Today, the Exchange Council of the European Energy Exchange (EEX) held its meeting in Leipzig chaired by Dr Michael Redanz, Managing Director of EWE Trading GmbH. The main subject of the meeting constituted the impending split of the common German Austrian price zone related to the question of how the index of the Phelix Future for the market area Germany/Austria should be determined after the price zone split.
Regarding the introduction of congestion management at the German/Austrian border the Management Board of the Exchange recommends to calculate the Phelix-DE/AT-Index as a weighted average of the hourly day-ahead prices for Germany and Austria determined by EPEX SPOT. The weighting ratio of Germany to Austria shall be set at 9:1. “This proportion takes into account the ratio of the yearly average production and consumption in the national markets Germany and Austria and thus provides a solid basis for the index calculation”, comments Managing Director Exchange Dr Tobias Paulun.
The Exchange Council approved the proposal as the most appropriate method to meet the requirements posed by trading participants to provide a transparent and comprehensible index. This methodology will be included in the corresponding contract specifications. In addition, the Management Board of the Exchange has the option to review the methodology annually and adjusting it, if necessary, in accordance with a corresponding resolution from the Exchange Council. The weighting factor will be reviewed for the first time in June 2020 for contracts with delivery from 2021 onwards to provide trading participants sufficient planning security for long-term positions.
For years EEX and the Exchange Council have intensively been advocating to maintain the established and liquid German-Austrian price zone which plays a key role in the European power wholesale market. Against this background the Exchange Council strongly regrets today’s decision based on the current regulatory development which needed to be taken to secure the future of the power derivatives market.
After the Federal Network Agency had requested the German transmission system operators on 28 October 2016 to prepare a congestion management on the German- Austrian border, expectation in the market grew that there would be a price zone split. This resulted in uncertainty and strong reluctance to trade long-term contracts and a demand for separate national German and Austrian products. Against this background and after consultation with the trading participants, EEX introduced new derivatives products for Germany (Phelix-DE-Futures) in addition to the existing Phelix product range for the German-Austrian price zone. Furthermore, the exchange will add Austrian Power Futures (Phelix-AT-Futures) and further maturities for Phelix-DE- Futures and options at the end of June. EEX’s decision to introduce these products is confirmed not least by the fact that the Federal Network Agency and E-Control announced the introduction of a congestion management on the German-Austrian border on 15th May 2017, to become effective on 1st October 2018.
Today's decision by the Exchange Council on the calculation of the Phelix DE/AT Index after a price split provides assurance for existing and newly opened long-term positions in Phelix DE / AT futures.
The Exchange Council of EEX is an official body of the exchange under the German Exchange Act. It consists of a total of 24 members who expertly represent the various relevant interest groups and business circles. In addition to the trading participants who are represented by 19 elected members from five different voting groups, four representatives from associations and one representative of energy science belong to the Exchange Council. The tasks of the Exchange Council include the formulation of the rules and regulations of the exchange and their amendments. The Exchange Council is also tasked with the supervision of the Management Board of the Exchange and the appointment of the Head of the Market Surveillance.
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