ENTSOG Tariff NC - Implementation Document 2nd Edition

Calculation of the fixed payable price Where the fixed payable price approach is applied, the payable price for a given standard capacity product at an IP is calculated per formula below.

P fix

= ( P R,y

× IND) + RP +AP

Where: P fix

is the fixed payable price;

P R,y

is the applicable reserve price for a yearly standard capacity product published at the time when the product is auctioned; is the ratio between the chosen index at the time of use and the same index at the time the product was auctioned; is the risk premium reflecting the benefits of certainty regarding the level of transmission tariff, where such premium shall be no less than 0;

IND

RP

AP

is the auction premium, if any.

The fixed payable price approach is for the yearly standard capacity product. The reserve price used in the formula is the one calculated for the annual yearly capac- ity auction. As outlined below, the TAR NC allows fixed and floating payable price approaches to coexist. Co-existence at a given IP needs to be explained as part of the final consultation under Article 26(1), and approved by the NRA as part of the decision under Article 27(4). With different network users paying different prices for the same yearly capacity product, there will be inevitably some form of cross-subsidisation. The TAR NC mitigates cross-subsidisation to some extent by introducing indexation (IND) and risk premium (RP) concepts. Indexation seeks to reflect the general evolution of prices over time. Different forms of indexation include financial inflation measures such as the producer price index, the retail price index and the cost of steel, and an index related to the calculation of the TSO’s allowed revenue. Although elements of the fixed payable price will be known at the time of contract signature, the elements will ‘update’ using the relevant indexation during the period of contract performance. IND stands for the ratio be- tween the chosen index at the time of the capacity product use, and the same index at the time of the capacity product auction. Depending on the chosen index, the fixed payable price could be higher or lower than the corresponding floating paya- ble price. The risk premium included in the formula should reflect the benefits of certainty regarding the level of transmission tariff for network users. The risk premium should simultaneously reflect the TSO’s risk associated with fixing a certain price level over an extended period, which prevents adaptation as underlying costs change. The level of such risk premium must be no less than 0   1) . Generally, a longer time period justifies a higher risk premium, as the risk of adverse future changes is also higher. The TAR NC defines the auction premium as the ‘difference between the clearing price and the reserve price in an auction’ . Any auction premium is included in the fixed payable price.

 1) The risk premium can be equal to zero in case the reserve prices exhibit low volatility and therefore, the application of indexation is the only change.

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