In our March 2011 E-Bulletin we highlighted the ongoing procedure under the third energy package to develop harmonised network codes for managing access to and developing cross border networks in the gas and electricity markets.  As we discussed in that article, the regulation requiring the harmonisation of network codes does not require any enabling legislation in order to be given legal effect in the UK.  Therefore as these codes will ultimately have a significant impact on how market players in the UK operate, it is critical that these players engage in the process for developing these codes in order to influence the outcome of that process.

The procedure for developing these network codes in respect of the electricity and gas markets is set out in Article 6 of Regulation 714/2009/EC and Article 6 of Regulation 715/2009 (the Access Regulations) respectively.

In summary, the process is as follows:

1. Priority list

After consulting the Agency for the Cooperation of Energy Regulators (ACER), the relevant European Network of Transmission System Operators (ENTSO) and the other relevant stakeholders, the Commission produces a "priority list" identifying areas to be included in the network codes.

2. Framework guidelines

At the request of the Commission, ACER produces a non-binding framework guideline setting out principles for the development of network codes relating to a particular area identified in the priority list.  The guidelines are required to contribute to non-discrimination, effective competition and the efficient functioning of the market.  ACER consults the ENTSO and the other relevant stakeholders in regard to the framework guidelines, during a period of no less than two months.  The Commission can request amendments to the guidelines if it considers that they do not contribute to non-discrimination, effective competition and the efficient functioning of the market.

3. Network codes

At the request of the Commission the ENTSO submits to ACER a network code which is in line with the accepted framework guidelines.  ACER shall provide a reasoned opinion to the ENTSO - following consultation with relevant stakeholders if this is deemed necessary by ACER - on the network code.  The ENTSO may amend the network code in light of the opinion of ACER and re-submit it to ACER.  When ACER is satisfied that the network code is in line with the relevant framework guideline, ACER shall submit the network code to the Commission for approval. Once approved, the network codes will be applied by Transmission System Operators (TSOs).

The consultation to identify the "priority list" closed 10 April 2011.  ACER has now published and is consulting on draft framework guidelines in respect of two of these priorities, these are as follows:
(i) Draft framework guidelines on electricity capacity allocation and congestion management

The national regulatory authorities in each member state are already required to comply with the congestion management guidelines set out in Annex 1 to the electricity Access Regulation (the Access Guidelines).  The framework guidelines currently being consulted on compliment the Access Guidelines, and the network code to be developed by ENTSO for electricity on the basis of these framework guidelines will ultimately either amend, repeal or where applicable replace the Access Guidelines.

Amongst other points, the framework guidelines cover:

  • optimal and coordinated use of transmission network capacity;
  • day-ahead capacity allocation;
  • forward capacity allocation;
  • intraday capacity allocation.

These framework guidelines envisage that the network code shall be developed and implemented by 2014.

This consultation is open for responses until 10 June.

(ii) Draft framework guidelines on gas balancing in transmission systems
These framework guidelines form the basis for a network code that is intended to define a European gas balancing regime, rather than the multiple fragmented regimes that apply in several balancing zones across Europe.  The objective is for the unified gas balancing regime to be market based and enable network users to trade gas efficiently, including across borders.

Amongst other points, the framework guidelines cover:

  • principles for network users and TSO roles and responsibilities;
  • buying and selling of flexible gas and balancing services by TSOs;
  • balancing period and nomination procedures;
  • imbalance charges;
  • TSO information provision obligations;
  • cross-border cooperation.

    These framework guidelines provide a mechanism for gradual implementation but only where the relevant TSO has been approved to carry out implementation in interim steps by the National Regulatory Authority.

This consultation is open for responses until 12 June.

With both consultations closing next month, market players should take the opportunity to comment on the draft framework guidelines now as they may not get another chance.  ACER may, but are not obliged to, consult on the network code produced by the relevant ENTSO.  If market players want to have a say in a network code that will have an impact on their future operations they'd better strike while the iron is hot.

Click here to comment on the draft framework guidelines.

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