REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the development of single day-ahead and intraday coupling in the Member States and the development of competition between NEMOs in accordance with Article 5(3) of Commission Regulation 2015/1222 (CACM)
Date: 2018-07-16
Institutions: Directorate-General for Energy, European Commission
Subjects: electrical energy, electricity supply, energy distribution, energy grid, energy law, energy market, energy transport, intra-EU trade, market access, single market

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 16.7.2018  COM(2018) 538 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL  on the development of single day-ahead and intraday coupling in the Member States and the development of competition between NEMOs in accordance with Article 5(3) of Commission Regulation 2015/1222 (CACM) {SWD(2018) 376 final}  
 
 
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

 on the development of single day-ahead and intraday coupling in the Member States 
and the development of competition between NEMOs in accordance with Article 5(3) of 
Commission Regulation 2015/1222 (CACM) 

Contents 

I. 

Introduction ..................................................................................................................................... 2 

II.  Main drivers for the single day-ahead and single intraday coupling ............................................... 2 

III. 

IV. 

Summary of the analysis ............................................................................................................. 3 

Preliminary conclusions .............................................................................................................. 5 

1 

 
 
 
 
 
I. 

Introduction 

On 14 August 2015 the Commission Regulation (EU) 2015/1222 establishing a Guideline on Capacity 
Allocation  and  Congestion  Management  (CACM)  entered  into  force1.  Pursuant  to  Article  5(3)  of 
CACM  the  Commission  shall  forward  a  report  to  the  European  Parliament  and  the  Council  in 
accordance with Article 24 of Regulation (EC) No 714/2009 on the development of single day-ahead 
and  intraday  coupling  in  the  Member  States,  with  particular  emphasis  on  the  development  of 
competition between nominated electricity market operators (NEMOs). 

Pursuant to Article 5(3) CACM the Commission shall, on the basis of that report, notably evaluate if 
the exemption to allow national legal monopolies2 or the continued refusal of a Member State to allow 
cross-border  trading  by  a  NEMO  designated  in  another  Member  State3  is  still  justified.  In  case  the 
Commission deems that this is not the case, it may consider appropriate legislative or other appropriate 
measures  to  further  increase  competition  and  trade  between  and  within  Member  States.  The 
Commission  shall  also  evaluate  the  governance  of  the  single  day-ahead  and  intraday  coupling,  with 
particular  emphasis  on  the  transparency  of  the  market  coupling  operator  (MCO)  functions  carried 
jointly  by  the  NEMOs.  If  the  Commission  deems  that  there  is  ambiguity  in  carrying  out  the 
monopolistic  MCO  functions  and  other  NEMO  tasks,  the  Commission  may  consider  appropriate 
legislative or other appropriate measures to further increase transparency and efficient functioning of 
single day-ahead and intraday coupling. 

As  part  of  the  monitoring  of  the  progress  with  the  development  of  day-ahead  and  intraday  coupling 
made in the last years and in accordance with Article 5(3) of the CACM Regulation, the Commission 
forwards  this  report  and  the  accompanying  staff  working  document  to  the  European  Parliament  and 
the Council. The particular focus of this report is on the development of competition between NEMOs, 
while  the  Commission  also  provides  a  preliminary  assessment  and  evaluation  of  the  governance  of 
single  day-ahead  and  single  intraday  coupling  established  by  the CACM  Regulation,  with  particular 
emphasis on the transparency of the MCO functions carried jointly by the NEMOs. A more detailed 
description of the Commission's assessment is presented in a Staff Working Document accompanying 
this report4. This report is without prejudice to possible future conclusions based on further experience 
notably with the implementation of the single intraday coupling. 

II.  Main drivers for the single day-ahead and single intraday coupling 

In order for the single day ahead and single intraday coupling to  be implemented, several actors and 
functions play a crucial role.  

To implement single day-ahead and intraday coupling, the available cross-border capacity needs to be 
calculated  in  a  coordinated  manner  by  the  Transmission  System  Operators  (TSO).  For  this  purpose, 
the TSOs have to establish a common grid model including estimates on generation, load and network 
status for each hour. The available capacity should normally be calculated according to the so-called 
flow-based  calculation  methodology,  which  takes  into  account  that  electricity  can  flow  via  different 

1  
2  
3  
4  

OJ L 197, 25.7.2015, p. 24–72. 
See Article 5(1), first subparagraph of CACM. 
See Article 5(1), third subparagraph of CACM. 
SWD(2018) 376 

2 

 
 
                                                            
paths and optimises the available capacity in highly interdependent grids. The available cross-border 
capacity is one of the key inputs into the further calculation process. In this process all Union bids and 
offers  are  collected  and  they  are  matched  by  power  exchanges,  taking  into  account  available  cross-
border capacity in an economically optimal manner. Single day-ahead and intraday coupling ensures 
that power usually flows from low- price to high- price areas. 

The  MCO  is  a  function  assigned  to  power  exchanges,  i.e.  the  NEMOs,  by  CACM.  This  function 
should  use  a  specific  algorithm  to  match  bids  and  offers  in  an  optimal  manner.  The  results  of  the 
calculation  should  be  made  available  to  all  NEMOs  on  a  non-discriminatory  basis.  Based  on  the 
results as calculated by the MCO, the NEMOs should inform their clients of the successful bids and 
offers  and  the  energy  should  then  be  transferred  across  the  network  according  to  the  results  of  the 
capacity calculation. 5 

For efficiency reasons and in order to implement single day-ahead and intraday coupling as soon as 
possible, CACM encourages the use of existing market operators and already implemented solutions 
where appropriate, without precluding competition from new operators. However, the Commission, in 
cooperation  with  the  Agency  for  the  Cooperation  of  Energy  Regulators  (Agency)  may  create  or 
appoint a single regulated entity to perform common MCO functions relating to the market operation 
of single day-ahead and intraday coupling.6 

In order to promote the completion and efficient functioning of the internal market in electricity and to 
ensure  the  optimal  management,  coordinated  operation  and  sound  technical  development  of  the 
electricity transmission system in the Union, close cooperation between TSOs, NEMOs and national 
regulatory  authorities  (NRAs)  is  essential.  In  particular,  synergies  arising  from  existing  capacity 
allocation and congestion management projects should be exploited which have been contributing to 
the development of the internal market in electricity.7 

III.  Summary of the analysis 

Regarding the single day-ahead coupling, the so-called "Price Coupling of Regions" (PCR) solution, 
designed  by  a  regional  project  before  the  entry  into  force  of  CACM,  served  as  basis  for  the 
implementation  of  the  pan-European  single  day-ahead  coupling.  Even  though  the  PCR  is  by  now 
applied in the vast majority of the Member States, the system regularly needed modifications in light 
of  the  increasing  operational  complexity  in  recent  years,  and  further  changes  are  still  necessary  in 
order for the PCR to become fully CACM compliant. 

Regarding the development of the single intraday coupling, the Cross-Border Intraday (XBID) project 
is the basis for the implementation of the pan-European single intraday coupling under CACM. During 
its  development  phase  not  all  TSOs  and  NEMOs  form  part  of  the  XBID  project,  but  the  remaining 
TSOs and NEMOs were already associated in the development of the project and adhered to it in order 
to comply with CACM and the MCO plan. Such adherence took effect from the launch of the XBID 
on  12  June  2018  covering  at  a  first  stage  14  European  countries.  The  XBID  project  will  enable  the 
single continuous intraday trading with a stepwise approach across the entire European Union. 

5 Recital 4ff of CACM. 
6 Recitals 14 and 15 of CACM. 
7 Recital 25 of CACM. 

3 

 
 
                                                            
Regarding the development of competition between NEMOs, so far the majority of the Member States 
bound  by  CACM  decided  to  apply  a  competitive  NEMO  model,  i.e.  the  default  model  for  NEMO 
designation  as  prescribed  in  CACM.  Since  the  entry  into  force  of  CACM  the  number  of  power 
exchanges  which  are  willing  to  become  active  in  other  Member  States  has  increased.  However, 
competition  in  the  single day-ahead  and  single  intraday  coupling  will,  once  applied,  still  be  limited, 
due to the existence of legal monopolies in several countries.  

On the governance structure of the market coupling projects, the existing solutions (PCR and XBID) 
had  a  specific  governance  structure,  as  they  started  on  the  basis  of  voluntary  early  implementation 
projects,  whereby  a  group  of  TSOs  and  power  exchanges  was  jointly  leading  these  projects.  The 
CACM  Regulation  sets  a  general  framework  for  such  cooperation  and  provides  some  principles  to 
avoid discrimination, while the development of the details of the cooperation was left to the NEMOs, 
in cooperation with TSOs. At the same time CACM assigns certain tasks to NEMOs for developing 
and operating the so-called MCO functions for the single day-ahead and single intraday coupling. The 
MCO function is not part of the competitive activities of the NEMOs, but it is designed as a regulated 
function that ensures the efficient matching of orders within and across bidding zones for all NEMOs 
in  the  European  Union  through  the  implicit  allocation  of  cross-zonal  capacity.  Several  complex 
technical methodologies and terms and conditions have to be developed and implemented by NEMOs 
and/or  TSOs  and  approved  by  NRAs  at  a  pan-European,  regional  or  national  level  in  order  for  the 
MCO function to fulfil its tasks.  

The  implementation  of  the  single  day-ahead  and  intraday  coupling  has  faced  delays  so  far  due  to 
several  challenges  related  to  the  governance,  such  as  the  increasing  number  of  involved  parties,  the 
need  for  new  arrangements  for  cost  sharing  and  cost  recovery  in  accordance  with  CACM  and  other 
governance issues, such as the need to find adequate decision-making rules. Other challenges may also 
arise  in  terms  of  efficiency  in  the  operation  of  the  algorithm  with  the  increased  number  of  NEMOs 
competent to perform these tasks, and new functionalities required to comply with CACM in future. 
NRAs have to ensure the ability of the NEMOs, or of a third party assigned with this task, to be able to 
perform the MCO function in accordance with the legal framework. 

A complexity in the implementation of the MCO plan lies also in the fact that under CACM, NEMOs 
are  mainly  responsible  for  the  development  of  the  single-day  ahead  and  single  intraday  coupling 
solutions,  while  the  TSOs  are  mainly  responsible  for  the  calculation  and  allocation  of  cross-zonal 
capacity. A clear determination of tasks, responsibilities and cost sharing/cost recovery arrangements 
may  help  to  allow  for  a  smoother  cooperation  between  NEMOs  and  TSOs.  Today,  the  concrete 
arrangements  depend  on  TSOs/NEMOs  proposals  and  approvals  at  pan-European,  regional  or 
sometimes national level. Experience gathered so far shows that legal uncertainties around issues such 
as cost sharing or cost recovery, and a lack of harmonisation of governance-related issues led to delays 
and significant disagreement among relevant parties at several occasions. 

In  addition,  the  implementation  of  the  various  methodologies  required  for  the  market  coupling  has 
proven  to  be  challenging.  While  deciding  on  such  matters,  it  is  essential  to  ensure  that  NEMOs  are 
treated  in  a  non-discriminatory  way  and  that  the  current  solutions  are  compliant  with  the  CACM 
requirements (or they can be further developed to be compliant). 

4 

 
 
IV.  Preliminary conclusions  

The Commission's experience with NEMOs competition  remains limited at this date,  notably due to 
the delay in the implementation of all regulatory and technical  steps necessary to allow  competition 
among  NEMOs  in  the  single  day-ahead  and  the  single  intraday  coupling.  From  the  preliminary 
experience so far, notably in the field of day-ahead market coupling, the competition model could be 
implemented by the majority of Member States in the Union without major obstacles. Thus, there are 
no  manifest  reasons  to  change  the  approach  chosen  by  CACM  and  to  exclude  competition  at  this 
stage.  

At the same time, due to the ongoing implementation at the time of publication of this report and as 
NEMOs  competition  has  not  yet  started  or  shown  its  full  effect  in  the  Member  States  where  no 
monopoly exists, the Commission will not take a conclusive view at this stage on whether it is justified 
to abolish the possibility for Member States to provide for a legal monopoly. The possibility to apply 
the  monopoly  model  and  to  refuse  the  trading  services  by  a  NEMO  designated  in  another  Member 
State  is  still  considered  as  an  exception  to  the  default  competition  model.  However,  the  monopoly 
NEMO  exception  under  the  CACM  does  not  impair  or  limit  in  any  way  the  application  of  the 
competition  rules  enshrined  in  the  Treaty  on  the  Functioning  of  the  European  Union  (Treaty).  In 
particular, the application of the Treaty's provisions on competition apply broadly to the conduct of the 
NEMOs on the market, including risks of cross-subsidisation, and any Member State measure granting 
NEMO’s  exclusive  rights.  Therefore,  as  non-discrimination  and  a  level  playing  field  among 
competitive  and  monopoly  NEMOs  need  to  be  ensured,  the  Commission  under  the  Treaty’s  and 
CACM provisions will continue to monitor the progress of day-ahead and intraday market coupling, as 
well as the effects of NEMO competition in the European Union.  

Regarding  the  governance  of  the  single  day  ahead  and  single  intraday  coupling  the  preliminary 
analysis of the progress made so far shows that the roles and responsibilities of NEMOs and TSOs in 
the  development  and  operation  of  the  coupling  solutions  need  to  be  better  clarified.  While  CACM 
appoints NEMOs with the main responsibility for these tasks, TSOs should be more involved and have 
a decisive role in technical requirements related to capacity calculation and allocation. Moreover, the 
experience shows that the MCO function plays a central role for the completion of the target model 
and the enhancement of NEMOs' competition. Therefore, the Commission sees a need to continue the 
discussion on the challenges faced so far and assess the various options for a potential change in the 
governance of the MCO function. 

The Commission remains strongly committed to continuing the work towards the creation of the single 
day-ahead and single intraday coupling in order to bring further benefits to European citizens through 
market integration. When it comes to fully reaping the potential of cross-border trade, the best recipe 
remains the full and timely implementation of CACM. 

5