Energy Community releases Policy Guidelines on wholesale markets, power exchanges

At this moment not a single functioning regional power market is in place in the Energy Community (EnC) Contracting Parties, EnC Secretariat concludes in Policy Guidelines on increasing Competition and Liquidity of Wholesale Electricity Markets, including Power Exchanges. The document provides recommendations on the legal and regulatory measures.

The document is a result of the 2018 Athens Forum’s request to the Secretariat to develop a guideline on wholesale market liquidity.

These Policy Guidelines provide recommendations on the legal and regulatory measures that could be used to introduce competition at national level and enable cross-border trade in situations where national incumbent undertakings still dominate the national wholesale markets, the Secretariat said on its website.

The document also suggests legal and regulatory measures that could be imposed in order to introduce and/or increase liquidity on organized markets, in particular power exchanges.

The Secretariat considers that both the national regulatory authorities (NRAs) and the national competition authorities (NCAs) of the Contracting Parties have competences to adopt such measures.

They are hereby invited to follow the EU experience, become proactive and start using their powers effectively, Secretariat said.

List of measures:

• I Measures that are designed to limit the influence of operators with significant market power and concentration in the industry chain or to reinforce small players with a view to enhance participation of smaller players or industrial users on the wholesale electricity markets.
• II Measures that aim to eliminate cross-subsidies, margin squeezes or concerted actions within vertically integrated undertakings.
• III Measures that directly enhance liquidity on organized markets.
• IV Measures aimed at preventing market power abuse on power exchanges.
• V Measures preventing market power abuse by the power exchange itself indirectly affecting access and liquidity.

Markets still dominated by incumbent undertakings

Secretariat said that instead of functioning regional market, the EnC Contracting Parties have markets that are still mostly national and each country has introduced its own national market design.

Even though the number of traders active in the Contracting Parties is not negligible, the national markets are still dominated by incumbent undertakings and organized markets barely exist. Bilateral contracts are the main market means and not all Contracting Parties are participating to a coordinated capacity allocation platform, the Secretariat noted.

The Secretariat, therefore, advises the Contracting Parties to reform their existing national market designs in such a way as to speed up the establishment of organized wholesale electricity markets as a precondition for regional and pan-European market coupling.

Furthermore, cross-border competition is particularly important for creating a pan-European internal electricity market, the Secretariat concluded.