2 nd Mini-For um for Central West Electricity REM

1. 2nd Mini-Forum for Central West Electricity REM EuroPEX Discussion Points Brussels, 20th of June 2006

2. Transparency – The Goals • Facilitating monitoring of market developments for both regulators and other stakeholders • Promoting market participation resulting in increased competition and liquidity of the markets • Levellingplayfield for the different trading arrangements in similar products • Reducing the risk that the data available provides a distorted picture of the markets and their openness to manipulation

3. Transparency – Consistency and Adequacy of Information Disclosure • Minimum standards to be applied EU-wide • coverage – minimum set of information disclosed • level of detail – unified for the minimum set of information • definition – unified to allow effective use of information • time resolution and updating frequency – simultaneously • format – ready to use by IT systems • Information is to be published rather than provided on request • Public disclosure of effective ring-fencing and “firewalls” methods used between the grid operation branches and the rest of vertically integrated companies in order to raise trust in the markets

4. Transparency – PXs asCommon Information Publishers • Improving effectiveness of information publishing and transparency • single point of reference for market data in a jurisdiction • timely and logically consistent disclosure of all relevant information in a jurisdiction (or more of them) • PXs have no direct interest in the markets and can gain no advantage from withholding information • independence from market participants • non-discriminatory access to information disclosed • proven capability to manage commercially-sensitive information • technical competence and established information systems already in place • PXs can facilitate cross-border access to information as their membership is already multinational

5. Market Coupling - Market design elements • Implicit auctions complemented by hedging instruments represent the most efficient solution to congestion management • implicit auctions are the most efficient short-term method for congestion management • financial Transmission Rights (FTRs) and, where sufficiently liquid compared to cross-border volumes, electricity derivatives are preferred hedging instruments • physical Transmission Rights (PTRs) with UIOSI are possible interim solution • Price difference bids (or ‘capacity bids’, but for firm flow obligations) if desired and beneficial to the market • Implicit intra-day cross-border markets: continuous matching, or intraday market coupling, or both

6. Market Coupling - Governance of Market Coupling • Recognised as a critical issue • PXs have a critical role in market coupling: provide orders, enable firm positions, clear and settle • Governance needs to reflect roles and responsibilities of TSOs and PXs • TSOs: capacity allocation according to regulation • PXs: price formation, fair and orderly market, may be regulated • Market coupling should be supported by a Central Coupling Office (CCO) – possibly jointly owned • contractual interface to TSOs and PXs • possible role of CCO in price formation • limit regulation to existing scope, and may vary locally

7. Market Coupling - Way Forward • EuroPEX should play an active role on two aspects: • need to define a longer-term model • need to define a strategy for transition towards the longer-term model – how build on existing/planned arrangements? • Institutional and governance issues are crucial in progressing towards a common approach to congestion management • EuroPEX can facilitate consultation process across markets

8. EuroPEX Members’ Projects – CWE Region