European TSO companies have reached a new voluntary agreement on Inter-TSO Compensation for transit (ITC). The Agreement, which was signed by 39 TSOs from 33 countries, is an interim solution until the official EC guideline for ITC compensation are in force, later in 2010.
The ENTSO-E Agreement is based on the EC proposal for binding guidelines on ITC, recently submitted for approval by EU Member States under Comitology. ENTSO-E welcomes the draft EC guidelines, built on a proposal by European TSOs, and expects the final version of the EC guidelines to confirm and further detail the methods to be applied in the future, for example on the treatment of capacities allocated in a manner not compatible with the Congestion Management guidelines.
The Agreement foresees two components to be compensated: transmission losses and infrastructure costs. As had been done by European Transmission System Operators in the past, transmission losses will be compensated based on the WWT (With and Without Transit) model. This means that losses are calculated on each TSO’s transmission grid in a load flow situation with transits and in a load flow situation without transits.
The price used to calculate the value of transit losses shall be equal to the price used to compensate losses by national tariffs. All ITC parties will therefore receive full compensation for losses in their system attributable to transits. A framework fund will be used to compensate transmission system operators for the costs of making infrastructure available to host transit flows of electricity. In line with the EC proposal, the value of the framework fund has been set to - 100 million per year.
Similar to previous ITC agreements, and to the draft EC guidelines, this agreement foresees that perimeter flows (i.e. third country imports and exports) shall contribute to the framework fund and the WWT calculations. The perimeter fee amounts to 0,7 MWh for 2010.
ENTSO-E was established on 19 December 2008 and has become fully operational as of July 2009. It replaces its six predecessor associations whose history goes back to 1951 and continues and consolidates their work. ENTSO-E’s legal raison d’être is the Third Legislative Package on the Internal Electricity Market, which came into effect on 3 September 2009.
Within the Third Package it is in particular Regulation 714/2009 on conditions for access to the network for cross-border exchanges in electricity which demands the establishment of ENTSO-E to “ensure optimal management of the electricity transmission network and to allow trading and supplying electricity across borders in the Community”.
The current ITC agreement was established by ENTSO-E predecessor ETSO and signed for the period 2008-2009. The new voluntary interim ITC agreement has become necessary since the current agreement on inter-TSO compensation has come to an end on 31 December 2009. At the same time, the EC guideline, has not yet come into force.
It is essential that the inter-compensation mechanism is run in 2010 to ensure appropriate compensation for costs incurred as a result of cross-border flows. Due to the absence of the required EC guidelines, a voluntary agreement between TSOs is still needed for (at least) some months in 2010.