Eurelectric thanks ENTSO-E for the possibility to comment on the proposed amendment to the balancing energy pricing methodology. Based on the reason presented below, Eurelectric rejects
the all-TSO proposal.
Eurelectric assessment of the proposal presented by ENTSO-E is explained below.
1. Eurelectric favours the principle of free formation of prices
Eurelectric would like to remind its opposition to any price limits (bidding or clearing) that would hinder the free formation of prices. If deemed necessary, technical price limits should not be a
barrier in this regard as they would be set high/low enough and be implemented for technical purposes only.
Eurelectric also notes that in some circumstances (e.g. scarcity situation), the EBGL authorizes the Member States to proceed with administrative components added to the imbalance settlement price, cf. E-Reg Art. 20(3)(c) and EBGL Art. 44(3).
2. Technical price limits might be needed
Eurelectric can see that it might make sense to set technical price limits to avoid outstanding impacts in terms of imbalance settlement prices in case of errors of IT and operational issues.
However, those should be duly justified before implementation, and they should in any case not hinder the free formation of prices.
In this context, it is crucial to recognize that the methodology to determine prices for the balancing energy that results from the activation of balancing energy bids was approved by ACER on 24 January 2020 while at that time a technical price limit was defined by ACER which continues to apply, set at a level which is seen to not restrict price formation. Any revision of the approved values for technical limits should follow the appropriate framework and should amongst others be fed by experience (experience of IT technical issues, errors, etc.), which should be duly reported to properly assess the need to update the values.
3. Prices must be able to reflect the real-time value of energy, also in a scarcity situation
The free formation of prices should allow the prices to fully reflect the real-time value of energy. In that regard, Eurelectric thinks that any technical price cap, should they be duly justified, must be greater than the VoLL. This principle should also apply to administrative imbalance settlement price in case of a scarcity situation.
4. Proposed price limits may not be in line with EBGL and Electricity Regulation requirements
In the all-TSO proposal, an amendment of the “technical” price limit is proposed. However, not all the arguments brought by ENTSOE seem to correspond to a technical limit but rather refer to an economic limit, to limit the BRP imbalance risks or the potential profit for BSPs. As stated under 1, this is something Eurelectric cannot accept.
ENTSOE mentions Article 30.2 of EBGL to justify the proposed measure. However, this article only refers to technical price limits and not economic ones. Therefore, it is questionable whether this article can form the legal basis for the proposal as presented by ENTSOE.
Moreover, in line with Article 3 of Regulation (EU) 2019/943 (“Electricity Regulation”) Member States, NRAs, TSOs, DSOs, market operators and delegated operators must ensure that electricity
2 market rules encourage the free formation of prices and avoid actions which prevent the formation of prices based on demand and supply. Article 10 of the Electricity Regulation furthermore states that “there shall be neither a maximum nor a minimum limit to the wholesale electricity price. This provision shall apply, inter alia, to bidding and clearing in all timeframes and shall include balancing energy and imbalance prices, without prejudice to the technical price limits which may be applied in the balancing timeframe and in the day-ahead and intraday timeframes in accordance with paragraph 2”, and para 3 of Article 10 states that “Transmission system operators shall not take
any measures for the purpose of changing wholesale prices.”
Eurelectric, therefore, concludes that the proposed price limits would also be in breach of the Electricity Regulation if their values prove to hinder the formation of prices that would have
emerged as a result of market participants’ demand and supply meeting
5. The unappropriated role of TSOs regarding the prevention of dominant position is to be
avoided
We disagree with the rationale proposed by the TSOs to prevent potential abuse of dominant positions. It is in no way the task of TSO to evaluate and prevent potential abuse of dominant
market positions. Even if this would be an issue, it is already be dealt with by specific rules and regulations, notably competition law.
Furthermore, TSOs are market participants in terms of REMIT. If TSOs would now be allowed to put in place measures against potential market abuse (targeting market participants), then we will fall into a situation with TSOs being “judge and party” at the same time. We oppose this. In addition, the line of argumentation by ENTSO-E in the consultation provides no new elements
compared to what was already known when implementing the balancing platforms (eg. a transition period was already foreseen etc). To our knowledge, no significant change or new element has been reported since then that would justify the proposed modification. Based on the reasons presented above, Eurelectric does not support the proposal and the rationale
behind it and therefore rejects it in its current state.
Having said this, we would like to express our following views on maximum price levels for a technical reason & the transition period…