European Developments Capacity Transmission Workgroup 6 th October

European Developments: Capacity Transmission Workgroup 6 th October 2011

Content ¾ Provides an overview of: ¾ ACER Framework Guidelines ¾ ENTSOG CAM Update ¾ Potential key GB impacts ¾ Summary & GB Stakeholder involvement

Framework Guideline ¾ ACER final CAM Framework Guideline published 3 rd Aug ¾ ENTSOG original Code delivery date 27 th. Jan 12 ¾ New Commission invitation to ENTSOG to deliver a CAM Code now extended to 9 th March 12

Changes from Previous Version ¾ The relevant clauses shall be amended within nine months after entry into force of the network code(s) ¾ The standardisation is based on a daily capacity product’s duration from 5: 00 to 5: 00 UTC/GMT, or any other time period harmonised across the EU as defined by European Network of Transmission System Operators for Gas ¾ At least 10 percent of the available firm capacity at each interconnection point shall be set aside for firm capacity services with a duration of less than one quarter ¾ These rules on mandatory bundling also apply, to the extent that they are relevant, to secondary capacity markets ¾ Sunset Clause revised: • Parties to agree, NRAs to mediate • Default rule in case users to not reach agreements • Sanctions allowed by NRAs to enforce agreements ¾ Commission Guidelines for tariff methodologies related to cross-border trade of natural gas or in the Framework Guidelines for network codes on rules regarding harmonised transmission tariff structures ¾ Web-based platform for primary capacity allocation and secondary capacity trading ¾ Timetable for the implementation of a single EU-wide platform required

European Network Code Development Process ENTSO EU Commission ACER (ERGEG/CEER) Work programme ENTSO Agency Commission Stakeholder Consultation Stakeholder workshops Preparation of draft Network Code Stakeholder Consultation & workshops Framework guidelines Commission Agency Consultation Commission Comitology CAM Code Current Phase DECC Legally binding Network Code GB Code Change process

CAM Consultation ¾ Capacity Allocation Mechanism (CAM) ¾ Entsog consultation on CAM draft EU code received 56 responses ¾ GB well represented @10 respondents + Associations ¾ Next Steps: ¾ Publish analysis of responses – now completed 26 th Sept ¾ Continue stakeholder dialogue on key aspects ¾ Sunset clause ‘default’ meeting 6 th Oct (Brussels) ¾ SJWS Stakeholder meeting planned for 20 th Oct (Brussels) ¾ The final EU code is still expected to be published in Jan 2012 ¾ Commission extended Code deadline until 9 th March ¾ ENTSOG may use additional timeline to carry out a short re-consultation period?

Key CAM Documents ¾ Project Plan ¾ Launch Document ¾ All stakeholder (SJWS) meeting material ¾ Draft CAM network code & supporting documents ¾ Consultation responses & ¾ Analysis report ¾ Available from ENTSOG @ ¾ http: //www. entsog. eu/publications/index_g_cam. html 7

ENTSOG Draft CAM Network Code ¾ Overview ¾ In principle similar to GB Entry arrangements however: ¾ Will have impacts to current arrangements ¾ Guidelines applicable to Interconnection Points only 8

GB Regime ¾ Governance ¾ 3 rd package Code development / changes ¾ Commitology timelines may not be appropriate for changes ¾ Lighter change process needs consideration ¾ Handbook approach? ¾ UNC Code change process ¾ T&C – Code amendment timeline 9 months ¾ Implementation? ¾ Different rules for IPs ¾ UNC to differentiate between IPs / Non IPs? ¾ Separate IP Code?

GB Regime ¾ Sunset Clause ¾ Within 5 years of the Code coming into force Users need to agree split of contracts either side of the IP to combine (bundle) capacity ¾ ENTSOG to provide a default rule if capacity is not bundled ¾ Does this effect capacity bookings (as already carried out via transparent auction process)?

GB Regime ¾ Mandatory Bundling ¾ Primary and secondary capacity via bundled products ¾ No opportunity to book / trade at flange ¾ Currently capacity sold in aggregate at an ASEP ¾ Bundling applicable to IPs only (Bacton) ¾ Current bookings out to 2025 ¾ Licence Baselines ¾ Implications to interconnector operators ¾ Art. 22 exemptions

GB Regime ¾ Enduring Exit ¾ Need changes to regime to incorporate auctions ¾ Auction Design ¾ Different to GB Entry auction ¾ Available capacity only no incremental (note: CEER Workplan 2012) ¾ Differing Stakeholders views on key draft Code principles: ¾ LT and MT products ¾ Volume based auction single round, ascending clock multi round, others

ENTSOG Draft CAM Network Code ¾ Standard Products ¾ Concept similar to Entry but differences in the detail design For LT - Users favoured Quarterly

ENTSOG CAM Consultation Auction - Products

ENTSOG CAM Consultation Auction - Design

GB Regime ¾ Interruptible ¾ No obligation to bundle ¾ Only align interruptible services ¾ Min obligation for day ahead (where firm sold out) ¾ CMP v CAM interaction - within day nom

GB Regime ¾ Incentive Regime ¾ Buy back on a bundled capacity product? ¾ Sale of non-obligated with a bundled product? ¾ Interoperability (CET) 05: 00 – 05: 00 gas day alignment ¾ CMP ¾ Commission undertook consultation during summer ¾ [New CMP document to be issued soon] - tbc ¾ [Restriction of renom rights not mandatory] – tbc ¾ [Oversell / Buy backs & incentives] - tbc

GB Regime ¾ Other 3 rd Package Code Interaction ¾ Tariffs ¾ Framework Guideline – then straight to commotology ¾ Code development step not included ¾ Implementation Timelines ¾ Code changes ¾ IT systems timeline ¾ Joint platform(s) / Separate

Summary ¾ Key Summary Points ¾ GB engagement via forums ¾ Process still open ¾ Potential changes to GB regime at IPs ¾ Multiple Code development & interaction ¾ GB engagement & support in EU Code development welcomed ¾ Further EU engagement needed to make stakeholders views understood ¾ More to come!