Commission Regulation (EU) 2017/2195 of 23 November 2017 establishing a guideline on electricity balancing (Text with EEA relevance. )

By six months after the approval of the proposal for the implementation framework for a European platform for the exchange of balancing energy from frequency restoration reserves with automatic activation, all TSOs shall designate the proposed entity or entities entrusted with operating the European platform pursuant to paragraph 3(e).

By eighteen months after the approval of the proposal for the implementation framework for a European platform for the exchange of balancing energy from frequency restoration reserves with automatic activation, all TSOs may develop a proposal for modification of the European platform for the exchange of balancing energy from frequency restoration reserves with automatic activation pursuant to paragraph 1 and of the principles set in paragraph 2. Proposed modifications shall be supported by a cost-benefit analysis performed by the all TSOs pursuant to Article 61. The proposal shall be notified to the Commission.

By thirty months from the approval of the proposal for the implementation framework for a European platform for the exchange of balancing energy from frequency restoration reserves with automatic activation, or where all TSOs submit a proposal for modification of the European platform pursuant to paragraph 5, by 12 months after the approval of the proposal for modification of the European platform, all TSOs performing the automatic frequency restoration process pursuant to Part IV of Regulation (EU) 2017/1485 shall implement and make operational the European platform for the exchange of balancing energy from frequency restoration reserves with automatic activation and they shall use the European platform to:

By six months after entry into force of this Regulation, all TSOs shall develop a proposal for the implementation framework for a European platform for the imbalance netting process.

The European platform for the imbalance netting process, operated by TSOs or by means of an entity the TSOs would create themselves, shall be based on common governance principles and business processes and shall consist of at least the imbalance netting process function and the TSO-TSO settlement function. The European platform shall apply a multilateral TSO-TSO model to perform the imbalance netting process.

The proposal in paragraph 1 shall include at least:

By six months after the approval of the proposal for the implementation framework for a European platform for the imbalance netting process, all TSOs shall designate the proposed entity or entities entrusted with operating the European platform pursuant to paragraph 3(e).

By one year after the approval of the proposal for the implementation framework for a European platform for the imbalance netting process, all TSOs performing the automatic frequency restoration process pursuant to Part IV of Regulation (EU) 2017/1485 shall implement and make operational the European platform for the imbalance netting process. They shall use the European platform to perform the imbalance netting process, at least for the Continental Europe synchronous area.

All TSOs shall provide a yearly report to the relevant regulatory authorities in accordance with Article 37 of Directive 2009/72/EC in which the costs of establishing, amending and operating the European platforms pursuant to Articles 19, 20, 21 and 22 are explained in detail. This report shall be published by the Agency taking due account of sensitive commercial information.

The costs referred to in paragraph 1 shall be broken down into:

Common costs referred to in paragraph 2(a) shall be shared among the TSOs in the Member States and third countries participating in the European platforms. To calculate the amount to be paid by the TSOs in each Member State and, if applicable, third country, one eighth of the common cost shall be divided equally between each Member State and third country, five eighths shall be divided between each Member State and third country proportionally to their consumption, and two eighths shall be divided equally between the participating TSOs pursuant to paragraph 2(a). The Member State's share of the costs shall be borne by the TSO or TSOs operating in a territory of that Member State. In case several TSOs are operating in a Member State, the Member State's share of the costs shall be distributed among those TSOs proportionally to the consumption in the TSOs control areas.

To take into account changes in the common costs or changes in the participating TSOs, the calculation of common costs shall be regularly adapted.

TSOs cooperating in a certain region shall jointly agree on a proposal for the sharing of regional costs in accordance with paragraph 2(b). The proposal shall then be individually approved by the relevant regulatory authorities of each of the Member States and, if applicable, third country in the region. TSOs cooperating in a certain region may alternatively use the cost sharing arrangements set out in paragraph 3.

The cost sharing principles shall apply to costs contributing to the establishing, amending and operating the European platforms from the approval of the proposal for the relevant implementation frameworks pursuant to Articles 19(1), 20(1), 21(1) and 22(1). In case the implementation frameworks propose that existing projects shall evolve into a European platform, all TSOs participating in the existing projects may propose that a share of the costs incurred before the approval of the proposal for the implementation frameworks directly related to the development and implementation of this project and assessed as reasonable, efficient and proportionate is considered as part of the common costs pursuant to paragraph 2(a).

As part of the proposals pursuant to Articles 19, 20 and 21, all TSOs shall harmonise the balancing energy gate closure time for standard products at the Union level, at least for each of the following processes:

Balancing energy gate closure times shall:

After the balancing energy gate closure time, the balancing service providers shall no longer be permitted to submit or update their balancing energy bids.

After the balancing energy gate closure time, balancing service providers shall report to the connecting TSO any unavailable volumes of balancing energy bids without undue delay in accordance to 158(4)(b) and 161(4)(b) of Regulation (EU) 2017/1485. If the balancing service provider has a connection point to a DSO, and if required by the DSO, the balancing service provider shall also report any unavailable volumes of balancing energy bids to the DSO without undue delay.

By two years after entry into force of this Regulation, each TSO applying a central dispatching model shall define at least one integrated scheduling process gate closure time which shall:

After each integrated scheduling process gate closure time, the integrated scheduling process bid may only be changed in accordance with the rules defined by the connecting TSO in the terms and conditions for balancing service providers set up pursuant to Article 18. Those rules shall be implemented before the connecting TSO joins any process for the exchange of balancing energy and shall allow balancing service providers to update their integrated scheduling bids to the extent possible until the intraday cross-zonal gate closure time, while ensuring:

Each TSO applying a central dispatching model shall establish the rules for using the integrated scheduling process bids prior to the balancing energy gate closure time in accordance with Article 18( 8) (c) in order to:

Standard products for balancing energy shall be developed as part of the proposals for the implementation frameworks for the European platforms pursuant to Articles 19, 20 and 21. After the approval of each implementation framework and no later than the time when a TSO uses the respective European platform, the TSO shall use only standard and, where justified, specific balancing energy products in order to maintain the system's balance in accordance with Article 127, Article 157 and Article 160 of Regulation (EU) 2017/1485.

By two years after entry into force of this Regulation, all TSOs shall develop a proposal for a list of standard products for balancing capacity for frequency restoration reserves and replacement reserves.

At least every two years, all TSOs shall review the list of standard products for balancing energy and balancing capacity. The review of standard products shall take into account:

The list of standard products for balancing energy and balancing capacity may set out at least the following characteristics of a standard product bid:

The list of standard products for balancing energy and balancing capacity shall set out at least the following variable characteristics of a standard product to be determined by the balancing service providers during the prequalification or when submitting the standard product bid:

Standard products for balancing energy and balancing capacity shall:

Following the approval of the implementation frameworks for the European platforms pursuant to Articles 19, 20 and 21, each TSO may develop a proposal for defining and using specific products for balancing energy and balancing capacity. This proposal shall include at least:

Each TSO using specific products shall review at least once every two years the necessity to use specific products in accordance with the criteria laid down in paragraph 1.

The specific products shall be implemented in parallel to the implementation of the standard products. Following the use of the specific products, the connecting TSO may alternatively:

The rules for converting balancing energy bids from specific products into balancing energy bids from standard products pursuant to paragraph 1(d) shall:

Each TSO applying a central dispatching model shall use the integrated scheduling process bids for the exchange of balancing services or for the sharing of reserves.

Each TSO applying a central dispatching model shall use the integrated scheduling process bids available for the real time management of the system to provide balancing services to other TSOs, while respecting operational security constraints.

Each TSO applying a central dispatching model shall convert as far as possible the integrated scheduling process bids pursuant to paragraph 2 into standard products taking into account operational security. The rules for converting the integrated scheduling process bids into standard products shall:

Each TSO shall ensure that fall-back solutions are in place in case the procedures referred to in paragraphs 2 and 3 fail.

Where the procurement of balancing services fails, the concerned TSOs shall repeat the procurement process. TSOs shall inform market participants that fall-back procedures will be used as soon as possible.

Where the coordinated activation of balancing energy fails, each TSO may deviate from the common merit order list activation and shall inform market participants as soon as possible.

In order to maintain the system's balance in accordance with Article 127, Article 157 and Article 160 of Regulation (EU) 2017/1485, each TSO shall use cost-effective balancing energy bids available for delivery in its control area based on common merit order lists or another model as set with the proposal by all TSOs pursuant to paragraph 5 of Article 21.

TSOs shall not activate balancing energy bids before the corresponding balancing energy gate closure time, except in the alert state or the emergency state when such activations help alleviate the severity of these system states and except when the bids serve purposes other than balancing pursuant to paragraph 3.

By one year after the entry into force of this Regulation, all TSOs shall develop a proposal for a methodology for classifying the activation purposes of balancing energy bids. This methodology shall:

For each balancing energy bid activated from the common merit order list, the TSO activating the bid shall define the activation purpose based on the methodology pursuant to paragraph 3. The activation purpose shall be notified and visible to all TSOs through the activation optimisation function.

In the event that the activation of balancing energy bids deviates from the results of the activation optimisation function, the TSO shall publish the information about the reasons for the occurrence of such deviation in a timely manner.

The request for activation of a balancing energy bid from the activation optimisation function shall oblige the requesting TSO and connecting TSO to accept the firm exchange of balancing energy. Each connecting TSO shall ensure the activation of the balancing energy bid selected by the activation optimisation function. The balancing energy shall be settled pursuant to Article 50 and between the connecting TSO and the balancing service provider pursuant to Chapter 2 of Title V.

The activation of balancing energy bids shall be based on a TSO-TSO model with a common merit order list.

Each TSO shall submit all necessary data for the operation of the algorithm in paragraphs 1 and 2 of Article 58 to the activation optimisation function in accordance with the rules established pursuant to Article 31( 1).

Each connecting TSO shall submit, prior to the TSO energy bid submission gate closure time, all balancing energy bids received from balancing service providers to the activation optimisation function, taking into account the requirements in Articles 26 and 27. The connecting TSOs shall not modify or withhold balancing energy bids, except for:

Each TSO applying a self-dispatching model and operating within a scheduling area with a local intraday gate closure time after the balancing energy gate closure time pursuant to Article 24 may develop a proposal to limit the amount of bids that is forwarded to the European platforms pursuant to Articles 19 to 21. The bids forwarded to the European platforms shall always be the cheapest bids. This proposal shall include:

At least once every two years after the approval of the proposal in paragraph 10 by the respective regulatory authority, all TSOs shall assess the impact of limiting the volume of bids sent to the European platforms and the functioning of the intraday market. This assessment shall include:

Each requesting TSO may request the activation of balancing energy bids from the common merit order lists up to the total volume of balancing energy. The total volume of balancing energy that can be activated by the requesting TSO from balancing energy bids from the common merit order lists is calculated as a sum of volumes of:

All TSOs may establish in the proposals for the implementation frameworks for the European platforms pursuant to Articles 19, 20 and 21 the conditions or situations in which the limits set out in paragraph 12 shall not apply. When a TSO requests balancing energy bids beyond the limit set out in paragraph 12, all other TSOs shall be informed.

Each TSO may declare the balancing energy bids submitted to the activation optimisation function unavailable for the activation by other TSOs because they are restricted due to internal congestion or due to operational security constraints within the connecting TSO scheduling area.

By one year after the entry into force of this Regulation, all TSOs shall develop a proposal for a methodology to determine prices for the balancing energy that results from the activation of balancing energy bids for the frequency restoration process pursuant to Articles 143 and 147 of Regulation (EU) 2017/1485, and the reserve replacement process pursuant to Articles 144 and 148 of Regulation (EU) 2017/1485. Such methodology shall:

In case TSOs identify that technical price limits are needed for efficient functioning of the market, they may jointly develop as part of the proposal pursuant to paragraph 1 a proposal for harmonised maximum and minimum balancing energy prices, including bidding and clearing prices, to be applied in all scheduling areas. In such a case, harmonised maximum and minimum balancing energy prices shall take into account the maximum and minimum clearing price for day-ahead and intraday timeframes pursuant to Regulation (EU) 2015/1222.

The proposal pursuant to paragraph 1 shall also define a methodology for pricing of cross-zonal capacity used for exchange of balancing energy or for operating the imbalance netting process. Such methodology shall be consistent with the requirements established under Regulation (EU) 2015/1222, and:

The harmonised pricing method defined in paragraph 1 shall apply to balancing energy from all standard and specific products pursuant to Article 26(3)(a). For specific products pursuant to Article 26(3)(b), the concerned TSO may propose a different pricing method in the proposal for specific products pursuant to Article 26.

Where all TSOs identify inefficiencies in the application of the methodology proposed pursuant to paragraph 1(a), they may request an amendment and propose a pricing method alternative to the pricing method in paragraph 1(a). In such case, all TSOs shall perform a detailed analysis demonstrating that the alternative pricing method is more efficient.

All TSOs shall establish an activation optimisation function in accordance with Article 29 and this Article for the optimisation of the activation of balancing energy bids from different common merit order lists. This function shall take into account at least:

Common merit order lists shall consist of balancing energy bids from standard products. All TSOs shall establish the necessary common merit order lists for the standard products. Upward and downward balancing energy bids shall be separated in different common merit order lists.

Each activation optimisation function shall use at least one common merit order list for upward balancing energy bids and one common merit order list for downward balancing energy bids.

TSOs shall ensure that the balancing energy bids submitted to the common merit order lists are expressed in euros and make reference to the market time unit.

Depending on the requirement for standard products for balancing energy, TSOs may create more common merit order lists.

Each TSO shall submit its activation requests for balancing energy bids to the activation optimisation function.

The activation optimisation function shall select balancing energy bids and request the activation of selected balancing energy bids from the connecting TSOs where the balancing service provider, associated with the selected balancing energy bid, is connected.

The activation optimisation function shall submit the confirmation of the activated balancing energy bids to the TSO requesting the activation of the balancing energy bids. The activated balancing service providers shall be responsible for delivering the requested volume until the end of the delivery period.

All TSOs that operate the frequency restoration process and the reserve replacement process to balance their LFC area shall strive to use all balancing energy bids from relevant common merit order lists to balance the system in the most efficient way, taking into account operational security.

TSOs that do not use the reserve replacement process to balance their LFC area shall strive to use all balancing energy bids from relevant common merit order lists for frequency restoration reserves to balance the system in the most efficient way, taking into account operational security.

Except in the normal state, TSOs may decide to balance the system using only the balancing energy bids from balancing service providers in its own control area if such decision helps alleviate the severity of the current system state. The TSO shall publish a justification for such decision without undue delay.

All TSOs of the LFC block shall regularly and at least once a year review and define the reserve capacity requirements for the LFC block or scheduling areas of the LFC block pursuant to dimensioning rules as referred in Articles 127, 157 and 160 of Regulation (EU) 2017/1485. Each TSO shall perform an analysis on optimal provision of reserve capacity aiming at minimisation of costs associated with the provision of reserve capacity. This analysis shall take into account the following options for the provision of reserve capacity:

Each TSO procuring balancing capacity shall define the rules for the procurement of balancing capacity in the proposal for the terms and conditions related to balancing service providers developed pursuant to Article 18. The rules for the procurement of balancing capacity shall comply with the following principles:

The procurement of upward and downward balancing capacity for at least the frequency restoration reserves and the replacement reserves shall be carried out separately. Each TSO may submit a proposal to the relevant regulatory authority in accordance with Article 37 of Directive 2009/72/EC requesting the exemption to this requirement. The proposal for exemption shall include:

Two or more TSOs exchanging or mutually willing to exchange balancing capacity shall develop a proposal for the establishment of common and harmonised rules and processes for the exchange and procurement of balancing capacity while respecting the requirements set out in Article 32.

Except in cases where the TSO-BSP model is applied pursuant to Article 35, the exchange of balancing capacity shall always be performed based on a TSO-TSO model whereby two or more TSOs establish a method for the common procurement of balancing capacity taking into account the available cross-zonal capacity and the operational limits defined in Chapters 1 and 2 of Part IV Title VIII of Regulation (EU) 2017/1485.

All TSOs exchanging balancing capacity shall submit all balancing capacity bids from standard products to the capacity procurement optimisation function. TSOs shall not modify or withhold any balancing capacity bids and shall include them in the procurement process, except under conditions set out in Article 26 and Article 27.

All TSOs exchanging balancing capacity shall ensure both the availability of cross-zonal capacity and that the operational security requirements set out in Regulation (EU) 2017/1485 are met, either by:

Each TSO using the methodology for calculating the probability of available cross-zonal capacity after intraday cross-zonal gate closure time shall inform other TSOs in their LFC block of the risk of unavailability of reserve capacity in the scheduling area or areas of its control area that may affect the fulfilment of the requirements pursuant to Article 157(2)(b) of Regulation (EU) 2017/1485.

TSOs exchanging balancing capacity for frequency restoration reserves and replacement reserves may develop a proposal for a methodology for calculating the probability of available cross-zonal capacity after intraday cross-zonal gate closure time. The methodology shall at least describe:

TSOs shall not increase the reliability margin calculated pursuant to Regulation (EU) 2015/1222 due to the exchange of balancing capacity for frequency restoration reserves and replacement reserves.

Within the geographical area in which the procurement of balancing capacity has taken place, the TSOs shall allow balancing service providers to transfer their obligations to provide balancing capacity. The concerned TSO or TSOs may request an exemption where contracting periods for balancing capacity pursuant to Article 32(2)(b) are strictly less than one week.

The transfer of balancing capacity shall be allowed at least until one hour before the start of the delivery day.

The transfer of balancing capacity shall be allowed if the following conditions are met:

In case the transfer of balancing capacity requires the use of cross-zonal capacity, such transfer shall only be allowed in case:

If a TSO does not allow the transfer of balancing capacity, the concerned TSO shall explain the reason for the rejection to the balancing service providers involved.

Two or more TSOs may at their initiative or at the request of their relevant regulatory authorities in accordance with Article 37 of Directive 2009/72/EC develop a proposal for the application of the TSO-BSP model.

The proposal for application of a TSO-BSP model shall include:

Where the TSO-BSP model applies, the respective TSOs and balancing service providers may be exempted from the application of the requirements in Article 16( 2), Article 16( 4), Article 16( 5) and Article 29( 9) for the relevant processes.

Where the TSO-BSP model applies, the involved TSOs shall agree on the technical and contractual requirements and on information exchanges for the activation of balancing energy bids. The contracting TSO and the balancing service provider shall establish contractual arrangements based on the TSO-BSP model.

The TSO-BSP model for the exchange of balancing energy from frequency restoration reserves may be applied only where the TSO-BSP model is also applied for the exchange of balancing capacity for frequency restoration reserves.

The TSO-BSP model for the exchange of balancing energy from replacement reserves may be applied where the TSO-BSP model is applied for the exchange of balancing capacity for replacement reserves or where one of the two involved TSOs does not operate the reserve replacement process as part of the load-frequency-control structure pursuant to Part IV of Regulation (EU) 2017/1485.

By four years after entry into force of this Regulation, all exchanges of balancing capacity shall be based on the TSO-TSO model. This requirement shall not apply to the TSO-BSP model for replacement reserves if one of the two involved TSOs does not operate the reserve replacement process as part of the load-frequency-control structure pursuant to Part IV of Regulation (EU) 2017/1485.

All TSOs shall use the available cross-zonal capacity, computed according to paragraphs 2 and 3 of Article 37, for the exchange of balancing energy or for operating the imbalance netting process.

Two or more TSOs exchanging balancing capacity may use cross-zonal capacity for the exchange of balancing energy when cross-zonal capacity is:

After the intraday-cross-zonal gate closure time, TSOs shall continuously update the availability of cross-zonal capacity for the exchange of balancing energy or for operating the imbalance netting process. Cross-zonal capacity shall be updated every time a portion of cross-zonal capacity has been used or when cross-zonal capacity has been recalculated.

Before the implementation of the capacity calculation methodology pursuant to paragraph 3, TSOs shall use the cross-zonal capacity remaining after the intraday cross-zonal gate closure time.

By five years after entry into force of this Regulation, all TSOs of a capacity calculation region shall develop a methodology for cross-zonal capacity calculation within the balancing timeframe for the exchange of balancing energy or for operating the imbalance netting process. Such methodology shall avoid market distortions and shall be consistent with the cross-zonal capacity calculation methodology applied in the intraday timeframe established under Regulation (EU) 2015/1222.

Two or more TSOs may at their initiative or at the request of their relevant regulatory authorities in accordance with Article 37 of Directive 2009/72/EC set up a proposal for the application of one of the following processes:

The proposal for the application of the allocation process shall include:

By five years after entry into force of this Regulation, all TSOs shall develop a proposal to harmonise the methodology for the allocation process of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves per timeframe pursuant to Article 40 and, where relevant, pursuant to Articles 41 and 42.

Cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves shall be used exclusively for frequency restoration reserves with manual activation, for frequency restoration reserves with automatic activation and for replacement reserves. The reliability margin calculated pursuant to Regulation (EU) 2015/1222 shall be used for operating and exchanging frequency containment reserves, except on Direct Current (‘DC’) interconnectors for which cross-zonal capacity for operating and exchanging frequency containment reserves may also be allocated in accordance with paragraph 1.

TSOs may allocate cross-zonal capacity for the exchange of balancing capacity or sharing of reserves only if cross-zonal capacity is calculated in accordance with the capacity calculation methodologies developed pursuant to Regulation (EU) 2015/1222 and (EU) 2016/1719.

TSOs shall include cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves as already allocated cross-zonal capacity in the calculations of cross-zonal capacity.

If physical transmission right holders use cross-zonal capacity for the exchange of balancing capacity, the capacity shall be considered as nominated solely for the purpose of excluding it from the application of the use-it-or-sell-it (‘UIOSI’) principle.

All TSOs exchanging balancing capacity or sharing of reserves shall regularly assess whether the cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves is still needed for that purpose. Where the allocation process based on economic efficiency analysis is applied, this assessment shall be done at least every year. When cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves is no longer needed, it shall be released as soon as possible and returned in the subsequent capacity allocation timeframes. Such cross-zonal capacity shall no longer be included as already allocated cross-zonal capacity in the calculations of cross-zonal capacity.

When cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves has not been used for the associated exchange of balancing energy, it shall be released for the exchange of balancing energy with shorter activation times or for operating the imbalance netting process.

The market value of cross-zonal capacity for the exchange of energy and for the exchange of balancing capacity or sharing of reserves used in a co-optimised or market-based allocation process shall be based on the actual or forecasted market values of cross-zonal capacity.

The actual market value of cross-zonal capacity for the exchange of energy shall be calculated based on the bids of market participants in the day-ahead markets, and take into account, where relevant and possible, expected bids of market participants in the intraday markets.

The actual market value of cross-zonal capacity for the exchange of balancing capacity used in a co-optimised or a market-based allocation process shall be calculated based on balancing capacity bids submitted to the capacity procurement optimisation function pursuant to Article 33( 3).

The actual market value of cross-zonal capacity for the sharing of reserves used in a co-optimised or a market-based allocation process shall be calculated based on the avoided costs of procuring balancing capacity.

The forecasted market value of cross-zonal capacity shall be based on one of the following alternative principles:

The efficiency of the forecasting methodology pursuant to paragraph 5(b), including a comparison of the forecasted and actual market values of the cross-zonal capacity, may be reviewed by the relevant regulatory authorities. Where the contracting is done not more than two days in advance of the provision of the balancing capacity, the relevant regulatory authorities may, following this review, set a limit other than that specified in Article 41(2).

By two years after entry into force of this Regulation, all TSOs shall develop a proposal for a methodology for a co-optimised allocation process of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves. This methodology shall apply for the exchange of balancing capacity or sharing of reserves with a contracting period of not more than one day and where the contracting is done not more than one day in advance of the provision of the balancing capacity. The methodology shall include:

This methodology shall be based on a comparison of the actual market value of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves and the actual market value of cross-zonal capacity for the exchange of energy.

The pricing method, the firmness regime and the sharing of congestion income for the cross-zonal capacity that has been allocated to bids for the exchange of balancing capacity or sharing of reserves via the co-optimised allocation process shall ensure equal treatment with the cross-zonal capacity allocated to bids for the exchange of energy.

Cross-zonal capacity allocated to bids for the exchange of balancing capacity or sharing of reserves via the co-optimised allocation process shall be used only for the exchange of balancing capacity or sharing of reserves and associated exchange of balancing energy.

By two years after entry into force of this Regulation, all TSOs of a capacity calculation region may develop a proposal for a methodology for a market-based allocation process of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves. This methodology shall apply for the exchange of balancing capacity or sharing of reserves with a contracting period of not more than one day and where the contracting is done not more than one week in advance of the provision of the balancing capacity. The methodology shall include:

Cross-zonal capacity allocated on a market-based process shall be limited to 10 % of the available capacity for the exchange of energy of the previous relevant calendar year between the respective bidding zones or, in case of new interconnectors, 10 % of the total installed technical capacity of those new interconnectors.

This methodology shall be based on a comparison of the actual market value of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves and the forecasted market value of cross-zonal capacity for the exchange of energy, or on a comparison of the forecasted market value of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves, and the actual market value of cross-zonal capacity for the exchange of energy.

The pricing method, the firmness regime and the sharing of congestion income for cross-zonal capacity that has been allocated for the exchange of balancing capacity or sharing of reserves via the market-based process shall ensure equal treatment with the cross-zonal capacity allocated for the exchange of energy.

Cross-zonal capacity allocated for the exchange of balancing capacity or sharing of reserves via the market-based allocation process shall be used only for the exchange of balancing capacity or sharing of reserves and associated exchange of balancing energy.

By two years after entry into force of this Regulation, all TSOs of a capacity calculation region may develop a proposal for a methodology for the allocation of cross-zonal capacity based on an economic efficiency analysis. Such methodology shall apply for the exchange of balancing capacity or sharing of reserves with a contracting period of more than one day and where the contracting is done more than one week in advance of the provision of the balancing capacity. The methodology shall include:

The allocation of cross-zonal capacity based on an economic efficiency analysis shall be limited to 5 % of the available capacity for the exchange of energy of the previous relevant calendar year between the respective bidding zones or, in case of new interconnectors, 10 % of the total installed technical capacity of those new interconnectors. This volume limitation may not apply for bidding zone borders connected through DC interconnectors until the co-optimised or market-based allocation processes are harmonised at Union level pursuant to Article 38(3).

The methodology for the allocation of cross-zonal capacity based on an economic efficiency analysis shall be based on a comparison of the forecasted market value of cross-zonal capacity for the exchange of balancing capacity or sharing of reserves, and the forecasted market value of cross-zonal capacity for the exchange of energy.

The pricing method, the firmness regime and the sharing of congestion income for the cross-zonal capacity that has been allocated for the exchange of balancing capacity or sharing of reserves based on an economic efficiency analysis shall ensure equal treatment with the cross-zonal capacity allocated for the exchange of energy.

TSOs referred to in paragraph 1 shall develop a proposal for a list of each individual allocation of cross-zonal capacity based on an economic efficiency analysis. Such list shall include:

TSOs referred to in paragraph 1 shall reassess the value of the allocated cross-zonal capacity in the process of the procurement of balancing capacity and release the allocated cross-zonal capacity which is no longer beneficial for the exchange of balancing capacity or sharing of reserves.

Balancing service providers which have a contract for balancing capacity with a TSO on the basis of a TSO-BSP model pursuant to Article 35 shall have the right to use cross-zonal capacity for the exchange of balancing capacity if they are holders of physical transmission rights.

Balancing service providers which use cross-zonal capacity for the exchange of balancing capacity on the basis of a TSO-BSP model pursuant to Article 35 shall nominate their physical transmission rights for the exchange of balancing capacity to the concerned TSOs. Such physical transmission rights shall provide the right to their holders to nominate the exchange of balancing energy to the concerned TSOs and shall therefore be excluded from the application of the UIOSI principle.

Cross-zonal capacity allocated for the exchange of balancing capacity in accordance with paragraph 2 shall be included as already allocated cross-zonal capacity in the calculations of cross-zonal capacity.

The settlement processes shall:

Each relevant regulatory authority in accordance with Article 37 of Directive 2009/72/EC shall ensure that all TSOs under its competence do not incur economic gains or losses with regard to the financial outcome of the settlement pursuant to Chapters 2, 3 and 4 of this Title, over the regulatory period as defined by the relevant regulatory authority, and shall ensure that any positive or negative financial outcome as a result of the settlement pursuant to Chapters 2, 3 and 4 of this Title shall be passed on to network users in accordance with the applicable national rules.

Each TSO may develop a proposal for an additional settlement mechanism separate from the imbalance settlement, to settle the procurement costs of balancing capacity pursuant to Chapter 5 of this Title, administrative costs and other costs related to balancing. The additional settlement mechanism shall apply to balance responsible parties. This should be preferably achieved with the introduction of a shortage pricing function. If TSOs choose another mechanism, they should justify this in the proposal. Such a proposal shall be subject to approval by the relevant regulatory authority.

Each injection or withdrawal into or from a scheduling area of a TSO shall either be settled in accordance with Chapter 3 or Chapter 4 of Title V.

As regards the settlement of balancing energy for at least the frequency restoration process and the reserve replacement process, each TSO shall establish a procedure for:

Each TSO shall calculate the activated volume of balancing energy according to the procedures pursuant to paragraph 1(a) at least for:

Each connecting TSO shall settle all activated volumes of balancing energy calculated pursuant to paragraph 2, with the concerned balancing service providers.

Each connecting TSO may calculate and settle the activated volume of balancing energy for the frequency containment process with balancing service providers pursuant to paragraphs 1 and 2 of Article 45.

The price, be it positive, zero or negative, of the activated volume of balancing energy for the frequency containment process shall be defined for each direction as defined in Table 1:

Each connecting TSO shall calculate and settle the activated volume of balancing energy for the frequency restoration process with balancing service providers pursuant to paragraphs 1 and 2 of Article 45

The price, be it positive, zero or negative, of the activated volume of balancing energy for the frequency restoration process shall be defined for each direction pursuant to Article 30 as defined in the Table 1.

Each connecting TSO shall calculate and settle the activated volume of balancing energy for the reserve replacement process with balancing service providers pursuant to paragraphs 1 and 2 of Article 45.

The price, be it positive, zero or negative, of the activated volume of balancing energy for reserve replacement process shall be defined for each direction pursuant to Article 30 as defined in the Table 1.

Each TSO shall calculate an imbalance adjustment to be applied to the concerned balance responsible parties for each activated balancing energy bid.

For imbalance areas where several final positions for a single balance responsible party are calculated pursuant to Article 54(3), an imbalance adjustment may be calculated for each position.

For each imbalance adjustment, each TSO shall determine the activated volume of balancing energy calculated pursuant to Article 45 and any volume activated for purposes other than balancing.

By one year after the entry into force of this Regulation, all TSOs shall develop a proposal for common settlement rules applicable to all intended exchanges of energy as a result of one or more of the following processes pursuant to Articles 146, 147 and 148 of Regulation (EU) 2017/1485, for each of the following:

Each TSO-TSO settlement function shall perform the settlement in accordance with the settlement rules pursuant to paragraph 1.

By eighteen months after the entry into force of this Regulation, all TSOs intentionally exchanging energy within a synchronous area shall develop a proposal for common settlement rules applicable to intended exchanges of energy, as a result of one or both:

By eighteen months after the entry into force of this Regulation, all asynchronously connected TSOs intentionally exchanging energy between synchronous areas shall develop a proposal for common settlement rules applicable to intended exchanges of energy, as a result of one or both:

The common settlement rules in accordance with paragraph 1 shall at least contain the provisions that the intended exchange of energy is calculated on the basis of the following criteria:

The common settlement rules of intended exchanges of energy in accordance with paragraphs 1(a), 1(b) and 1(c) shall take into account:

The common settlement rules of intended exchanges of energy in accordance with paragraph 1(d) shall take into account the methodology for pricing of cross-zonal capacity used for operating the imbalance netting process pursuant Article 30(3).

All TSOs shall establish a coordinated mechanism for adjustments to settlements between all TSOs.

By eighteen months after the entry into force of this Regulation, all TSOs of a synchronous area shall develop a proposal for common settlement rules applicable to all unintended exchanges of energy. The proposal shall include the following requirements:

By eighteen months after the entry into force of this Regulation, all asynchronously connected TSOs shall develop a proposal for common settlement rules applicable to all unintended exchanges of energy between asynchronously connected TSOs.

The proposals of common settlement rules of unintended exchanges of energy between TSOs shall ensure a fair and equal distribution of costs and benefits between them.

All TSOs shall establish a coordinated mechanism for adjustments to settlements between them.

Each TSO or, where relevant, third party shall settle within its scheduling area or scheduling areas when appropriate with each balance responsible party for each imbalance settlement period pursuant to Article 53 all calculated imbalances pursuant to Article 49 and Article 54 against the appropriate imbalance price calculated pursuant to Article 55.

By one year after entry into force of this Regulation, all TSOs shall develop a proposal to further specify and harmonise at least: