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Milan – 16 th November 2010

Milan – 16 th November 2010. Cross Border capacity allocation in 2011: CASC Project. Context.

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Milan – 16 th November 2010

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  1. Milan – 16th November 2010 Cross Border capacity allocation in 2011: CASC Project

  2. Context • All TSOs active in the ERGEG Electricity Regional Initiatives of CSE and CWE and Switzerland are committed to actively contribute to the further development and integration of the single European electricity market and to an increasing harmonisation of the cross-border capacity allocation management on borders • TSOs should facilitate the cross-border congestion management processes towards market actors, e. g. by creating a single point of contact, using same IT-tools and aiming for harmonized rules. • This should result in common coordinated congestion management methods and common procedure for the allocation of transmission capacity. • In order to further enhance regional and interregional coordination TSOs have signed a Memorandum of Understanding aiming at the creation of an interregional Joint Auction Office and in a later stage the harmonisation of long term Auction Rules

  3. The MoU formalising TSOs common will • Memorandum of Understanding (MoU) signed on the 19/05/2010 aimed to • Stronger integration of EU power markets • Interregional cooperation and harmonization through common coordinated methods • All involved TSOs outsourcing auctions to CASC to become new shareholders in CASC • Single Point of Contact for Users in the allocation of interconnection Capacity in the CWE and CSE region • Main commitments • 2011 - CASC will perform all currently explicit auctions on interconnections between Italy and France, Austria, Slovenia, Greece and Switzerland and on interconnections of Switzerland with Austria and Germany • 2012 – harmonised Auction Rules for explicit auctions operated by CASC for CWE and CSE region as well as Switzerland

  4. Actions in progress after the signature of MoU • Modification of all TSOs and CASC IT system for managing transfer of activities • Procedures and Data Exchanges between CASC and all involved TSOs defined • New governance structure for CASC • Since 10th November 2010, APG, ELES, HTSO, Swissgrid and Terna become new shareholders in CASC • CASC denomination changes from CASC CWE to CASC. EU SA • Capacity Allocation Process, rules and actions for 2011 • Mandate to CASC, to operate as Auction Operator on behalf of all TSOs for all Italian Borders (1 April 2011) and Swiss Borders to Germany and Austria (1st March 2011) • Auction Rules 2011 for all borders, amended, in order to take into account the outsourcing of allocation process to CASC • Public Consultation of Italian Border s Auction Rules 2011

  5. Goals and benefits of CASC project • “Single point of Contact” for market users in the allocation of interconnection capacity in both CWE and CSE region including Switzerland • Stronger coordination of TSOs in the implementation of common allocation capacity rules • An important step towards increased harmonisation of Auction Rules in Europe

  6. Italian Border Auction Rules for 2011 and associated consultations • Due to the expected starting date the 1st April 2011 and to the usual issuing of Auction Rules (AR) per year, two sets of Rules developed: • A first one set of AR for Q1 with same features as for 2010 except for Market Coupling between Italy and Slovenia • A second set of AR starting from the 1st April 2011 with CASC Auction Operator

  7. Auction Rules for 2011 and associated consultations Consultation on Italian Border Auction Rules for 2011 with CASC as Auction Operator is in course since Friday 5th November 2010 and will finish Friday 19th November 2010 included. Questions or comments from Participants in English are expected to be taken into account or to be answered before NRAs sending for final approval. All these questions and comments have to be sent to a unique email address: auctionrules2011.consultation@terna.it

  8. Next steps • As TSOs intend to delegate to CASC the management of all rights (also already allocated yearly PTRs) from the launch date, consultation on the second set of Italian Border AR and approval by NRAs should be performed before the yearly auctions for 2011 to let Participants be aware of all features before bidding. • Consequently, the expected time schedule is: • End of public consultation of Italian Border AR on 19 November 2010 • TSOs finalise Italian Border AR taking into account comments of Market Participants and send them to NRAs for approval • Approval of Italian Border AR by NRAs expected before the yearly auctions for 2011 performed by TSOs • On 1 March 2011 CASC starts operation as Joint Auction Office for Swiss Northern Borders • On 1 April 2011 CASC starts operation as Joint Auction Office for Italian Borders • Aiming at further interregional harmonisation of rules for explicit auctions TSO will work on common Auction Rules of explicit yearly and monthly auctions performed by CASC in 2012

  9. Allocation of PTRs for the year 2011 Allocation of PTRs for the year 2011 Dec Jan Feb Mar Apr Dec Jan Feb Mar Apr First Yearly Auction First Yearly Auction TSOs act as Auction Operator as today TSOs act as Auction Operator TSOs act as Auction Operator as today CASC acts as Auction Operator First CASC Auction TSOs Integration Test Users Test Users Test TSOs Integration Test Registration of Users Registration of Users CASC acts as Auction Operator First CASC Auction CASC acts as Auction Operator

  10. Focus on the Auction Rules organization • Auction Rules with CASC will include in the border specific appendices some requirements concerning the relationship TSO/Nomination Agent for the scheduling process. • Taking this situation into account, the Auction Rules set forth: • requirements imposed on the Participant and on CASC related to the Allocation activities > declaration of Acceptance for the Allocation (DoAA) • requirements imposed on the Participants and on TSO* related to the Nomination activities > Declaration of Acceptance for the Nomination (DoAN) • Consequently, two types of liability are included on the AR: • contractual liability of CASC for the performance of the allocation tasks, and • contractual liability of some TSO* for the performance of the nomination tasks. * Excepted with RTE as requirements and liability for the Nomination are set in the Import/export Rules to be signed with RTE for the scheduling activities in France

  11. Transfer to CASC of yearly PTRs management • PTRs for Italian Borders with delivery dates within the first three months of 2011 will be allocated as today by: • APG, ELES, HTSO, Swissgrid and Terna acting as Auction Operators on behalf of both TSOs (for the direction in export from each respective border) • Terna as Auction Operator for the direction in import and export on the France- Italy border on behalf of both TSOs. • Accordingly participants shall comply with the border specific risk management provisions. • For PTR allocation with delivery date starting from 1st April 2011, Participants shall comply with CASC new risk management policy: • Regarding the specific case of yearly PTRs, Participants owning these PTRs shall provide CASC with 2/12 of the total yearly amount before the monthly auctions for April 2011 (approximately before 18th March 2011).

  12. Overlapping of risk management provisions • As a consequence of the transfer to CASC during 2011, at least for yearly PTRs owners and for participants intending to obtain capacity in the monthly auctions for April, overlapping of risk management constraints will exist with on one hand current Auction Office and on the other hand, CASC. • Example: • Participant A obtained in the direction France to Italy 100 MW for all 2011 at 11 €/MWh (per month, the amount to be paid is 803 k€) • For the first three months, Bank Guaranty (BG) with TERNA should be set at 803 k€ (+ monthly and daily debts) as minimum value and this BG should be kept by TERNA at least until May 2011 to cover daily PTR settlement • To be entitled with CASC, the Participant shall credit CASC bank account with 1,6 M€ not later than middle of March 2011

  13. Forum with all Participants • The present SG meeting mainly deals with main issues related to the CASC project during the consultation phase on the Italian Border Auction Rules 2011. • An additional specific forum involving all interested market players will be organized beginning of 2011 in order to deal with all technical issues and facilitating the transition towards CASC. • This forum will be occasion to discuss deeper: • Process to be entitled with CASC • IT requirements with CASC • Financial provision with CASC • … • … and to collect expectations from Market players.

  14. Italian Borders as is Italian Borders with CASC Focus on Allocation process 1/4 • In order to participate in the auctions, User has: • to meet grid access requirements of one of two TSOs involved (yearly and monthly auctions) or exporter TSOs (daily auctions) • to send to the Auction Operator the Statement of Acceptance • to provide to the Auction Operator a Bank Guarantee (or a Cash Deposit) in order to cover all the outstanding debts • In order to participate in the auctions, User has: • to meet grid access requirements of one of two TSOs involved (yearly and monthly auctions) or exporter TSOs (daily auctions) • to be registered with CASC by: • sending the Declaration of Acceptance for Allocation and Nomination to CASC • signing the Participant’s Financial Agreement with CASC • to open a dedicated Business Account at the bank selected by CASC (BGL BNP Paribas Luxemburg) Participation requirements 14

  15. Italian Borders as is Italian Borders with CASC Focus on Allocation process 2/4 Users provide a Bank Guarantee (or a Cash Deposit ) Amount of Bank Guarantee (or a Cash deposit) depends by Auction Operator When running auction no check of bidding Vs amount of BG (except for daily auctions in direction SLO-IT) Invoicing time, deadlines for payment and reimburse compensation depend on the product and by Auction Operator • Users open a Business Account property of CASC • When running auctions, CASC auction tool (EXAU) checks the amount of money in the Business Account: • at bidding, for daily auctions • at clearing price, for long term auctions • - Monthly/Daily auctions the amount is blocked after the- auction • - Yearly auctions, 2/12 of the amount is blocked after the auction • Invoicing automatically debited in Business Account at M+1 • Harmonization on invoicing time, deadlines for payments and reimburse compensation • Reimburse compensations (curtailment, Resale/UIOSI) is made in a different Bank Account property of Users Financial Issues

  16. Italian Borders as is Italian Borders with CASC Focus on Allocation process 3/4 Yearly Base Yearly Base without Maintenance period (*) Monthly Base (0:00-24:00 Mo-Su) Monthly peak (8:00-20:00 Mo-Fr) Monthly off-peak (0:00-8:00 & 20:00-24:00 Mo-Fr - 0:00-24.00 Sa & Su) Daily Hourly Yearly Base Yearly Base without Maintenance period (*) Monthly Base (00:00-24:00 Mo-Su) Monthly peak (8:00-20:00 Mo-Fr) Monthly off-peak (0:00-8:00 & 20:00-24:00 Mo-Fr - 0:00-24.00 Sa & Su) Daily Hourly Products • 100% payback (except RTE – 110% for the direction FR=>IT) • PTRs are guaranteed: • Yearly and Monthly after 7:00 of D-1 (with exception of France in the direction FR=> IT, D-2 working days) • Daily after the publication of Auction Results Firmness Both of them will not change with CASC 16

  17. Italian Borders as is Italian Borders with CASC Focus on Allocation process 4/4 UIOSI for long term PTRs non nominated No reimbursement of Daily PTRs not nominated In case of cancellation of the Daily auction, PTR holders are refunded for each non-nominated MW at the clearing price of the native Auction In case the ATC of daily auction is lower than the Total not nominated capacity , the share of capacity successfully resold is refunded at daily auction price, the rest is refunded at the original price. UIOSI & Daily Compensation It will not change with CASC Transfer deadline is at 12:00 D-2 (with exception of France in the direction FR=> IT, D-2 working days) Transfers have to be confirmed by the Beneficiary Transfer deadline is at 12:00 D-2 (with D-2 working days) Transfers have to be confirmed by the Beneficiary Transfer 17

  18. BACK UP

  19. Analysis of impacts if we success to transfer yearly to CASC from 1st April 2011 1st April 2011 Go Live CASC The overlapping between Bank Guarantee provided to TSOs and the Bank Account given to CASC has not an huge impact on Users. The full payment of Yearly PTRs for Jan, Feb and Mar in January (payment in advance) CASC should invoice Yearly PTRS for April in May 2011 (payment ex-post) Users can riduce the Bank Guarantee with TSOs before deposit money on CASC Bank Account expire of Bank Guarantee Live CASC

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