With an aim to intensify trade in electricity, the European Union enacted the Regulation (EC) 1228/03 in July 2003. The act regulates the access to the network for cross-border exchanges and spells out the principles of cross-border congestion management. It has been an integral part of the Energy Community acquis on electricity from the outset.
In order to enhance cross-border exchanges, the following principles are to apply:
1. Transmission system operators must be compensated for costs incurred as a result of hosting cross-border flows of electricity on their networks. This is prerequisite for an open, competitive market.
2. Non-discriminatory and transparent tariffs for access to networks must be set to reflect payments and receipts resulting from compensation between transmission system operators. This is a precondition for effective competition in the internal market.
3. In cases of network congestion, the allocation of cross-border capacities shall be addressed with non-discriminatory, market based solutions to give efficient signals to market participants and transmission system operators.
4. Different safety, operational and planning standards used by national transmission system operators should be harmonized in order to avoid distortion of competition.
5. Publication of relevant data for the market participants to eliminate asymmetries in information.
As part of the enforcement, the national governments have the duty to lay down the rules on penalties applicable to infringements of the regulation. The penalties must be effective, proportionate and dissuasive.
Pursuant to the regulation 1228/2003, congestion management should be based on the following principles:
1. economic efficiency and promotion of competition
2. maximising of the amount of capacity available and the use made of it
3. transparency to network users on a non-discriminatory basis
4. secure network operation
5. largely revenue neutral mechanisms from the point of view of TSOs.
The Regulation (EC) 1228/03 identifies explicit and implicit auctions as an appropriate market orientated measure to allocate available cross-border capacities.
