COMMISSION STAFF WORKING DOCUMENT Accompanying the document 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  SWD(2018) 376 final  COMMISSION STAFF WORKING DOCUMENT Accompanying the document 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) {COM(2018) 538 final}  
 
 
Contents 
I. 

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

II.  Development of the single day-ahead and intraday coupling .......................................................... 3 

1.  Development of the single day-ahead coupling .......................................................................... 4 

2.  Development of the single intraday coupling .............................................................................. 6 

3.  Development of competition between NEMOs .......................................................................... 8 

III. 

IV. 

CACM governance of single day-ahead and single intraday coupling ..................................... 12 

Conclusion ................................................................................................................................. 15 

1 

 
 
 
 
 
I. 

Introduction 

On 14 August 2015 the Commission Regulation (EU) 2015/1222 establishing a Guideline on Capacity 
Calculation  and  Congestion  Management  (CACM)  entered  into  force1.  Pursuant  to  Article  5(3)  of 
CACM the Commission shall forward a report (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 monopolies or the continued refusal of a Member State to allow 
cross-border  trading  by  a  NEMO  designated  in  another  Member  State  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. 

The  CACM  Regulation  establishes  the  principle  of  competition  between  NEMOs  regarding  their 
competitive activities (i.e. trading services in day-ahead and intraday markets, pre- and post-coupling 
activities), both (a) by providing that several NEMOs can in principle be designated in one Member 
State and (b) by allowing NEMOs to offer services in a Member State other than the Member State of 
designation, without being designated as NEMO in such other Member State ("passport approach"). At 
the  same  time  it  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.  The  MCO  function  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.  CACM  sets  the  legal  and 
regulatory  framework  for  the  performance  of  the  MCO  function  by  the  NEMOs  accompanied  by 
technical 
regulatory  oversight.  The  CACM  framework  shall  be  complemented  by  certain 
methodologies  and  terms  and  conditions  to  be  developed  by  NEMOs  and/or  transmission  system 
operators (TSOs) and approved by national regulatory authorities (NRAs) at a pan-European, regional 
or  national  level.  The  MCO  is  obliged  to  ensure  equal  treatment  of  all  participating  NEMOs  in  this 
process. 

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. A comprehensive report on 
the experience with NEMOs competition and governance of the single day-ahead and single intraday 
coupling  is,  therefore,  not  possible  at  this  stage.  The  Report  and  this  accompanying  staff  working 
document provide a first summary of the preliminary experience with the market coupling framework 

1 

OJ L 197, 25.7.2015, p. 24–72. 

2 

 
 
                                                            
gathered  to  date.  This  analysis  is  without  prejudice  to  possible  future  conclusions  based  on  further 
experience notably with the implementation of the single intraday coupling.  

As part of the monitoring of the progress made in the last years and in accordance with Article 5(3) of 
the  CACM  Regulation,  the  Commission  forwards  this  staff  working  document  together  with  the 
Report to the European Parliament and the Council. This staff working document focuses and provides 
more detailed information on the development of competition between NEMOs (II). 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 (III). The Commission's preliminary 
conclusions are set out in section IV of this staff working document. 

II.  Development of the single day-ahead and intraday coupling  

In accordance with CACM, all designated NEMOs proposed to implement the single day-ahead and 
single  intraday  coupling  building  on  contractual  arrangements,  processes  and  technical  systems  that 
have already been established in existing regional projects. This NEMOs' proposal is included in the 
so-called "MCO plan" which was approved by all NRAs on 26 June 2017 and it has an impact on the 
chosen technical solutions but also the governance of the future single day-ahead and single intraday 
coupling. The approval of the MCO plan confirmed: 

 

 

 

the adoption of the Price Coupling of Regions (PCR) solution as the basis for pan-European 
single day-ahead coupling; 
the  adoption  of  the  Cross-Border  Intraday  (XBID)  solution  as  the  basis  for  pan-European 
single intraday coupling; and 
the  role  of  the  NEMO  Committee  as  the  body  representing  all  NEMOs  and  responsible  to 
oversee the future establishment, development and operation of the MCO functions.  

NEMOs  shall  implement  the  MCO  plan  within  one  year  after  its  approval.2  The  Agency  for  the 
Cooperation of Energy Regulators (Agency) had to report to the Commission on the progress made in 
establishing  and  performing  the  MCO  functions  one  year  after  entry  into  force  of  CACM3.  The 
Agency has also the right to assess the effectiveness and efficiency of establishment and performance 
of the MCO function at any time. In case the assessment shows that the requirements are not fulfilled, 
the  Agency  may  recommend  to  the  Commission  further  measures  for  timely  delivery  of  the  single 
day-ahead  and  single  intraday  coupling.4  Such  measures  may  include  appointing  another  entity  or 
entities with the respective tasks.5 

2 

3 

4 
5 

See related documentation in https://www.europex.org/all-nemos/all-nemos-mco-plan/ and more on the 
governance aspects of the MCO function below in Chapter III. 
The Commission received this report on 9 August 2016 and two others thereafter. Due to the fact that 
the implementation was in very early stage, the Agency was not in a position to evaluate whether the 
progress made was satisfactory and make a recommendation for additional measures.  
Article 7(5) CACM. 
Article 7(6) and recital 15 CACM. 

3 

 
 
                                                            
Apart  from  the  MCO  plan  implementation,  which  focuses  more  on  regulatory  and  contractual 
arrangements6,  CACM  requires  some  highly  complex  and  detailed  technical  rules  to  be  further 
detailed  in  TSOs'  or  NEMOs'  proposals  which  have  to  be  approved  by  the  relevant  NRAs  at  pan-
European, regional or national level7. A number of such methodologies and terms and conditions have 
been  developed  by  TSOs  or  NEMOs  and  approved  by  the  relevant  NRAs,  whereas  other  important 
methods  are  still  under  development  or  approval.  Only  if  the  main  methodologies  and  terms  and 
conditions  have  been  developed,  approved  and  implemented,  the  effects  of  CACM  can  be  fully 
measured  and  evaluated.  In  order  to  avoid  delays  in  the  establishment  of  the  single  day-ahead  and 
single  intraday  coupling,  CACM  includes  specific  provisions  regarding  the  cooperation  between 
TSOs, NEMOs and regulatory authorities, such as a specific decision-making framework introducing a 
qualified majority voting rule for the majority of the proposals to be agreed among TSOs and NEMOs, 
as well as rules for the decision-making process by the regulatory NRAs and, if no agreement between 
is possible, the Agency.8  

Even  though  not  yet  fully  implemented  and  despite  some  delays  in  the  development  of  individual 
methods, the implementation of CACM has already at this stage brought tangible positive results.  

1.  Development of the single day-ahead coupling 

The "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.  PCR  uses  a  governance  structure  based  on  a  co-ownership  agreement  and  a  co-operation 
agreement  among  power  exchanges9.  Currently,  PCR  is  applied  in  2310  countries,  representing  over 
85% of the European electricity consumption. 

6 

7 

8 
9 

10 

See  under  Chapter  III  of  this  document  regarding  the  governance  of  single  day-ahead  and  intraday 
coupling. 
There are more than 20 methodologies and terms and conditions to be developed and approved at pan-
European  level  as well  as  several  ones  in  each  capacity calculation region (CCR) or at larger/smaller 
regional or national level. CACM requires the definition of CCRs in the Union within which TSOs will 
have to apply the same capacity calculation methodologies and cooperate closely in order to meet the 
objectives of CACM. See for example Article 20 CACM regarding the TSOs proposal for a common 
coordinated capacity calculation methodology in each CCR or Article 7 CACM regarding all NEMOs 
proposal for the price coupling algorithm (in day-ahead) and the continuous trading matching algorithm 
(in  intraday)  in  accordance  with  the  requirements  developed by  both  TSOs  and  NEMOs.  In  addition, 
local  i.e.  national  arrangements  need  to  be  put  in  place  as  national  cost  recovery  provisions  or 
redesigning of national markets to make them compatible with the CACM target model. 
See Article 9 CACM. 
EPEX  SPOT,  GME,  Nord  Pool,  OMIE,  OPCOM,  TGE  and  OTE,  see  https://www.europex.org/all-
nemos/all-nemos-mco-plan/. 
The  23  countries  are  Austria,  Belgium,  Denmark,  Estonia,  Finland,  France,  Germany,  Italy,  Latvia, 
Lithuania,  Luxembourg,  Norway,  Poland,  Portugal,  Slovenia,  Spain,  Sweden,  the  Netherlands,  Great 
Britain,  and  Poland.  Croatia  and  Bulgaria  are  connected  to  the  PCR  via  the  relevant  technical  tool 
(EUPHEMIA) but without interconnector capacities.  

4 

 
 
                                                            
Figure 1: State of play in pan-European Single Day-Ahead Coupling as of July 201711 

PCR uses a common price coupling algorithm commonly known as EUPHEMIA (acronym for  Pan-
European  Hybrid  Electricity  Market  Integration  Algorithm12)  to  calculate  electricity  prices  across 
Europe  and  to  implicitly  allocate  cross-border  capacity.  CACM  requires  that  a  "flow  based" 
approach13 is used as default method in capacity calculation in all CCRs, unless the TSOs in a certain 
CCR  apply  for  a  "coordinated  net  transmission  capacity"  (NTC)  approach,  which  may  still  be  used 
under certain conditions.14 The NTC approach is currently still the main approach used for calculating 
the  cross-zonal  capacity  to  be  offered  through  implicit  allocation  across  Europe.  In  May  2015,  the 
Central West Europe (CWE) region15 introduced the flow-based approach for capacity calculation in 
the  CWE  region,  which  was  then  extended  to  cover  Austria  in  November  2016.  In  parallel,  the  so-
called  "4M  market  coupling  project"  (4M  MC)  went  live  in  November  2015,  covering  Czech 
Republic, Slovakia, Hungary and Romania and also applying EUPHEMIA algorithm, based on a NTC 
approach. Furthermore, some Member States are in the process of redesigning their electricity markets 
in order to be able to meet the CACM objectives, i.e. in order to couple their day-ahead and intraday 
markets  with  neighbouring  Member  States16.  The  extension  of  the  flow-based  approach  to  other 
Member  States  in  the  same  or  other  CCRs  will  be  challenging  and  is  necessary  in  order  to  fully 
implement CACM. 

11 

12 
13 

14 
15 
16 

See 3rd Report on the progress and potential problems with the implementation of Single day-Ahead and 
Intraday Coupling, ENTSO-E, August 2017, page 9. 
See public description of the algorithm https://www.europex.org/all-nemos/all-nemos/.  
The flow-based capacity calculation method tries to optimise the calculation of cross-border capacities 
by a more sophisticated analysis of possible cross-border transmission and is particularly useful in areas 
with highly meshed grids.   
Article 20(1) and (7) CACM. 
Belgium, France, Luxemburg, Germany and the Netherlands. 
In  particular  Ireland,  Northern  Ireland  and  Greece  needed  to  undergo  significant  reforms  in  order  to 
comply  with  CACM  and  enable  integration  with  the  rest  of  Europe.  Whereas  Ireland  and  Northern 
Ireland announced the market coupling by May 2018, Greece is also in the process of redesigning the 
local market. 

5 

 
 
 
                                                            
Technically  the  PCR  in  its  current  form  continues  to  successfully  operate  day-ahead  coupling,  with 
only minor operational incidents. None of these incidents has led to decoupling of any bidding zones. 
However, in light of increasing operational complexity, improvements to the IT systems needed to be 
frequently introduced, and further changes are still necessary (for example, the EUPHEMIA algorithm 
can  only  accommodate  one  power  exchange  per  bidding  zone17,  which  needs  to  be  changed  with  a 
view to enabling the inclusion of multiple NEMO arrangements (MNAs), as explained in section II.1. 
below. 

2.  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. The XBID became operational on 12 June 2018, comprising as 
a first step certain but not all bidding zone borders18.Until the launch of the XBID on 12 June 2018 the 
project was comprised of TSOs and NEMOs from 14 European countries19 while all other EU TSOs 
and NEMOs adhered to the project in order to comply with CACM and the MCO plan.  

Figure 2: State of play in XBID project as of 15 June 2018 (Phase 1)20 

17 

18 

19 

20 

  https://www.entsoe.eu/news/2018/06/14/european-cross-border-intraday-xbid-solution-and-10-

In  Great  Britain  specific  provisional  arrangements  are  put  in  place  to  allow  competition  between 
NEMOs in the day-ahead market until the PCR solution is updated. 
The XBID project parties launched the the first phase of XBID with 10 local implementation projects 
allowing continuous trading of electricity across the following countries: Austria, Belgium, Denmark, 
Estonia,  Finland,  France,  Germany,  Latvia,  Lithuania,  Norway,  the  Netherlands,  Portugal,  Spain  and 
Sweden.  
See 
local-implementation-projects-successful-go-live/.  
The  14  countries  were  Austria,  Belgium,  Denmark,  Finland,  France,  Germany,  Great  Britain,  Italy, 
Luxembourg, Norway, Portugal, Spain, Sweden and the Netherlands. See 3rd Report on the progress and 
potential  problems  with  the  implementation  of  Single  day-Ahead  and  Intraday  Coupling,  ENTSO-E, 
August 2017, page 18. 
See https://ec.europa.eu/energy/sites/ener/files/documents/180530-
31_xbid_florence_forum_slides_vfinal_0.pdf. 

6 

 
 
                                                            
 
Most  other  European  countries  are  considered  to  take  part  in  XBID  with  additional  local 
implementation projects in a second phase in 2019. 

Figure 3: XBID local implementation projects (Phase 1 and 2)21  

The  XBID  project  enables  the  single  continuous  intraday  trading  across  the  European  Union  and  is 
based  on  a  common  IT  system  with  three  main  elements,  that  is  the  shared  order  book  (SOB),  the 
single  capacity  management  module  (CCM)  and  a  shipping  module  (SM).  The  common  IT  system 
accommodates  the  continuous  matching  of  bids  and  orders  from  market  participants  in  one  bidding 
zone with bids and orders coming from its own bidding zone and from any other bidding zone within 
the project’s reach while cross-zonal capacity is still available. Where single continuous trading is in 
place, existing cross-zonal implicit allocation is replaced. Cross-zonal explicit allocation may continue 
to  exist  as  a  transitional  intraday  arrangement,  in  accordance  with  the  requirements  of  CACM.22 
Complementary  regional  actions  may  also  be  implemented  on  certain  bidding  zone  borders  if  the 
CACM criteria are fulfilled23. 

21 

22 
23 

See https://ec.europa.eu/energy/sites/ener/files/documents/180530-
31_xbid_florence_forum_slides_vfinal_0.pdf.  
Articles 64 - 67 of CACM. 
Article 63 of CACM. 

7 

 
 
 
 
                                                            
The  NEMOs  appointed  a  service  provider24  to  develop  the  common  IT  tool  on  their  behalf.  As  the 
development  of  the  IT  tool  includes  also  TSO-relevant  aspects  (e.g.  the  CMM),  TSOs  and  NEMOs 
have concluded respective agreements regarding the development and operation of the IT tool.  

The original contractual arrangements of the XBID project included agreements between the involved 
power exchanges as well between power exchanges and the XBID service provider or with involved 
TSOs. These agreements will be complemented by new ones in order to fully comply with the CACM 
legal framework25. 

The  XBID  project  allows  for  the  participation  of  multiple  NEMOs  per  country  as  explained  below 
under  section  II.3,  but  ensuring  its  full  compliance  with  the  CACM  requirements  will  remain  a 
challenge.  Main  elements  to  implement  in  the  future  are  the  pricing  of  intraday  capacities,  the 
incorporation of direct current (“DC”) losses and the ability to accommodate flow-based parameters as 
cross-zonal capacities in the intraday timeframe. 

3.  Development of competition between NEMOs 

Member States should ensure that all interested NEMOs do not face any legal or de facto barriers to be 
designated  or  apply  the  passport  approach.  Where  a  monopoly  NEMO  exists,  Member  States  may 
exceptionally refuse the trading services by other NEMOs under certain conditions26.  

The possibility to apply the monopoly model and to refuse the trading services by a NEMO designated 
in  another  Member  State  is  an  exception  to  the  default  competition  model  and  should  be  of  a 
transitional nature. A transitional period can for example be justified as long as the single day-ahead 
and single intraday coupling has not been extended to certain isolated or less coupled Member States. 
In  certain  cases  it  may  be  effective  to  combine  the  adaptation  to  the  competitive  model  with  the 
change of arrangements necessary for joining the PCR and XBID system. 

On the other hand, given that energy markets are becoming more and more coupled, maintaining legal 
monopolies functions in the future may have adverse effects on competition in other related activities. 
Under  CACM,  NEMOs  acting  as  legal  monopolies  in  a  Member  State  may  not  be  allowed  to  offer 
trading  services  in  Member  States  where  the  NEMOs'  competition  model  applies27.  However,  such 
monopoly  entities  may  develop  other  business  in  secondary  markets  in  the  latter  Member  States, 
indirectly  competing  with  the  competitive  NEMOs  in  services  not  strictly  related  but  indirectly 
connected with the NEMOs tasks (e.g. IT infrastructure services by the monopoly NEMO to another 
NEMO in a Member State where the competitive model applies).  

Under CACM, NRAs and competition authorities should therefore monitor closely any risk of cross-
subsidisation to avoid  that NEMOs protected  by a legal  monopoly abuse their position in secondary 
markets on which they are not yet dominant. In any event, 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  is  not  confined  to  risks  of  cross-

24 
25 
26 
27 

Deutsche Börse AG (DBAG). 
See below under section III. 
Articles 4(6) and 5 CACM. 
According to Article 4(6)(d) of CACM the relevant NRA may refuse the trading services in its Member 
States by a NEMO granted a monopoly status in another Member State. 

8 

 
 
                                                            
subsidisation, but they apply more broadly to the conduct of the NEMOs on the market and 
any Member State measure granting NEMO’s exclusive rights. 

Status of NEMO designations 

In  accordance  with  CACM,  all  Member  States  bound  by  it28  have  designated  at  least  one  NEMO. 
CACM includes among its objectives the fair and non-discriminatory treatment of NEMOs and TSOs 
as well the creation of a level playing field for NEMOs.29 So far 17 Member States have decided to 
apply  a  competitive  NEMO  model  whereas  9  Member  States  have  introduced  a  legal  monopoly.  In 
this  regard,  Ireland  is  a  Member  State  that  has  changed  the  status  from  a  legal  monopoly  to 
competition among NEMOs. Two NEMOs were designated in Ireland and Northern Ireland and will 
compete in future once market coupling has been introduced.  

Where competition will be applied in the single day-ahead and single intraday coupling, NEMOs may 
exercise  their  right  to  offer  trading  services  in  another  Member  State  (passport  approach)  without  a 
need  for  designation  as  a  NEMO  in  that  Member  State.  Several  NEMOs  have  already  expressed 
interest  to  use  the  passport  approach  (e.g.  in  Austria,  France,  Germany,  the  Netherlands,  Belgium, 
Poland and Great Britain).30  

Figure 4: Status regarding NEMOs' competitive model in the Union as of April 2018 

As shown above, 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 

28 

29 
30 

CACM  does  not  apply  on  islands  where  the  transmission  system  is  not  connected  with  other 
transmission systems via interconnections, i.e. Cyprus and Malta. 
Article 3 of CACM. 
See full list of designated NEMOs here: 
https://acer.europa.eu/en/Electricity/FG_and_network_codes/CACM/Pages/NEMO%20list.pdf .  

9 

 
 
 
                                                            
coupling  will,  once  applied,  still  be  limited,  due  to  the  existence  of  legal  monopolies  in  several 
countries.  The  Commission  has  received  several  stakeholder  complaints  concerning  the  exclusion 
from  markets  as  a  result  from  legal  monopolies,  as  well  as  about  administrative  problems  in  the 
designation  process  of  NEMOs  or  discriminatory  treatment  of  NEMOs  willing  to  use  the  passport 
approach.  In  particular  national  rules  which  still  exist  in  some  Member  states  in  parallel  to  the 
(exclusive)  CACM  rules  on  NEMO-designation  raise  concerns  in  this  respect  (e.g.  obligations  to 
establish a local entity even if when the passport is requested, obligations to obtain additional licences, 
financial and shareholding requirements etc.).  

Competition  between  power  exchanges  has  shown  clear  advantages  in  some  local  markets  in  the 
Union. In the UK, competition among power exchanges has been implemented since several years and 
experience  shows  positive  results,  e.g.  more  transparency  and  better  services.31  It  seems  further  that 
where competition among trading platforms exists, innovation is fostered. In the local UK and German 
markets where competition among power exchanges but also between power exchanges and over-the-
counter  (OTC)  platforms  exists,  the  markets  are  characterised  by  a  high  degree  of  product 
innovation.32  Where  monopolies  are  established,  trading  opportunities  in  terms  of  platforms, 
innovative  products  and  close  to  real  time  trading  to  allow  further  integration  of  renewable  sources 
appear to be more limited.  

Implementation of multi-NEMO arrangements (MNA) 

Moving from a monopolistic to a competitive model on the basis of CACM requires some technical 
adjustments  of  existing  solutions  and  contractual  modifications  of  existing  agreements.  From  the 
technical side, Articles 45 and 57 of CACM require that, for both day-ahead and intraday timeframes 
respectively, TSOs in cooperation with NEMOs develop proposals for cross-zonal capacity allocation 
and other necessary arrangements for bidding zones where more than one NEMO is designated and/or 
offers trading services33. These arrangements are called "multi-NEMOs arrangements" (MNA). They 
are meant to ensure that in such bidding zones NEMOs and interconnectors provide the necessary data 
and financial coverage for cross-zonal capacity allocation and other arrangements.  

The  technical  implementation  of  the  MNA  is  a  precondition  for  the  functioning  of  the  single  day-
ahead and single intraday coupling with more than one NEMO in a bidding zone. TSOs and the MCO 
should  treat  NEMOs  in  a  non-discriminatory  way  when  establishing  these  rules  and  during  their 
execution  to  ensure  compliance  with  the  objectives  of  CACM34.  The  status  of  the  MNA 
implementation  differs  between  the  single  day-ahead  and  the  single  intraday  coupling  as  presented 
below. 

The single day-ahead coupling is based on implicit auctions during which all NEMOs within a bidding 
zone  shall  have  equal  access  to  cross-zonal  capacity.  The  price  coupling  algorithm  must  take  into 
account all orders of each NEMO equally when allocating cross-zonal capacity across bidding zones, 

31 

32 

33 

34 

See  data  on  the  UK  wholesale  market:  https://www.ofgem.gov.uk/data-portal/wholesale-market-
indicators#thumbchart-c9407274809200317-n95199. 
E.g. introduction of the UK 30 minute intraday auction in 2015 or the 15 minutes settlement product on 
the German market, designed to better serve consumer needs without, in these cases, putting into danger 
the homogeneity of the single coupling scheme. 
The same applies also to bidding zones where interconnectors exist which are not operated by TSOs 
certified in accordance with Article 3 of Regulation (EC) No 714/2009. 
See in particular Article 3(e)(h)(i), Article 38 and Article 51 CACM. 

10 

 
 
                                                            
but  the  current  PCR  algorithm  cannot  yet  accommodate  more  than  one  NEMO  in  one  bidding  zone 
(PCR was developed before the entry into force of CACM). In line with the approved MCO plan, the 
PCR algorithm still needs to be adapted to accommodate all aspects of multi-NEMO arrangements as 
established  in  each  bidding  zone.  The  Commission  has  received  complaints  regarding  the  delays  in 
such  adaptation  and  follows  closely  the  developments  to  ensure  that  no  further  unjustified  delays 
occur.  

Regarding  the  intraday  timeframe,  CACM  foresees  continuous  trading  as  the  target  model  which  is 
based  on  a  shared  order  book  (SOB)  and  the  capacity  management  module  (CMM)35.  The  SOB,  as 
developed  within  the  XBID  project,  can  accommodate  all  orders  from  all  bidding  zones  and  all 
NEMOs. At the same time, the CMM can ensure that cross-zonal capacity is allocated accordingly to 
each  order  coming  from  the  SOB  based  on  the  first-come  first-served  principle.  The  XBID  solution 
was  designed  to  accommodate  multiple  NEMOs  in  each  bidding  zone  from  the  beginning  and  does 
therefore not raise the concerns expressed for the day-ahead timeframe. 

Some  aspects  related  to  competition  between  NEMOs  and  the  MNA  have  been  reported  to  the 
Commission  which  are  particularly  challenging.  They  still  need  to  be  clarified  and  potentially 
harmonised in the MNA or in other arrangements for the day-ahead as well as the intraday timeframes. 
Such issues are the cost sharing and cost recovery of TSOs' and NEMOs' costs for the development 
and  operation  of  the  single  day-ahead  and  single  intraday  solutions,  the  agreement  on  some  post-
coupling  arrangements  (clearing  and  settlement)  or  the  sharing  of  NEMOs'  order  books  in  case  of 
decoupling36. At the point of drafting this document, no final agreement among the relevant parties on 
these issues was found. It therefore remains to be seen whether and to what extent applying different 
NEMO rules between bidding zones may hamper competition among NEMOs.  

Cost sharing and cost recovery arrangements 

The  new  framework  established  by  CACM  had  also  an  impact  on  cost  sharing  and  cost  recovery 
arrangements  for  NEMOs  and  TSOs.  While  main  principles  are  set  in  CACM37,  decision  on  cost 
issues remains a national responsibility. Whereas previous pilot projects were fully recovered by TSO 
tariffs, such cost recovery arrangements had to be reassessed and partially modified in several Member 
States.  The  question  how  costs  should  be  shared  (e.g.  among  Member  States,  between  TSOs  and 
NEMOs  and  between  NEMOs  where  competition  applies)  has  been  discussed  in  length  and  is  to  a 
certain extent still open, leading to delays and hampering, to a certain extent, the cooperation between 
TSOs and NEMOs38. 

Clearing and settlement arrangements 

Article 68 CACM contains rules on so-called post-coupling activities, i.e. clearing and settlement of 
all matched orders. Every NEMO, in order to be designated, shall be able to act as a central counter 
party to market participants and to each other and provide necessary clearing and settlement services 
with financial resources required to perform its tasks. Shipping agents may also act as counter party 

35 
36 

37 
38 

See details under section II.3. of this document. 
The sharing of the order books in case of decoupling is obligatory based on the MNA in the Nordic 
region but not in the CWE region. 
See articles 75 to 80 CACM. 
See on potential governance reforms below, III. 

11 

 
 
                                                            
between central counter parties (i.e. NEMOs) if the relevant parties conclude a specific agreement to 
do so.  

In  order  for  healthy  competition  to  develop  within  and  across  Member  States  and  the  objectives  of 
Article  3  CACM  to  be  complied  with,  Article  77  CACM  provides  that  relevant  costs  fall  under 
regulatory scrutiny. The provision requires that clearing and settlement arrangements are put in place 
by  central  counterparties  and  shipping  agents.  The  costs  related  to  these  tasks  may  be  recovered  in 
accordance  with  CACM  if  they  are  reasonable  and  proportionate.  The  clearing  and  settlement 
arrangements  should  avoid  unnecessary  costs  and  take  into  account  the  risk  entailed  in  these 
operations.  In  accordance  with  Article  77(2)  CACM  the  cross-border  clearing  and  settlement 
arrangements, if any, should be approved by all relevant NRAs. 

Two  main  different  approaches  are  applied  currently  regarding  the  performance  of  the  clearing  and 
settlement  tasks:  Whereas  a  NEMO  may  perform  itself  the  function  of  a  central  counter  party  and 
shipping  agent,  another  NEMO  may  choose  to  delegate  such  tasks  to  another  entity,  capable  to 
perform the said tasks. CACM allows both models to be applied, whereas the rule concerning the cost 
recovery of fees as presented above shall be respected in all cases. Thus, fees imposed by NEMOs or 
third  parties  on  their  behalf  which  do  not  fulfil  these  criteria  cannot  be  recovered  and  should, 
therefore, be avoided.  

III.  CACM governance of single day-ahead and single intraday coupling 

For efficiency reasons and in order to implement the single day-ahead and single intraday coupling as 
soon as possible, CACM provides that existing market operators and existing solutions should be used 
where  appropriate  and  without  precluding  competition  from  new  operators.  At  the  same  time,  it  is 
expressly mentioned in CACM that the Commission, in cooperation with the Agency for 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.39 

The  existing  solutions  (PCR  and  XBID)  had  a  governance  structure  agreed  by  the  project  parties, 
whereby  a  group  of  TSOs  and  power  exchanges  was  jointly  leading  these  early  implementation 
projects.  Building  on  the  existing  arrangements,  CACM  provides  that  all  NEMOs  must  cooperate 
closely with each other, and with TSOs where required, to implement CACM. The CACM Regulation 
sets  only  a  general  framework  for  such  cooperation  and  provides  some  principles  to  avoid 
discrimination40, while the  development  of the details of the  cooperation  was  left to the NEMOs,  in 
cooperation with TSOs. Such framework includes in particular the following arrangements. 

The MCO plan 

A  milestone  for  the  future  governance  of  the  single  day-ahead  and  single  intraday  coupling  is  the 
MCO plan41. The deadline for the implementation of the MCO plan is one year after its approval, i.e. 
June 2018. By then the technical and contractual tasks described therein have to be completed. 

39 
40 
41 

See recitals 14 and 15 CACM. 
See e.g. Article 7(4) CACM. 
Article 7(3) CACM. 

12 

 
 
                                                            
The  main  objective  of  the  MCO  plan  is  to  provide  clarity  regarding  the  technical  solutions,  the 
contractual  arrangements  as  well  as  main  principles  for  the  operation  of  the  single  day-ahead  and 
single intraday coupling algorithms. 

The  proposed  day-ahead  and  intraday  MCO  arrangements  build  on  contractual  arrangements, 
processes and systems that have already been established in the PCR and the XBID project. The MCO 
tasks  include  the  development  and  maintenance  of  the  single  day-ahead  and  single  intraday 
algorithms, systems and procedures for single the day-ahead and single intraday coupling, processing 
input  data  on  cross-zonal  capacity  and  allocation  constraints  provided  by  coordinated  capacity 
calculators, operating the price coupling and continuous trading algorithms and validating and sending 
single day-ahead and single intraday coupling results to NEMOs. 

The governance structure proposed in the MCO Plan includes the following contracts:  

the “All NEMO Cooperation Agreement” (ANCA); 

a) 
b)  for the single day-ahead coupling, the NEMO DA Operational Agreement which will govern 

the cooperation between the NEMOs, the service provider and the assets owners; 

c)  for the single intraday coupling: 

i. 

ii. 

iii. 

the NEMO ID Operational Agreement which will govern the cooperation between the 
NEMOs;  
the  intraday  operational  agreement  between  all  NEMOs  and  all  TSOs  including  the 
back to back agreement between NEMOs and TSOs due to the fact that only NEMOs 
are in direct contractual relationship with the service providers which affects partially 
TSOs tasks (e.g. the capacity allocation functions of the algorithm); and 
various contracts with the relevant service providers. 

The existing contractual arrangements for the PCR and XBID projects are the basis for the governance 
structure proposed with the MCO plan and need to be updated in order to fully comply with CACM 
while NEMOs and TSOs, not yet parties to these agreements, need to adhere to the new agreements.  

Day-to-day management 

The  success  of  the  single  day-ahead  and  single  intraday  coupling  depends  not  only  on  the  proper 
development  of  the  said  solutions,  but  also  on  a  well-functioning  management  of  the  day-to-day 
operation.  TSOs  and  NEMOs  are  in  the  process  of  developing  arrangements  for  such  management 
which  should,  for  example,  provide  for  regular  meetings  to  discuss  and  decide  on  day-to-day 
operational issues. 

Development of methodologies related to the single day ahead and single intraday coupling 

In  addition  to  the  MCO  Plan,  CACM  requires  the  development  of  several  methodologies  and  terms 
and conditions in order to complete the design of the single day-ahead and single intraday coupling. 
Some shall be developed by TSOs, others by NEMOs (due to the target model set by CACM which is 
based on implicit allocation). However, even  if the  single day-ahead and single intraday coupling  is 
highly  linked  to  the  methodologies  developed  by  TSOs,  the  implementation  and  execution  of  such 
methodologies  is  dependent  on  the  performance  and  governance  of  the  MCO  function,  which  is, 
pursuant to the current CACM concept, a NEMOs responsibility. The cooperation between TSOs and 
NEMOs  has  proven  challenging  in  some  fields,  in  particular  where  some  aspects  of  the  cooperation 

13 

 
 
are  left  open  in  CACM,  such  as  the  cost  sharing  and  cost  recovery  rules  as  presented  below,  the 
prioritisation of tasks and certain governance aspects.  

As  an  example,  the  NEMOs  shall  propose  a  description  of  the  algorithms  for  the  day-ahead  and 
intraday timeframe, and technical requirements taking into account technical requirements developed 
by the TSOs42. How the technical requirements will be set and how the implementation will take place 
(i.e. which change will be given priority when updating the algorithms) may differ, depending on the 
interests  of  TSOs  or  NEMOs.  Another  important  deliverable  under  CACM,  the  TSOs'  regional 
proposals  on  the  respective  capacity  calculation  methodologies  for  single  day-ahead  and  intraday 
coupling in each region are not yet approved, and their implementation is not expected before 2019 or 
later in some regions. 

Challenges regarding governance 

The increased number of the parties involved in the implementation of single day-ahead and intraday 
coupling,  the  new  arrangements  for  cost  sharing  and  cost  recovery  in  accordance  with  CACM  and 
other governance issues as decision making rules present challenges for all NEMOs and all TSOs as 
well as NRAs. Such challenges have not been experienced to that extent when the number of parties 
was smaller in the pilot projects, neither in other cases of NC implementation, as for example during 
the  establishment  of  the  single  allocation  platform  under  Commission  Regulation  (EU)  2016/1719 
establishing a guideline on forward capacity allocation (FCA).  

In general and in order to avoid deadlocks, CACM establishes rules to prevent that certain proposals 
are blocked by individual TSOs or NEMOs, i.e. a qualified  majority voting principle applies for the 
majority of pan-European proposals and regional proposals where a region is composed of more than 
five  Member  States.43  However,  some  proposals  shall  be  decided  upon  based  on  unanimity  by  the 
relevant  TSOs,  a  process  that  may  lead  to  additional  delays  in  the  submission  of  certain 
methodologies.  Once  a  proposal  is  submitted,  relevant  NRAs  shall  agree  on  the  approval  of  the 
TSOs/NEMOs proposals or in case of disagreement, the decision making is referred to the Agency. In 
many cases, the relevant NRAs have requested for amendments of submitted methodologies whereas 
in  a  significant  number  of  cases  the  decision  had  to  be  taken  by  the  Agency.  Such  a  lengthy 
development and approval process linked to the complex governance structure of TSOs, NEMOs and 
NRAs has delayed the timely implementation of CACM. 

Challenges may arise also in terms of efficiency in the operation of the algorithm with the increase of 
number  of  NEMOs  competent  to  perform  these  tasks.  Regarding  day-ahead  coupling,  the  PCR 
algorithm is run by several NEMOs in a rotating way, whereas in the XBID project the operation of 
the continuous market algorithm, once it is put in operation, is assigned to a service provider. 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 CACM. 

A  complexity  in  the  implementation  of  the  MCO  plan  lies  also  in  the  fact  that  the  latter  is  binding 
upon  NEMOs  while  some  respective  methodologies  and  contractual  arrangements  need  the 
contribution and/or agreement by all TSOs. This is because the single day-ahead and single intraday 

42 

43 

NEMOs  also  proposed  rules  on  maximum  and  minimum  clearing  prices,  back  up  methodologies  and 
products  which  have  been  approved  by  all  NRAs.  See  relevant  information  and  the  detailed 
methodologies in https://www.europex.org/all-nemos/all-nemos/.  
Article 9 CACM. 

14 

 
 
                                                            
coupling  is  a  process  where  collected  orders  are  matched  and  cross-zonal  capacity  is  allocated 
simultaneously for different bidding zones in the given timeframe. As CACM appoints the NEMOs as 
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 is required. 
In  particular  cost  sharing  and  cost  recovery  is  only  partially  harmonised  across  the  Union  based  on 
principles  set  in  CACM.  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 cost sharing and cost recovery and lack of harmonisation led to delays 
and significant disagreement among relevant parties at several occasions. 

In  addition  to  the  challenges  faced  when  implementing  the  MCO  plan,  the  implementation  of  the 
proposals  on  the  description  of  the  algorithm,  including  technical  requirements  and  the  proposals 
defining the products has shown challenges. While deciding on these 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). They also need to allow 
for  geographical  extensions  so  that  all  bidding  zone  borders  between  Member  States  are  coupled  as 
soon  as  possible.  The  chosen  solutions  as  designed  and  partially  applied  so  far  have  not  being 
designed  to  cover  all  CACM  requirements,  all  bidding  zone  borders  in  the  Union  and  all  kinds  of 
complex  products  offered  to  market  participants.  Potential  changes  to  update  the  current  technical 
solutions may address this challenge in the long term. Until this happens, robust governance ensuring 
a  level  playing  field  and  fair  treatment  of  all  parties  is  required.  A  balance  has  to  be  found,  for 
example,  between  complex  products  applied  in  the  bidding  zones  and  the  geographical  extension  of 
the  current  solutions  to  cover  the  entire  Union.  Cost  sharing  and  cost  recovery  as  well  as  decision-
making rules need to be clearly defined in order to deal with the further development of the technical 
solutions in a timely manner. 

Having identified the above challenges in particular on the XBID project, the Commission has started 
work with the relevant parties in order to assess the need for improvement of the current governance. 
The first workshop of the XBID Working Group on Governance took place on 8 December 2017 and 
the second  one followed  on 23 February 2018. The  meetings identified the points of discussion and 
focused  until  now  on  the  improvement  of  the  contractual  relationship  between  the  XBID  service 
provider and the NEMOs/TSOs, as well as the NEMOs/TSOs governance in the intraday timeframe. 
Follow-up workshops will be organised within 2018, with a view to discussing progress made by the 
parties as well as any necessary measures towards a more efficient organisation of the MCO function. 

IV.  Conclusion 

Regarding the abolishment of the NEMO monopoly model 

From  the  preliminary  experience  so  far,  notably  in  the  field  of  day-ahead  market  coupling,  the 
competition  model  has  been  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,  notably  given  the  benefits  evidenced  in  competitive  Member  States  towards 
Member  States  with  monopoly  NEMOs  regarding  more  advanced  markets  and  more  innovation 
regarding products and trading opportunities. 

15 

 
 
As CACM is still under implementation at the time of publication of the Report and the staff working 
document and 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  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 progress of the single day-ahead and intraday coupling 

The potential to increase competition and trade between and within Member States depends on the full 
and  timely  implementation  of  market  coupling.  As  concerns  the  governance  structure  of  the  parties 
organising market coupling, this includes notably the completion of the various TSOs/NEMOs/NRAs 
tasks, the adaptation of the current technical solutions to the CACM requirements and the extension of 
the current day ahead and intraday coupling to the entire European Union. In particular, a focus will be 
the  full  extension  of  the  single  day-ahead  coupling  to  South  East  Region  as  well  as  the    future 
extensions of the XBID project to other bidding zone borders. The Commission underlines the priority 
of the extension of market coupling to all Member States before the current solutions are updated (e.g. 
to include more complex products). A simplification of cross-zonal trading products can be a short- to 
mid-term  solution  to  accommodate  such  extensions, accompanied  by a longer term update  of the IT 
solutions. 

The preliminary analysis of the progress made in the development of the single day-ahead and intraday 
coupling  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. Such an involvement should be 
balanced  by  appropriate  and  clear  cost  sharing  and  cost  recovery  mechanisms.  Roles  and 
responsibilities  need  to  be  clarified  regarding  clearing  and  settlement  as  well  the  function  of  the 
shipping agent. 

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. The Commission sees a need to discuss 
the challenges faced so far and assess the various options for a potential change in the governance of 
the MCO function. Similar to other platforms in other timeframes, as the single allocation platform in 
forward capacity allocation or the pan-European balancing platforms in the balancing timeframes, the 
responsibility  for  the  MCO  function  could  be  more  clearly  regulated  with  separate  governance, 
accounts, decision making, cost-sharing and costs recovery rules. Such a structure would ensure that 
no NEMO can benefit from unjustified economic advantages through participation in MCO functions, 

16 

 
 
that TSOs would be sufficiently involved and clearly assigned with specific tasks whereas cost issues 
would  be  clarified.  Pre-  and  post-coupling  activities  like  clearing  and  settlement  or  shipping  could 
remain  outside  such  a  regulated  MCO  function,  thereby  fully  preserving  the  scope  for  NEMOs  to 
compete. 

Further implementation in the next months and years will allow drawing better conclusions. Regarding 
the  single  day-ahead  coupling  the  implementation  of  the  multi  NEMO  arrangements  will  show 
whether measures regarding the governance in the day-ahead timeframe are appropriate. Based on the 
ongoing discussions in the XBID working group on governance, the Commission may also consider 
changes to the existing governance of the single intraday coupling. 

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.  

17