1. Introduction

Interconnector congestion revenue distribution refers to the legal and regulatory rules governing who receives, holds, and may ultimately use the revenues generated when electricity transmission capacity between two bidding zones becomes scarce.

In a cross-border electricity market, an interconnector links two electricity systems. When the available transmission capacity is insufficient to permit unrestricted trading, the wholesale electricity prices in the two connected markets can diverge. Under market coupling, this price difference creates congestion income, sometimes called congestion rent.

For example, if electricity costs €50/MWh in Zone A and €80/MWh in Zone B, and 1,000 MWh is transferred across a constrained interconnector, the gross congestion value associated with that cross-zonal allocation may be approximately:

(€80 − €50) × 1,000 = €30,000.

The legal question is not simply who initially collects this amount. Modern energy law regulates how congestion income can be distributed and used, principally to ensure that it supports interconnection capacity, system reliability, and consumers rather than becoming an unrestricted profit stream.

The European Union provides one of the clearest statutory frameworks through Article 19 of Regulation (EU) 2019/943 on the internal market for electricity. (EUR-Lex)

2. Meaning of Congestion Revenue

Congestion arises where available interconnection capacity cannot accommodate all economically desirable cross-border electricity transactions.

A simplified model is:

Congestion Revenue=PriceReceiving Zone−PriceSending ZoneCongestion\ Revenue = Price_{Receiving\ Zone}-Price_{Sending\ Zone}

multiplied by:

Cross−Zonal Capacity AllocatedCross-Zonal\ Capacity\ Allocated

Thus:

CR=(PB−PA)×QCR=(P_B-P_A)\times Q

where:

CR = congestion revenue;

Pᴬ = electricity price in exporting zone;

Pᴮ = electricity price in importing zone;

Q = electricity transmitted across the interconnector.

The European Commission's legal framework recognises that congestion income generally results from the difference between wholesale electricity prices on interconnected transmission systems. (EUR-Lex)

The important legal principle is that congestion income is not treated as ordinary unrestricted commercial revenue.

3. European Union Legal Framework

Article 19 of Regulation (EU) 2019/943

Article 19 establishes the central EU framework for congestion income.

It provides that congestion-management procedures may generate revenue when congestion actually arises. The distribution procedure must be reviewed by regulatory authorities and must:

not distort capacity allocation; and

not create a disincentive to reduce congestion. (EUR-Lex)

This is important because an interconnector operator should not have an economic incentive to preserve artificial scarcity merely to increase congestion income.

4. Priority Uses of Congestion Revenue

Article 19 establishes two principal priority uses.

A. Guaranteeing allocated capacity

Congestion revenue can first be used to guarantee the actual availability of allocated cross-zonal capacity, including firmness compensation.

This is particularly significant where transmission rights have been sold but the interconnector subsequently becomes unavailable.

The framework therefore links congestion income with the protection of market participants that purchased transmission capacity.

B. Maintaining or increasing cross-zonal capacity

The second priority is:

maintaining existing interconnection capacity;

increasing interconnector capacity;

optimising existing infrastructure through coordinated remedial actions; and

financing network investments relevant to reducing interconnector congestion. (EUR-Lex)

This reflects a central regulatory philosophy:

congestion revenue should help address the infrastructure constraint that generated the revenue.

5. Residual Congestion Revenue

Where the priority objectives have been adequately fulfilled, the remaining revenues can be taken into account by regulatory authorities when approving network tariff methodologies or determining network tariffs.

However, residual revenue must be kept separately until it can be used consistently with the applicable statutory objectives. (EUR-Lex)

This produces a hierarchy:

Congestion income → capacity firmness → capacity maintenance/expansion → regulated tariff treatment → residual accounting.

The framework therefore limits the possibility of treating congestion income simply as an unrestricted shareholder distribution.

6. Role of Transmission System Operators

Transmission System Operators (TSOs) play a central role in the administration of congestion revenues.

Under Article 19(4), TSOs propose the methodology governing the use of congestion revenues following consultation with:

regulatory authorities;

relevant stakeholders; and

other affected market participants.

The methodology is then subject to regulatory approval at the EU level through ACER. (EUR-Lex)

This creates a multi-level governance structure:

TSOs → National regulatory authorities → ACER → regulated methodology.

Consequently, revenue distribution is not purely a contractual matter between interconnector owners and market participants.

7. Distribution Versus Use of Revenue

An important conceptual distinction must be made between distribution and use.

Distribution

Distribution concerns the allocation of congestion income between the relevant regulatory jurisdictions, TSOs or interconnector arrangements.

Use

Use concerns what the recipient may legally do with the money.

For example, an interconnector may receive congestion income but still be legally restricted as to its ultimate use.

This distinction prevents the mistaken assumption that ownership or receipt of congestion income automatically means unrestricted economic entitlement.

8. Cross-Border Allocation

Cross-border interconnectors create particular difficulties because two jurisdictions may participate in:

licensing;

investment;

cost recovery;

congestion management;

tariff regulation; and

consumer protection.

Consequently, regulatory frameworks frequently establish mechanisms for allocating the economic consequences between the connected jurisdictions.

A useful contemporary example is Nemo Link, the electricity interconnector between Great Britain and Belgium.

Ofgem's 2024 End of Period Assessment explains that Nemo Link is jointly regulated by Ofgem and Belgium's CREG and that the resulting revenue adjustment was split 50/50 between GB and Belgian consumers. (Ofgem)

The same approach was applied to Nemo Link's 2025 within-period adjustment. (Ofgem)

This illustrates an important principle: cross-border interconnector economics may ultimately be shared with consumers rather than retained entirely by the infrastructure operator.

9. United Kingdom Framework

The UK provides a particularly useful example because interconnectors operate within both:

the retained EU-derived electricity regulatory framework; and

the UK's domestic regulatory regime.

Ofgem requires interconnector licensees to report:

the amount of revenue collected from allocation of interconnector capacity; and

the actual use of those revenues.

Ofgem publishes this information annually. (Ofgem)

For example, Ofgem's 2025 report covers interconnectors including EWIC, IFA, NGIFA2, Nemo Link, NGNSL, NGVLL and GIL and examines revenues collected during 2025 and their use. (Ofgem)

This creates an important transparency obligation.

10. Ofgem's Congestion Income Methodology

In January 2024, Ofgem approved a common Use of Congestion Income Methodology for relevant GB electricity interconnector licensees.

Ofgem concluded that the methodology satisfied the requirements of Article 19 and the retained electricity regulation framework. (Ofgem)

The methodology applies to congestion income collected from 1 January 2024 and establishes the conditions under which revenues can be used for the purposes corresponding to Article 19(2). (Ofgem)

This demonstrates that congestion revenue distribution is increasingly governed through standardised regulatory methodologies rather than individual commercial arrangements.

11. Consumer Protection

Congestion revenue frameworks have an important consumer-protection dimension.

If interconnector congestion produces substantial revenues, regulators must determine whether those revenues should:

finance transmission investment;

compensate capacity holders;

reduce network charges;

support system reliability; or

otherwise benefit consumers.

Ofgem expressly explains that its annual revenue reporting is intended to ensure that GB consumers continue to benefit from interconnection and that revenues are used appropriately. (Ofgem)

The regulatory principle can therefore be expressed as:

Infrastructure scarcity should generate infrastructure or consumer benefits rather than an uncontrolled scarcity premium.

12. Interaction with Cap-and-Floor Regulation

Congestion income must also be distinguished from the broader revenue regime governing interconnectors.

The UK's cap-and-floor regime establishes maximum and minimum revenue levels over the regulatory life of an interconnector.

Under the regime:

revenues below the floor may result in a top-up payment;

revenues above the cap may be returned to consumers.

For Nemo Link, Ofgem's first End of Period Assessment compared cumulative revenues against the cap and floor over the relevant five-year period. (Ofgem)

This produces two complementary regulatory mechanisms:

13. Case Law: Baltic Cable

A particularly important European case concerning congestion income is the Baltic Cable litigation.

The case concerned the use of congestion revenues generated by an electricity interconnector between Sweden and Germany.

The underlying legal controversy illustrates the fundamental proposition that congestion income cannot simply be treated as freely disposable commercial profit. The European legal framework imposes restrictions concerning the use of such revenues. (EUR-Lex)

The litigation is important because it demonstrates that Article 19-type rules have substantive legal consequences for interconnector operators and regulatory authorities.

Legal significance

The case supports several principles:

congestion income is connected to the allocation of scarce cross-border capacity;

its use is subject to EU electricity-market rules;

interconnector operators do not possess unlimited discretion over the revenue;

regulatory authorities can scrutinise the economic treatment of congestion income.

The case is therefore highly relevant when analysing the legal character of interconnector congestion revenue.

14. Case Law: ACER and Cross-Border Congestion Governance

EU litigation involving ACER also demonstrates the increasingly important role of EU-level institutions in managing congestion.

For example, the General Court's T-483/21 judgment concerned the regulatory framework governing regional operational security and congestion-related remedial measures. The Court considered Article 19 of Regulation 2019/943 and its objective of using congestion-related revenues for investments relevant to reducing interconnector congestion. (EUR-Lex)

The broader legal significance is that congestion management cannot be separated from:

network operation;

remedial action;

cross-border capacity calculation;

investment;

cost allocation; and

revenue utilisation.

Thus, congestion revenue law forms part of a wider architecture of electricity-market governance.

15. Case Law: BNetzA v ACER

A more recent General Court judgment, Cases T-600/23 and T-612/23, BNetzA and Germany v ACER, concerned cross-zonal capacity calculation and congestion management under the EU electricity-market framework.

The judgment of 1 October 2025 addressed issues concerning the allocation of cross-zonal capacity between bidding zones and the methodologies used for congestion management. (Court of Justice of the European Union)

Although the litigation was not simply a dispute over distribution of congestion revenue, it is relevant because revenue cannot be understood independently of the legal rules governing the capacity that generates it.

16. Principles Emerging from the Case Law

The statutory framework and relevant jurisprudence reveal several broader principles.

1. Congestion revenue has a regulated character

It is not necessarily equivalent to unrestricted ordinary commercial profit.

2. Scarcity should not be artificially preserved

Revenue arrangements should not incentivise interconnector operators to maintain congestion.

3. Capacity availability is central

Revenue can be directed towards maintaining the reliability and firmness of allocated transmission capacity.

4. Investment is a recognised use

Where appropriate, congestion income can support investments that reduce congestion.

5. Consumers may ultimately benefit

Where priority purposes are fulfilled, regulatory tariff mechanisms can incorporate residual revenues for consumer benefit.

6. Cross-border governance is essential

Interconnectors operate across legal jurisdictions, requiring cooperation between national regulators and EU-level institutions.

17. Governance Architecture

A modern congestion revenue distribution framework can be represented as follows:

Electricity trading

↓

Cross-border capacity becomes scarce

↓

Market coupling / capacity allocation

↓

Price difference between bidding zones

↓

Congestion income

↓

Regulatory accounting

↓

Priority uses

capacity firmness;

compensation;

maintenance;

remedial actions;

capacity expansion;

congestion-reducing investment

↓

Residual revenue

↓

Tariff treatment / separate account

↓

Regulatory oversight and consumer benefit

This architecture attempts to align market efficiency, infrastructure investment and consumer protection.

18. Problems in Revenue Distribution

Despite the relatively clear legal framework, several difficult questions remain.

A. Who should receive the revenue?

Possible beneficiaries include:

interconnector operators;

TSOs;

national consumers;

network users;

governments;

transmission-system investment programmes.

Different regulatory models may produce different outcomes.

B. Which jurisdiction should benefit?

An interconnector can connect two electricity markets while the infrastructure costs are distributed differently between them.

This creates questions concerning:

cost causation;

benefit sharing;

investment responsibility;

consumer location; and

regulatory jurisdiction.

C. What qualifies as congestion-reducing investment?

This can be legally contentious.

For example, should congestion income finance:

a new interconnector;

reinforcement of an internal transmission line;

a phase-shifting transformer;

redispatch;

digital grid-management infrastructure?

The answer depends on the applicable methodology and regulatory approval.

19. Importance of Transparency

Transparency is fundamental because congestion revenues can become significant when cross-border price differences persist.

The UK system demonstrates this through annual reporting requirements. Ofgem publishes the amount of revenue collected and how it was used. (Ofgem)

Transparency serves several legal objectives:

prevents hidden transfers;

enables regulatory scrutiny;

protects consumers;

allows market participants to understand infrastructure economics;

facilitates cross-border accountability.

20. Relationship with Energy Justice

Congestion revenue distribution also has an energy-justice dimension.

Where scarcity revenues are generated because consumers face differences in electricity prices, allocating those revenues exclusively to private infrastructure owners may raise questions concerning the distribution of benefits and burdens.

Regulatory frameworks therefore increasingly emphasise:

efficiency + reliability + investment + consumer benefit.

The European approach particularly demonstrates that congestion income is connected to the functioning of the internal electricity market rather than being merely an ordinary corporate revenue stream.

21. Conclusion

Interconnector congestion revenue distribution frameworks establish the legal rules governing the treatment of revenues generated when cross-border electricity transmission capacity is scarce.

The EU framework under Article 19 of Regulation 2019/943 establishes a hierarchy in which congestion revenues should primarily support the availability and firmness of cross-zonal capacity and the maintenance or expansion of interconnection capacity. Residual revenue can, subject to the framework, be taken into account in regulated network tariffs. (EUR-Lex)

The UK approach demonstrates how these principles operate through regulatory methodologies, annual transparency reports and the cap-and-floor regime. Ofgem's treatment of Nemo Link illustrates how interconnector revenues can ultimately be shared with consumers in both connected jurisdictions. (Ofgem)

The relevant case law, including the Baltic Cable litigation and subsequent EU cases concerning ACER and cross-zonal capacity, demonstrates that congestion revenue is embedded within a wider legal framework governing market coupling, capacity allocation, network investment and consumer protection. (EUR-Lex)

Accordingly, the central legal principle is that congestion revenue should be regulated so that the economic value created by scarce cross-border capacity contributes to reliable, efficient and expanded interconnection rather than creating incentives to preserve artificial congestion.