Congestion Management ERGEG Recommendations for Guidelines Adopted via

Congestion Management ERGEG Recommendations for Guidelines Adopted via a Comitology Procedure Stefanie Neveling (BNetz. A) Madrid Forum, 14 January 2010

Contents • Why are new rules on congestion management necessary? • ERGEG proposals and Impact Assessment • ERGEG Recommendations and Way Forward Madrid Forum, 14 January 2010 2

Background Physical congestion occurs rarely: <70% of technical capacity 70 -80% of technical capacity 80 -90% of technical capacity >90% of technical capacity 365 days Source: www. gas-roads. eu Madrid Forum, 14 January 2010 Actual flows in 2009 3

General Issues • Scope of guidelines • Rules apply to cross-border points between adjacent entry-exit -systems where subject to booking procedures. • Capacity management clauses in existing contracts shall be amended in line with the implemented provisions. • Network users shall be entitled to reduce their capacity bookings during transitional period. • NRAs shall ensure that TSOs have incentives to achieve the aim of Guidelines. Madrid Forum, 14 January 2010 4

Capacity Maximisation • TSOs to offer the maximum amount of firm capacity that can be offered for use without restrictions. • Technical capacity to be calculated through transparent methodologies, using best available and cost-efficient procedures • Dynamic calculation of available capacity – TSOs shall regularly recalculate capacity based upon actual technical conditions (e. g. temperature) Impacts: How will additional firm capacity impact interruptible contracts? • Risk of being interrupted may increase, but additional firm capacity will be available Madrid Forum, 14 January 2010 5

Oversubscription and Buy-Back • TSOs to implement mechanisms to offer additional firm short-term and longer term capacity • Based on statistic scenarios an extra amount of capacity exceeding the capacity previously calculated to be offered • In case of actual physical congestion transmission system operators shall tender for buying back capacity. • TSOs to estimate the possibility and the costs of buying back capacity on the market and to reflect this in the amount of additional capacity • The mechanisms and possible transition periods for the implementation of these mechanisms are subject to review by NRA Madrid Forum, 14 January 2010 6

Oversubscription and Buy-Back Impacts: • What is the expected impact on availability of capacity? • Based on over-subscription TSOs should be able to offer additional long-term capacity • mechanism does not touch existing contracts • How often will buy-back take place? • Based on current utilisation rates actual buy-back is expected to happen rarely • As a consequence costs will be rather low Madrid Forum, 14 January 2010 7

Firm day-ahead UIOLI • Where demand for firm day-ahead capacity exceeds the offer, NRAs to decide on firm day-ahead UIOLI procedure • To this end, NRAs may reduce or remove existing re-nomination rights reflecting • requirements at specific points • the share of the booking of particular network users • the users’ objectively justified needs • Day-ahead capacity set free by this mechanism to be allocated by auction only • The offer and allocation of day-ahead capacity shall be performed in such a way that buyers can take part in daily gas trading Madrid Forum, 14 January 2010 8

Firm day-ahead UIOLI Impacts: How are shippers affected by restriction of re-nomination rights? • Big portfolios can better cope with unexpected events and therefore may not need full re-nomination rights • Small portfolios to be protected (e. g. “ 2+2”) How are portfolios containing many gas fired power stations affected? • In big portfolios with many power stations fluctuations are neutralised against each other • Smaller portfolios can explicitly be protected • Therefore: No interference with electricity markets expected Madrid Forum, 14 January 2010 9

Firm day-ahead UIOLI Impacts: How does a restriction of re-nomination rights impact balancing? • Portfolio balancing: Expected increase of liquidity of gas markets will help to avoid imbalances • System balancing: Where a system is short system balancing energy can be provided on interruptible capacity Madrid Forum, 14 January 2010 10

Withdrawal of Underutilised Capacity • The procedure requires: • shippers request capacity and unable to obtain this capacity on the primary or secondary market; • capacity holder systematically underutilizes allocated capacity • capacity owner has not sold or offered the capacity and is unable to satisfactorily justify the behaviour • The capacity holder can • lose capacity rights for a given period or for the remaining term • be limited in nomination rights for a given period to the maximum flows of the previous year. Madrid Forum, 14 January 2010 11

Recommendations and Way Forward • ERGEG sees urgent need to improve congestion management in Europe • Stakeholder Workshop on 2 February 2010 • Binding rules are needed for the implementation of harmonised access conditions • ERGEG invites Commission to consider adoption of binding guidelines on congestion management via comitology • ERGEG recommends speedy adoption during the ‘interim period’ – waiting for the third package entering into force is no option • Pragmatic approach preferred either under current Regulation or anticipating the new Regulation • ERGEG is prepared to contribute to the next steps on this issue Madrid Forum, 14 January 2010 12

Thank You! Madrid Forum, 14 January 2010 13