How the Third Package might encourage investment 22

How the Third Package might encourage investment 22 – 23 November 2007 GIE Annual Conference

Major elements of the 3 rd Package • In the draft Directive: – TSOs Independency: Unbundling, ISO, more power to NRAs • In the Regulation : Organisation of the TSOs cooperation – Commission – Cooperation of TSOs within a formal TSO body, ENTSOG – New European regulatory body, ACER • In both documents: Regional cooperation Ø Today’s focus is on how TSOs organize themselves to cooperate in view of fostering investment 2

Cooperation Architecture COMMISSION Market players ENTSOG TSO TSO TSO 3 ACER NRA NRA

Ten Year Statement • ENTSOG has to deliver a Ten Year Investment Plan every two years • Modelling of the network • Scenario development • Supply and demand adequacy report • Assessment of the resilience of the system The Investment Plan shall identify investment gaps, notably with respect to cross boarders • Regional cooperation should also deliver a TYIP 4

Establishment of TYS: Process (1) • In the first step, ENTSOG will analyse if capacity gaps (if any) exist between networks • In a second step, ENTSOG will carry out a study about the resilience of the European Network • European Supply/Demand scenarios could be compared against the Network resilience study • Theses scenarios will be explained to the market 5

Establishment of TYS: Process (2) • Stakeholders will know about capacity shortages • TSOs should organise Open Season ( or auctions) where and when capacity is needed. The process has to be binding, transparent and non discriminatory 6

The transition period • The issue of investment is a priority for GTE, therefore GTE+ will tackle it in 2008 • 3 GTE+ people will be hired in January 2008 to work on GTE+ priorities. GTE members have committed to cover GTE+ costs. 7

What could impede the efficiency of the process? • There is no buyer for the capacity; shippers consider the price too high compared to expected wins – Pipe could be used for SOS reason Extreme cold: a shipper might “take the risk” SOS in case of shortage of one supply source is not an obligation for shippers – Purpose of the pipe is only arbitrage – Price of the capacity is not known • The design of the Open Season is inefficient ( For instance, it is impossible to buy simultaneously entry and exit capacity 8

What could impede the efficiency of the process? • TSO doesn’t organise an Open Season – The price of the capacity offered is low compared with the cost of the reinforcement Transit is not recognised as such E/E price don’t reflect the actual cost • TSO doesn’t build after an Open Season – The capacity needed is « uneconomic » . 9

Conclusion • The Third package is helpful in tackling the investment issue • We still have to work with ACER and EC to prevent impediments 10

Establishment of ENTSOG Commission 3. Opinion 2. Opinion ENTSOG 1. Draft statutes (+ members & procedures) ACER 4. Adopt statutes & establishment (possibly after amendment to meet Commission and/or ACER opinion) 11

Annual Work Programme (AWP) & 10 -year Investment Plan Commission 4. Adopt AWP & 10 -Year. IP 3 bis. Opinion if drafts do not ensure: - non-discrimination - effective competition - efficient market functioning 3. Opinion (optional) ACER ENTSOG 2. Draft AWP (+ results consultation) & 10 -Year. IP 1. Consultation for AWP Market 12

Technical & Market Codes (by ENTSOG) 5. 6. Adopt Guidelines and/or codes (comitology) 4. Request advice on guidelines (optional) 0. AWP 3 bis. Opinion if draft code is: 1. adopted but does not ensure: - non-discrimination - effective competition - efficient market functioning 2. not adopted 3. adopted but not implemented Commission 3 bis. Recommendation - eg: when not implemented: make code legally binding - eg: modify draft code And/Or 3. Opinion (optional) ENTSOG ACER 2. Draft (+ results consultation) 4. Adopt & monitor implementation 13 1. Consultation Market Cooperation with Easee-gas to be sought