Capacity allocation in natural gas transmission networks Pilot framework guideline - Public consultation results and new content of guidelines - Dr. Stefanie Neveling, Co-Chair ERGEG TF 18th Madrid Forum 28th September 2010

Scope Scope of the framework guideline: Existing capacity (as calculated by TSOs) of IPs between entry-exit zones within the EU Existing contracts to be adopted six month after entry into force the network code Result of consultation: Scope widely supported Clarity demanded concerning application to capacity of new infrastructure and TPA-exempted infrastructure ERGEG’s response: Consistence of processes for determining incremental capacity Application to unsold capacity developed through open seasons Scope of the Framework guideline: existing capacity as calculated by TSOs of IPs between entry-exit zones within the EU Existing contracts to be adopted six month after entry into force the network code Result of Consultation: Scope widely supported clarity demanded concerning application to: existing capacity or also to the capacity brought in by new infrastructure TPA-exempted infrastructure ERGEG’s response: Consistence of processes for determining incremental capacity Unsold Capacity developed through open seasons

Capacity Services Definition of capacity products: Small number of products, various durations (short term - multi-annual) A minimum share of capacity shall be sold as short term products Firm & interruptible standardised products all over Europe Interruptions should take place in a coordinated manner Result of consultation: Responses agree on quotas for products of different durations, but diverge as to the exact percentage (10-25%) and how it should be set Agreement on need for standardised products ERGEG’s response: Clarification that transit shall not be treated differently Obligation to reserve min. 10% of available cap. for short-term prod. Harmonisation of interruptible capacity deleted  implementation problem (calculation of likelihood of interruption) Definition of capacity products: Small number of products of various durations, from short term to multi-annual A minimum share of capacity shall be sold as short term products Firm and interruptible products Products should be the same all over Europe Interruptions should take place in a coordinated manner Result of Consultation: responses agree on quotas for products of different durations, but diverge as to the exact percentage (10-25%) and how it should be set agreement on need for standardised products ERGEG’s response: Clarification that transit shall not be treated differently Obligation to reserve at least 10% of available capacity for short-term products Harmonisation of interruptible capacity deleted  implementation problem (calculation of likelyhood of interruption)

Bundled services Bundled services: Exit & Entry capacity available at every IP shall be integrated to allow for transports via a single allocation & nomination proc. Sunset clause: entire technical cap. shall stepwise be bundled until 5 years after the entry into force of legally binding network codes One contractual IP for several phys. IPs connecting the same zones Results of consultation: 15 respondents explicitly support bundling & hub-to-hub services 16 respondents are opposed to the full bundling of cross-border capacity  Trading at the flange not to be precluded ERGEG’s response: Full bundling of cross-border capacity will positively & significantly contribute to the integration of the EU gas markets Need for a “sunset clause”: otherwise facilitation of cross-border gas flows will take years or even decades Bundled services exit and entry capacity available at every interconnection point shall be integrated in such a way that the transport of gas is provided on the basis of a single allocation procedure and single nomination. Sunset clause: entire technical capacity shall be bundled five years after the entry into force of legally binding network codes One contractual interconnection point out of several physical interconnection points connecting the same entry-exit zones Results of consultation 15 respondents explicitly support the bundling of cross-border capacity and the creation of hub-to-hub services 16 respondents are opposed to the full bundling of cross-border capacity into one single capacity product. They do not want trading at the flange to be precluded ERGEG’s response ERGEG thinks that full bundling of cross-border capacity will positively and significantly contribute to the integration of the European gas markets ERGEG believes that there is a need for a “sunset clause”: Without such a Clause the facilitation of cross-border gas flows will take years or even decades.

Capacity allocation Capacity allocation procedures: Auction as standard allocation methodology Pro-rata as interim step when necessary First come first served is disallowed (but might be an option under restricted preconditions) Priority: having the same CAM on the two sides of IPs Results of consultation: majority prefers auctions as the standard CAM for firm capacity 2 respondents state that auctions are not the most efficient CAM ERGEG’s response: Through auctions, capacity is allocated to shippers who value it most Pro-rata allocation will be allowed in cases when conditions are not met for efficient and fair auctions for longer-term products Capacity allocation procedures If no congestion, capacity is allocated as requested by shippers Auction as standard allocation methodology Pro-rata as interim step when necessary First come first served is disallowed (but might be an option under restricted preconditions) Priority: having the same CAM on the two sides of interconnection points Results of consultation majority of respondents prefer auctions as the standard mechanism to allocate firm capacity In the views of two respondents auctions are not the most efficient means of allocating capacity ERGEG’s response Through auctions, the capacity is allocated to those shippers who value it most pro-rata allocation will be allowed in cases when conditions are not met for efficient and fair auctions for longer-term products

Stakeholder involvement & conclusions Result of consultation: Request for stakeholder involvement / regular consultations on capacity products (adapted to local market conditions, commodity & balancing products) ERGEG’s response: Stakeholder consultations introduced with regard to: Breakdown of capacity services and the percentage of available capacity to be set aside for firm short term services The CAM used at each IP: In case of auction, the design of auction shall also be consulted upon. Result of consultation: capacity breakdown should be adapted to local market conditions capacity products offered to be in line with markets needs, commodity and balancing products regular market consultations on these products required ERGEG’s response: Stakeholder consultations introduced with regard to: Breakdown of capacity services and the percentage of available capacity to be set aside for firm short term services The CAM used at each interconnection point in accordance with 3. In case of auction, the design of auction shall also be consulted on. Conclusions: Results of consultation valued & incorporated in the FG CAM Well-balanced position reached  Requested clarification and sufficient concretion realised

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