1. Context
12 TSOs in North West Europe (NWE) have commenced a project to facilitate a single price coupling across a region covering CWE, Scandinavia and GB
Project outline presented to AHAG
Appointed project leader and project office
Solution as fast as possible in order to replace ITVC, implying focus on NWE first?
Uncertain path to European solution (is it expected that other regions conform to NWE model, including governance?)
6 PXs have commenced an project to implement a single matching algorithm that can be extended across Europe (PCR)
Current parties cover Northern, CWE, FUI, SWE, SCE regions; plus other adjacent market areas already covered by PXs (i.e. Baltic, CH…). PXs in CEE are also associated
Single algorithm is a prerequisite of the European target model, and recognised as a PX responsibility
Decentralised model, accountable to TSOs/regulators according to the relevant governance frameworks
Appointed project leader
Progressing on several workstreams after concept proven with simulations
Commission is to draft a Governance Guideline
Agreed plan presented at the last Florence Forum, target to have draft for December FF
Detail likely to be in “Operational Tier”, outside the Guideline – “preparation will continue by PXs and TSOs”, with regulatory oversight
Allows for different ways of implementing the Operational Tier, reflecting national legislation/regulation

2. Development of the Price Coupling of Regions (PCR) Initiative
Markets initially included in PCR TWh
Markets which showed interest to join
Markets that could join next as part of an agreed European roadmap
*Source: UCTE 2007 power consumption data

3. Development of the Price Coupling of Regions (PCR) Initiative
Key features of the initiative are:
PXs using one single co-owned matching algorithm. Such an algorithm will be published on the internet
Common operational procedures handling normal and emergency situations
Each individual PX takes the responsibility to fulfill locally legal and regulatory requirements as well as TSO agreements
Able to adapt to local/regional frameworks

4. Simulations outcomes and analysis
Robustness tests - Prices
Price deviation. Histogram of the number of hourly calculated prices by a single algorithm in one pass, in percentage, vs the value calculated by each of the algorithms for their own prices areas.
Ability to handle diversity of products and scale of calculation has been demonstrated on 3 existing algorithms (154 days, 14 prices areas, hourly prices simulated)
The calculation of the prices is of a good quality for a first attempt. Price deviation compared to local algorithm calculation is controlled .

5. PCR has been welcomed by Florence Forum:
Way forward
PCR has been welcomed by Florence Forum:
“The Forum welcomed the Power Exchanges’ initiative PCR and asked to ensure that it is in accordance with the emerging governance framework. The Forum stressed the need for co-operation between regulators, TSOs and Power Exchanges. The Forum also stressed the importance of ensuring that the input and requirements of TSOs and regulators are taken into account.”
AHAG has asked how NWE and PCR work together (concerns that projects might be conflicting)
Highly complementary to each other: PCR delivers joint PX responsibilities (e.g., coordinated matching function); NWE a TSO regional implementation
Different geographic scopes – regulators seem to want a solution for Europe and a clear roadmap, not just a NWE solution
Be consistent with emerging governance framework under AHAG
AHAG to review at next meeting on 21 Sep
TSOs and PXs also asked to present to FUI Implementation Group on 13 Sep
EuroPEX/ENTSO-E working level meeting planned on 14 Sep
Day Ahead Governance Project to review on 15 Sep
EuroPEX/ENTSO-E director level dinner on 20 Sep

6. Development of the Price Coupling of Regions (PCR) Initiative
Implementation plan

7. Possible project structure – Overview
PCR Implementation Project
Regional Implementation Projects
Adopt PCR coordinated matching function within existing regional solutions (e.g., Mibel, CWE, Nordic-Baltic, GB, Italy-Slovenia)
Adopt PCR coordinated matching function as part of any new regional solutions (NWE?)
Deliver common algorithm/ coordinated matching function that meets requirements of regional projects while enabling future single European market coupling
Identify/resolve any conflicting requirements
Facilitate convergence on common European “Operational Tier”

8. Conclusions
Simulations shows that technical feasibility of PCR has been proven in terms of single algorithmic computation
Wide European dimension
Regulators involvement considered as essential for the success
TSOs – national and regional have to be key partners in the development and later the operation
Clear roadmap for market participants