ACER: Compensation Surged For Grid Operators Covering Losses From Cross-Border Transit Flows In 2022

ACER publishes today its report on the implementation of the Inter-Transmission System Operator Compensation Mechanism (ITC) for 2022.

ACER issues these yearly monitoring reports since 2012, as mandated by the relevant Regulation. 

What is the ITC mechanism?

The ITC mechanism aims to ensure a fair compensation among Transmission System Operators (TSOs) for the costs of hosting cross-border electricity flows on their networks (e.g. power losses and investments in network infrastructure). European TSOs contribute and receive money from the ITC Fund depending on how much electricity they import and export across their national borders, as well as on the volume of transits they carry through their networks.

ACER is responsible for overseeing the yearly implementation of the ITC mechanism and reporting its findings to the European Commission.

What are the key findings for 2022? 

• In 2022, the cost of losses used for the ITC mechanism to calculate the contribution and compensation for each ITC party increased significantly across Europe due to soaring electricity prices.
• This increase led to higher contributions and compensations among ITC parties, resulting in another record-high ITC fund of approximately €605 million.
• Changes in net positions were notable for several ITC parties, with many shifting from a net contributor to a net recipient position or vice versa.
• The distribution of net compensations and contributions was concentrated in a few countries.
• ACER’s report also highlights shortcomings in data accuracy and timeliness in implementing the ITC mechanism and emphasises the need for increased data auditing efforts, calling for greater transparency in determining loss values and input data, as well as for stricter enforcement of contractual deadlines. ACER reiterates its recommendations to ENTSO-E, TSOs and National Regulatory Authorities (NRAs) for methodological improvements in handling losses within the ITC mechanism.

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ACER’s monitoring shows broad implementation of the electricity imbalance settlement harmonisation methodology across the EU

Today, ACER releases its first interactive dashboard on monitoring the implementation of the Imbalance Settlement Harmonisation (ISH) methodology.

What is the ISH methodology?

The ISH methodology, introduced in 2017 by the Electricity Balancing (EB) Regulation and approved by ACER in 2020, aims at harmonising the main features of electricity imbalance settlement across the EU.

Each Transmission System Operator (TSO) calculates the difference between the forecasted and actual electricity consumption or production for each Balance Responsible Party (BRP) in its area. By identifying these imbalances, BRPs can take actions to support the power grid’s balance, helping to maintain or restore the balance between electricity supply and demand.

With the implementation of the ISH methodology, the TSOs were required to harmonise the main features of the imbalance settlement, including the imbalance calculation, the main components for calculating the imbalance price, and the use of single or dual imbalance pricing.

What did ACER monitoring find?

ACER’s 2024 analysis is based on the data received from the TSOs of 23 EU Member States (the methodology is not applicable in Malta and Cyprus, while Austria and Bulgaria did not submit their data).

The ACER monitoring found:

• The ISH methodology has been fully or largely implemented in nearly all observed Member States (22).
• 5 TSOs do not use any additional components, 19 TSOs (from 16 Member States) are using one or more additional components, and 2 TSOs are in the process of implementing the use of additional component/s.
• 20 TSOs (from 17 Member States) use single imbalance pricing, 5 TSOs use dual pricing, while 1 TSO is in the process of implementing the use of dual pricing.

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