grid connection and access), to ensure there are no discriminatory practices. This authority could lie entirely with the national regulators. Some regional authority, however, may be necessary to settle disputes related to the connection and/or access to and operation of the APG.

Topics related to TPA will involve many stakeholders such as generator owners (including IPPs), transmission owners and TSOs, as well as national regulators and ministries. This topic will therefore also require close co-ordination and facilitation. This includes commercial arrangements such as the wheeling charge methodology.

Finally, some degree of training and capacity building will be required across the AMS. This will also require co-ordination, both to ensure capacities are aligned throughout the region and to reduce any existing knowledge gaps.

Mechanism for settling transactions

When establishing multilateral power trade, a key focus will need to be on ensuring the efficient and secure handling of the financial aspects of trading. Most of the markets in existence have a CCP, also called central clearinghouse, that plays an intermediary role in these transactions in order to reduce overall counterparty risk in the market.

Any future multilateral trading among the AMS will need to consider the financial elements of wheeling and loss settlements, settlement of traded volumes through organised markets, and other trading and currency-related monetary flows. To reduce market risk further, it is also common to require collateral be posted by the market participants before they are allowed to participate in regional trading. Collateral calculations and related operations are also often handled by a central clearinghouse.

Minimum requirements with regard to settlement and clearing functions should be agreed upon at the start between all relevant parties. This type of financial operation may involve a larger volume of transactions that require timely (i.e. rapid) settlement, so it may also be necessary to establish minimum requirements for any banks involved in the settlement process.

Potential role of a CCP

There are a number of relevant functions that could or should be centralised to ensure that multilateral trading is efficient and financially secure. The main roles of a CCP should include at least the following:

responsibility for all clearing-related operations for electricity wholesale markets

interface to the market participants

interface to the market operator settlement team (if separate entity)

internal data provider for financial reporting services

partial owner of the operational procedures for wholesale electricity markets clearing (with ownership shared with the relevant transmission owners, which provide relevant data and retain ownership of that data).

The aim of a CCP is to establish a transparent and efficient flow of funds while overseeing the financial settlement and clearing of all trades in the organised market(s). In addition, a CCP can reduce counterparty risk. For example, if one market participant fails to settle its obligations, the CCP will step in to honour the obligations and cover any monetary shortfall. An overview of markets with and without a CCP is provided in Figure 47.

89