On 29 March 2017, the United Kingdom gave formal notice of its intention to withdraw from the European Union based on Article 50 of the Treaty on European Union (TEU).

In accordance with this text, this notification triggered a 2-year period at the end of which the membership of the United Kingdom to the European Union will in principle cease. Thus, unless a withdrawal agreement sets another date or unless the European Council, unanimously and in agreement with the United Kingdom, decides to postpone, as of March 30, 2019 the United Kingdom will cease to be a Member State of the European Union and become a third country.

The potential of a no-deal Brexit must be considered, without prejudice to the outcome of the withdrawal negotiations between the United Kingdom and the European Union.

This letter is to inform all market participants of the potential legal and regulatory consequences of an exit with no deal between the United Kingdom of the European Union. In all cases, RTE will work in close collaboration with the French authorities and the relevant regulators to ensure the proper operation of the electricity markets.

France - England capacity allocation (IFA)

In accordance with the European Commission’s notice to energy market participants of 27 April 2018, “As of the withdrawal date, United Kingdom based operators will cease to participate in the single allocation platform for forward interconnection capacity, the European balancing platforms and the single day-ahead and intraday coupling.  United Kingdom based NEMOs will become third country operators and will no longer be entitled to carry out market coupling services in the EU.”

• Concretely, as far as annual, monthly and intraday France - England capacity auctions are concerned, a no-deal Brexit will have no impact. These auctions are explicit and carried out on a bilateral platform dedicated to the France - England border.
• Concerning daily auctions, in the case of decoupling, a daily explicit auction mechanism is planned. These daily explicit auctions will take place via the CMS IFA platform used for the other market timeframes. On 26 February 2019, RTE submitted the market terms and conditions associated with these explicit auctions for approval to the CRE and is able to implement these auctions from March 30, 2019.
• Energy exchanges such as BALIT on the IFA interconnector will be maintained in the event of a no-deal Brexit. They will cease at the launch of the first European balancing platform.

Bank guarantees

The current market terms and conditions (MA-RE, NEBEF, SSY-F, MECAPA) and contracts in force contain a requirement concerning the registered legal address of the guarantor for bank guarantees required for financial security. The latter may be a credit institution “domiciled in a Member State of the European Union, Switzerland or Norway. "

Thus, in the case of a no-deal Brexit and in accordance with the contracts in force and the market mechanism terms and conditions (MA-RE, NEBEF, SSY-F, MECAPA), RTE will apply the following provisions concerning bank guarantees:

• current first demand guarantees issued by a credit institution domiciled in the United Kingdom before the date of the withdrawal of the United Kingdom from the European Union remain valid;
• guarantors domiciled in the United Kingdom will no longer be authorized to issue a first-demand guarantee under the Terms and conditions and contracts from the date of withdrawal of the United Kingdom from the European Union.

Capacity Mechanism

In their current wording, the capacity mechanism terms and conditions indicate that RTE can require company holders of an account on the register to have "their permanent residence in one of the Member States of the European Union, of the European Economic Area or of Switzerland" and to be "registered for VAT within the European Union".

This faculty will continue to apply post Brexit.

REMIT

RTE reminds market participants that pursuant to the REMIT regulation, it is their responsibility to be registered with the EU Member State national regulatory authority to participate in the electricity markets, in particular those organized by RTE.

In this respect, the European Agency for the Cooperation of Energy Regulators (ACER) has published an open letter in which it informs market participants of the consequences of a withdrawal of the United Kingdom from the European Union on the implementation of REMIT and states that market players registered in the United Kingdom who wish to continue to participate in the European Union’s wholesale energy market will need to be registered with a national regulatory authority of another Member State where they are predominantly active. Although each market participant may register only with one national regulatory authority at a time, the ACER is inviting all relevant market participants to already begin the procedure for re-registration.

In the event a Brexit deal is reached, and subject to the final provisions of such an agreement, there should be a transition period during which Union law would be applicable in the United Kingdom. RTE will contact you to clarify the related terms and conditions.

For additional information, please contact marketservices@rte-france.com (tel: +33.1.41.66.7000) or your usual sales contact.

March 01, 2019