Electricity market operators urge EU to drop proposal for single market coupling operator

All nominated electricity market operators or NEMOs from member states expressed concerns over the initiative to establish a “single legal entity” in the European Union to operate market coupling. The proposal is part of the electricity market design reform.

Chief executive officers of European NEMOs called for the deletion of the “single legal entity” (SLE) in the current review of the electricity market design. The heads of all nominated electricity market operators from EU member states voiced concerns because of the push to take away the organization of the market coupling operation (MCO) function away from them and transmission system operators (TSOs). The Council of the EU proposed it in its negotiating position, also known as general approach.

The companies operate power exchanges throughout the EU and in Norway. Market coupling is a mechanism to integrate day-ahead and intraday markets. It has proved to be the cornerstone of the EU’s internal market for electricity, the CEOs stressed in the open letter.

Single entity would centralize market coupling operation function

“Our efforts for over 20 years have maximised social welfare and brought billions of euros of efficiency gains each year for European citizens and industries. With transparent price formation mechanisms and reliable short-term markets, we provide crucial tools for investment decisions and the decarbonisation of the electricity sector. Our short-term electricity markets have proven to be a pillar of stability in the face of the recent energy crisis,” the statement adds.

Adopting the proposed solution would lead to new legal and regulatory conflicts between European and national regulation, oversight and jurisdiction, CEOs claim

A single operator would centralize the function and deprive member states of their powers to regulate and monitor their own markets, the signatories argued. At the same time, it would lead to new legal and regulatory conflicts between European and national regulation, oversight and jurisdiction, they added.

Centralization contradicts the EU principles of proportionality and subsidiarity, the CEOs pointed out. They claim the current, distributed operation of market coupling in a rotational system with backup operators is more reliable, secure and cost-efficient than the alternative and stressed that it would bring massive and incalculable disruptions.

A centrally designed and operated market would disrupt the efficiency of the EU market, the announcement reads.

Single entity means single point of failure

“The SLE would also increase operational risks, since all MCO operations will be performed by a single entity, which will be a potential single ‘point of failure’. The current operational arrangement relies on several NEMOs performing in parallel the MCO function (as main coordinators and back-up coordinators),” the chief executives underscored. They noted that market participants’ organizations such as the European Federation of Energy Traders (EFET) and Eurelectric also opposed a switch to a single entity.

The European Commission hasn’t provided an impact assessment of the proposal, the CEOs of European NEMOs warned.

Instead, they suggested optimizing governance through improved resource adequacy – to deliver implementation projects on time, and
contractual simplification – to reduce complexity.

Among the 17 signatories are the heads of companies operating exchanges and electricity markets in Southeastern Europe: BRM and OPCOM (Romania), CROPEX (Croatia) BSP Southpool (Slovenia), IBEX (Bulgaria) and HEnEx (Greece).