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Petri Mäntysaari the Legal Tools of Electricity Producers in the Internal Petri Mäntysaari EU Electricity Trade Law The Legal Tools of Electricity Producers in the Internal Electricity Market EU Electricity Trade Law ThiS is a FM Blank Page Petri Ma¨ntysaari EU Electricity Trade Law The Legal Tools of Electricity Producers in the Internal Electricity Market Petri Ma¨ntysaari Dept. of Accounting and Commercial Law Hanken School of Economics Vaasa Finland ISBN 978-3-319-16512-7 ISBN 978-3-319-16513-4 (eBook) DOI 10.1007/978-3-319-16513-4 Library of Congress Control Number: 2015938910 Springer Cham Heidelberg New York Dordrecht London © Springer International Publishing Switzerland 2015 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Printed on acid-free paper Springer International Publishing AG Switzerland is part of Springer Science+Business Media (www.springer.com) Preface The target for the completion of the internal electricity market was 2014. The NWE region leads the way in market integration. The gradual emergence of an internal electricity market has changed the legal and commercial landscape for wholesale electricity market participants. The most important wholesale market participants are electricity producers. This book has four principal aims. The first is to describe the characteristic objectives of electricity producers in electricity wholesale markets. The second is to find out what legal tools and practices electricity producers can use to reach their characteristic objectives in the NWE region. Third, the book describes the regula- tion of the internal electricity market at EU level from the perspective of wholesale electricity producers. Fourth, this book contributes to theory-building in commer- cial law. Commercial law research—and legal science in general—can give an alternative view of markets if it focuses on the study of actual market behaviour through the lense of market participants’ legal tools and legal practices. Vaasa, Finland Petri Ma¨ntysaari v ThiS is a FM Blank Page Abbreviations ACER Agency for the Cooperation of Energy Regulators BaFin Bundesanstalt fu¨r Finanzdienstleistungsaufsicht BGB Bu¨rgerliches Gesetzbuch BSC Balancing and Settlement Code CACM Capacity Allocation and Congestion Management CACM Regulation Draft Commission Regulation (EU) No .../.. establishing a Guideline on Capacity Allocation and Congestion Management CAISO The California Independent System Operator CASC Capacity Allocation Service Company CCS Carbon capture and storage CEER Council of European Energy Regulators CFTC The Commodity Futures Trading Commission CfD Contract for Difference CHP Combined heat and power CISG Convention on the International Sale of Goods CJEU The Court of Justice of the European Union CM Clearing Member Commission European Commission CRD IV Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/ 87/EC and repealing Directives 2006/48/EC and 2006/49/EC CRR Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 CWE Central Western Europe DCUSA The Distribution Connection and Use of System Agreement vii viii Abbreviations DCFR Draft Common Frame of Reference DG European Commission, Directorate General DSO Distribution System Operator ECC European Commodity Clearing AG ECR European Court Reports EEG Gesetz fu¨r den Vorrang erneuerbarer Energien (Erneuerbare- Energien-Gesetz) EEX European Energy Exchange AG EFET European Federation of Energy Traders EMCC European Market Coupling Company GmbH EMIR Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories ENTSO-E European Network of Transmission System Operators for Electricity EnWG Gesetz u¨ber die Elektrizita¨ts- und Gasversorgung (Energiewirtschaftsgesetz) EPAD Electricity Price Area Differential ERGEG European Regulators Group for Electricity and Gas FCR Frequency Containment Reserves FERC The Federal Energy Regulatory Commission FRR Frequency Restoration Reserves FTR Financial Transmission Right GCM General Clearing Member ISDA International Swaps and Derivatives Association, Inc. ISO Independent System Operator ITVC Interim Tight Volume Coupling KWG Kreditwesengesetz LFCR Load-Frequency Control and Reserves MAD II Directive 2014/57/EU of the European Parliament and of the Council of 16 April 2014 on criminal sanctions for market abuse (market abuse directive) MAD, MAD I Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse) MAR Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC MCO Market Coupling Operator MiFID II Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/ EU (recast) Abbreviations ix MiFID, MiFID I Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC MiFIR Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 NC CACM Network Code for Capacity Allocation and Congestion Management NC FCA Network Code on Forward Capacity Allocation NC RfG Network Code on Requirements for Grid Connection applicable to all Generators NC Network Code NEMO Nominated Electricity Market Operator NordREG Nordic Energy Regulators NOU Norges offentlige utredninger NPS Nord Pool Spot AS NRA National Regulatory Authority NVE Norges vassdrags- og energidirektorat NWE North-Western Europe NYISO The New York Independent System Operator Ofgem Office of Gas and Electricity Markets OTC Over-the-counter Ot.prp. Odelstingsproposisjon PCR Price Coupling of Regions PSH Pumped storage hydropower PTR Physical Transmission Right REMIT Regulation (EU) No 1227/2011 of the European Parliament and of the Council of 25 October 2011 on wholesale energy market integrity and transparency RES-E Electricity generated from renewable sources RR Restoration Reserves RTO Regional Transmission Organization SEC The Securities and Exchange Commission SOU Statens Offentliga Utredningar SWE South-Western Europe TCC Transmission Congestion Contract TEU The Treaty on European Union TFEU The Treaty on the Functioning of the European Union TSO Transmission System Operator UCC, U.C.C. Uniform Commercial Code x Abbreviations USC, U.S.C. United States Code UIOLI principle The use-it-or-lose-it principle UIOSI principle The use-it-or-sell-it principle ULIS Convention relating to a Uniform Law on the International Sale of Goods Contents 1 Introduction .......................................... 1 References ............................................ 7 Part I General Aspects 2 Setting the Scene ....................................... 11 2.1 General Remarks . 11 2.2 Electricity Markets . 11 2.2.1 General Remarks . 11 2.2.2 The Wholesale Market . 12 2.2.3 Participants in the Physical Wholesale Market . .... 18 2.2.4 The Financial Market and the Emission Allowances Market................................... 21 2.3 Business Models . 23 2.3.1 General Remarks . 23 2.3.2 Large Consumers and Retailers . ............ 23 2.3.3 Brokers and Portfolio Managers ................ 24 2.3.4 Energy Merchants .......................... 25 2.3.5 Electricity Producers and Integrated Firms . ....... 27 2.4 The Physical Characteristics of Electrical Energy .......... 38 2.5 Characteristic Issues . 41 2.5.1 General Remarks . 41 2.5.2 Grid Access, Delivery Point and Voltage Level ..... 42 2.5.3 Volume .................................. 45 2.5.4 Transmission and Distribution Capacity . .... 45 2.5.5 Balance . ................................ 46 2.5.6 Measurement .............................. 51 2.5.7 The Separation of Physical Rights, Service Rights and Financial Rights ........................
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