Action for establishing a Single Auction Office for CSE

1. Action for establishing a Single Auction Office for CSE Electricity Regional Initiative - Central-South Region 2nd Stakeholders Group Meeting 21 April 2008

2. Background • For establishing an integrated regional cross border market in the CSE Region, the setting up of a Single Auction Office - dealing exclusively with regional cross border market issues – is the solution proposed to reach further developments. • The Auction Office may act as a service provider for Market Participants, and regional TSOs. • “One Stop – One Shop” principle • According to the resolutions of the 6th Implementation Group for CSE, the TSOs have elaborated an action plan laying down the necessary next steps for establishing the SAO, which is seen as the proper basis of further regional market integration.

3. Two phase implementation approach I/II • For establishing the SAO, a project with two phases approach is foreseen. • During the first phase different possibilities and options will be elaborated and analysed. • Based on these findings the necessary decisions will be made in the second phase. • To reach this goal a specific working group has been created, involving TSOs from Italy, France, Switzerland, Austria, Slovenia and Greece.

4. Two phase implementation approach II/II Phase I: • Definition of the SAO perimeter activities; • Analysis of different options for SAO (location, legal vehicle, manpower, IT, financing, governance and voting rights, competition issues, shareholding, remuneration); • Development of common goals for next phase; • Elaboration of draft business plan; • Signature of a MoU for setting up a SAO. Phase II : • Definition of the concrete tasks and responsibilities of the SAO (depending on outcome of Phase I); • Definition of final business plan; • Development of implementation plan.

5. Perimeter of activities of the SAO Proper starting points for the SAO in CSE: • Regional coordinated NTC-based auctions (explicit auctions); • Regional coordinated flow-based auctions (explicit auctions); • Regional (flow-based) market coupling (implicit auctions). • For this latest activity TSOs could involve PXs for relevant aspects. • SAO will start with Regional coordinated NTC-based auctions • TSOs will take care that the structure of the SAO is open for further development. (e.g. to perform Market Coupling).

6. Options for SAO and its organisation • The SAO, as an entity enabling and facilitating regional coordinated cross-border trading activities, has to follow certain underlying basic principles to ensure transparency and confidence amongst its share - and stakeholders. • The activity of TSOs will consist in the analysis of the different possible options for setting up SAO (and in particular voting rights, control of SAO by TSOs, accessibility of information,…), • For the setting up of SAO different legal vehicles, either belonging to a national or a supranational form, have to be taken into account. • The study of the different legal forms will be performed respecting criteria like transparency, governance and responsibility. • Additionally merger/cartel related issues have to be taken into consideration carefully.

7. Contractual issues I/II • For setting up the SAO and also for running it, different contracts are required for thoroughly managing the requested functions and services. Contracts necessary before setting up the SAO: • MoU, to be signed at the end of Phase I, defining the commitment of TSOs to carry out the implementation of the SAO • Pre-incorporation cost sharing agreement for splitting all the costs during the project amongst the partners • Contracts associated to the legal vehicle of the SAO (articles of association, shareholders agreement).

8. Contractual issues II/II Contracts necessary to run the SAO: • Auction Rules, as the contractual framework towards auction participants. • Service level agreement between TSOs and the SAO which regulated the services and duties of SAO (i.e. Financing of the SAO). • Inter TSO contract, which regulates the rights and duties amongst the shareholding TSOs and the congestion rent sharing. • The above-mentioned list of contracts could be integrated and/or modified subject to the results of Phase 1 and Phase 2.

9. Draft Business Plan and signature of MoU • The results of activities for the definition of operating perimeter of SAO, the analysis performed on the organization and legal form of SAO will enable TSOs to develop a first draft of business plan and a MoU • TSOs will present the draft MOU to the IG for discussion. • The MoU will include the main issues defined for setting up the SAO and the timetable agreed among TSOs for achieving the major milestones of Phase II. • The signature of MoU is a precondition to implement the phase 2 and in particular will allow TSOs: • To define the final version of the SAO Business plan; • To develop the implementation plan for setting up the SAO including tendering procedures needed to acquire IT tools (if needed), • To establish legally incorporate the SAO; • To define all relevant contracts and Auction Rules required.

10. Action Plan - milestones phase I In order to give a date of entering into operation of SAO, the Phase I has to be performed.

11. Thank you for your attention!