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Published: 12/3/2018. Updated: 12/3/2018

NCC approved TSOs common proposal for the hedging opportunities


National Commission for Energy Control and Prices (NCC) implementing the Commission Regulation (EU) establishing a guideline on forward capacity allocation (FCA) approved the Latvian, Lithuanian and Swedish Transmission System Operators common proposal for the hedging opportunities on Lithuanian – Swedish (SE4), Lithuanian – Latvian and Lithuanian – Polish bidding zone borders.

The regulatory authorities agreed with TSOs proposal not to introduce new hedging instruments but rather to focus on making existing hedging instruments more suitable for hedging in the respective bidding zones. For this reason, TSOs proposed an increase of cross-zonal capacities on the EE-LV border and by this they expect that the price differences between Estonia and Latvia will decrease. This will improve the correlation of the Latvian/Lithuanian day-ahead price with the Nordic system price and will make the Nordic system price forward products more suitable to hedge the Latvian/Lithuanian day-ahead price. According to the TSOs, the investments in the grid are planned to be completed by 2020 and are expected to "alleviate the currently existing structural congestion on this border and ultimately will also lead to the integration of the Latvian and Lithuanian bidding zones  in deeper  price  convergence  between  Estonian  bidding  zone  and  Latvian  and Lithuanian bidding zones combined".

FCA Regulation requires the competent NRAs at least every 4 years assess whether the electricity forward market provides sufficient hedging opportunities in the concerned bidding zones. The TSOs assumptions regarding  necessary investments in the grid and price convergence shall be taken into account and evaluated in the next NRAs assessment on cross-zonal risk hedging opportunities.