Northern Mini ForumCopenhagen, 27 June 2006

Gunnar LundbergGunnar Lundberg

Chair of the EURELECTRIC Chair of the EURELECTRIC WG Wholesale Markets & TradingWG Wholesale Markets & Trading

Vice Chair of the Markets CommitteeVice Chair of the Markets Committee

Market Transparency

• Conclusions from the 12th Florence Forum :

“EURELECTRIC agreed to provide a list of information that it considers market agents need to have in order to trade efficiently, where possible in co-ordination with traders, power exchanges and customers, with the aim to provide this list by November 2005.”

• Liquid day-ahead and forward markets and open balancing and intra-day markets with trustworthy prices

• Sufficient number of market participants in the day-ahead and forward markets on both demand and supply side

• Transparent access to common sets of market information

• Coordinated and market-based mechanisms to manage congestion

• Set of sufficiently harmonized market frameworks to allow cross-border trading on all markets

• Develop interconnection where economically feasible

Prerequisites for a European wholesale market

Benefits of Market Transparency

• Promote market liquidity and enhance market efficiency– To effectively risk-manage their positions and cater

for demand and supply uncertainties– To take “make or buy” generation decisions

• Facilitate new entry

• Engender market confidence

• Facilitate regulatory oversight

Market Transparency – Key Principles

Relevant data should

• Be available to all• Be authoritative • Be based as far as possible on common

standardised definitions and formats• Be issued at the same time in a regional market• Be easily accessible• Be based on best estimates in good faith• Provide sufficient degree of confidence

Market transparency – the need to make a balanced assessment

• costs: the cost of collecting not yet available data has to be proportional to the benefits

• level of details: the degree of details should be determined by the range of data relevant to price formation

• confidentiality: market participants must be able to operate without revealing commercially sensitive information

Pan-E

uropean market

EURELECTRIC approach towards market transparency is embedded in its Road Map to a

European Electricity Market:

Integration at European level

2007-12

Coordination between regions 2005-10

Development within regions 2005-09

Continued liberalisation of national markets 2005-07

Market Transparency – Transmission and Access to Interconnectors

• Year-, Month-, Week- and Day-ahead forecast of available commercial capacity on borders

• Planned maintenance of borderlines • Unplanned line outages• Legacy contracts and reservations for legacy

contracts• Remaining available commercial capacity for day-

ahead and intra-day allocation• Total nominated capacity per hour• Realised physical flows on borders per hour• Long-term evolution forecast of the transmission

infrastructure, etc.

Market Transparency – Generation

• Installed generation capacity by fuel type (ex ante)• Available generation capacity

– Ex ante information to be made available following a 2-phase-approach

• Actual hourly aggregated generation by fuel type (ex post)

• Unplanned loss of generation capacity– Ex post information by fuel type on price area level; 2-

phase-approach• Water levels in hydro reservoirs• Further information on projected maintenance,

mothballing, etc.

Market Transparency – Load

• Year-, Week- and Day-ahead aggregated forecast of load

• Actual system load in MW/h

Market Transparency – Balancing and reserve power

• Price and volumes for balancing power• Aggregated capacity margin supply-demand• System balancing status• Actual use of secondary and tertiary reserve

Market Transparency – Wholesale market

• Prices and volumes on power exchanges or for OTC standard contracts by brokers in the– Day-ahead markets– Intra-day markets– Forward and derivatives markets

Market transparency –

HOW TO CREATE A LEVEL PLAYING FIELD?

2 ways can be envisaged:

■ Implementation via Europe-wide RegulationPro’s: a tested route, will avoid potential for market distortionsCon’s: lengthy process, risk to align it to the country with the lower pace of development

■ Implementation via regional cooperationPro’s: tailored and pragmatic approach, quicker process Con’s: untried approach on European scale, greater trade distortions may result in absence of appropriate guidance

Market transparency – Way forward I

Provide a list of data for benchmarking existing market transparency arrangements in order to

1. Harmonise transparency requirements within regions

2. Progress towards harmonisation between regions

Use upcoming regional Mini-Fora to create momentum for levelling up transparency standards in the regions (provided that all categories of market players are represented)

Regional approach for market transparency requires

• Putting in place the necessary governance arrangements

• Using the Mini-Fora as the natural vehicle for development

• Follow ‘level up’ benchmark in the regions• Genuine cooperation between all stakeholders and

in particular the regulators– ERGEG proposal for market transparency in public

consultation EURELECTRIC input– Different approaches relatively close in majority of issues

Market transparency – Way forward II

Thank you for your attention.

Representing the European Electricity Industry