Austria: Wholesale Electricity Trading In Austria: A Basic Primer To Electricity And Gas Wholesale Trading

A. Wholesale electricity trading

1. Background information

Austria is a federal state. Therefore, governmental responsibilities are shared between two levels of territorial authority: the Federal Government and the nine Provinces. The legislative competences are divided between the Federal Government and the nine Austrian Provinces.

In a nutshell, the Federal Electricity Act (Elektrizitätswirtschafts- und –organisationsgesetz - ElWOG) sets out fundamental principles, whereas the respective Provincial Electricity Acts provide for ancillary and more detailed regulations.

2. Licence requirements

Neither the ElWOG, nor any of the nine Provincial Electricity Acts, provide for any obligation to obtain a licence for wholesale Electricity Traders. Thus, a trading licence is not required. Electricity Traders, domestic or foreign, do not have to establish a company or branch in Austria in order to be able to commence electricity trading. However, if no branch or company has been established, a national process agent has to be notified to E-Control (the Austrian NRA).

3. Trading requirements

3.1. OTC and power exchange trading

Apart from joining or forming a balancing group (see section 3.2 below), there are no specific requirements for OTC trading in electricity. An Electricity Trader may do business with its trading partners by concluding bilateral sale and purchase agreements.

In Austria, spot-market products (day ahead, etc) may be traded on the Energy Exchange Austria (EXAA). For trading electricity on the power exchange, it is necessary to be admitted as a member of EXAA. The registration process as a member of EXAA takes two to three months, on average. The length of the proceedings depends, for instance, on the completeness of the documentation.

When trading on the power exchange, the model agreements provided by EXAA are mandatory.

3.2. Balancing market

The Austrian electricity wholesale market is based on a balancing group system (Bilanzgruppensystem). In order to be able to trade electricity on the Austrian wholesale market, the Electricity Trader has to either establish its own balancing group (Bilanzgruppe, BG) or join an already existing BG. Non-domestic Electricity Traders usually choose to establish their own BG. However, if an Electricity Trader does not intend to do so, it might alternatively join an already existing BG. When doing so, the Electricity Trader has to enter into an admission agreement with the balancing group responsible for the existing BG. Admission to a BG is subject to general terms and conditions that have been approved by the regulatory authority E-Control.

4. Cross-border trading

Cross-border supplies have to be notified to the relevant TSO by virtue of the operating schedule.

There are two control area managers in Austria responsible for operating the transmission systems in their control areas:

  • Austrian Powergrid AG (APG) - control area East and Tyrol
  • VKW-Netz AG - control area Vorarlberg

There are no bottlenecks with regard to cross-border supplies in the line connections of VKW-Netz AG. Neither are there any bottlenecks with regard to the connections of APG to Germany.

Line bottlenecks are likely to occur on the connections via the transmission system of APG to the Czech Republic, Hungary, Slovenia, Italy and Switzerland. The transmission capacities requested by the market participants regularly exceed the existing transmission capacities. Hence, the transmission rights for those short capacities are auctioned among the TSOs. Thereby, physical transmission rights for specific time periods (eg one year, months, days or hours of a certain day) are bought in auction and subsequently at the user's free disposal for electricity supplies. As control area manager, APG is in charge of determining and allocating the line capacities available to the market within the control area East and Tyrol. For example, in order to supply electric energy from Austria to Slovenia, it is necessary to secure the desired capacities in an auction.

In order to be able to participate in the auctions, it is basically necessary to fill in a registration form and be recognised by E-Control as a BG responsible or member of a BG.

5. Grid access

For Electricity Traders who do not supply final customers in Austria, access to the transmission system is significant only in the context of cross-border supplies. There are no fees for Electricity Traders for grid utilisation.

As already mentioned, there are no bottlenecks for supplies to Germany. Hence, only the operating schedules for the supplies need to be notified to the competent TSO (control area manager) according to the general terms and conditions that have been approved by E-Control. With regard to supplies for which capacities are auctioned (Hungary, Czech Republic, Italy, Slovenia, Switzerland), an operating schedule can be notified only after the appropriate capacity has been bought in auction.

B. Wholesale gas trading

1. Background information

Wholesale gas trading in Austria is governed by the provisions of a federal law, the Austrian Gas Management Act (Gaswirtschaftsgesetz - GWG).

From 1 January 2013 onwards a new gas market model is introduced. In the past, the gas market was organised into three national market areas and one transit zone. According to the new model, the national and transit distribution systems will be merged into three market areas. The Baumgarten hub, which previously was a physical hub, is being transformed into a virtual trading point (VTP) with one entry/exit zone.

2. Licence requirements

According to the GWG, Gas Traders are natural persons or legal entities buying and selling natural gas without carrying out the function of transmission or distribution within or outside the system in which such a natural gas trader is established.

The GWG does not provide for any obligation to obtain a licence for wholesale Gas Traders. Thus, no trading licence is required according to Austrian natural gas law. Up to date, only Gas Traders buying or selling natural gas for Austrian customers (wholesale or final customers) in the federal territory of Austria had to notify their activities to the Austrian NRA (E-Control) prior to their commencing. Thus, no notification was required if a Gas Trader only traded on the Baumgarten physical hub and the natural gas did not enter the Austrian grid. However, from January 2013 onwards, when the entry/exit system becomes effective, there will no longer be a distinction between a national market area and a transit market. Thus, all Gas Traders who are trading on the VTP Baumgarten have to notify their activities to the Austrian NRA.

Unlike Electricity Traders, Gas Traders who wish to buy or sell natural gas for customers in the federal territory of Austria have to register a business in accordance with the Austrian Trade Law (Gewerbeordnung - GewO). For this purpose, the trader has to register a branch in Austria. The registration of a branch requires a physical presence in Austria, as the applicant has to provide an office address and a lease agreement upon registration.

3. Trading requirements

3.1. OTC and on the exchange trading

In Austria, trading of natural gas mainly takes place at the Central European Gas Hub (CEGH), which is one of the most important hubs for natural gas in Central Europe. Trading may either take place OTC or on the gas exchange platform. In both cases, the Gas Trader has to register with CEGH and to conclude a CEGH Membership Agreement.

If the Gas Trader intends to trade on the CEGH Gas Exchange of Wiener Börse , it must also become a member of the Vienna Stock Exchange (Wiener Börse AG) and sign a contract with the clearing house European Commodity Clearing AG (ECC). Certain technical requirements for connection to the XETRA trading system have to be met. Finally, a number of forms have to be completed in order to set up the persons with specific rights on the trading system. On the CEGH, both trading on the spot and on the futures market is possible.

3.2. Balancing group system

Like the electricity market, the Austrian natural gas market is based on a balancing group system. Any system user, ie any natural person or legal entity feeding into or out of a system or being supplied by a system or whose facility is connected to a system, has to be a member of a balancing group. They can either join an existing balancing group or register as a balancing group responsible party who establishes its own balancing group.

A wholesale Gas Trader who does not supply gas to final customers in Austria is not considered a system user. Therefore, membership in a balancing group is not required. However, a wholesale Gas Trader who intends to sell gas to other Gas Traders or suppliers on the Austrian market has to conclude a contract with a supplier who is a member of a balancing group. This contract is a private law contract and not subject to any special rules. The respective contract partner of the whole-sale Gas Trader will then nominate the entry of the gas into the respective control area by way of an external schedule.

4. Cross-border trading

Gas Connect Austria (GCA), a 100% subsidiary of OMV Gas & Power coordinates the use of transit pipelines of different operators for natural gas transit ("one-stop-shop") through Austria. Transit of natural gas is based on general terms and conditions and approved calculation methods.

There are five cross-border interconnectors: Trans-Austria-Gas-Pipeline (TAG), South-East-Gas-Pipeline (SOL), West-Austria-Gas-Pipeline (WAG), Hungarian-Austria-Gas-Pipeline (HAG) and PENTA-West- Pipeline.

Capacity bookings for natural gas transits can be made via the Online Capacity Booking platform provided by GCA.

5. Grid access

For Gas Traders who are solely trading on the VTP at Baumgarten and do not intend to physically supply gas to final customers in Austria, no access to the grid is required.

For those cases where gas is supplied to final customers based in Austria, the GWG stipulates that all users of the grid enjoy non-discriminatory access to the grid.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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