THE EUROPEAN ELECTRICITY TRANSMISSION SYSTEM OPERATORS UNANIMOUSLY AGREE ON THE PRINCIPLES FOR A NEW CROSS-BORDER TRADE (CBT) SYSTEM FOR 2003

ETSO members adopted by consensus on October 11 a new proposal for a cross-border trade mechanism for 2003 as was requested at the 8th Regulators Forum in Florence in February. Its purpose is to compensate the use of national transmission systems by cross-border flows in 2003. The proposal is intended to further facilitate electricity trade in Europe. It is based on a harmonised payment scheme that could be implemented also in some non-EU countries. The new proposal presents some major differences compared to the first ever CBT mechanism put in place this year. It applies a uniform model and criteria for the identification of the horizontal network (part of network affected by cross-border trade) of each country, and harmonises the costing scheme for the relevant horizontal network. Moreover, the current fund of 200 million Euro will now most likely be reduced. Due to the lack of locational signals being in place in 2003, the mechanism maintains the Transit component but reduced from 1 Euro to 0.5 Euro/MWh to be charged to those market participants responsible of export flows. The rest of the fund will be financed through grid tariff sharing the cost among all consumers. This proposal for 2003 is in accordance with the ETSO vision of a step-by-step approach envisaging further development in years to come.

Contrary to the 2002 system in which each TSO had defined in its own way the horizontal network (HN) of its country, a harmonised definition is now applied. The HNs of all countries use the Allocation of Transit Flow (ATF)-method which defines for each network element (e.g. a line) if it is allocated to the HN or not by a technical auditable approach. In other words, the ATF-approach identifies the HN by calculating the participation of each network element to transit by comparing it with a situation without transit.

By introducing a standard transit flow of 100 MW into a country's network, the method identifies which elements bear a flow that is greater or equal to 1 MW. Elements with transit flows that are lower than this threshold value are removed. The determination of the HN costs will be based on the regulated costs agreed by the respective regulators and published. Moreover, the cost claim for the 2003 CBT mechanism will not include costs of losses induced by transits, contrary to the 2002 system. A separate contract will be established to compensate costs of losses.

The ETSO compensation fund is likely to be lower than 200 million Euro and will be divided in three parts:

• A first part called "declared export" part of the fund: In order to raise this fund, a charge of 0.5 Euro/MWh is set on all declared exports declaring different control blocks for the "source" and "sink". This charge recovery must be as for the 2002 system in the spirit of
• levying a fee on those market participants having the responsibility of export flows.
• A second part called "net flow" part of the fund: It is raised from the contribution resulting from the part of the national tariffs included in the "L". The contribution from the perimeter countries, as in the present 2002 mechanism, remains at 1 Euro/MWh as an injection fee on the declared exports from exporters/traders of these countries to the ETSO CBT area.
• A third part of the fund: In the case that the sum of the two previous parts is less than the ETSO fund, the difference will be charged to the exporting countries. The way this amount will be charged in the network tariffs within each concerned country is left to subsidiarity.

ETSO is ready for removal of the remaining transit fee in 2004 provided that an agreement will be reached in Europe to introduce locational signals in network tariffs (see ETSO position paper on our website).

Contact: Ana Aguado, tel: 32 2 7418621  / e-mail:ana.aguado@etso-net.org
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