1. Development and Implementation of a Coordinated Model for Regional and Inter-Regional Congestion Management Development and Implementation of a Coordinated Model for Regional and Inter-Regional Congestion Management María Luisa Huidobro Member of the EuroPEX Steering Committee

2. Background to joint work on: ”Development and Implementation of a Coordinated Model for Regional and Inter-Regional Congestion Management”

3. Challenge from Florence Forum ‘The Forum requested ETSO and EuroPEX to write a common discussion paper before March 2008 to address the implementation of regional and interregional capacity allocation methods, in particular the governance of the bodies running the system and to address the technical, legal and commercial challenges implied by the Consentec target model. Other stakeholders were invited to contribute to the discussion and ETSO and EuroPEX were invited to take particular account of the work so far done by EFET.’ ◆ Joint Action on ETSO and EuroPEX from the Florence Forum

4. Terms of Reference ◆ A working group from ETSO & EuroPEX established in November 07 ◆ Terms of Reference identified 5 broad areas of work 1.Flow based capacity calculation methods 2.Long Term & Secondary Market Timeframe 3.Day Ahead Timeframe 4.Intraday Timeframe 5.Legal and Regulatory Issues ◆ Original schedule was to deliver the result in April 2008 ◆ Timescale not realistic – Therefore a two stage approach adopted with Interim in April and Final in November 2008

5. Glidepath Approach

6. Market Perspectives – Criteria for success

7. Implementation approaches LOW MED to LOW HIGH to MED HIGH Developments initiated by TSOs and PXs at regional level with the appropriate cooperation and support from regulators and market parties; Developments facilitated by TSOs and PXs at regional and inter-regional level, but with a clear mandate provided regulatory authorities and the EC. Formal and coordinated (European) approach via the establishment of market codes and rules (potentially binding) such as envisaged in the EC’s 3 rd package proposals; Imposed by new EU legislation ’BOTTOM UP ’TOP DOWN’ Need for centrally driven EU-initiative Implementation Approaches High-level strategy

8. Congestion Management Model Options

9. DOME COUPLING

10.  Industry consultation done in June Individual responses (10+) and summary are published on EuroPEX & ETSO homepages  Survey within EuroPEX & TSO about regional/inter-regional development plans & prospects  Roadmap alternatives  Describe paths and issues from bilateral to regional, to inter- regional and European scale for: Day Ahead Intra Day Forwards (Long Term)  Deliver Report and presentation at 15th Florence Forum late Nov. ‘08 Key work towards Final Report

11. Challenge for next phase of project ◆ Elaborate on the choices for the way forward (Day Ahead, Forwards, Intraday)  What the different approaches can deliver: speed of implementation and geographic extent, European harmonisation, quality of solution, etc  What they require: implementation organisation and direction, enduring governance and regulation, etc Feasible glidepath

12. Implementation Issues Relatively few parties involved Common interests, clear regional benefits Bottom-up / evolutionary processes SUCCESSFUL REGIONAL PROGRESS TO DATE: Many more stakeholders involved More divergent interests, wider benefit distribution A consensual approach more difficult CHALLENGES AHEAD FOR INTER- REGIONAL DEVELOPMENTS: Increasing need for more ‘Top Down’ initiatives?

13. Day Ahead Market (DAM) 1.Unified Pan-European solution 2.Horizontal Integration 3.Dome coupling Key features to assess: Efficiency Complexity Implementation challenges Degrees of centralisation Governance issues OPTIONS CONSIDERED: METHODS Explicit auctions of physical transmission rights (PTRs) Implicit auctions CAPACITY ASSESSMENT Flow based ATC Bilateral ATC ALLOCATION :

14. Forward Cross Border Market Transmission Rights (TR): PTR with UIoLI PTR with UIoSI Financial Transmission Right (FTR) Energy derivatives: Contract for Difference (CfD) OPTIONS CONSIDERED: More implicit auctions in DAM PTRs with UIoSI PTRs may evolve towards FTRs Market players want liquidity in a secondary market Development of CfD-markets are independent of TR-solution DEVELOPMENT PATHS:

15. Intraday Market Explicit capacity auctions Implicit auctions First-come-first-served access to capacity obligations Continuous trading OPTIONS CONSIDERED: Ensure liquidity and market depth Ensure competition DEVELOPMENT PATH: Regional solutions appear to be more important than inter- regional solutions at current stage