Day-Ahead Electricity Market Governance

1. Introduction

Day-ahead electricity market governance means the legal and regulatory system through which electricity is bought and sold for delivery on the following day. It decides who can participate, how bids are submitted, how prices are calculated, how cross-border electricity is traded, and how market security is maintained.

In the European Union, day-ahead market governance is mainly based on Regulation (EU) 2019/943 on the internal market for electricity and Regulation (EU) 2015/1222, known as the Capacity Allocation and Congestion Management (CACM) Regulation.

The basic aim is to create a market that is competitive, transparent, non-discriminatory and properly coordinated across borders.

2. Legal Framework

The first important instrument is Regulation 2019/943. It establishes common rules for the internal electricity market and provides principles for wholesale electricity markets.

The second is the CACM Regulation 2015/1222. It establishes detailed rules for:

day-ahead capacity allocation;

congestion management;

bidding zones;

market coupling;

nominated electricity market operators (NEMOs);

transmission-system operators (TSOs); and

common market-coupling procedures.

Therefore, governance is not controlled by one organisation. It involves EU institutions, national regulators, ACER, TSOs and NEMOs working together.

3. Role of ACER

The Agency for the Cooperation of Energy Regulators (ACER) provides EU-level regulatory coordination.

ACER supports the development and implementation of common electricity-market rules and monitors the functioning of European electricity markets.

This is important because electricity does not stop at national borders. A decision made in one country can affect electricity flows and prices in neighbouring countries.

Thus, day-ahead governance requires regional and EU-level coordination, rather than completely independent national regulation.

4. Role of TSOs

Transmission System Operators (TSOs) are responsible for operating high-voltage electricity networks.

In the day-ahead market, TSOs provide information about available cross-zonal transmission capacity. This information is essential because market participants cannot trade unlimited quantities of electricity across borders.

TSOs therefore have two connected responsibilities:

facilitate electricity trading; and

protect the physical security of the electricity system.

The legal framework requires coordination between TSOs so that commercial market activity remains consistent with actual network capacity.

5. Role of NEMOs

Nominated Electricity Market Operators (NEMOs) operate important parts of the day-ahead market.

They receive buying and selling bids and participate in the Single Day-Ahead Coupling (SDAC) process.

The market-coupling system matches bids from different bidding zones while considering available cross-border capacity. This means electricity can be traded across borders without requiring every participant to separately arrange transmission rights.

The governance framework therefore connects commercial bidding with physical network limitations.

6. Market Coupling and Price Formation

A central feature of day-ahead governance is market coupling.

Suppose electricity is cheaper in one bidding zone and more expensive in another. If sufficient transmission capacity exists, electricity can flow from the lower-price area towards the higher-price area.

If transmission capacity becomes insufficient, congestion occurs. The market may then produce different clearing prices in different bidding zones.

The CACM framework uses common European market-coupling arrangements to allocate scarce transmission capacity efficiently.

7. Transparency and Non-Discrimination

Good governance requires market participants to receive relevant information on equal terms.

Rules concerning:

available transmission capacity;

market rules;

bidding procedures;

clearing arrangements;

congestion; and

market results

must operate transparently.

A TSO or NEMO should not give an individual market participant an unjustified advantage.

This principle is particularly important because electricity markets involve infrastructure that is often characterised by natural-monopoly conditions.

8. Market Monitoring

Day-ahead electricity markets also require monitoring against market manipulation and abusive trading behaviour.

The EU's REMIT framework regulates wholesale energy-market integrity and transparency. It prohibits practices such as insider trading and market manipulation.

Monitoring is important because electricity cannot easily be stored at large scale in the traditional power system. A participant with significant generation or network influence may therefore have an important effect on prices.

9. Relevant Case Laws

AEM v AEM Torino – Joined Cases C-128/03 and C-129/03

The Court of Justice considered electricity-market and network-access issues. The case is useful for the principle that electricity-market arrangements must respect non-discriminatory access and EU competition principles.

Commission v Slovakia – Case C-264/09

This case concerned preferential access to electricity transmission capacity. It demonstrates the importance of preventing discriminatory treatment in electricity-network arrangements. This principle is relevant to modern cross-border day-ahead market governance.

Federutility and Others – Case C-265/08

The Court examined state intervention in energy pricing. The judgment recognised that public intervention in energy markets can exist, but it must satisfy EU legal requirements and be properly justified.

ENTSO-E / Market Coupling Governance

Although many modern market-coupling disputes are handled through regulatory decisions rather than classic court judgments, the EU governance structure increasingly depends on cooperation between ACER, national regulatory authorities, TSOs and NEMOs.

10. Importance for Renewable Energy

Day-ahead governance has become more important because renewable generation is variable.

For example, a wind producer may expect high generation tomorrow but later face lower wind speeds. Solar generation also depends heavily on weather.

The day-ahead market therefore provides an initial schedule, while later trading and balancing mechanisms allow participants to correct deviations.

This governance structure supports the integration of wind, solar, batteries, demand response and flexible consumers.

11. Conclusion

Day-ahead electricity market governance is a multi-level legal system. EU legislation establishes common rules, ACER provides regulatory coordination, TSOs manage transmission capacity and system security, while NEMOs operate the market-coupling process.

Its central principles are transparency, competition, non-discrimination, efficient capacity allocation, market integrity and system security.

The development of day-ahead governance is especially important for the future electricity system because increasing renewable generation and cross-border electricity trading require markets to operate in a coordinated and digitally connected manner.