1. 1 Madrid, 31 st May 2012 16 th SG Meeting South Gas Regional Initiative

2. 2 Agenda

3. 3 II. Capacity Allocation Mechanisms Area of workResponsibleStartingDeadline CAM harmonisation proposal (CAM pilot testing Sp ‐ Pt borders) TSOsJan. 2011Jun. 2012 II.1 CAM to be applied at the Portuguese-Spanish interconnection Procedure approval (for information by NRAs) Information Memorandum (for information by TSOs) II.2 Next Steps and calendar (for information by NRAs)

4. 4 Approval procedure  Regulators, in each country, will approve the common base of the CAM methodology (auction)  The CNE draft document (Circular) was sent to Public Consultation, which finished on 29th May. It is being reviewed taking into consideration Stakeholders’ comments  Once the methodology had been approved, Regulators will revise and approve TSOs’ Information Memorandum and Standard Contracts  After that, the Registration period for the interested parties to participate in the auction will be opened and the procedure will start II. Capacity Allocation Mechanisms

5. 5 Information Memorandum (to be presented by TSOs) II. Capacity Allocation Mechanisms

6. 6 III. Congestion Management Procedures harmonization Area of workResponsibleStartingDeadline CMP harmonization proposal (CMP pilot testing Fr ‐ Sp borders) NRAs-TSOsJan. 2011Jan. 2012 III.1 Results of the CMP comitology process (for information by NRAs) III.2 Next Steps and calendar (for discussion)

7. 7 Results of the comitology process  EC comitology guidelines on CMP have been recently approved (20 th April). They will apply to physical and virtual international connection points and connection between different balancing zones.  No final version available yet (translation + impact assessment needed)  Formal approval by Parliament and Council expected in August. Final adoption in September 2012.  Mechanisms considered in the CMP comitology are: Oversubscription and buyback (to be proposed by TSOs and approved by NRAs) Firm day-ahead UIOLI (by NRAs request) Surrender of contracted capacity LT UIOLI (by NRA request) III. Congestion Management Procedure

8. 8  These mechanisms must be implemented before October 2013, except Firm day-ahead UIOLI, for which the deadline is July 2016  ACER will annually monitor congestion. First ACER’s monitoring report will be produced in 2014. In the meantime regulators will made a list of congested interconnections and will monitor the implementation of the codes So far in the SGRI, work was done on Long Term Use It Or Lose It  NRA will request TSO to release underused capacity when this capacity have not been offered to third parties under reasonable conditions  Primary capacity holder will lose the underused capacity for a specific period of time or until the end of the contract  Primary capacity holder owns contract’s rights and obligations referred to the released capacity until this capacity is contracted by a third party Need to develop common criteria for oversubscription and buy-back? III. Congestion Management Procedure

9. 9 IV. Study on tariffs between Portugal and Spain Area of workResponsibleStartingDeadline CNE-ERSE joint study on tariff regimes in Spain and Portugal NRAs2010Dec. 2011

10. 10 Evaluation of comments from the Public Consultation  16 responses received during the Public Consultation, which denotes market’s great interest. Responses include positive contributions into finding solutions. The comments received are published on regulators and ACER web sites  Regulators currently elaborating the evaluation of comments paper.  General conclusions showed in this document are: Stakeholders agree on the tasks included in the SGRI work plan for 2011- 2014, and consider they are being developed according to plan. Full transposition of the EC third package should be the basis for the regulatory harmonization A convergent goal for the regulatory harmonization is needed, not only at the cross border level but also at European level Stakeholders favour the adoption of transitory measures, either on the regulatory side or on the operational side, than can produce results in the short term. IV. Study on tariffs between Portugal and Spain

11. 11 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q1 Stakeholders welcomed the regulators’ overview of the Iberian transmission systems and its present regulatory framework General agreement on the results Results of the case studies are correct Cross border payments result from adding transmission tariffs at the IPs General support for the initiative of removing unjustified cost barriers at the border Eliminating tariff pancaking at cross border IPs could help the integration of markets More issues should be included in the analysis Different load profiles and suppliers of smaller size (new entrants) Balancing costs Capacity Reservation CBTs are not the only problem, regulatory framework harmonization should include other infrastructures and activities Question 1: Would you agree with the analysis made on current market situation and on the major issues affecting cross border trade between Portugal and Spain? Q1 Q2 Q3 Q4 Q5

12. 12 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q2 (i) European regulatory framework First step of any change in the present Iberian regulatory framework must be the transposition of the European Directives and Regulations CB tariffs should result from general entry-exit transmission tariff methodology They should signal costs and physical constraints Transmission and distribution tariffs should be separated to achieve a better cost allocation Cost and tariff additivity should be applied Cross subsidies between activities and between PT and SP must be avoided Each country’s transmission costs must be recovered Security of supply costs (over capacity) should be covered by exit tariffs to consumers Tariff structure harmonization should be achieved Tariff methodology and capacity/commodity split Price definitions (e.g. reserved capacity vs past 12M max) Treatment of backhaul flows Elimination of tariff discounts Question 2: How do you think that transmission network costs should be allocated at cross border IP (both in Spain and Portugal), taking into account the defined principles (coherence, transparency, cost recovery and cost reflectiveness, etc) and the starting situation of the regulatory tariff framework in both countries? Q1 Q2 Q3 Q4 Q5

13. 13 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q2 (ii) Cost transfer away from CBT CB tariff could be reduced by transferring costs to entry points of MIBGAS and lowering exits to customers in the exporting country ­ This transference should be established in both countries under the same objectives and transparent principles. ­ Need to avoid cross-subsidies between systems, detrimental to national users of one of the countries Inter TSO compensation schemes do not signal costs to network users Other comments suggest a compensation mechanism between TSO and the creation of a single Iberian entry-exit zone Long term view of the CBT Some comments propose the removal of CBT between PT&SP (e.g. electric) Others propose that CBT should be kept Question 2: How do you think that transmission network costs should be allocated at cross border IP (both in Spain and Portugal), taking into account the defined principles (coherence, transparency, cost recovery and cost reflectiveness, etc) and the starting situation of the regulatory tariff framework in both countries? Q1 Q2 Q3 Q4 Q5

14. 14 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q3 (i) Priorities of S-GRI WP2011-14 were confirmed Transposition of EU Directives and Regulations into national law Harmonization of CAM and CMP at the IP Harmonization of balancing rules and incentives Regional investment planning Implementation of common operating license for market agents Other topics were mentioned with detail proposals Reduction of cross border tariff costs Extend harmonized CAM to other capacity products (longer term) and apply long term cap. booking at PT side to make possible to implement NC Single point of nomination for the IPs Harmonization of capacity payments (annual reserve vs past 12M max) Question 3: Which do you feel are the most important aspects where harmonization (apart from the cross border tariffs harmonization) can contribute significantly to short term market integration? Q1 Q2 Q3 Q4 Q5

15. 15 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q3 (ii) Some issues would require a longer time frame Adoption of harmonized mechanisms for investment decisions (Open Seasons) Increase operational reserves for system management by TSO Creation of a single Virtual IP between PT&SP Harmonization of security of supply obligations Single Iberian balancing zone Common communication protocols and data formats for TSO Question 3: Which do you feel are the most important aspects where harmonization (apart from the cross border tariffs harmonization) can contribute significantly to short term market integration? Q1 Q2 Q3 Q4 Q5

16. 16 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q4 (i) Question 4: How would you implement the proposed step-wise approach, aiming for a more integrated market in the longer term? Q1 Q2 Q3 Q4 Q5 Agents proposed different steps, final targets and implementation speeds Strategies can be arranged in several types: A: the most conservative. Ends w/ harmonization of CAM, CMP and tariff principals. B: Also conservative. Includes the proposal of reducing CB tariffs. C: Includes CB tariff elimination in the long term and one Iberian hub. D: The more forward looking strategies include the merger of the 2 Iberian balancing areas and entry-exit zones. This strategy, though ambitious, proposes small incremental steps. E: Ambitious goals and fast moving. For the first three tasks there is a general agreement between all comments. Most comments also propose the reduction of CB tariffs

17. 17 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q4 (ii) Proposed road mapABCDE EU Gas Dir.& Regs. transposition New tariff system in SP and improvement in PT tariffs Decoupled E-E tariff system, Additive tariffs No cross subs, transparent cost allocation; Tariff sufficiency Harmonize CAM & CMP Harmonize Balancing rules (Network Codes) Transitory market-making measures Reduce CB Tariffs (ITC, cost transf. to entries, discounts) CB tariff elimination (no economic border) VIP between PT&SP Single HUB w/ 2 balancing zones (1 EE zone) Single balancing zone, single EE area Question 4: How would you implement the proposed step-wise approach, aiming for a more integrated market in the longer term? 11 1 1 1 22 22 3 3 43 3 Different strategies proposed Q1 Q2 Q3 Q4 Q5 2 2

18. 18 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q5 (i) Operational level improvements Common access platform to manage cross border trade Harmonization of data formats, communication, nomination and schedule Netting of imbalances for shippers in the 2 balancing areas Operating the IP as a virtual point Joint management of underground storage SP-PT and equal tariffs Security of supply Separate “efficient” cost level from extra costs driven by SoS objectives How to look at SoS in an integrated Iberian market perspective Possibility to locate strategic gas reserves in the Iberian space Higher role for TSO activities Providing more flexibility options to market agents TSO working together to provide balancing services to shippers Maximizing CB capacity availability (e.g. oversubscription & buyback) Question 5: Would you identify new issues you think are important to create a favorable cross border trade environment? How would you set the timing and prioritization for the discussion on these issues? Q1 Q2 Q3 Q4 Q5

19. 19 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q5 (ii) Compatibility of the existing long term contracts (transit) Conciliate existing contracts with the new harmonized rules, respecting their legal terms and EU Dirs&Regs Long term capacity booking framework Keep long term capacity contract at transmission infrastructures: efficient cost signal, operative advantages, revenue stability, matches EU codes Make LT contracts binding for TSO and shippers Promote secondary capacity trading HUB development For wholesale market and balancing market purposes Organized spot market development Single balancing point Extend good practices to higher goals Tariff harmonization in the border FR-SP Question 5: Would you identify new issues you think are important to create a favorable cross border trade environment? How would you set the timing and prioritization for the discussion on these issues? Q1 Q2 Q3 Q4 Q5

20. 20 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Other issues (i) Good practices on public consultation procedures Hearing should give at least 8 weeks for comments Trade off between costs and benefits of market integration Investments linked to market integration should be compared against increased competition benefits CEER Gas Target Model interactions NRAs shall develop an analysis on “market functioning” and propose measures to achieve market integration and good market functioning by 2014 CBT Public Hearing could set the grounds for this analysis Other issues raised in the public hearing

21. 21 Next steps 1. Approve and publish the document reviewing and analysing the comments received [deliverable VI.2 SGRI WP] 2. CNE-ERSE proposal for tariff harmonization in SP and PT [deliverable VI.2 SGRI WP] 3. Identify the priorities in MIBGAS market integration process, in particular concerning Cross Border tariff, CAM and CMP harmonization [deliverable VI.3 SGRI WP] 4. Start implementing small, concrete, steps for an harmonized tariff framework, following closely the European network codes in progress Opportunities are there in PT (gas codes revision during 2012) and SP (EU Gas Dir. Transposed in March) 5. Carry on discussions within the SGRI framework and keep stakeholder involvement and updating

22. 22 Area of workResponsibleStartingDeadline Supervision of compliance with the implementation of the new provisions on transparency in the Regulation 715/2009/CE, for transmission, LNG and storage infrastructure operators NRAsSep. 2011Jun. 2012 V. Transparency V.1 Stakeholders’ comments on the operators’ questionnaires: results of the public consultation (for information by NRAs) V.2 Next steps and calendar (for discussion)

23. 23 V.1 Comments received from Stakeholders on the public consultation onsulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Public Consultation on ACER website (end date was the 20 th April) Little participation Participants: 5 agents (two answers are confidential)  TSO  Shippers / suppliers  Industry associations No answers from the French side Note: the comments are shown as they were received, thus they may present inconsistencies and divergences Regulators propose sending a reminder to SG members to encourage stakeholders to participate in Public Consultation on compliance with transparency requirements (Regulation 715/2009/CE)

24. 24 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q1 One participant considers that in a number of cases regulatory requirements have not been met, or information has been provided with a delay, or in a inconsistent and complex manner (examples are not provided). There is need to disclose information in English from one TSO. One operator thinks that, since questionnaire is complex, different criteria could be used to answer some questions for the different operators, influencing the level of compliance (they must include explanations and comments) Two agents consider the links are often not specific of the information they should provide, and in some cases are referred to websites of third parties. One operator would have welcome the inclusion of a reply as a “partially compliant”. Question 1: What are your views on the overall quality, consistency, frequency and availability of the information published by TSOs, LSOs and SSOs in order to comply with the Transparency requirements in Gas Regulation EC/715/2009? Are there any areas of improvement? Q1 Q2 Q3 Q4 Q5 Q6 Q7

25. 25 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q2 Question 2: Do you consider the questionnaires responses accurately reflect the information that is made publicly available by TSOs, LSOs, and SSOs in order to comply with the Transparency requirements in Gas Regulation EC/715/2009? If you consider they do not, please provide specific examples. One operator considers that the conclusion presented with percentages of positive and negative answers is not reflecting the accurate level of compliance. The reasons are given:  implicit subjectivity on the TSOs, LSOs and SSOs criteria  many answers are conditioned by the existing regulatory framework in the Member State: daily and not hourly flow nominations, a daily balancing regime, implicit UIOLI... One user says:  most TSOs’ answers accurately reflect the public information  some LSOs provide links to general information  one SSO questionnaire is filled out with links to NRA’ website Q2 Q1 Q3 Q4 Q5 Q6 Q7

26. 26 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q3 One participant expresses that the degree of user-friendliness of websites and platforms differs considerably – proposal of standardisation between formats used by TSOs. Two agents considers that information published by one operator is difficult to access and to find relevant information (lack of advanced information, information failures, lack of historical information and useless information formats). Question 3: Is the information that is published by TSOs, LSOs and SSOs in order to comply with the Transparency requirements in Gas Regulation EC/715/2009 user-friendly? Where you consider the information is not user- friendly, please provide specific examples. Q3 Q2 Q1 Q4 Q5 Q6 Q7

27. 27 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q4 Two participants answer that no registration or charge is required in order to access public information from all operators websites. Question 4: Is the information that is published by TSOs in order to comply with the Transparency requirements in Gas Regulation EC/715/2009 available free of charge without subscriptions and free of register for online access? Where you find it is not available free of charge please provide specific examples. Q4 Q2 Q3 Q1 Q5 Q6 Q7

28. 28 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q5 One stakeholder considers difficult to assess from TSOs websites if they are providing the information as close to real time as possible. TSOs have access to more frequent data (more than daily) in order to operate their networks efficiently and safely. Encourage regulators to work for understanding fully the TSOs within-day information availability. Question 5: Is the information that is required to be published at all relevant points by the TSOs (Annex 1, Chapter 3, Article 3.3 (a-g)) published “close to real time i.e. as soon as it is available to the system operator”? If not please provide specific examples. Q5 Q2 Q3 Q4 Q1 Q6 Q7

29. 29 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q6 One operator underlines that two LSOs have already implemented the Transparency Platform, but some information (availability of slots for ship unloading operations) is difficult to obtain from some LSOs. One user answers that several LSOs are providing links to too general and extensive information, being difficult to quickly find the desired information. Two stakeholders said that most SSOs publish information in a clear and easily accessible way (two participants agree), even when improvements will be welcome in particular cases. Question 6: Is the information that is required by the Regulation to be disclosed by the LSOs and SSOs published “in a meaningful, quantifiably clear and easily accessible way and on a non-discriminatory basis”? If you consider they do not, please provide specific examples. Q6 Q2 Q3 Q4 Q5 Q1 Q7

30. 30 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers | Q7 Question 7: Do you consider the data on the use and availability of services offered by LSOs and SSOs are published “in a time-frame compatible with the facility users’ reasonable commercial needs”? If you consider they do not please provide specific examples. One operator expresses that regulatory frameworks vary in every Member State as well as maturity of market, level of services provided (tolerance, flexibility services), interest of groups of stakeholders... Q7 Q2 Q3 Q4 Q5 Q6 Q1

31. 31 Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Summary of answers – PRELIMINARY CONCLUSIONS All participants welcome the public consultation on compliance monitoring of TSOs, LSOs and SSOs against the Third Package gas Transparency Requirements launched by SGRI. They support all the improvements and works to be done in order that the real internal gas market becomes a reality, as soon as possible. In general, a significant level of compliance is reported on all requirements, althought it is not the same in the three countries. In some TSOs websites the relevant information is not easy to find. Need to improve frequency of publication, historical data, language, different formats... Some LSOs and SSOs websites reflect the available information but there is room for improvement in easy and direct access. Subjective criteria, misunderstanding and particular national conditions can lead to different interpretations of compliance level.

32. 32 V.2 Next steps and calendar (for discussion) onsulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha Reminder to encourage furthers stakeholders participation in Public Consultation New deadline to Public Consultation: 18 th June Regulators to publish the stakeholders’ answers in ACER website

33. 33 VI. Review of actions in the WP 2011-2014 Areas of workResponsibleStartingDeadline Capacity allocation mechanisms () I.1. OSP France-Spain: annual allocation of short-term capacities TSOs Nov. (yearly) Dec. (yearly) I.2. CAM harmonisation proposal between Spain and PortugalNRAs-TSOsJan. 2011Jun. 2012 I.2. CAM harmonisation proposal in the whole regionNRAs-TSOsJan. 2012Dec. 2013 I.3. Set up a common TSO Allocation Platform: Roadmap and Implementation TSOsJul. 2012Dec. 2014 Congestion management procedures (CMP) II.1. CMP harmonisation proposal between Spain and FranceNRAs-TSOsJan. 2011 Dec. 2012 II.2. CMP harmonisation proposal between and Spain and PortugalNRAs-TSOsJan. 2012Jan. 2013 Investment in new infrastructure. Ten-Year Network Development Plans and projects of common (European) interest III.1. Regular update and publication in CEER website of project status of OS 2013 and 2015 TSOs-NRAsDec. (yearly)Jun. (yearly) III.2. Drafting of the South Regional Investment Plan 2012TSOsJul. 2011Jan. 2012 III.3. Feedback to ENTSO-G on contents and methodology of the regional investment plan NRAsJan. 2012Jul. 2012 III.4. Input to ENTSO-G for the Community-wide TYNDP 2013TSOsJan. 2012Jan. 2013 III.5. Creation of a working group in the region in order to test the process of PCI identification NRAs -TSOsMar. 2012Dec. 2012 III.6. Drafting of the South Regional Investment Plan 2014TSOsJan. 2013Jan. 2014

34. 34 GRIP (Gas regional Investment Plan): A public consultation on the TSOs GRIP was launched on 7 February until 7 March 2012. Only one answer received. Stakeholders are again invited to send comments before 18th June 2012. Regulators will issue their opinion on the following months taking into consideration stakeholders comments VI. Review of actions in the WP 2011-2014

35. 35 VI. Review of actions in the WP 2011-2014 Areas of workResponsibleStartingDeadline Security of Supply (SoS) IV.1 Periodically update on progress on Regulation 994/2010 implementation Competent Authorities Permanent IV.2 Promotion of market’s participation through public consultations in the development of preventive action plans NRAsPermanent Balancing V.1. Contributing to the FG and NC, by raising the regional experience and lessons learned NRAs-TSOsPermanent V.2. Investigation of the use of the gas markets in the region for balancing purposes NRAs-TSOsJun. 2012Jun. 2013 V.3. Analyse the current configuration of balancing zones and possible merging of certain areas NRAs-TSOsJan. 2013Dec. 2013 V.4. Pilot project for a common balancing platform in the three countriesTSOsJan. 2014Dec. 2014 Tariffs VI.1. CNE-ERSE joint study on tariff regimes in Spain and PortugalNRAs2010Dec. 2011 VI.2. CNE-ERSE proposal for tariff harmonization in Spain and PortugalNRAs2010Dec. 2012 V.I3. Further studies to evaluate the current tariff structures and propose improvements NRAsJan. 2012Dec. 2012

36. 36 VI. Review of actions in the WP 2011-2014 Areas of workResponsibleStartingDeadline Interoperability VII.1. Contribute with the regional experience to the development of the FG and the NC NRAs-TSOsPermanent VII.2. Analysis of interoperability aspects and procedures that need to be harmonised among the three countries (in line with the FG-NC) TSOsJan. 2013Jan. 2014 VII.3. In particular, harmonisation of gas day, communication protocols between TSOs, quality standards, programming and nomination schedules, etc. TSOsJan. 2014Dec. 2014 Implementation of the 3 rd Package VII.1. Supervision of compliance with the implementation of the new provisions on transparency in the Regulation 715/2009/CE, for transmission, LNG and storage infrastructure operators NRAsSep. 2011Jun. 2012 Developing hub-to-hub trading in the South region IX.1. Hub development NRAs-TSOs- stakeholders Jan.2013Dec. 2013 IX.2. Hub-to-hub gas trading in the region NRAs-TSOs- stakeholders Jan.2014Dec. 2014

37. 37 VI. AOB and next meetings  Infrastructures associated to OS 2013:. TSOs should send as soon as possible the updated status records required already several times

38. 38 Calendar 2nd semester 2012 - SGRI Proposal: ???? July: 20th IG 27 September : 17th SG 6 November: 21st IG 13 December: 18th SG