31 May 2007

Press Release

Pentalateral Energy Forum (B-D-F-LUX-NL):

A Memorandum of Understanding on Electricity Market Coupling and Security of Supply in the Central Western European region was signed in a High Level Plenary Meeting of the Pentalateral Energy Forum in Luxembourg on 6 June.

The Ministers of the Pentalateral Energy Forum and the High Level representatives of the Regulatory Authorities, Transmission System Operators (TSOs), Power Exchanges (PXs) and the Market Parties Platform of the Central Western European (CWE) region (Belgium, France, Germany, Luxembourg, the Netherlands), signed today a Memorandum of Understanding (MoU) on Market Coupling and Security of Supply in Central Western Europe in its High Level Plenary Meeting at the International Conference Center in Luxembourg.

This MoU is a huge step forward towards an efficiently functioning cross border electricity market in the region and it should form the basis for further European integration. Key elements are the development of a flow-based market coupling system for the region until 2009, several measures for increased security of electricity supply begining already in 2007 and organisational questions of the Pentalateral Energy Forum.

Market Coupling:

The Memorandum of Understanding details the objective of the analysis, design and implementation of a flow-based market coupling between the five countries of the CWE region with January 2009 as a target date. The flow-based market coupling model will support reliability of the electrical system and increase economic efficiency for the region by introducing a single region-wide implicit auctioning system based on a regional load flow calculation.

A Working Group comprised of TSOs and PXs will be responsible for analysis, design and implementation of the flow-based market coupling and will form the basis for the necessary negotiations, steering and decision-making. TSOs and/or PXs will also examine the opportunity in setting up a joint-TSO and/or PX company, which would be in charge of the relevant market issues within the CWE area.

The project will be divided into 5 project phases. The next step will be a concept plan developed by TSO´s and PX´s until the end of July. First implementation measures shall subject to regulatory approval already start in January 2008, the implementation phase could be accomplished in the fourth quarter of 2008. Thus as a target date for the start of the operational phase January 2009 is foreseen.

Security of Supply:

Furtheron the MoU has the objective to achieve four steps in the field of security of electricity supply.

It is intended to elaborate an improved regional system adequacy forecast (SAF) 2008- 2015 based on all available data. The SAF will take into account network extension planning, generation planning and forecast of load based on commonly defined scenarios. A TSO working group of experts will deliver a road map by the end of 2007.

A harmonised incidents classification scale should enable those relevant to have a common view and a common assessment of the incidents affecting the system reliability. A first draft of a harmonized incidents classification scale will be finalised by TSO experts by the end of 2007.

The TSOs commit themselves to improving their broad existing cooperation. They will focus on

- an emergency communication platform;

- a future unique TSO platform of TSO experts for communication and cooperation on a daily basis to share common non real time studies by the end of 2008.

The Signatories intend to develop a regional transmission capacity plan for the region to show structural bottlenecks in a transparent and coherent way and to help identify investment projects in a regional perspective. After having assessed existing national capacity plans until October 2007, the completion of the regional plan is foreseen until March 2009.

Organisational Questions:

The Pentalateral Energy Forum has been founded in June 2005 by the ministers of the five countries of the Central Western European Region, i.e. Belgium, France, Germany, Luxembourg and the Netherlands in order to improve their cooperation in the field of energy. This initiative aims to give political backing to a process of regional integration of electricity markets towards a European energy market in compliance with Directives 2005/89 and 2003/54 and Regulation 1228/2003.

The Forum will be the prime vehicle to support and review the general progress of the objectives of this Memorandum of Understanding will help to resolve upcoming issues and any issue hindering the timely progress of the Memorandum of Understanding projects.

Support Groups consisting of representatives from Governments, Regulators, TSOs, PXs and the Market Parties Platform have been installed and meet regularly.

The Regional Action Plan, published by the Regulators of CWE region on the 12th of February 2007, constitutes an important step towards regional market integration and will be supported by all signatories.