ACER amends the congestion income distribution methodology
What is it about
ACER approves today the proposal received by Transmission System Operators (TSOs) to amend the congestion income distribution methodology in the European electricity markets.
What is the congestion income distribution methodology?
Congestion arises when there is limited capacity to transport electricity between different areas. When a congestion occurs, a price difference emerges between the different bidding zones which generates congestion income. The congestion income distribution methodology describes how to distribute such income among TSOs to ensure fairness and efficient operation of the electricity market.
Why the need to amend the methodology?
There are two main reasons for amending the methodology:
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Several mechanisms (such as flow-based allocation or advanced hybrid coupling) have recently been or will soon be implemented to increase the efficiency of the market coupling. However, these mechanisms can cause unintuitive flows (electricity flows from an expensive zone to a cheaper one). This amendment aims to address the financial consequence of unintuitive flows and to ensure a non-discriminatory treatment of all TSOs.
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In the future, exchange of balancing capacity or sharing of reserve will be implemented. Both mechanisms would generate congestion income that need to be distributed. This amendment will regulate how congestion income will be distributed among TSOs.
What are the next steps?
Following ACER’s approval of the methodology, European TSOs will implement the required changes.