access block international transmission auctions cera lert december 20 2000 title access block international transmission auctions opening european power markets e mail category cera insight cera knowledge area european power despite apparent impasse negotiations among european transmission system operators regulators european commission florence auctions international transmission capacity itc france united kingdom denmark belgium italy austria switzerland slovenia netherlands opening access countries paving way single european marketplace however patchwork auctioning access itc leaves important issues unresolved significant include potential gaming third party transit allocation auction proceeds stand issues cera believes likely lead action european level eventual imposition integrated scheme nevertheless current plans open europe itc represent watershed activity hasten transparency market determine trade flows signal transmission investment 2001 international auctions opening markets major portion international transmission capacity continent allocated auction 2001 see table 1 cera view auctions itc likely greatest impact 2001 following areas increasing market transparency posting available transmission capacity yearly monthly daily bases facilitate market efficient usage scarce interconnector capacity first time signals new transmission investment power flows transmission asset valuation come market increasing cross border trade although auctions may reduce uncertainty marketplace initially effect heightened transparency access rules prices soon work increase trade secondary markets interconnector capacity add number actively traded power products work increase overall level trade increasing price correlation auctions replace nonmarket based allocation methods long term capacity reservation dynamic character shorter term auctions combined expected secondary market capacity bring access international capacity line needs market way market able adjust rapidly changes local conditions thereby work correlate pricing points increasing competition players secured access itc given price looking sign supply contracts integrate capacity structured deals result could aggressive maneuvering part incumbents new entrants alike resulting greater competition national level reducing competitiveness imports results international transmission capacity auctions determine competitiveness imported power domestic markets final prices offered itc reflect relative cost power markets work make cheaper power expensive import spurring investment transmission money raised auction could provide transmission companies financial capability invest upgrading international transmission links access international transmission capacity netherlands germany belgium 2001 auctioned 63 million euros see http www tso auction org details auctions access spain france italy expected realize premium access highly coveted markets connecting rather integrating markets auctions national grids accurately commercial grids pragmatic approach problem granting access scarce international transmission capacity open transparent basis auctions open access interconnectors time reward transmission system operators even proposed approaches likely satisfy market players stated objectives european policymakers cera view following issues may eventually bring hammer itc auctions third party transit bilateral nature itc auctions perpetrates problem tariff pancaking discriminates trade involving transit third grid ultimately inconsistent european commission objective single european power market fact physical power flows follow contractual flows almost always transit third party grids weakens legitimacy approach transaction based scheme although still transactional nature tied specific deal auctions fall within european commission stated preference market based mechanisms allocating international transmission capacity remains seen successful approach achieving integration national markets action european level could move allocation itc direction nontransactional mechanisms market splitting counter trading redispatching gaming auctions auctions theory allocate access transmission nondiscriminatory market basis value practice remains seen gaming avoided even though auctions placed limits ownership transmission capacity tactical maneuvers could bid transmission prices players act raise price imported power allocating auction proceeds one likely outcome auctions transfer profits players transmission owners recoup rents currently reaped players works raise value transmission assets relative generation suppliers traders remains seen funds auctions allocated among transmission companies grid transmission still currently subject monopoly regulation end come shoot rapids us ceraweek 2001 shooting rapids strategies risks energy future houston february 12 16 2001 information register please visit http www 20 cera com ceraweek make changes cera com account go forgot 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