Guidance for project promoters and regulators for the cross-border cost allocation of projects of common interest

Abstract

• At present, the common cross-border cost allocation practice is that each country pays for the assets on its territory. The recently adopted Regulation (EU) No 347/2013 on guidelines for the implementation of European energy infrastructure priorities is an opportunity to improve this practice by introducing innovative cross-border cost allocation (CBCA) agreements. The Cost Benefit Analysis (CBA) that will now be available for all so-called Projects of Common Interest (PCI) is a tool that can be used to design this type of agreements. • The current practice can be improved in three dimensions, and for each we propose a minimum standard. The first way to improve CBCA agreements is to base them on the CBA results. The minimum standard that we propose is that if one of the involved parties in a project is likely to be a significant net loser, that loss should at least be compensated. The second way to improve the CBCA agreements is to enter into a formal contract. The minimum standard that we propose is that this contract at least include a reward/penalty for the commissioning date. The third way to improve the CBCA agreements is to agree on a set of projects rather than individual projects. The minimum standard that we propose is that strongly complementary projects be defined as a single PCI. • We recommend ACER guarantee the minimum standards in its decisions, and we also recommend that project promoters and National Regulatory Authorities (NRAs) consider going beyond these minimum standards in cases where this is opportune. There is indeed room for regulatory innovation in this context, and we illustrate that innovation in CBCA agreements is already happening by referring to the cases of Norway-Sweden and Italy-Greece.