15.3.2022

ACER to decide on how to improve risk hedging opportunities on the bidding zone borders between Finland and Sweden

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Electricity transmission line

ACER to decide on how to improve risk hedging opportunities on the bidding zone borders between Finland and Sweden

What is it about?

The National Regulatory Authorities (NRAs) for energy from Finland and Sweden asked the EU Agency for the Cooperation of Energy Regulators (ACER) to decide on how to address the insufficient risk hedging opportunities on the bidding zone borders between Finland and Sweden.

An assessment performed by the NRAs indicated insufficient hedging opportunities in the Finnish bidding zone. To improve this, NRAs can either request their Transmission System Operators to issue long-term transmission rights or ensure the availability of other long-term cross-zonal hedging products that can support the functioning of the wholesale electricity markets.

As the NRAs could not reach an agreement, they referred the decision to ACER.

What are the consequences of insufficient risk hedging opportunities?

Hedging opportunities are needed for market participants to address their risk exposure to the volatility of the electricity price. Not being able to address such exposure would result in societal costs (e.g. higher costs of supply, higher premiums, less competition, entry barriers, higher risk of default).

The long-term electricity markets should provide market participants with access to long-term electricity products, allowing them to hedge their open long-term position for electricity. If the long-term electricity markets are not able to provide this, they should be supported by a regulatory intervention.

How does ACER contribute?

ACER’s decision will promote long-term cross-zonal trade by improving  the availability of long-term cross-zonal risk hedging opportunities for market participants.

ACER will open a public consultation for four weeks in early April and invite interested stakeholders to submit their inputs. As a next step, ACER will organise a public workshop around mid-April.

In doing so, ACER aims at collecting different views to inform its decision–making process.

A decision will be reached by 12th September 2022.

Read more on the Public Notice.