THE REGULATION OF POWER EXCHANGES IN EUROPE

Transcription

1 THE REGULATION OF POWER EXCHANGES IN EUROPE Edited by DR. MARTHA M. ROGGENKAMP DR. FRANCOIS BOISSELEAU intersentia Antwerp - Oxford

2 TABLE OF CONTENTS FOREWORD PREFACE LIST OF CONTRIBUTORS LIST OF ABBREVIATIONS v vii ix xi CHAPTER 1. THE LIBERALISATION OF THE EU ELECTRICITY MARKET AND THE ROLE OF POWER EXCHANGES MARTHA ROGGENKAMP and FRANCOIS BOISSELEAU 1 1. Introduction 1 2. Electricity Liberalization in Europe The Creation of an Internal Energy Market The EU Treaty and the Electricity Sector Electricity Companies and Competition Law State Monopolies and Exclusive Rights to Import and Export Free Movement of Goods Concluding Remarks The Electricity Directives Introduction Market Opening Third Party Access System Operators Unbundling Dispute Settlement Authority and Regulatory Authority Public Service Obligations Regulation no. 1228/2003 and Access to Cross-border Interconnections Trading Electricity in a Liberalised Market Introduction Physical Trading Trading Financial Products The Emergence of Power Exchanges Introduction The Forerunner of Power Exchanges: Power Pools What is a Power Exchange? Products 23 XV

3 3.5. Price Formation Mechanisms Introduction HourlyBids Block Bids Matching Organization of the Book 28 CHAPTER 2. THE NORDIC ELECTRICITY MARKET - A MATURE INTERNATIONAL MARKET AND POWER EXCHANGE ODD-HARALDWASENDEN Introduction Energy Liberalisation in the Nordic Countries Introduction and Overview Market Structure Production, Consumption and Market Players Interconnection Electricity Legislation Overview Electricity Legislation in Sweden, Denmark and Finland Norwegian Electricity Legislation Security Legislation Overview Norwegian Security Legislation Security Legislation in Sweden, Denmark and Finland Competition Law The Emergence of an Organised Market: Nord Pool The Emergence of the Marketplace: History The Physical Market The Emergence ofa Financial Market Current Organisation - the Nord Pool Group of Companies Participants and Trading Activities at a Glance Supervision Functioning of the Physical Market General The Role of the Marketplace in the Power System - TSO Interface Legal Framework of the Marketplace Licensing The Obligations of Nord Pool Spot Regulation of the Cross-border Functions of the Marketplace 58 XV1

4 4.4. Products and Bidding in the Elspot Market Price Setting in the Elspot Market - Market Splitting Clearing and Settlement in the Physical Market Elbas The Financial Market of Nord Pool Introduction - the Correlation between Physical and Financial Trade Regulation of the Financial Market Nord Pool's Surveillance of the Market Functioning of the Nord Pool Financial Market in General The Products in the Financial Market Introduction Forward Contracts and Future Contracts Options Contracts for Difference Clearing and Settlement in the Financial Market Regulation of the Clearing Services Clearing Procedures Cross-border Trade Between the Nordic Area and Other Countries Introduction Capacity Reservation and Congestion Management Developments Conclusions 79 CHAPTER 3. THE UK ELECTRICITY MARKET -FROM POOL TO EXCHANGE MARKBARTHOLOMEW Introduction The Electricity Market Arrangements in England and Wales The Separate Market Arrangements in Scotland and in Northern Ireland The Extension of NETA Liberalisation and the New Industry Structure Drivers for Liberalisation The New Market Structure Generation: The New Generation Companies Transmission: The National Grid Company plc Distribution and Retail Supply: The RECs Interconnection 89 XVI1

5 The England-France Interconnector The Anglo-Scottish Interconnector The Electricity Market in England and Wales The Electricity Pool NETA Balancing Mechanism Development ofotc and Exchange-Based Trading Legal and Regulatory Framework Scope and Relevance Electricity Act 1989 and the New Regulatory Framework Utilities Act 2000 and the Development of the Regulatory Framework Regulation of Competition Financial Services Regulation The Abolition of the Pool and the Implementation of NETA Review of the Electricity Trading Arrangements Failings of the Electricity Pool Inflexible Governance High Prices Market Power Abuse No Demand-Side Participation Excessive New Generation Successes of the Pool Security and Quality of Supply Encouragement of New Investment Retail Supply Competition The Objectives of NETA Interaction with Gas Market Flexible Trading Transparency Lower Wholesale Prices More Flexible Governance Have the Objectives of NETAbeen achieved? Flexible Trading Transparency Lower Wholesale Prices More Flexible Governance Other Consequences of NETA Operating Inefficiencies Additional Costs for Retailers Impact on Renewable Generators 110 xvm

6 6. The Development of Power Exchanges Under NETA The Role of the Exchanges The Institutions UKPX APX International Petroleum Exchange New Developments BETTA Rationale behind BETTA Common Trading Arrangements Common Transmission Access Arrangements Single GB System Operator Emissions Trading Implementation of the EU Emissions Trading Directive Implications of the Emissions Trading Directive for the UK. Electricity Market Conclusion 117 CHAPTER 4. THE LIBERALISATION OF THE ELECTRICITY SECTOR IN THE NETHERLANDS AND THE ROLE OF THE APX ONNO VERKUYL, MARTHA ROGGENKAMP and FRANCOIS BOISSELEAU Introduction The Liberalisation of the Electricity Sector The Legal Framework before Market Liberalisation Electricity Act Market Structure before Liberalisation The Liberalisation of the Electricity Market The Electricity Act Market Opening Unbundling and the Appointment of Network Managers Third Party Access Programme Responsibility The Dutch Energy Regulator (DTe) Market Structure after Liberalisation Electricity Trade and the Establishment of the APX The Establishment of the APX Ownership and Organisation of APX From Private to Public Ownership Organisation of APX 133

7 Endex NV and Its Relationship with APX BV Participants at APX Supervision Introduction The Role of the Energy Regulator DTe Internal Supervision Functioning of the Organised Market The Regulations Products Introduction Day-Ahead-Market Commodity Delivery System Cross-border Trade Interconnectors Import and Export Regulations and Reciprocity Rules Access to the Interconnectors and Capacity Reservation New Developments Conclusion 148 CHAPTER 5. LIBERALISATION AND ENERGY EXCHANGE(S) IN GERMANY MICHAEL CiESLARCzYKand MANFRED UNGEMACH Introduction Liberalisation of the German Electricity Sector Market Structure and Market Development Market Structure Electricity Production and Consumption Trading Legal Framework Implementation of the 1996 Electricity Directive and pending Implementation of the 2003 Electricity Directive Market Opening Unbundling Third Party Access Licensing Requirements Supervision Competition Law Applicability of the Competition Law Regime Abuse Control of Exclusive Dealing Agreements 162

8 Abuse of a Dominant Position Prohibition of Discrimination and Unfair Hindrance Recent Amendments and New Developments Private Law Associations Agreements Balancing Agreements Financial Services and Banking Regulation Introduction Licensing Requirements The Leipzig Power Exchange and the Frankfurt European Energy Exchange The Establishment of the LPX and the EEX The Merger of Both Exchanges into one German Electricity Exchange Structure / Supervision The Functioning of die Organised Market The Participants The Regulations Introduction Exchange Rules Trading Rules Clearing Rules Examination Regulations Markets Products Spot Market Futures Market OTC Clearing Services Cross-border Trade Introduction Interconnectors Import/Export Regulations and Reciprocity Rules Access to Interconnectors and Capacity Reservation Applicable Legislation Congestion Management New Developments Conclusion 192

9 CHAPTER 6. INTRODUCING COMPETITION IN THE FRENCH WHOLESALE MARKET: THE ROLE OF THE POWER EXCHANGE NICOLAS CHARBIT and FRANCOIS BOISSELEAU Introduction Liberalisation of the French Electricity Sector Market Structure Legal Framework Implementation of the Electricity Directive The Electricity Law and Energy Trading Financial Security Regulation Powernext The Establishment of Powernext The Participants/Owners of Powernext Supervision Functioning of the Power Exchange The Regulations The Products Market Developments Cross-border Trade Interconnection with Neighbouring Countries Import/Export Regulations and Reciprocity Rules Access to Interconnectors and Capacity Reservation New Developments Conclusion 219 CHAPTER 7. THE LIBERALISATION OF THE AUSTRIAN ELECTRICITY INDUSTRY AND THE ROLE OF THE AUSTRIAN POWER EXCHANGE KATJA TAUTSCHER and MARTIN ABRAM Introduction: the Liberalisation of the Austrian Electricity Sector The Electricity Market in Austria Production and Consumption Market Structure and Market Development The Wholesale Market The Legal Framework for Electricity Trading Division of Powers Electricity Legislation Implementation of Directive 1996/92/EC Unbundling 228 xxl1

10 Third Party Access Balancing Regime Independent Regulatory Authorities Competition Law Regime Regulatory Authorities Elektrizitäts-Control GmbH (ECG or "E-control") Elektrizitäts-Control Commission (ECC) Federal Minister of Economics and Labour Financial Regulations Introduction Physically Settled Transactions Cash Settled Derivatives Security Legislation Emergence of the Organised Market The Establishment of the Austrian Power Exchange EXAA Legal Basis of EXAA Regulations The Participants of EXAA Types of Participation Requirements for Participation Membership Supervision Products Traded on EXAA General Spot Market Products Derivatives Market Products - espreads RECS Certificates and Guarantees of Origin The Functioning of the Organised Market Trading on the Spot Market Trading on the Derivatives Market Objections against Trade Confirmations Delivery, Clearing and Settlement Collateral Fees Cross Border Trade Introduction Import/Export Regulations and Reciprocity Rules Access to Interconnectors Restrictions due to Insufficient Grid Capacity Allocation through Capacity Division Allocation through Auction Fees 251 XX111

11 6. New Developments Environmental Exchange Trading Gas Products Auctions of Transmission Capacity Conclusion 253 CHAPTER 8. THE SPANISH EXPERIENCE: THE ROLE OF THE POWER POOL JAVIER DE QUINTO, INIGO DEL GUAYO and YOLANDA GARCIAMEZQUITA Introduction The Liberalisation of the Spanish Electricity Sector The Electricity Act A New Regulatory Model Market Opening Transmission System Operator The Establishment of a Power Pool The Issue of Stranded Costs The Spanish Electricity Market Structure The Market Operator (OMEL) The Establishment of OMEL Market Rules The Functioning of the Pool Introduction Market Participants The Daily Market Cross-border Trade International Electricity Connections Import/Export Regulations and Reciprocity Rules New Developments: The Iberian Market Conclusion 268 CHAPTER 9. THE ROLE OF THE ORGANISED ELECTRICITY MARKET IN ITALY FRANCESCOVETRÖ The Electricity Sector before Liberalisation Liberalisation of the Italian Electricity Sector Market Structure Legal Framework General Regulating the Networks 273 XX1V

12 Supervision Market Opening Regulating the Market The Electricity Market Operator GestoreDel Mercato Elettrico Establishment of the Market Operator Market Regulations The Markets The Energy Markets: Day-Ahead and Adjustment Markets Dispatching Services Market Other Developments General Green Certificates Energy Efficiency Certificates Cross-border Trade Interconnection with Neighbouring Countries Access to Interconnectors and Capacity Reservation Interconnectors and the Organised Market Conclusion 285 CHAPTER 10. THE LEGAL FORM OF POWER EXCHANGES: A COMPARATTVE OVERVIEW BARRYBARTON Introduction Legal Foundations Legal Nature of Power Exchanges Exchanges Created by Contract or other Private Law Means Exchanges Created by Statute or other Public Law Means Exchanges Created as Corporations Exchanges in the EU Functional Distinctions External Regulation Types of Regulation Monopoly Self-Regulation Direction, Governance, and Management of Power Exchanges Decision-making Powers Earlier Analysis A New Classification 302 XXV

13 5. Specific Governance Issues Participants or Independents Market Principles Voice of Participants Rulemaking and Voting Monitoring and Surveillance Dispute Resolution Enforcement Inward Looking and Outward Desirable Attributes of Power Exchanges Continuing Evolution 310 xxvi