Florence Forum, November 2008 Regulation (EC) 1228/ ERGEG Compliance Monitoring

2 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Structure of presentation  Key findings of compliance monitoring  Recommendations by ERGEG  Next steps

3 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Structure of presentation  Key findings of compliance monitoring  Recommendations by ERGEG  Next steps

4 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Key findings Generally NRA replies show that the Regulation and the CM Guidelines have not yet been fully implemented  Progress since First Report  Regional Initiatives to find practical solutions  Changes take time and amendments are even needed to national legislation Intra- and Inter-Regional coordination and coherence in congestion management methods and procedures must be improved to comply  Set-up of the intra-day allocation mechanism as soon as possible for those interconnectors not having implemented this mechanism yet

5 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Key findings – allocations in different time frames

6 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Key findings – congestion income Congestion income per country in year 2007, totalling 1840 million euros

7 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Key findings – use of congestion income Use of congestion income in year 2007 for three purposes according to Article 6(6) of the Regulation => mainly to reduce tariffs

8 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Key findings – countertrading / redispatching Application of cross-border countertrading or redispatching => neither of these methods applied roughly half of the interconnections

9 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Key findings Transparency – improvements required especially  Relevant information on forecast demand and generation  Realised ex-post values for the forecasted information => To meet the requirements set in regional transparency reports Difficult to evaluate compliance due to lack of criteria for some topics, e.g.  Maximising capacity  Minimising the impacts to the neighbouring control areas  Firmness of transmission capacity and curtailment of transmission capacity  Implementation of CM methods that foster competition

10 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Key findings Conflicts between national and European legislation, mainly as regards to NRAs’ powers -> harmonisation in regulatory issues, e.g.  Regulators’ powers in dispute settlement  Proceedings and processes which are required when an issue is “a subject to review” or “notified” according to the CM Guidelines  Resolving the question of which authority is responsible for each particular element of cross-border trading in each country  Evaluation of the efficiency of the usage of cross-border capacity Amendments are necessary for the Regulation and the CM Guidelines to remove ambiguities, to improve clarity and to reduce the possibility of diverging interpretations Need to develop the framework for the future compliance reporting

11 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Structure of presentation  Key findings of compliance monitoring  Recommendations by ERGEG  Next steps

12 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Recommendations - Commission / Member States Open the “old merchant interconnections” to the market with rTPA regime; Complement the existing general provisions in Section 5 (Transparency) of the CM Guidelines, with legally binding and detailed provisions on information management and transparency; Harmonise the key regulatory issues in terms of governance; Assign the responsibility for restrictions to participate in the allocation process to the regulators, who may implement this cooperation with the Competition Authorities;

13 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Recommendations - Commission / MS Anchor reporting by the TSOs on all relevant issues so that it becomes an “inherent” and “self-explanatory” duty Adopt and implement the ITC and Transmission Tariffication Guidelines ASAP (MS) Implement the legal framework to support the implementation of the rules in the CM Guidelines, in terms of regulatory powers and requirements on TSOs

14 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Recommendations - TSOs Truly commit and implement the agreed projects Define and agree on a common approach and detailed rules for solving internal and cross-border congestion throughout Europe, in line with the provisions in the Regulation and the CM Guidelines

15 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Recommendations - Regulators Define and put in place concrete measures to speed-up the implementation process of CM Guidelines Assess economic efficiency of congestion management methods Advise the Commission on amendments to the Regulation and the CM Guidelines in terms of: o curtailment and firmness, o Interconnection capacity maximisation by TSOs, o provisions on usage of countertrading and redispatching, o use of congestion income,

16 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Structure of presentation  Key findings of compliance monitoring  Recommendations by ERGEG  Next steps

17 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Next steps – Public consultation ERGEG launched public consultation ending by 12 November ERGEG invited proposals from all stakeholders on the following issues:  Most effective and rapid actions achieving compliance where non- compliance and deviations from the legal provisions in the Regulation and the CM Guidelines have been identified.  Suggestions on any further needs for more precise and detailed provisions in the Regulation and the CM Guidelines, possibly also beyond the findings in the Second Compliance Report ERGEG will publish comments and replies to questions received from stakeholders  Actions after public consultation will be taken by the end of year 2008

18 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Next steps – EC request on actions by NRAs to improve compliance EC letter to ERGEG o EC asked ERGEG “to which extent the identified areas of non- compliance have been followed up by NRAs’ measures to enforce compliance” o EC stated also that “it would be helpful to inform on enforcement powers allocated to the NRAs” ERGEG has conducted an inquiry and analysis with the NRAs on the four key questions: o NRA actions to ensure compliance o Timetable to meet compliance – NRA’s view o NRA powers/competence to ensure compliance o Interconnectors without congestions – procedures if congestions exists  ERGEG reply to EC in December 2008

19 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Concluding remarks ERGEG expects that the results of the 2nd Compliance Report will help establish and ensure in a sustainable way the compliance with all the relevant provisions for the cross-border electricity trade in the EU ERGEG will work further on enhancing the compliance monitoring methodology and quality of outcome It is also anticipated that the new provisions in the proposed Third Legislative Package will contribute to the improved cross-border trade and electricity market integration in the EU

20 XV Florence Forum, November Regulation (EC) 1228/2003 Second Compliance Report Thank you for your attention ! More information at ERGEG website: