Regulating for Integration: How the EU Balances Competition and Cooperation Among Power Exchanges in Electricity Markets

Regulation is not only about setting rules but also about shaping institutional arrangements and governance structures in markets. In the European Union (EU), electricity market regulation illustrates this dynamic vividly: it requires both competition and cooperation among power exchanges—regulated marketplaces where electricity is traded through standardized mechanisms. Historically, several Member States operated monopolistic power exchanges, but EU market liberalization and integration policies have introduced competition for market share and liquidity within and across national borders. A key piece of legislation was the Capacity Allocation and Congestion Management (CACM) Regulation (EU) 2015/1222, a Commission-adopted implementing act under the EU Electricity Regulation (EU) 2009/714. At the same time, the above regulation mandates deep cooperation among these exchanges, particularly in performing the Market Coupling Operator (MCO) function, which involves jointly developing algorithms and systems for cross-border market coupling to ensure efficient price formation and optimal use of interconnectors. This duality—competition and cooperation under a single regulatory framework—raises fundamental questions for regulation studies: How do regulators design and adjust governance arrangements when market actors must simultaneously compete and collaborate? Regulating for the integration of European markets moreover quickly runs into the issue of whether and how decentralized cooperation evolve into centralized EU-level entities or not. The revision of the Capacity Allocation and Congestion Management (CACM) Regulation, originally adopted by the Commission via comitology in 2015, provides a key case. The ongoing revision, paused during the energy crisis and resumed in 2025, has sparked debate over whether to centralize the MCO function in a single legal entity or maintain multilateral cooperation among exchanges. This paper investigates how and why the EU is re-regulating the balance between competition and cooperation among power exchanges, and what this reveals about EU strategies for regulating as well as making an internal electricity market in Europe. Paper for P2, but could also fit P3 and P7.