Commission Regulation (EU) 2016/1719 of 26 September 2016 establishing a guideline on forward capacity allocation (Text with EEA relevance)

TITLE I

GENERAL PROVISIONS

Article 1

Subject matter and scope

Article 2

Definitions

For the purposes of this Regulation, the definitions in Article 2 of Regulation (EC) No 714/2009, Article 2 of Regulation (EU) 2015/1222, Article 2 of Commission Regulation (EU) No 543/2013 (¹) as well as Article 2 of Directive 2009/72/EC of the European Parliament and of the Council (²) shall apply.

In addition, the following definitions shall apply:

(1) ‘forward capacity allocation’ means the attribution of long-term cross-zonal capacity through an auction before the day-ahead time frame;

(2) ‘long-term transmission right’ means a physical transmission right or a FTR — option or a FTR — obligation acquired in the forward capacity allocation;

(3) ‘allocation rules’ means the rules for forward capacity allocation applied by the single allocation platform;

(4) ‘single allocation platform’ means the European platform established by all TSOs for forward capacity allocation;

(5) ‘auction’ means the process by which long-term cross-zonal capacity is offered and allocated to market participants who submit bids;

(6) ‘UIOSI’ means the principle according to which the underlying cross-zonal capacity of physical transmission rights purchased and non-nominated is automatically made available for day-ahead capacity allocation and according to which the holder of these physical transmission rights receives remuneration from the TSOs.

(7) ‘nomination’ means the notification of the use of long-term cross-zonal capacity by a physical transmission rights holder and its counterparty, or an authorised third party, to the respective TSOs;

(8) ‘nomination rules’ means the rules with regard to the notification of use of long-term cross-zonal capacity by a physical transmission rights holder and their counterparty, or an authorised third party, to the respective TSOs;

(9) ‘market spread’ means the difference between the hourly day-ahead prices of the two concerned bidding zones for the respective market time unit in a specific direction;

(10) ‘compensation rules’ means the rules according to which each TSO responsible for the bidding zone border, where long-term transmission rights have been allocated, compensates transmission right holders for curtailing the long-term transmission rights.

Article 3

Objectives of forward capacity allocation

This Regulation aims at:

(a) promoting effective long-term cross-zonal trade with long-term cross-zonal hedging opportunities for market participants;

(b) optimising the calculation and allocation of long-term cross-zonal capacity;

(c) providing non-discriminatory access to long-term cross-zonal capacity;

(d) ensuring fair and non-discriminatory treatment of TSOs, the Agency, regulatory authorities and market participants;

(e) respecting the need for a fair and orderly forward capacity allocation and orderly price formation;

(f) ensuring and enhancing the transparency and reliability of information on forward capacity allocation;

(g) contributing to the efficient long-term operation and development of the electricity transmission system and electricity sector in the Union.

Article 4

Adoption of terms and conditions or methodologies

Where TSOs deciding on proposals for terms and conditions or methodologies listed in paragraph 6 are not able to reach an agreement, they shall decide by qualified majority voting. A qualified majority for proposals in accordance with paragraph 6 shall require the following majority:

(a) TSOs representing at least 55 % of the Member States; and

(b) TSOs representing Member States comprising at least 65 % of the population of the Union.

A blocking minority for decisions on proposals for terms and conditions or methodologies listed in paragraph 6 shall include TSOs representing at least four Member States, failing of which the qualified majority shall be deemed attained.

For TSO decisions on proposals for terms and conditions or methodologies listed in paragraph 6, one vote shall be attributed per Member State. If there is more than one TSO in the territory of a Member State, the Member State shall allocate the voting powers among the TSOs.

Where TSOs deciding on proposals for terms and conditions or methodologies listed in paragraph 7 are not able to reach an agreement and where regions concerned are composed of more than five Member States, they shall decide by qualified majority voting. A qualified majority for proposals in accordance with paragraph 7 shall require the following majority:

(a) TSOs representing at least 72 % of the Member States concerned; and

(b) TSOs representing Member States comprising at least 65 % of the population of the concerned region.

A blocking minority for decisions on proposals for terms and conditions or methodologies listed in paragraph 7 shall include at least the minimum number of TSOs representing more than 35 % of the population of the participating Member States, plus TSOs representing at least one additional Member State concerned, failing of which the qualified majority shall be deemed attained.

TSOs deciding on proposals for terms and conditions or methodologies listed in paragraph 7 in relation to regions composed of five Member States or less shall decide by consensus.

For TSO decisions on proposals for terms and conditions or methodologies listed in paragraph 7, one vote shall be attributed per Member State. If there is more than one TSO in the territory of a Member State, the Member State shall allocate the voting powers among the TSOs.

The proposals for the following terms and conditions or methodologies and any amendments thereof shall be subject to approval by the Agency:

(a) the generation and load data provision methodology pursuant to Article 17;

(b) the common grid model methodology pursuant to Article 18;

(c) the requirements for the single allocation platform pursuant to Article 49;

(d) the harmonised allocation rules pursuant to Article 51;

(e) the congestion income distribution methodology pursuant to Article 57;

(f) the methodology for sharing costs of establishing, developing and operating the single allocation platform pursuant to Article 59;

(g) the methodology for sharing costs incurred to ensure firmness and remuneration of long-term transmission rights pursuant to Article 61.

The proposals for the following terms and conditions or methodologies and any amendments thereof shall be subject to approval by all regulatory authorities of the concerned region:

(a) the capacity calculation methodology pursuant to Article 10;

(b) the methodology for splitting cross-zonal capacity pursuant to Article 16;

(c) the regional design of long-term transmission rights pursuant to Article 31;

(d) the establishment of fallback procedures in accordance with Article 42;

(e) the regional requirements of the harmonised allocation rules pursuant to Article 52, including the regional compensation rules pursuant to Article 55.

The proposals for amendment to the terms and conditions or methodologies shall be submitted to consultation in accordance with the procedure set out in Article 6 and approved in accordance with the procedure set out in this Article.

Article 5

Stakeholder involvement

The Agency, in close cooperation with ENTSO for Electricity, shall organise stakeholder involvement regarding forward capacity allocation and other aspects of the implementation of this Regulation. This shall include regular meetings with stakeholders to identify problems and propose improvements notably related to the operation and development of the forward capacity allocation, including the harmonisation of auction rules. This shall not replace the stakeholder consultations in accordance with Article 6.

Article 6

Consultation

Article 7

Confidentiality obligations

TITLE II

REQUIREMENTS FOR TERMS, CONDITIONS AND METHODOLOGIES

CHAPTER 1

Forward capacity calculation

Section 1

General requirements

Article 8

Capacity calculation regions

For the purposes of this Regulation the capacity calculation regions shall be those established pursuant to Article 15 of Regulation (EU) 2015/1222.

Article 9

Capacity calculation time frames

All TSOs in each capacity calculation region shall ensure that long-term cross-zonal capacity is calculated for each forward capacity allocation and at least on annual and monthly time frames.

Section 2

Capacity calculation methodology

Article 10

Capacity calculation methodology

The uncertainty associated with long-term capacity calculation time frames shall be taken into account when applying:

(a) a security analysis based on multiple scenarios and using the capacity calculation inputs, the capacity calculation approach referred to in Article 21(1)(b) and the validation of cross-zonal capacity referred to in Article 21(1)(c) of Regulation (EU) 2015/1222; or

(b) a statistical approach based on historical cross-zonal capacity for day-ahead or intraday time frames if it can be demonstrated that this approach may: (i) increase the efficiency of the capacity calculation methodology; (ii) better take into account the uncertainties in long-term cross-zonal capacity calculation than the security analysis in accordance with paragraph 4(a); (iii) increase economic efficiency with the same level of system security.

All TSOs in each capacity calculation region may jointly apply the flow-based approach for long-term capacity calculation time frames on the following conditions:

(a) the flow-based approach leads to an increase of economic efficiency in the capacity calculation region with the same level of system security;

(b) the transparency and accuracy of the flow-based results have been confirmed in the capacity calculation region;

(c) the TSOs provide market participants with six months to adapt their processes.

Article 11

Reliability margin methodology

The proposal for a common capacity calculation methodology shall include a reliability margin methodology which shall meet the requirements set out in Article 22 of Regulation (EU) 2015/1222.

Article 12

Methodologies for operational security limits and contingencies

The proposal for a common capacity calculation methodology shall include methodologies for operational security limits and contingencies which shall meet the requirements set out in Article 23(1) and (2) of Regulation (EU) 2015/1222.

Article 13

Generation shift keys methodology

The proposal for a common capacity calculation methodology shall include a methodology to determine generation shift keys which shall meet the requirements set out in Article 24 of Regulation (EU) 2015/1222.

Article 14

Methodology for remedial actions

If remedial actions are taken into account in the long-term capacity calculation, each TSO shall ensure that those remedial actions are technically available in real time operation and meet the requirements set out in Article 25 of Regulation (EU) 2015/1222.

Article 15

Cross-zonal capacity validation methodology

The proposal for a common capacity calculation methodology shall include a cross-zonal validation methodology which shall meet the requirements set out in Article 26 of Regulation (EU) 2015/1222.

Article 16

Methodology for splitting long-term cross-zonal capacity

The methodology for splitting long-term cross-zonal capacity shall comply with the following conditions:

(a) it shall meet the hedging needs of market participants;

(b) it shall be coherent with the capacity calculation methodology;

(c) it shall not lead to restrictions in competition, in particular for access to long-term transmission rights.

Section 3

Common grid model

Article 17

Generation and load data provision methodology

Article 18

Common grid model methodology

Article 19

Scenarios

Article 20

Individual grid model

When developing the individual grid model for a long-term capacity calculation time frame in capacity calculation regions, where security analysis based on multiple scenarios pursuant to Article 10 is applied, each TSO shall apply the requirements set in Article 19 of Regulation (EU) 2015/1222.

Section 4

Capacity calculation process

Article 21

General provisions

Article 22

Creation of a common grid model

The process and requirements set in Article 28 of Regulation (EU) 2015/1222 for creating a common grid model shall apply when creating the common grid model for long-term capacity calculation time frames in capacity calculation regions, where security analysis based on multiple scenarios pursuant to Article 10 is applied.

Article 23

Regional calculations of long-term cross-zonal capacities

Where TSOs apply the statistical approach pursuant to Article 10, the process for the calculation of long-term cross-zonal capacity shall include at least:

(a) a selection of historical day-ahead or intraday cross-zonal capacity data sets from a single period or a set of periods and order the data into a duration curve;

(b) a calculation of capacity corresponding to the risk level for the selected data set;

(c) a calculation of long-term cross-zonal capacity to be offered to forward capacity allocation taking into account a margin to reflect the difference between historical cross-zonal capacity values and forecasted long-term cross-zonal capacity values;

(d) common rules to take into account available information about planned outages, new infrastructure and generation and load pattern for the long-term capacity calculation time frames.

Article 24

Validation and delivery of cross-zonal capacity and split cross-zonal capacity

Article 25

Coordinated curtailment of cross-zonal capacity

Section 5

Biennial report on capacity calculation

Article 26

Biennial report on capacity calculation and allocation

For each bidding zone, bidding zone border and capacity calculation region, the report on capacity calculation and allocation shall contain at least:

(a) the capacity calculation approach used;

(b) statistical indicators on reliability margins;

(c) statistical indicators of cross-zonal capacity, where appropriate for each capacity calculation time frame;

(d) quality indicators for the information used for the capacity calculation;

(e) where appropriate, proposed measures to improve capacity calculation;

(f) recommendations for further development of the forward capacity calculation, including further harmonisation of methodologies, processes and governance arrangements.

CHAPTER 2

Bidding zones

Article 27

General provisions

CHAPTER 3

Forward capacity allocation

Section 1

General provisions

Article 28

General principles

The allocation of forward capacity shall take place in a way which:

(a) uses the marginal pricing principle to generate results for each bidding zone border, direction of utilisation and market time unit;

(b) allocates no more than the offered long-term cross-zonal capacity in accordance with Article 39;

(c) is repeatable.

Article 29

Input and results

The single allocation platform shall use the following inputs for determining the allocation of forward capacity in accordance with paragraph 2:

(a) validated splitting of long-term cross-zonal capacity submitted by each coordinated capacity calculator and capacities associated with returned long-term transmission rights pursuant to Article 43;

(b) bids submitted by market participants.

For each forward capacity allocation, the single allocation platform shall simultaneously determine at least the following results for each bidding zone border, direction of utilisation and market time unit:

(a) the volume of allocated long-term transmission rights expressed in MW;

(b) the price of long-term transmission rights pursuant to Article 40;

(c) the execution status of bids.

Section 2

Options for cross-zonal transmission risk hedging

Article 30

Decision on cross-zonal risk hedging opportunities

The decisions pursuant to paragraphs 1 and 2 shall be based on an assessment, which shall identify whether the electricity forward market provides sufficient hedging opportunities in the concerned bidding zones. The assessment shall be carried out in a coordinated manner by the competent regulatory authorities of the bidding zone border and shall include at least:

(a) a consultation with market participants about their needs for cross-zonal risk hedging opportunities on the concerned bidding zone borders;

(b) an evaluation.

The evaluation referred to in paragraph 3(b) shall investigate the functioning of wholesale electricity markets and shall be based on transparent criteria which include at least:

(a) an analysis of whether the products or combination of products offered on forward markets represent a hedge against the volatility of the day-ahead price of the concerned bidding zone. Such product or combination of products shall be considered as an appropriate hedge against the risk of change of the day-ahead price of the concerned bidding zone where there is a sufficient correlation between the day-ahead price of the concerned bidding zone and the underlying price against which the product or combination of products are settled;

(b) an analysis of whether the products or combination of products offered on forward markets are efficient. For this purpose, at least the following indicators shall be assessed: (i) trading horizon; (ii) bid-ask spread; (iii) traded volumes in relation to physical consumption; (iv) open interest in relation to physical consumption.

In case the assessment referred to in paragraph 3 shows that there are insufficient hedging opportunities in one or more bidding zones, the competent regulatory authorities shall request the relevant TSOs:

(a) to issue long-term transmission rights; or

(b) to make sure that other long-term cross-zonal hedging products are made available to support the functioning of wholesale electricity markets.

Article 31

Regional design of long-term transmission rights

No later than six months after the coordinated decisions of the regulatory authorities of the bidding zone border to introduce long-term transmission rights pursuant Article 30(2), TSOs of the concerned capacity calculation region, shall jointly develop a proposal for the regional design of long-term transmission rights to be issued on each bidding zone border within the concerned capacity calculation region.