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Forward Capacity Allocation: Early Implementation Project on the Harmonisation of Allocation Rules

​​​The Forward Capacity Allocation (FCA) received a positive vote by the Electricity Cross Border Committee in October 2015 and has now been submitted to the European Parliament and Council for scrutiny, scheduled to finish in July 2016. The FCA sets out rules regarding the type of long term transmission rights that can be allocated via explicit auction and the way holders of transmission rights are compensated in case their right is curtailed. The overarching goal is to promote the development of liquid and competitive forward markets in a coordinated way across Europe, and provide market participants with the ability to hedge their risk associated with cross-border electricity trading.

In order to deliver these objectives, a number of steps are required. In coordination with regulators and interested stakeholders, ENTSO-E has decided to begin the early implementation of a number of projects before the guideline is adopted.

One of these projects is the Harmonisation of long term Allocation Rules (HAR).

What is the objective?

Allocation rules govern the contractual arrangements for cross zonal capacity allocation in the long-term timeframe by explicit auctions. Generally, the allocation rules deal with:

  • the procedures for auctioning transmission rights;

  • the terms on which market participants may participate in explicit auctions; and

  • the terms for use of cross zonal capacity.

Currently there is no single set of harmonised rules for trading across European bidding zone borders. A number of regional allocation platforms are in place in different regions, each one with specific allocation rules.

According to the FCA, all Transmission System Operators (TSOs) have to “develop a proposal for harmonised Allocation Rules” (HAR) no later than 12 months after its entry into force (Article 51 of the FCA). The reason for not adding the rules in the FCA is that they may need to be amended on a more frequent basis than the regulation in order to meet the needs of market participants. It was thus considered more efficient to include and detail the requirements for the harmonised allocation rules in a separate document.

Where do we stand?

The first EU HAR was submitted and approved by the relevant NRAs in 2015 and applied for the auctions of 2016 (“2016 EU HAR”) as part of the FCA early implementation. After the ECBC’s positive vote on the FCA (30 October 2015) the relevant TSOs in coordination with regulators and interested stakeholders decided to update the EU HAR to further align with the FCA even before it enters into force and poses obligations on TSOs to do so. The purpose of the project was that the HAR are approved by the relevant national regulatory authorities in 2016, and will therefore become applicable for 2017 yearly allocation.

The process of amending the HAR started in the beginning of 2016 and was concluded in the end of June 2016 with the unanimous approval by all TSOs on the main body of the HAR. The TSOs should then submit the HAR Main Body and the border/regional specific annexes (when applicable) to the relevant NRAs for approval. The HAR is envisaged to apply from 1 January 2017 for long-term transmission rights on the list of borders also approved by NRAs.

ENTSO-E has published a consolidated version of the main body of the HAR for information purposes only. This document does not in any way represent an official and final consolidation of the HAR and the annexes. The final documents are subject to the outcome of the regulatory process applicable in each relevant jurisdiction. Further, ENTSO-E has published some of the border/ regional specific annexes. It should be noted that certain annexes will be published after the review of the relevant regulatory authorities.

Stakeholder Involvement

Stakeholders were involved in the process, starting with a stakeholder meeting on 20 January 2016. In this meeting the HAR Stakeholder Advisory Group (which was established in 2015) provided feedback and expectations on the review of the EU HAR. Following the provisions of the FCA, a public consultation was organised which lasted 4 weeks (from 18 April to 18 May 2016). Through this public consultation each interested party has been able to submit comments on the EU HAR. In the middle of the public consultation (6 May 2016), ENTSO-E organised a public workshop in a form of a webinar where the participants received general information on the EU HAR which intended to help them in providing their comments and they were also able to ask their questions.

Following the public consultation on the main body of the HAR, a document was prepared and approved by all TSOs summarising the comments from the public consultation. The document explains in details why the proposed changes were or were not incorporated into the final version of the document.

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