The Regulation on Wholesale Energy Market Integrity and Transparency (REMIT) aims to prevent and protect consumers and businesses against market abuse in the European electricity and gas markets. The rules were revised in May 2024 to ensure they keep pace with evolving market dynamics.

In April 2024, ACER addressed several questions from stakeholders to help them comply with their reporting obligations under the revised REMIT, before it entered into force.

As a follow up, ACER now clarifies (in an open letter) the obligations for market participants to notify national regulatory authorities and ACER on their usage of algorithmic trading and direct electronic access.

What is algorithmic trading?

Algorithmic trading involves using computer algorithms to automate trades at high speeds, while direct electronic access allows persons to trade directly on organised market places using another entity’s trading code or infrastructure.

Why is the open letter relevant?

Today’s open letter provides examples of activities that fall under the new notification obligations for algorithmic trading, helping market participants comply with the revised REMIT (Article 5a).

These notifications will reinforce regulatory oversight, ensure market transparency, and help manage risks associated with advanced trading methods.

ACER invites market participants to review both open letters and ensure they meet the new obligations.

What are the next steps?

In September 2024, ACER intends to publish an open letter to clarify the obligations detailed in Article 9 (1), which require  that non-EU market participants must designate their representative in the EU, as well as the obligations for persons professionally arranging or executing transactions (Article 15).

By the end of 2024, ACER aims to revise the existing ACER Guidance on the application of REMIT to incorporate the changes introduced by the revised REMIT.

Learn more about REMIT.

Today, ACER releases its first interactive dashboard on monitoring the implementation of the Imbalance Settlement Harmonisation (ISH) methodology.

What is the ISH methodology?

The ISH methodology, introduced in 2017 by the Electricity Balancing (EB) Regulation and approved by ACER in 2020, aims at harmonising the main features of electricity imbalance settlement across the EU.

Each Transmission System Operator (TSO) calculates the difference between the forecasted and actual electricity consumption or production for each Balance Responsible Party (BRP) in its area. By identifying these imbalances, BRPs can take actions to support the power grid’s balance, helping to maintain or restore the balance between electricity supply and demand.

With the implementation of the ISH methodology, the TSOs were required to harmonise the main features of the imbalance settlement:

• Imbalance calculation, including its position, actual allocated volume, and imbalance adjustment.
• Main components for calculating the imbalance price. Additional components such as scarcity, incentivising, and connecting TSOs’ financial neutrality may also be used if approved by the NRA.
• Use of single or dual imbalance pricing:
  • Single (EU’s target model): imbalances are settled at a single price, regardless of whether they result from excess supply or excess demand. This pricing incentivises BRPs to help restore the system’s balance.
  • Dual: different prices apply for positive (excess supply) or negative (excess demand) imbalances. This pricing incentivises BRPs to maintain their own balance.

Why is the harmonisation of ISH aspects important for the electricity market?

Harmonising these aspects across EU Member States creates a more integrated and efficient electricity market. It ensures that imbalance prices accurately reflect real-time energy values, provides consistent incentives for market participants, and enhances the transparency and efficiency of balancing markets. This, in turn, supports the stability and reliability of the electricity grid, key for meeting the EU's energy goals and transitioning to a sustainable energy future.

What did ACER monitoring find?

ACER’s 2024 monitoring exercise evaluated the implementation degree of each ISH methodology feature by each TSO. The analysis is based on the data received from the TSOs of 23* EU Member States (the methodology is not applicable in Malta and Cyprus, while Austria* and Bulgaria did not submit their data).
*Update of 19 August 2024: The analysis is now updated with the data received from 24 Member States (after Austria submitted their data on 30 July 2024).

The ACER monitoring found:

• The ISH methodology has been fully or largely implemented in nearly all observed Member States (22).
• 5 TSOs do not use any additional components, 19 TSOs (from 16 Member States) are using one or more additional components, and 2 TSOs are in the process of implementing the use of additional component/s.
• 20 TSOs (from 17 Member States) use single imbalance pricing, 5 TSOs use dual pricing while 1 TSO is in the process of implementing the use of dual pricing.

What are the next steps?

In the coming months, ACER will continue to check the implementation status of Terms, Conditions and Methodologies (TCMs) of the:

• Electricity Balancing (EB);
• Capacity Allocation and Congestion Management (CACM);
• Forward Capacity Allocation (FCA); and
• System Operation (SO).

The information collected will be the foundation of ACER’s implementation monitoring dashboards (the next expected in 2025). Relevant stakeholders will be notified in due time about when and how to submit their data.

What else is new?

Have you checked ACER’s updated Electricity Balancing TCMs monitoring webpage? It offers a clear, colour-coded overview of each TCMs’ implementation status, complete with useful links and key dates.

ACER publishes today its report on the implementation of the Inter-Transmission System Operator Compensation Mechanism (ITC) for 2022.

ACER issues these yearly monitoring reports since 2012, as mandated by the relevant Regulation. 

What is the ITC mechanism?

The ITC mechanism aims to ensure a fair compensation among Transmission System Operators (TSOs) for the costs of hosting cross-border electricity flows on their networks (e.g. power losses and investments in network infrastructure). This compensation is financed through the ITC Fund, established by the European Network of Transmission System Operators for Electricity (ENTSO-E). European TSOs contribute and receive money from the ITC Fund depending on how much electricity they import and export across their national borders, as well as on the volume of transits they carry through their networks.

ACER is responsible for overseeing the yearly implementation of the ITC mechanism and reporting its findings to the European Commission.

What are the key findings for 2022?

• In 2022, the cost of losses used for the ITC mechanism to calculate the contribution and compensation for each ITC party increased significantly across Europe due to soaring electricity prices. Among the 35 ITC parties, only Belgium, the Netherlands, and Albania reported similar or slightly lower costs of losses compared to 2021.
• This increase led to higher contributions and compensations among ITC parties, resulting in another record-high ITC fund of approximately €605 million. This marked the fourth consecutive year of setting record values, with a 66% rise in 2022 compared to 2021.
• Changes in net positions were notable for several ITC parties, with many shifting from a net contributor to a net recipient position or vice versa. These shifts confirm previously observed trends of unstable and unpredictable net positions, mainly arising from fluctuating flow patterns across Europe and year-to-year volatility of losses and costs.
• The distribution of net compensations and contributions was concentrated in a few countries. Specifically, five ITC parties (Switzerland, Poland, Denmark, Great Britain and Estonia) received almost two-thirds of the total net compensation, while two ITC parties (Italy and Norway) accounted for nearly half of the total net contributions of 2022.
• In 2022, the perimeter countries (i.e. non-participating countries connected to the ITC parties’ networks) contributed with €13 million to the ITC fund, making up 2.2% of its total. This low contribution was due to the record-high ITC fund and to reduced scheduled flows between the perimeter countries and the ITC parties.
• ACER’s report also highlights shortcomings in data accuracy and timeliness in implementing the ITC mechanism and emphasises the need for increased data auditing efforts, calling for greater transparency in determining loss values and input data, as well as for stricter enforcement of contractual deadlines. ACER reiterates its recommendations to ENTSO-E, TSOs and National Regulatory Authorities (NRAs) for methodological improvements in handling losses within the ITC mechanism. These include:
  • increasing the frequency of snapshots for loss estimation,
  • using liquid forward-market prices to estimate the cost of losses, and
  • introducing ex-post reconciliation processes to account for transit loss costs.

Further considerations

ACER acknowledges energy regulators’ recent commitment to conduct a comprehensive review of the cost-benefit sharing mechanisms with the aim of improving current regulatory approaches to better share the costs and benefits of electricity network infrastructure arising from cross-border trade.

Access all ACER ITC monitoring reports.