1. Gas Regional Initiative North West Region - Short Term Capacity GRI NW SG Meeting Brussels – 26 November 2010

2. 2 GRI NW SG Meeting Brussels – 26 November 2010  According to Roadmap project shall focus on short-tem capacity issues: -maximising use of existing capacity including reserve capacity through examination of how unused capacity could be released day-ahead and -investigating into how TSOs could be incentivised  Aim: make available firm primary capacity on day-ahead market Strategic rationale

3. 3 GRI NW SG Meeting Brussels – 26 November 2010 Day-Ahead Oversubscription  TSO has good knowledge on how much capacity will be used  TSO slightly oversubscribes the system‘s capacity  In (rare) cases where flows exceed the system‘s capability TSO buys back the usage rights from shippers Short-Term Calculation  TSOs calculate available firm capacity based on long term assumptions and scenarios  In the period running up to real time TSOs have more certainty about network conditions, e.g.  Can release additional firm capacity to the market day-ahead Envisaged Approaches

4. 4 GRI NW SG Meeting Brussels – 26 November 2010 Incentivisation  TSOs: Incentive mechanism that compensates the additional financial risks coming along with providing additional capacity is needed  TSOs sees incentive mechanism as prerequisite for further steps  The German case: Regulatory framework did not foresee the possibility of compensating additional financial risks through incentivisation  Other frameworks have in this regard more flexibility

5. 5 GRI NW SG Meeting Brussels – 26 November 2010  The legal/regulatory framework in Germany (cf. ordinance “Access to gas transmission networks”) changed since prerequisites were identified  Amendement of ordinance “Access to gas transmission networks” (GasNZV; entered into force September 2010)  Gives the german regulator possibility of incentivisation  Particularly relevant in STC context: GasNZV, §10  TSOs may apply measures in order to offer capacity on a short-term basis beyond the already offered technical capacity (“additional capacity”). They are especially entitled to buy firm capacities back from capacity holders as far as this is necessary in order to ensure secure operation of the network.  TSOs have to use revenues generated through the application of measures for cost- recovery of such measures at first. In case revenues exceed the costs, TSOs are allowed to keep 50% of such revenue while 50% are booked on a settlement account. In case costs exceed the revenues, TSOs are obliged to bear 50% of the difference between costs and revenues while 50% are booked on a settlement account. Amendment of german framework

6. 6 GRI NW SG Meeting Brussels – 26 November 2010  German TSOs welcome new ordinance with respect to the possibility of compensating additional risks  Incentivisation issue is not perceived as an obstacle anymore, but other concerns were raised:  How is the technical available capacity approved by NRA? -is still unclear how an approval procedure of technical capacity will concretely look like  such an approval procedure won´t be developed at short notice  Interference with other national/european processes -Obligation to develop one single capacity platform, auction design, merger of entry/exit zones resulting from GasNZV; determination process by BNetzA (bundling, restriction of renomination rights)  in light of limited resources prioritization needed -Cf. Comitology procedure on Congestion Management Procedure  Interference with bilateral initiatives -Cf. Link4Hubs, Gatrac, etc. Reaction by TSOs

7. 7 GRI NW SG Meeting Brussels – 26 November 2010  Determination and commitment by all relevant parties including TSOs, NRAs, and shippers is key to realize a concrete pilot  Described environment is not supportive for a pilot at this stage  Where is added value of such a pilot, if similar products are already marketed? Cf. Link4Hubs  But still valuable lessons learned during this project:  Measures on oversubscription, capacity buy-back and short-term calculation have been intensively discussed and their interactions and dependencies with other measures like restriction of renomination rights were extensively reviewed; lead to substantial gain in knowledge and increased mutual understanding  Introducing of a incentivization mechanism in some regulatory frameworks; amendment of regulatory framework will have positive effects on offered capacity  Discussed measures in STC project found their way into recommendations on congestion management procedures Achieved goals / Lessons learned

8. 8 GRI NW SG Meeting Brussels – 26 November 2010 Thank You!