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The French Balancing mechanism will start at the beginning of April 2003.

Source: RTE 28/10/2002

The French Balancing mechanism will start at the beginning of April 2003.

RTE, the French power Transmission System Operator, is responsible for balancing in real time electricity supply and demand. To carry out this mission, RTE must have some possibility to match the supply or the demand in order to offset the unavoidable contingencies disturbing this balance. In order to continue to contribute to the electricity market opening in France, the goal of RTE is to initiate competition between different balancing bids concerning generation and consumption, as is already the case in Scandinavia or in the United Kingdom. RTE has consequently carried out a project to define a Balancing Mechanism to organise the players activities and their financial compensation, that takes into account the economic merit order of the bids. This mechanism also provides the imbalance costs of the holders of "balance responsible" contracts.

This Balancing Mechanism project was carried out in consultation with the transmission network users within the CURTE (Committee of the French Power Transmission Network Users). RTE thus proposed a complete mechanism, concerning both the operating rules of the Balancing Mechanism and the rules governing the imbalances of the "balance responsible" entities. Most market actors have agreed with RTE's proposal, which is a good compromise between the different options considered, and consistent with the mechanisms already set up in the main countries of the European Union.

However, some CURTE participants expressed their concern about starting the mechanism under conditions of reduced fluidity of the electricity market. Indeed, the winter periods may lead to strong sporadic electricity price increases, that during the starting phase of the mechanism might induce a high price volatility for the imbalances of the "balance responsible" entities.

In this context, RTE, which had planned to initiate the mechanism in November, but whose ongoing concern is to take into account the opinion of the French electricity market players, has decided to postpone the start of the Balancing Mechanism at the beginning of April 2003, after the winter period. The additional time will be used to clarify some rules still under discussion, and to train all market players in the practical aspects of the mechanism. The final rules will be submitted to the French Electricity Regulator in December 2002 prior to publication, allowing the Balancing Mechanism bidders and the "balance responsible" entities the necessary preparation time before the actual start.

Thus, on the basis of its present proposal for a Balancing Mechanism that is transparent, non discriminatory and open to all the players, RTE reaffirms its commitment to this essential stage to the further opening of the electricity market in France.