Inter-TSO compensation mechanism

​​​The Inter-Transmission System Operator Compensation (ITC) mechanism is defined by the Commission Regulation (EU) 838/2010. The ITC mechanism provides compensation for:         

•  the costs of losses incurred by national transmission systems as a result of hosting cross-border flows of electricity, and        
          
•  the costs of making infrastructure available to host cross-border flows of electricity.       

Part A of the Annex to the Regulation (EU) 838/2010 sets out guidelines on the ITC mechanism, covering the relevant costs, types of participants, derivation of the compensation and payment amounts and definitions of key input parameters. It also stipulates a number of duties for ACER, the key ones being:         

• to oversee the implementation of the ITC mechanism and report to the ​Commission​ each year on the implementation of the ITC mechanism and the management of the ITC fund; and 
           
• to undertake its best endeavours to assess the annual cross-border infrastructure compensation fund within two years of the application of the ITC regulation, and recommend a figure to the Commission. Along with that recommendation, ACER is also required to provide opinion on suitability of the current methodology of using long run average incremental costs (LRAIC). In its opinion on suitability of LRAIC, the Agency concludes that the LRAIC methodology is - in the context of the current ITC  mechanism - of only limited suitability.          

In March 2013, the Agency published a recommendation on a new regulatory framework for ITC.  In the Agency's view, the future framework should focus on: limiting the infrastructure compensation to existing infrastructures; engaging into cross-border cost allocation agreements for new investments; and on implementing an ex-post compensation mechanism for the loop-flow-induced costs and losses.          

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