1. Name Surname Milan, November 2010 European Federation of Energy Traders 1 The Central South Region and the European Target Model – How to ensure consistency? Milan, 16 November 2010 Andrea Siri/Riccardo Rossi TF Italy

2. 2 Milan, November 2010 Content  Single Price Coupling and Italy/Slovenia market coupling project  European Infraday Market  Transmission Rights Allocation from 2011

3. 3 Milan, November 2010 European Price Coupling by 2015 The day-ahead market establishes a reference price for transmission rights with financial settlement and financial contracts... Day-ahead capacity allocation  single price coupling by 2015  Single pricing algorithm  Harmonized gate closure times  Sharing of all bid data between PXs  Compatible bids/products

4. 4 Milan, November 2010 Transparency and involvement – Markets are based on trust Market coupling  is a milestone toward the Single European Electricity Market  increases efficiency in x-border capacity use GE/DK – Expl. Auctions GE/DK – EMCC Markets are based on trust: lack of transparency can have devastating effects on markets The success of the project basically depends on the confidence that market participants place in it

5. 5 Milan, November 2010 Consistency, market based solution tests and full transparency Market Coupling Project Italy/Slovenia  Consistency with the target model has to be ensured  Full and detailed transparency on arrangements Lesson learned by CWE Market coupling project  Tests are needed; stakeholder involvement is necessary Questions and suggestions:  Which are back up/fall back solutions  Necessary to encourage trust  What are the results of preliminary tests?  Full transparency needed  Are tests with market participants planned?  At least 2weeks  Bids submitted at the same price  Market based rules  What happen in case results from PXs are inconsistent?  pre-defined rules

6. 6 Milan, November 2010 Basics and features for a European Infraday Market Basics agreed:  Accessibility for all market parties  Visibility/Tradability of all offers European wide  Transparent for market parties  Quickly/easily implementable across EU  Efficient utilization of X-Border capacity  Market based allocation of additional significant infraday capacity Main Features:  Reduce balancing needs  Portfolio Optimisation  Ability to trade until close to real time (h–1, delivery hour h)  Fast Matching + must allow block bids  X-Border OTC offers to be published and traded like any other deal Clear preference for continuous trading + market based capacity allocation when significant additional capacity becomes available

7. 7 Milan, November 2010 A Target Model by 2015 ( Florence Forum Dec 2009)  Where appropriate, specific National/Regional ID solutions may be developed  A specific National/Regional ID solution is not obligatory  Any specific National/Regional ID trading solution must be compatible with the Inter-Regional Target Model

8. 8 Milan, November 2010 Remarks and preferences on Terna ID proposal No mention of any involvement of X-border trading No equal access to all market parties in the National ID Market Two auction sessions (MI 3 and MI4) in day D instead of continuous trading Proposal to include X-border capacity only in the CS-IG meeting (29.09.2010)  X-border ID capacity auctions before MI3, MI4  Gap in tradable hours: 00-12 missed  Capacity calculation Unclear  No renominations possible till h–1 the delivery hours h  4 hrs between gate closure Remarks

9. 9 Milan, November 2010 Remarks and preferences on Terna ID proposal From the EU Rules (1228/2003) TERNA proposal is welcomed : a step forward Road map for arriving at x-border full infraday implementation Road Map to be addressed and fixed Infraday market open to all market participants Organised on a continuous trading basis Renominations possible till h-1 Transparent decision process and market based arrangements ID X-border capacity Terna proposal: Sessions need to cover all hrs of the day Gate closure as close as possible to the first hour of delivery Need to allow for bilateral X-border infra-day trading What about Countries in CS where not yet applied? EFET’s point of view

10. 10 Milan, November 2010 Target model for TRs Allocation Target Model  100% of forecast available capacity forward in line with forward energy market horizons  FTRs or PTRs with Use-it-or-Sell It (UIOSI)  A secondary market for trading transmission capacity rights is a high priority  Financial firmness of capacity rights is essential in order to hedge x-border positions  Compensation for capacity curtailment needs to be market- spread based, predictable and standardized  The costs of guaranteeing firmness should be met from TSOs allowed revenues (with appropriate incentives

11. 11 Milan, November 2010 CS ERI consultation for Q2/2011 on EFET remarks Full harmonisation with CASC rules ideal for 2011 Interim period for Yearly and Monthly/Daily for Q1/2011 Is another interim mechanism needed for Q2>Q4/2011? Why? Specific remarks Harmonised set of rules = no rules defined per border! (see Annex I > IV) Bank guarantee : same structure, legal entity, duration, applicable law, … Harmonization of payments terms (e.g. deadlines, …) Harmonization of IT platform (different access procedure, internet link, …) Testing phase for checking new platforms and Deep training for users Cross collateral coverage best practice implementation (likewise EEX) where applicable Fee, charges, pre-defined and not let to “unknown” calculation Market data availability: simple internet area with full set of real updated info (capacity allocated, daily TRM, capacity resold, hourly commercial interconnection flow, hourly physical interconnection flow, …, updated load flow????)

12. 12 Milan, November 2010 Thanks for your attention European Federation of Energy Traders Amstelveenseweg 998 1081 JS Amsterdam Tel: +31 (0)20 5207970 Email: secretariat@efet.orgsecretariat@efet.org www.efet.org