April 2011

Issue: April 2011

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Feature
- CEER consults on its proposal for the introduction of an Europe-wide wholesale energy trading passport

Events
- See calendar of next workshops

Publications
- CEER public consultation on the introduction of a Europe-wide energy wholesale trading passport
- FactSheet on regulatory practices for the promotion of energy efficiency - An overview by ICER & CEER

Region in the Spotlight
-  FUI links to CWE through Britned interconnector

International
 - ICER workshop on Energy Efficiency

Editorial
CEER is pleased to announce the appointment of Ms Natalie McCoy as CEER Secretary General. Ms. McCoy succeeds Ms Fay Geitona, who has taken up the post of NRA Coordinator within the Agency for the Cooperation of Energy Regulators.

ACER has launched for public consultation, two draft Framework Guidelines: one on Electricity Capacity Allocation and Congestion Management; and the other on Gas Balancing in Transmission Systems. 

During Europe’s 2011 Sustainable Energy Week, the International Confederation of Energy Regulators (ICER) hosted a workshop in Brussels on Regulatory Practices for the Promotion of Energy Efficiency.

The 3rd workshop on an EU-wide gas target model took place in London on 11th April.  The fourth (and final) workshop on the gas target model will take place in Brussels in June.

In the spotlight are the France-UK-Ireland (FUI) and the Central West (CWE) electricity regions which have been linked through the Britned interconnector.

The feature article, this month, is on CEER's proposal for the introduction of an EU-wide wholesale electricity and gas trading licence passport.

 CEER consults on its proposal for the introduction of a Europe-wide
wholesale energy trading passport

CEER has launched for public consultation its policy advice on the introduction of a Europe-wide wholesale energy trading passport.  Deadline for comments is the 17th June.

At the Commission’s request, the regulators have examined whether there is a need to harmonise licencing regimes for wholesale energy trading in the EU.

The CEER engaged a consultant to conduct a study which found that currently a huge variety of different rules and regimes exists in Europe; that this poses serious administrative burdens; and that several of the current licencing requirements in European countries are perceived as serious market entry barriers especially for trading companies that want to be active in several countries.

CEER’s advice, which builds upon the finding of the study, examines the effects of the existing non-harmonised national licencing regimes and sets out a framework for dealing with the existing shortcomings regarding regulatory access to trading on electricity and gas wholesale markets.

Implementation Options
CEER presents four (non-exhaustive) options for a more harmonised regulatory access regime to wholesale energy trading:
• to continue with the status quo and not introduce any changes;
• to extend the existing MiFID (Markets in Financial Instruments Directive) passport to electricity and gas trading;
• to set certain minimum and maximum requirements for national licencing regimes;
• to introduce a Europe-wide Energy Wholesale Trading Passport.

CEER concludes that a Europe-wide energy wholesale trading licence passport would be the best policy option.

Benefits of the single Euro-trading licence approach
• Significant reduction of bureaucracy − Set up a level playing field
• “One-stop-shop” for traders: surveillance of compliance with license only by home country authority;
• Oversight in the EU improved as all traders in all EEA countries are registered. There would also be collateral benefits e.g. in the fight against VAT fraud.

Key elements of CEER’s proposed EU-wide wholesale energy trading licence passport:
• It would cover electricity and gas wholesale trading;
• This Europe-wide wholesale energy trading passport would replace all existing national licencing regimes for wholesale trading.  Traders would need to apply for a trading licence in one country only, and could subsequently use this ‘passport’ to operate in other EU countries;
• Supply and shipper licences are not affected by this proposal;
• The passport licence fees would be cost-based;
• Penalties in case of infringement − license revocation as
a last resort only.
• The licence should ensure a minimum “safety net” with a definitive set of requirements so that trading companies would demonstrate their technical, financial and organisational capacity to fulfil all energy regulatory requirements. On the other hand CEER does not recommend the regulatory access regime to attempt to check the companies’ potential economic success.
• It would not create overlaps with other harmonised regimes: In particular this Europe-wide wholesale energy trading passport would not apply to companies within the scope of the current legislation on Markets in Financial Instruments Directives (MiFID). The scope focuses on regulatory issues whereas additional requirements for network access or starting trading activities related to TSOs or trading venues (such as energy exchanges) are not in the scope.

CEER recommends that the energy national regulatory authority (NRA) should be the body who issues the passport and monitors legal compliance by the passport holders. The Agency for the Cooperation of Energy Regulators (ACER) could compile a comprehensive database with all trading companies active at European level. In order to ensure a level playing field, application and supervision procedures should be standardised Europe-wide.

REMIT proposal as the possible legal instrument to introduce the licence?
The proposal for a single Euro-trading license has been picked up by the European Parliament’s rapporteur in the currently political negotiations on the European Commission’s proposal on a Regulation for Energy Market Integrity and Transparency (REMIT).

The Commission’s REMIT (Regulation on Energy Market Integrity and Transparency) proposals, tabled in December 2010, set up a framework for monitoring wholesale energy markets in order to detect market abuse and manipulation, thereby ensuring the integrity and transparency of those markets.  The central element of this framework is the establishment of a market monitoring function at European level, a task which should be carried out by the Agency for the Cooperation of Energy Regulators. The REMIT proposal also seeks to grant additional investigatory and enforcement powers to NRAs. 

On a separate but related issue, ERGEG has developed advice on the regulatory oversight of energy exchanges, which will soon issue as a public consultation document.

CEER Events

Events

See all dates of Regional Initiatives meetings (RCC, IG, SG) on the ERGEG online Calendar.  

Regional Initiatives Update

Region in the Spotlight - FUI links to CWE through Britned interconnector

On 1 April 2011, Britned, the HVDC transmission link between the UK and the Netherlands was brought into operation. The 260 km long sub-sea cable is a joint venture between National Grid (the British TSO) and TenneT (the Dutch TSO) and has a transmission capacity of 1000 MW.

BritNed provides a market coupling solution linking the day-ahead markets on each side of the cable. The BritNed interconnector links the GB electricity market in the France-UK-Ireland (FUI) electricity region to a with the liquid and integrated Central West region (which includes Belgium, France, Germany, Luxembourg and the Netherlands). Connection to the CWE region also provides a link to the Nordic market as the two are integrated.  Earlier this year (12 January 2011) the NorNed cable connecting Norway and the Netherlands joined the interregional market coupling (a so called tight volume coupling operated by the European Market Coupling Company) between Central-West region on one side and Norway, Sweden, Finland, Estonia and Denmark on the other. Inter-regional market coupling is an important step towards pan-European price coupling. The European Council on 4 February 2011 set 2014 as a target for the completion of the internal market for electricity and gas.

BritNed is a high-priority project for Europe’s energy industry (see Siemens Press Release). The HVDC transmission link between Britain and the Netherlands will ensure more reliable energy supply and enable electricity and interconnector capacity. Capacity will be traded via energy auctions. Britned’s capacity is open to all market participants and is allocated based on implicit auctions run by the Amsterdam Power Exchange (APX-ENDEX) and Unicorn on short term explicit auctions.  It is expected that this will help to create a price index that is robust and reliable and will increase liquidity and volume of trade in the GB market.

The first capacity auction took place on 31 March 2011 for delivery on the next day and saw 15 participants in the GB market. This first day saw 8,138 MWh of baseload volume on the UK auction with an average price of £50.93/MWh in line with over-the-counter prices. For more information see the APX-ENDEX press release. More information on the flows over Britned and for volume and price information.

International Activities

Brussels was host to 136 events during Europe’s Sustainable Energy Week (11-14 April). Visit www.eusew.eu. Energy regulators took the opportunity to raise the profile of their work on smart grids and energy efficiency in particular.  The International Confederation of Energy Regulators (ICER) hosted a workshop on Regulatory Practices for the Promotion of Energy Efficiency (12 April). CEER speakers also participated in a workshop organised by the European Commission (DG Energy) on the deployment of smart energies (14 April).  A CEER Factsheet on Smart Grids and an ICER/CEER Factsheet on Energy Efficiency were distributed. 

At the ICER workshop on energy efficiency, regulators placed the spotlight on the ICER Energy Efficiency Report (June 2010), drawing important lessons from best practice in Europe and abroad. The ICER Report is a particularly useful reference point on energy efficiency practices from across the globe, allowing comparison of energy efficiency policies between EU countries (all 27 Members States are covered) and other regions (Africa, North and South America, Asia, Australia and Oceania).

Distinguished speakers at the event included Philip Lowe on the European Commission’s new Energy Efficiency Action Plan, Bo Diczfalusy (IEA) who presented the work of International Energy Agency; and Richard Cowart (Regulatory Assistance Project) on lessons from the United States. View here the presentation slides, documents and photos of the ICER workshop on energy efficiency (12  April 2011).

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