1. 1 Madrid, 2 nd Nov 2011 17 th IG Meeting South Gas Regional Initiative

2. 2 17th IG meeting SGRI- Agenda

3. 3 II. Development of ENTSO-G first draft of CAM Network Code (Information by TSOs)

4. 4 III. Capacity Allocation Mechanisms harmonization

5. 5 III.1 Comments sent by Stakeholders Two responses received commenting on the design of the Spanish- Portuguese auction Main comments are: Participants: The requirement for shippers to be registered in both countries where the capacity at the interconnection point is auctioned should be removed (one agent) At least, affiliate companies should be considered the same shipper (one agent) Product definition: Annual products required to assure the possibility to book flat capacity during 12 consecutive months (two agents) Balance of capacity assigned to different products: other products should be allocated in this coordinated process, like day ahead, interruptible and backhaul (one agent) Bundled and unbundled products should coexist (one agent)

6. 6 III.1 Comments sent by Stakeholders Main comments are (cont.): Capacity offered: Incentives required for TSOs to assure they offer the maximum capacity and to promote investments (one agent) An analysis of how to maximize the capacity offered and on the possibility of single virtual point is needed (one agent) Allocation methodology: The CAM should ensure a flat allocation alongside different interconnection points, in order to incentivise gas flow around Europe (one agent) Multiple round algorithm for long term products is suggested, similar to the Spanish one used for allocation of underground storages capacity (one agent) Reserve price: Reserve price equal or lower than the regulated tariff (one agent) For very short term capacity (day-ahead or within day), reserved price zero or lower than the regulated tariff (one agent)

7. 7 III.1 Comments sent by Stakeholders Main comments are (cont.): Binding window (TSOs’ proposal is 5 days): The TSOs’ proposal allows shippers not to participate the first 4 days of the binding window. In this case, aggregated information on the bids provided at the end of these days will not be reliable. An alternative proposal is to have rounds with firm offers from the beginning. (Two agents) Volume-based cleared-price auction: While one agent agree with this mechanism, since it is considered to better maximize the allocation of capacity and minimize the number of bids where pro rata is applied, the other is against this mechanism, because the pro rata may allocate capacity that it is impossible for the shipper to use and because the maximization of capacity may involve no more capacity for others auctions or products

8. 8 III.1 Comments sent by Stakeholders Main comments are (cont.): Other comments: CMP and CAM should be developed in parallel, because CAM effectiveness would be limited by contractual congestions (one agent) There’s a need for keeping coherence with allocation processes applied in the OS between Spain and France: timing, period offered, time products, etc. (one agent) It would be interesting to keep coordination between allocation in the different interconnection points within the SGRI in the future (one agent) Coordination between TSOs is considered essential (single point of contact, single nomination, coordinated data exchange, coordinated capacity calculation, etc.) (one agent) Coherence between gas products and electricity market schedules is required (one agent)

9. 9 (Information by TSOs) Area of workResponsibleStartingDeadline CAM harmonisation proposal (CAM pilot testing Sp ‐ Pt borders) TSOsJan. 2011Jan. 2012 III.2 Progress on the CAM harmonization at Portugal-Spain interconnections

10. 10 IV. Congestion Management Procedures harmonization

11. 11 IV.1 Comments sent by Stakeholders One response received on the proposal for CMP harmonization between France and Spain Main comments are: CMP and CAM should be developed in parallel, because CAM effectiveness would be limited by contractual congestions Interconnection points between Spain and Portugal should also be considered in the proposal CMP should be specific for every capacity product, the same CMP for short and long term capacity shouldn’t be appropriate TSOs should develop a coordinated secondary capacity market, which would promote the application of UIOSI mechanism Ex ante mechanisms, like oversubscription or interruptible capacity, are required in order to maximize the capacity offered in the short and mid term TSOs should develop a common, clear and transparent UIOLI mechanism for long term capacity

12. 12 Scope: All interconnection points regardless of whether they are currently congested or not Mandatory: Overselling and buy-back firm capacity before 1 January 2013: TSOs must propose the scheme and NRAs will approve it The mechanisms will be based on statistical scenarios and structured as revenue and cost-sharing scheme between TSOs and users If there is a potential congestion, buy-back mechanism will be market-based NRAs (in consultation with TSOs) may set minimum overselling volume TSOs to inform NRAs regularly on the functioning of the system IV.2 CMP Comitology Guidelines (amending Regulation 715/2009)

13. 13 IV.2 CMP Comitology Guidelines (amending Regulation 715/2009) Optional: Firm day ahead UIOLI, Mandatory since 1 July 2016 if ACER monitoring report shows that in 2015 contractual congestion has occurred in the allocation of products with a duration of one month or longer Based on renomination rights restrictions: o Firm renominations upwards allowed up to 50% of the fraction of the initially not nominated capacity. The remaining capacity can be nominated on interruptible basis o Renominations downwards allowed down to 50% of the initial nominations o If initial nomination is over 90% of the booked capacity, renominations downwards are not allowed

14. 14 IV.2 CMP Comitology Guidelines (amending Regulation 715/2009) Other mechanisms: Surrender of booked capacity mechanism: When contractual congestion exists, TSO is obliged to accept surrendered capacity TSOs to define conditions for user to surrender totally or partially their booked capacity to TSOs NRAs to approve the mechanisms Long term UIOLI: Capacity holders will lose their capacity if: o Capacity is requested but it’s not available in the primary market o Primary holder has not offered unused capacity in the secondary market o Primary holder uses less than 80% of its contracted capacity for more than 12 consecutive months without justification or during a winter month

15. 15 IV.2 CMP Comitology Guidelines (amending Regulation 715/2009) APPROVAL PROCEDURE: UPDATE Impact assessment and draft document presented in the last Madrid Forum The Forum invited EC to start the comitology process Informal meeting between EC and representatives of the Member States on the 14 th October, countries were given 10 days for written comments

16. 16 V. First draft of the Regional Investment Plan (Information by TSOs)

17. 17 VI. MIBGAS

18. 18 VI.1 Proposal to achieve an integrated market COMMENTS SENT BY STAKEHOLDERS Two stakeholders sent comments proposing a plan to foster MIBGAS Agent 1 proposal: The existence of different regulations hampers the functioning of MIBGAS: In the short term, the proposal is to analyse measures which foster the access to interconnection capacities and LNG terminals, and to design a common balancing mechanism, integrating historical transit capacities: o The same CMP for the entire interconnection capacity o To carry out the CAM pilot project o To revise the tariff methodology in Spain o To compare Spanish regulated tariff and historical transit costs o To align balancing flexibility and imbalances charges o To remove the minimum volume requirement to access the regulated exchanges mechanism in the Portuguese LNG terminal In the mid term it would be necessary to analyze the integration model

19. 19 VI.1 Proposal to achieve an integrated market COMMENTS SENT BY STAKEHOLDERS Agent 2 proposal: SHORT TERM With regard to pancaking: o To finalize NRAs’ study on cross border tariffs; afterwards NRAs to propose harmonized tariff o TSOs to analyze administrative pancaking and to simplify the access to interconnection infrastructures CMP and CAM to be developed at the same time, since CAM’s effectiveness is limited by contractual congestion With regard to interconnection capacity between Spain and Portugal, the agent proposes: o To establish a coordinated and transparent capacity calculation methodology o TSOs to improve coordination in order to increase the capacity and its utilization: single communication point and process, single nomination, single data format and standard procedures to sort out operational constrains o To consider one single virtual point (Tuy + Badajoz) in capacity allocation processes o TSOs to define and develop the following mechanisms: Overselling and buy back, interruptible capacity, backhaul capacity and secondary market

20. 20 VI.1 Proposal to achieve an integrated market Agent 2 proposal (cont.): SHORT TERM NRAs, with Stakeholders’ cooperation, to identify asap in which cases to create national wholesale market areas is possible, and to define where more than one Member State are required when achieving a well functioning wholesale market MID TERM Definition of common balancing rules and penalizations Development of a coordinated, cost reflective and transparent access tariffs for all infrastructures

21. 21 VI.2 Update of ERSE-CNE study on cross border tariffs between Portugal and Spain

22. 22 VII. AOB and next meetings

23. 23 VII. AOB and next business  AOB: Spanish hub operator (presentation by Enagas) Transparency compliance ( follow North Region plan)  Next meetings: ACER asking for a six month agenda Next SG meeting with Ministries, ACER and EC representatives

24. 24 Conclusions: On CAM harmonization ERSE and CNE will give feed back to TSOs on the way forward and will propose the implementation to both Governments On the CMP pilot project, doubts on the way forward are shown, considering the current draft of EC CMP comitology guidelines: mandatory/voluntary oversubscription, ways of surrender the capacity, opportunity to continue with the harmonization of UIOLI long term between France and Spain. Risk and cost should be taken into consideration. Since the cost of UIOLI long term is low, the SGRI will follow working as planned. A precise proposal for the next steps will be made by TSOs. On the GRIP, TSOs will share with the SGRI the investment plan for comments of regulators and stakeholders. In the next IG meeting the plan will be presented and discussed. Conclusions

25. 25 Conclusions: On tariffs harmonisation in Spain and Portugal, after the finalisation of the study, it will be sent previously to TSOs for comments to be provided in a week, and then submitted to public consultation On transparency, regulators will submit questionnaires to check compliance with Regulation, following North Region example Regarding next meeting agenda, regulators will send asap a proposal Conclusions