The Role of TSO Madrid 7 -8 Feb

The Role of TSO Madrid, 7 -8 Feb. The Role of TSO

The roles of industry players Scope : • First vision of role of TSO in GTE position paper • Industry players and functions • Topics associated with defining the role of the TSO • Conclusions Madrid, 7 -8 Feb. The Role of TSO 2

GTE Position Paper 2001 • Provision of technical transmission capacity is responsibility of TSO • Commercial matching of supply and demand is responsibility of shipper/supplier Madrid, 7 -8 Feb. The Role of TSO 3

The Industry Players Traders/Wholesalers S T O R A G E Traders/Wholesalers Suppliers / Retailers Shippers Producers Meter source Transmission Madrid, 7 -8 Feb. End Consumers Meter Distribution The Role of TSO 4

Role of Shipper • May buy gas from producer or trader or other shippers • Buys services from transporter • May buy storage services • Nominates gas flows to transporter • May sell gas on to supplier • May be supplier as well Madrid, 7 -8 Feb. The Role of TSO 5

Role of Supplier • • Sells gas to final consumer Buys gas from shipper Does not contract directly with transporter May be integrated with shipper role Madrid, 7 -8 Feb. The Role of TSO 6

Role of Trader • • • Buys and sells gas May buy from producer or shipper May sell to shipper or supplier Does not need to contract with transporter May be a shipper or supplier as well Madrid, 7 -8 Feb. The Role of TSO 7

Minimum role of Transporter • • • Develops & maintains network Maintains physical system balance Receives gas at point of input Delivers gas at point of offtake TSO offtake may be another TSO, a distributor, a direct connection to a consumer, or a storage facility Madrid, 7 -8 Feb. The Role of TSO 8

Key topics for the TSO • Provision of transmission capacity, including sufficient (long term) investment • Maintaining system integrity and safety These topics are closely related to Security of Supply Madrid, 7 -8 Feb. The Role of TSO 9

Transmission Capacity (1) • Long term investments • Traditionally provided by long term supply and transmission contract arrangement, or a regulatory framework such • Transmission services may be provided by competing TSOs, especially in international transmission Madrid, 7 -8 Feb. The Role of TSO 10

Transmission Capacity (2) • Physical transmission capacity facilitates diverse supplies • Continued and growing interdependence of networks throughout the EU • Adequate transmission capacity in any one Member State does not guarantee its supplies • How do we ensure adequate investment in all parts of the transmission chain? Ensure a healthy investment climate for the transmission companies Madrid, 7 -8 Feb. The Role of TSO 11

Transmission Capacity (3) Contract option: – TSO responds to (long term) commitments from shippers – Shippers incentivised/obliged to book sufficient capacity – TSO has no direct security obligations, just contracts Regulated option: – TSO has security obligations (e. g. peak day capacity level) – Investment planned by TSO without long term shipper commitments – Funding provided by regulatory contract In either case, the regulatory and/or legal framework should be clear, stable & encourage investment Madrid, 7 -8 Feb. The Role of TSO 12

Balancing and Flexibility • Transporter manages physical system using: – Line pack inventory; – Access to additional flexibility (e. g. storage) • Shipper manages commercial balancing, including: – Supply/demand portfolio management; – Purchase of flexibility services; – Contracting directly with storage operator; – Paying imbalance charges Shippers are responsible for balancing & should be incentivised to do so - Transporter should have only a residual balancing role Madrid, 7 -8 Feb. The Role of TSO 13

Security of Supply Ensuring that consumers physically receive the gas that they have contracted or are otherwise entitled to expect Security of supply depends upon adequacy of: • Transmission and/or distribution capacity; and • Gas supply (including storage) Madrid, 7 -8 Feb. The Role of TSO 14

Roles and Obligations • TSO should not have supply responsibilities; only physical integrity requirements • For larger consumers, suppliers are responsible but may not need security obligations (will need controllable and measurable offtakes) • For smaller consumers (including residential), there is a public good case for suppliers to have security obligations Madrid, 7 -8 Feb. The Role of TSO 15

PSO for Transporters • GTE is concerned about supply PSOs being placed on transporters because: – confuses primary roles of transporter & supplier; – risks market distortion & perverse incentives; – fair allocation of costs is difficult; and – may encourage supplier gaming Obligations to supply should rest with suppliers, not transporters Madrid, 7 -8 Feb. The Role of TSO 16

Conclusions and Recommendations • Public policy framework should be confined to prescribing outputs (e. g. security standards to be achieved) not inputs (e. g the means) • Market forces and industry should be allowed to find the most efficient solutions • Transporters are responsible for determining infrastructure investment – but need long term investment signals and funding • Hence consider obligations on suppliers to make adequate provision for both gas supplies and transport capacity to meet security standards Madrid, 7 -8 Feb. The Role of TSO 17