1. 1 29 th April 2014 Teleconference 28 th IG Meeting South Gas Regional Initiative

2. 2 Agenda

3. 3 II.1. Supervision of the yearly capacity auction in March 2014 (for information by NRAs) II. Early implementation of the CAM NC

4. 4 II.1. Supervision of the yearly capacity auction in March 2014 CAM NC establishes that NRAs should ensure that CAMs are implemented at the IPs in the most effective way SPAIN Following the Circular 1/2014 de la CNMC, the Spanish regulator is going to supervise the application of CAM in last 3 rd March auction. For this purpose, CNMC has requested information to ENAGÁS. The deadline to receive the information on the process is 28 April. II. Early implementation of the CAM NC

5. 5 II.2. Quarterly capacity auction on 3 rd of June 2014. Preparation Process of information to stakeholders. Publication of capacity to be offered in the auction (for information by TSOs) II. Early implementation of the CAM NC

6. 6 II.3. Information about other capacity allocations calendar in the region and beyond II. Early implementation of the CAM NC

7. 7 III. Update. Study on models for integration of the Spanish and Portuguese gas markets (for information by NRAs) III. Iberian Gas Hub

8. 8 MIBGAS Models for the integration of the Spanish and Portuguese gas markets in a common Iberian Natural Gas HUB Area of work ResponsibleStartingQuestions to Stakeholders Deadline Analysis of the possible models for the integration of the Spanish and Portuguese gas markets in a common Iberian Natural Gas HUB NRAs2013May 2014Q3 - 2014

9. 9 General Objective. In order to assess the feasibility for the development of a gas hub, the study analyzes different aspects of the current gas market situation in Spain and Portugal, including prices in the gas market, as the most important factors.. The study covers three different models for Iberian gas market integration, comparing the advantages and disadvantages for each model.  Market Area Model.  Trading Region Model.  Wholesale Market with Implicit Capacity Allocation.

10. 10 1 The Market Area Model (full integration) Market Area A Country A Country B Market Area AB Cross- border market area National market area Final customers (A) Final customers (B) VP Final customers (A) VP. Features. The adjacent transmission and distribution networks situated in the same geographical area (and well interconnected) are forged into a single entry/exit system.. The market area includes all gas transmission and distribution systems of participating countries (one single market area).. The market area enables a single wholesale market with a single virtual point.. The market region has a single balancing system (with a single balancing entity and balancing rules).

11. 11 2 The Trading Region Model (full integration, except balancing) Country ACountry B Trading Region AB End user zone A End user zone B Final customers (A)Final customers (B) VP. Features:. The adjacent transmission and distribution networks that are situated in the same geographical area and that are well interconnected are forged into a single entry/exit system with a single virtual point.. The Trading Region has two end-user balancing zones. The balancing in each end user zone is performed according to the respective national rules (unbalances are managed by the National balancing entities).

12. 12 3. Wholesale market with implicit allocation of capacity. Features:. A certain amount of the interconnection capacity is reserved for implicit allocation.. In this model, gas trade and allocation capacity are assigned simultaneously via a gas exchange (or a gas trading platform).. The implicit allocation may promote market liquidity on the Iberian gas market and can represent a first step for market integration. The introduction of this model would give a new approach to the development of a wholesale gas market, providing price transparency as well as benefits to the retail market, being a preliminary step for further integration through the trading region model or the gas market area model. Market participants make “bids” and “offers” for buying or selling of gas Interconnection capacity is being reserved for implicit allocation The implicit mechanism matches those bids and offer with the highest price differences Capacity is automatically assigned once a trade is made until cross-border capacity is sold out or prices have converged

13. 13 Preliminary evaluation of the models Market Area ModelTrading Region Model Wholesale market with implicit allocation of capacity Requires substantial legal and regulatory alignment among Spain and Portugal (implementation will take many years). Requires very good interconnection capacity. Can be considered as a long term objective for the Iberian Market. Requires substantial legal and regulatory alignment among Spain and Portugal. Requires very good interconnection capacity. Co-habitation of one single virtual point with two end-user balancing zones (possibly with different balancing rules) is really a challenge. Can be applied with limited interconnection capacity (the markets will decouple when the interconnection capacity is fully used). Does not require a high level on harmonization of national legislations (implementation can be faster). Will directly promote market liquidity on the common Iberian gas hub. Can be a first step for the Iberian gas market integration. The implicit allocation may promote market liquidity on the Iberian gas market and can represent a first step for market integration. The introduction of this model would give a new approach to the development of a wholesale gas market, providing price transparency as well as benefits to the retail market, being a preliminary step for further integration through the trading region model or the gas market area model [CNMC1]. [ERSE2] [CNMC1] [ERSE2] [CNMC1] We agree with the new wording[CNMC1] [ERSE2] Because this is a consultation document it seems to us that we should not be so affirmative. And give more space to the comments of the agents. Furthermore, the gas hub is not an objective for itself. The implicit allocation may promote market liquidity on the Iberian gas market and can represent a first step for market integration. The introduction of this model would give a new approach to the development of a wholesale gas market, providing price transparency as well as benefits to the retail market, being a preliminary step for further integration through the trading region model or the gas market area model [CNMC1]. [ERSE2] [CNMC1] [ERSE2] [CNMC1] We agree with the new wording[CNMC1] [ERSE2] Because this is a consultation document it seems to us that we should not be so affirmative. And give more space to the comments of the agents. Furthermore, the gas hub is not an objective for itself.

14. 14 IBERIAN GAS HUB Work in progress 1. Document analyzing the advantages and drawbacks of the possible models, the regulatory harmonization requisites for its implementation by CNMC – ERSE (2014 April). 2. Public hearing (2014 May) 3. Analysis of stakeholders responses to the public hearing (2014-Q3) 4. Final document to be approved by CNMC- ERSE (2014- Q3)

15. 15 IV. Calendar and detailed tasks for the harmonisation: gas day, nomination and renomination procedures, data exchange and reference temperature – priorities for 1st Nov 2015 (for discussion) IV. Balancing and interoperability

16. 16 (for information by TSOs) V. Update of the development of GRIP /TYNDP

17. 17 Next meetings: SG meeting on 22 May is cancelled RCC meeting: date to be determined VI. AOB and next meetings - 2014