1. Bonn Workshops 8 and 9 Feb. 2007 Gas Regional Initiative North West Region Balancing workstream Workstream leader: Cemil Altin (Ofgem)

2. 2 GRI – NW Bonn Workshops, 8 and 9 Feb. 2007 Background North West region identified gas balancing as a priority area of work The North West RCC issued a questionnaire to market participants on gas balancing in November. Also published on ERGEG website ERGEG also published its final guidelines for good practice for gas balancing (GGPGB) in December after open/transparent consultation – sets out guidance to NRAs/TSOs on design of gas balancing mechanisms 18 responses were received to the North West RCC gas balancing questionnaire. All non-confidential responses are on ERGEG website A “facilitation paper” for this session has been prepared and circulated by the RCC alongside a “data appendix”

3. 3 GRI – NW Bonn Workshops, 8 and 9 Feb. 2007 Purpose of this session Discuss the responses to the questionnaire Discuss the key issues that arise Discuss what the possible next steps should be Important opportunity for all stakeholders to express their views

4. 4 GRI – NW Bonn Workshops, 8 and 9 Feb. 2007 The questionnaire and responses Responses received from TSOs, shippers and traders Respondents were asked to identify for interconnection points that they use issues associated with interaction between gas balancing mechanisms: Balancing periods Nomination/re-nomination regimes The way allocations are derived How imbalances are calculated Tolerance levels and services offered Market mechanisms in place for balancing The information provided either side of the connection point Respondents asked to rate difficulty caused by the issue (from 1 for “not difficult” to 5 for “extremely difficult”)

5. 5 GRI – NW Bonn Workshops, 8 and 9 Feb. 2007 The questionnaire and responses A number of respondents did not provide ratings in all instances or different figures for the same issues depending on the interconnection point Table below summarises scores given by respondents

6. 6 GRI – NW Bonn Workshops, 8 and 9 Feb. 2007 Some observations on the responses A significant number of the problems identified by respondents appear to relate to operation of gas balancing mechanism within a specific country rather interaction between mechanisms e.g.: The way allocations are derived The way imbalance prices are calculated and/or lack of liquid, market based mechanisms Some problems were identified in the interaction between “networks” e.g.: Differences in nomination/re-nomination arrangements between National Grid & IUK can lead to missed trading opportunities & reduced liquidity Some problems were also identified with the interaction between networks within a particular country e.g.: Differing tolerance levels in Netherlands Different arrangements across Germany There are differences in the level, way and frequency of information provision between connected systems – this appears to give rise to problems of risk management/ability to take effective balancing actions/could give lead to barriers to entry

7. 7 GRI – NW Bonn Workshops, 8 and 9 Feb. 2007 Some themes and questions Themes There are some distortions and complexities caused by the way balancing mechanisms interact There are problems in managing risk effectively and efficiently in some gas balancing mechanisms There are differences in the level, scope, method of information provision between gas balancing mechanisms

8. 8 GRI – NW Bonn Workshops, 8 and 9 Feb. 2007 Some themes and questions Questions What are the key areas of interaction between gas balancing mechanisms? How do these interactions impact on the ability of market participants to manage risk? Do these interactions lead to barriers to entry/trade? Do any barriers impinge disproportionally on smaller players? What can be done to manage the interactions more effectively? What could be done to improve the level, scope, consistency of information provided under balancing mechanisms? Are there any countries in the North West region where the problems of gas balancing are particularly acute? If so, what could be done about them?

9. 9 GRI – NW Bonn Workshops, 8 and 9 Feb. 2007 Possible ways forward? For discussion Application of the ERGEG GGPGB – to improve the operation of gas balancing mechanisms within each country Development of information templates for gas balancing – in consultation with stakeholders to improve transparency and therefore ability to manage risk within/across balancing mechanisms Development of 2 case studies on gas balancing interactions – to explore in more detail the interactions between balancing mechanisms Who should do what? RCC IG SG Enabler Group