Today, ACER publishes its preliminary report on the effects of the Market Correction Mechanism (MCM) on energy markets and security of supply.

Background to the Market Correction Mechanism

The recently adopted MCM Regulation establishes a MCM to protect citizens and the economy against excessively high gas prices.

The MCM sets a bidding limit on certain financial derivatives traded at EU exchanges with the aim of limiting EU gas prices. This bidding limit is triggered when specific conditions are met.

The Regulation tasks ACER and the European Securities and Markets Authority (ESMA) with publishing a report (by 1 March 2023) to assess the market effects resulting from the introduction of the MCM, and a preliminary report by 23 January 2023.

ESMA also published their preliminary report today.

MCM has not had an impact on EU gas markets to date

So far, ACER has not identified significant impacts (positive or negative) that could be unequivocally and directly attributed to the adoption of the MCM Regulation itself. Its entry into force coincided with a time when prices were significantly lower compared, notably, to the second half of 2022. ACER cannot conclude that these market dynamics in the first weeks of 2023 are a direct or indirect effect of the approval of the MCM Regulation.

However, this does not preclude any impact on financial and energy markets in the future. Hence, both Agencies are proposing indicators to continue monitoring market developments and help detect potential future impacts of the MCM.

ACER welcomes feedback on the MCM indicators

In its preliminary report, ACER proposes to use eleven market indicators in its final effects report due on 1 March 2023. These indicators cover across three areas: prices, flows and trades.

ACER welcomes stakeholder feedback on these indicators, and in particular on the following questions:

• Are there any potential effects that could be triggered by the MCM, and early warning signs that should be monitored, that have not been identified in this ACER report?
• Are there any indicators that you consider relevant for assessing the effects of the MCM that have not been discussed in this ACER report?
• Are there any other points which you consider relevant to improve the ACER report on the effects assessment of the MCM that is due on 1 March?

Interested parties should send their feedback on the indicators by Monday, 6 February 2023, to MCM_effects@acer.europa.eu.

See the ACER preliminary report and the ESMA preliminary report.

Read more about the MCM.

Following the Board of Appeal’s Decision of 7 July 2022, ACER has amended its previous Decision No 14/2021 of 3 November 2021 on the long-term capacity calculation methodology of the Core capacity calculation region.

In the amendment of the methodology, ACER has reached a consensus with regional regulatory authorities and Transmission System Operators (TSOs) on the improved provisions related to the validation process of calculated capacities.

What is the methodology about?

Long‐term cross-border capacity calculation promotes effective long‐term cross‐zonal trade. It allows for long‐term planning and provides hedging opportunities by calculating reliable capacities and making them available to market participants at an early stage.

The long-term capacity calculation methodology of the Core region covers yearly and monthly capacity calculation processes by applying the flow-based approach, which is compatible with the day-ahead capacity calculation methodology applied since June 2022.

The Core region comprises of 13 countries: Austria, Belgium, Czech Republic, Croatia, France, Germany, Hungary, Luxemburg, the Netherlands, Poland, Romania, Slovakia and Slovenia.

What are the main amendments of the methodology?

Article 17 of the Proposal describes the capacity validation process performed by the Core TSOs and the Coordinated Capacity Calculator.

ACER amended Article 17 by listing the situations in which a TSO may change the long-term capacity on their own critical network elements with contingencies (CNECs) during the validation process.

The list mentions all situations possibly requiring a correction of the long-term capacity for reasons of operational security during the validation stage. ACER has introduced additional paragraphs of Article 17 in order:

• To cover exceptional topologies from the outage planning coordination process, not modelled through the reference timestamps and common grid models (CGMs);
• To list the situations and operational security limits which the flow-based approach is unable to capture. While thermal limits can be modelled with the flow-based approach, voltage limits, short-circuit current limits, frequency and dynamic stability limits might not be;
• To explicitly cover the situations where the operational security limits could be modelled with the input data for the flow-based approach, but they would be overwritten by the application of the minimum RAM; and
• To introduce changes to the reporting obligations for all listed validation situations.

What are the next steps?

The Core long-term capacity calculation methodology is planned to be implemented by the end of 2024.

Access the ACER’s Decision 03-2023 and its Annex I, Annex Ia and Annex II.

On 30 December 2022, a new Council Regulation (EU) 2022/2576 entered into force requiring ACER to produce and publish an objective daily LNG price assessment.

As of today, 13 January 2023, ACER makes its LNG price assessment report available on a daily basis.

Today ACER published the first LNG price assessment. By 16.00 CET today, ACER has collected 9 transactions, of which 2 were eligible. According to the methodology, the LNG market data reported for the price assessment during the relevant rolling time window is not sufficient. So today it is not possible to calculate a single daily LNG price indication.

On the basis of the LNG market data reports received from registered LNG market participants, ACER’s daily price assessment reports will be published no later than 18:00 CET (weekdays only) on the TERMINAL platform.

Is this the final version of the ACER price methodology?

ACER’s LNG price assessment methodology was published today as a beta version based on European LNG Daily - Methodology for LNG price assessments Beta 1.0. Hence, initially ACER’s LNG price assessment consists of a weighted average price of daily LNG spot transacted quantities and is based on transactions concluded and reported for the purchase or sale of LNG with delivery in the European Union. By 31 March, ACER’s price assessment methodology will be refined with the support of the newly established LNG price assessment/benchmark expert group

Is ACER’s LNG Price Assessment report the same as the new LNG Benchmark?

No. In addition to the daily LNG price assessment, and no later than 31 March 2023, ACER will also publish a daily LNG benchmark. Currently in EU, the standard benchmarks are related to the Dutch Title Transfer Facility (TTF), which is used for both pipeline gas and LNG. The Council Regulation requires ACER to develop an alternative transaction-based LNG benchmark based on verifiable price assessments for LNG cargo deliveries to EU, to ensure the new LNG benchmark is reflective of real-world prices for the fuel. According to the Regulation, the new LNG benchmark, based on mandatory data reporting, shall contribute to greater market transparency and effectively, lower wholesale prices for gas without distorting competition in the EU energy markets. Stakeholders may use the LNG benchmark voluntarily.

LNG market data collection and registration of LNG market participants

LNG market participants must submit their LNG market data to ACER via TERMINAL by first registering in the Centralised European Register of Energy Market Participants (CEREMP) and identifying themselves as an ‘LNG market participant’, and second creating a user account at TERMINAL.

Detailed information on the registration process of LNG market participants in CEREMP and TERMINAL is available here.

LNG market participants shall submit daily to ACER the LNG market data as close to real-time as technologically possible.

Whilst the reporting obligation for both LNG transactions and bids and offers applies since 30 December 2022, when facing issues with the technical feasibility of reporting (given the short implementation timeline), LNG market participants should currently prioritise the reporting of transactions over the reporting of bids and offers and should report bids and offers as soon as technologically feasible.

When submitting LNG market data, market participants shall follow the dedicated reporting guidance published on the ACER website (link here). ACER considers the reporting guidance as an evolving document and will release further updates and FAQ documents as required, in consultation with the industry.

Read more about LNG Price Assessment.

Europe’s spot electricity markets have an automatic maximum price limit adjustment mechanism in case of extraordinary high prices. ACER has approved changes in the methodologies for automatically increasing the maximum price limit in case of price spikes. The timely adjustment of those price limits is needed to ensure security of supply this winter through optimal short-term dispatch of generation, efficient use of interconnections and to encourage demand response. The amended methodologies will lead to a more gradual increase of the day ahead and intraday market price limits than with the previous rules.

What are the methodologies about?

With expected high prices on the electricity markets ahead, ACER urged the Nominated Electricity Market Operators (NEMOs) to submit proposals to amend the Capacity Allocation and Congestion Management methodologies related to:

• The Harmonised Maximum and Minimum Clearing Price (HMMCP) methodology for Single Day-Ahead Coupling (SDAC); and
• The Harmonised Maximum and Minimum Clearing Price (HMMCP) methodology for Single Intraday Coupling (SIDC).

These methodologies define Europe’s single day-ahead and intraday electricity markets’ maximum and minimum price limits. Following receipt of the NEMOs’ proposals in September 2022, ACER has reviewed and now approved the amendments to the HMMCP methodologies. ACER considered this review as a high priority and approved the amendments in an expedited manner, issuing the HMMCP SDAC Decision and the HMMCP SIDC Decision two months before the legal deadline.

What are the benefits of the changes?

The methodology amendments update the conditions that will lead to fewer and smaller adjustments of the price limits. This will allow market participants to get used to the new price limits, allowing new generation and demand response to enter.

See examples of the effects of the amendments here.

The combined effect of these amendments will be to more gradually adjust the short-term electricity market price limits, effectively limiting a cascading effect of increases in case of repeated extreme prices resulting from the current methodology, while conserving the benefits of timely adjustments of the price limits on the efficiency of the European spot markets.

Additionally the automatic adjustment mechanism is introduced for intraday markets, triggering price limits adjustments on the intraday auctions, currently planned to be launched in the first months of 2024.

Access the ACER’s HMMCP SDAC Decision and ACER’s HMMCP SIDC Decision.

How else to reduce price spikes in the coming months?

Price spikes can occur more frequently if electricity generation together with cross-border interconnector capacity is not enough to serve demand. Making interconnector capacity available for trade and encouraging demand response is vital to ensure security of supply over the coming winter.

Therefore, and irrespective of the decisions, in the coming months, ACER reiterates its plea for:

• Transmission System Operators (TSOs) to make sufficient cross-zonal interconnector capacity is available for electricity cross-border trade; and
• Market participants to bring significant demand response to the market.

ACER publishes its Single Programming Document 2023-2025 which sets out:

• The 2023 Annual Work Programme;
• ACER’s priorities in upcoming years; and
• New responsibilities allocated to ACER as part of Europe’s energy crisis response.

Priorities

ACER will continue its work on:

• The completion of the Internal Energy Market and monitoring of its functioning;
• Contributing to the infrastructure and security of supply challenges;
• Increasing integrity and transparency of wholesale energy markets; and
• Longer-term regulatory challenges.

Europe’s energy crisis response

A core part of ACER and the national energy regulators’ work in 2023 will continue to be on Europe’s energy crisis response. The Agency takes on tasks allocated to ACER under the emergency Council regulations (such as creating and publishing daily the new LNG price assessment, and the Market Correction Mechanism), as well several new responsibilities, following the entry into force of Regulation (EU) 2022/869 on Guidelines for trans-European energy infrastructure (“new TEN-E Regulation”).

The document was adopted on 15 December 2022 by ACER's Administrative Board, following the favourable opinion of the Agency's Board of Regulators.

Access the ACER Single Programming Document 2023-2025.

Access previous editions here.

Congestion income is the revenue that Transmission System Operators (TSOs) collect in the event of congestion when allocating electricity cross-zonal capacity.

How Member States can use the congestion revenue they collect is specified in the EU law. National Regulatory Authorities (NRAs) must report to ACER (the EU Agency) on the use of electricity congestion income. ACER has updated its recommendation to regulators on how to do so.

Why did ACER update its Recommendation?

• Regulation on an emergency intervention to address high energy prices (October 2022) allows Member States to use the surplus congestion income to also finance measures in support of final electricity customers.

• The Methodology for the use of congestion income will for the first time come into full effect for the NRAs reports to be published in early 2023.

• Gained experience in the first two years of the NRA reporting on the amounts and use of congestion income.

Hence, ACER has updated its original (2020) Recommendations to NRAs.

What’s new in ACER’s recommendation?

• Discontinuity of collecting some project specific data that is already available to ACER (e.g. commissioning date, capital expenditure etc.);

• More options provided for the NRAs to prove the cross-border relevance of projects where congestion income is used;

• The possibility to indicate the support for electricity customers as a use of the collected congestion income is now included; and

• Clarification of certain terms and clearer phrasing.

Access the ACER (2022) Recommendation.