Another record-high Inter-TSO compensation (ITC) mechanism fund size in 2021

Last updated on 18.04.2024
Power grid lines in winter

Another record-high Inter-TSO compensation (ITC) mechanism fund size in 2021

What is the report about?

ACER publishes today its Report on the implementation of the Inter-Transmission System Operator Compensation mechanism (ITC) covering the year 2021.

ACER issues these yearly monitoring reports since 2012, as required by the European Commission Regulation no. 838/2010.

What is the ITC Fund?

The ITC fund compensates transmission system operators (TSOs) for the costs incurred on national power systems for hosting cross-border flows of electricity (transits). The ITC fund seeks to cover the costs of:

  • The incurred transmission losses;
  • Making infrastructure available.

What did the 2021 ITC monitoring report find?

  • The ITC fund in 2021 amounted to €364.5 million, reaching its highest-ever value for the third year in a row. For 2021, this is explained by an almost 20% rise in the volume of transmission losses due to transits.
  • There is a decrease in the value of losses for the vast majority of the ITC Parties (TSOs or groups of TSOs participating in the ITC mechanism) in 2021 compared to 2020.
  • The losses values of individual ITC Parties that are rather volatile from year to year plus the changing volumes of losses due to transits significantly affect the net ITC compensation of several ITC Parties. The volatility occurs mainly because:
    • Power exchange prices are most frequently used as a basis to value the losses;
    • ITC Parties determine ex ante the value of losses for the ITC mechanism on a yearly basis.
  • In 2021, the ITC Parties contributed 96.6% to the ITC fund, while the contribution of the Perimeter countries (non-participating countries connected to the ITC Parties’ networks) remained around 3%. The reasons for the significant decrease of Perimeter countries’ compared to the 2011-2019 period are:
    • Decrease of the volume of the scheduled flows between the Perimeter countries and the ITC Parties;
    • Decreased Perimeter countries’ fee; and
    • Increased overall amount of the ITC fund.

What are ACER’s next steps?

ACER considers that in light of extreme price volatility and in line with the general tarification principle of cost reflectivity introduced by the Regulation on the internal market for electricity, there may be room for improvements on how, when and/or how often the values of losses are determined for the purpose of the ITC mechanism.

Access the Report.