NordREG urge the Nordic Energy Ministries to develop the Forward Capacity Allocation Network Code

The Network Code on Forward Capacity Allocation Network Code stems from the Third Internal Energy Market package. The Network Code will be put to comitology by the European Commission during 2015.

The Nordic Regulators (NordREG) have under the umbrella of the Agency for the Cooperation of Energy Regulators (ACER), raised several issues concerning the draft code during its development in 2014. Now when the Code has been handed over to the Commission, NordREG has presented a common position paper which has been sent to the Nordic Energy Ministries.

The paper addresses our main concerns related to the NC, specifically concerning the chosen path to make Long Term Transmission Rights the preferred instrument of intervention even in situations where other instruments could provide a better solution.

NordREG shares a concern that, in the current draft, the overall objective of the Code to make markets work better and provide market participants with sufficient hedging opportunities, seems to be subordinate to the preference of having Long term transmission rights (LTTR) introduced. Although LTTR have potential to bring benefits to cross border trade between national electricity markets, NordREG identifies a substantial risk that they would instead be detrimental to the functioning of the Nordic market due to a splitting of liquidity between instruments already existing in the financial market and LTTR.

We are of the opinion that the network code should not have LTTRs as the default solution, but should allow for any measure that contributes to reaching the objective of the regulation. We propose a structural rewrite of the code, which will allow a stronger commitment for all NRAs to achieve the final goal of having a well-functioning and efficient EU internal energy market (IEM) and to finding the appropriate measures to facilitate this.