1. 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

2. 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

3. 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)

4. 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.

5. 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

6. 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

7. Thank you!