FUI Feedback on PCG Target Model and roadmap propositions

1. FUI Feedback on PCG Target Model and roadmap propositions FUI Stakeholder Group Meeting Paris, 4th November 2009 These comments reflect the general views expressed at the meeting. They do not necessarily reflect the views of any individual party(either regulators or stakeholders

2. Key Questions • Do you agree with the proposed target model? If not specify why • Given your starting point in your region what do you consider the best interim steps to successfully achieve the target model in your region? • What are the most critical challenges you are likely to face in coordinating with adjacent regions? • How will you seek to coordinate implementation between regions? Do you think PCG guidance could be beneficial for effective coordination of all regions? If not, how could coherence and convergence be ensured? • Comments on the proposed roadmap

3. FUI Feedback on the PCG target model and roadmap propositions: • Process • Feedback on the six target models • Way forward

4. Key issues on the PCG process • Early consultation welcome on high level issues but much more detailed information needed, prior to final decision process- need to fully explain and detail the structure of the consultation process going forward • Clear roadmap needs to be developed as soon as possible to inform individual initiatives • Target model for some time periods not clear/need more development, prior to any decisions on preferred model • Further clarification on who is leading the work and the progress going forward is required • Need to recognize there are different starting points in the regions and this may require a flexible timeline/additional resources to allow all members to participate effectively

5. Feedback on the six target models • Forward market (Annex 1) • Day ahead (Annex 2) • Intra-day (Annex 3) • Balancing (Annex 4) • Capacity Calculation (Annex 5) • Governance (Annex 6)

6. Forward market • FUI is already close to implementing this; already have PTRs and UOSI arrangements • Key issue is implementing firmness, including level of compensation and ““who pays for firmness?” .

7. Day ahead market • Support for price coupling with CWE, but this should be on a phased basis: • Firstly, a coordinated approach is needed for all current and future GB interconnectors with CWE by quarter 1 2011 • Challenges for SEM development mean that a longer time frame is needed for full price coupling with Ireland • Britned is required by its exemption to have market coupling; Britned is due to be operational by Q1 2011.

8. Intra-day market • Good progress in the region • Growth of wind generation increases the importance of having intra-day markets, to complement day ahead capacity allocation. Intra-day markets need to be developed giving proper consideration to the characteristics of renewables • Currently have explicit intra-day auctions on IFA; IFA needs to consult its customers on the next steps

9. Balancing • We’ve demonstrated a good start in the FUI region. • TSO-TSO model w/out Common Merit Order(CMO) has been successfully implemented on the IFA. • Further work is under way in order to implement the enduring solution on IFA. • Implementation of the proposed target model of TSO-TSO with CMO requires important structural changes in market design which need to be analysed. • Each new integration step shall be assessed, before proceeding. As with all timeframes, benefits need to outweigh the costs (legal, technical..)

10. Governance • Given the developments over the past year, both in markets and institutional structure, governance should be reviewed in order to ensure that it remains fit for purpose and robust to likely future developments. • Governance issues at all timeframes need to be sufficiently addressed • Florence Forum in December needs to provide some clarity on the next steps [given the issues identified in this response] in order to facilitate effective progress