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Transmission system operators proposals on hedging possibilities on Lithuanian cross-borders according to FCA guideline Article 30(5b)
Lithuanian, Latvian, Swedish and Polish National Regulatory Authorities (NRAs) this year bilaterally agreed on cross-zonal risk hedging opportunities on Lithuanian – Latvian (LT-LV), Lithuanian – Sweden (LT-SE4) and Lithuanian – Polish (LT-PL) bidding zone borders. The respective NRAs requested TSOs (LITGRID AB, Affärsverket Svenska kraftnät, Augstsprieguma tīkls AS) not to issue long-term transmission rights (LTTR)[1], but to make sure that other long-term cross-zonal hedging products are made available to support the functioning of the wholesale electricity markets.
Lithuanian, Latvian, Swedish TSOs in coordination with Polish TSOs upon the request of NRA’s, prepared proposals on hedging possibilities on Lithuanian cross-borders and provided them to the the Lithuanian, Latvian, Swedish National Regulatory Authorities for approval.
Hedging options
Today there is a financial market connecting to the Nordic- Baltic electricity wholesale market with high liquidity in the spot price, providing good possibilities to have full hedge in all Nordic - Baltic bidding zones. Existing Nordic - Baltic hedging options together with existing Polish Financial Instrument Market with Physical Delivery provides means for hedging of trades on relevant Lithuanian cross-borders.
Considering legal framework and existing hedging options within Baltic – Nordic regions and Poland, TSOs are of the opinion that hedging of cross-border electricity trading may be based on the currently available options: Nasdaq OMX offered Nordic system ENO product with EPAD (Riga / Malmo (SE4) / Helsinki) and FTRs on the border Estonia – Latvia and Polish long-term forward electricity market option.
Proposal for way forward
TSOs believe that the most efficient way forward is to focus on existing hedging options and continue with development of grid and increasing the transmission capacity of congested borders. Considering the lack of legal regulation and interpretation of the current regulatory legal framework TSOs can’t be engaged in facilitation of the functioning financial risk hedging market(s). A more effective means that is in the hands of TSOs is grid development further expansion of cross-border capacities. E.g. LitPol Link project finalization, EE-LV border expansion by building new HVAC line foreseen by 2020.
Accordingly, below are details of the TSOs proposals for other long-term cross-zonal hedging products to support the functioning of wholesale electricity markets based on relevant NRAs decision according to FCA guideline Article 30(5b).
[1] Long-term transmission rights (LTTR) jointly refers to physical transmission right (PTR) or a financial transmission rights (FTR)
TSO’s common supporting document of the necessary arrangements to support the functioning of wholesale electricity markets
Proposal for the Hedging Opportunities on the Lithuanian –Swedish (SE4) Bidding Zone Border
Proposal for the Hedging Opportunities on the Lithuanian – Polish Bidding Zone Border
Proposal for the Hedging Opportunities on the Lithuanian – Latvian Bidding Zone Border
Proposal for the Hedging Opportunities on the Lithuanian –Swedish (SE4) Bidding Zone Border
Proposal for the Hedging Opportunities on the Lithuanian – Polish Bidding Zone Border
Proposal for the Hedging Opportunities on the Lithuanian – Latvian Bidding Zone Border
