1. 1 st GRG meeting, Zagreb, 30 September 2005 Gas Regulatory Group Main issues to be addressed

2. 2 Background… In the beginning of 2005 the establishment of three Gas working groups for SEE was decided: In the beginning of 2005 the establishment of three Gas working groups for SEE was decided: The high level Gas Working Group (EC and governments) The high level Gas Working Group (EC and governments) The Working group on Gas Infrastructure Financing (chaired by the WB, with the participation of GTE, OGP and other industrial stakeholders) The Working group on Gas Infrastructure Financing (chaired by the WB, with the participation of GTE, OGP and other industrial stakeholders) The Gas Regulatory Group (ECSEE Regulators and the EC) The Gas Regulatory Group (ECSEE Regulators and the EC) The GIF group has already had its first meeting in Belgrade last March and is holding its second meeting in Belgrade on 3-4 October 2005 The GIF group has already had its first meeting in Belgrade last March and is holding its second meeting in Belgrade on 3-4 October 2005 It was agreed that the chairman of the GRG will be invited to attend the meetings of the GIF and vice versa It was agreed that the chairman of the GRG will be invited to attend the meetings of the GIF and vice versa

3. 3 Background (cont)… IFIs (especially WB, EBRD) have announced their commitment to financially support gas projects in the SEE region (transmission pipelines, LNG, storage facilities, distribution networks and –possibly- gas fired generation) IFIs (especially WB, EBRD) have announced their commitment to financially support gas projects in the SEE region (transmission pipelines, LNG, storage facilities, distribution networks and –possibly- gas fired generation) The existence of a harmonized, well-defined and stable regulatory framework in the SEE, especially regarding gas infrastructure, is a prerequisite for the provision of the financial support of all regional projects The existence of a harmonized, well-defined and stable regulatory framework in the SEE, especially regarding gas infrastructure, is a prerequisite for the provision of the financial support of all regional projects Compliance with the provisions of the EU legislative framework (Directives and Regulations) and the ECSEE Treaty will be used as a benchmark for financial support by IFIs Compliance with the provisions of the EU legislative framework (Directives and Regulations) and the ECSEE Treaty will be used as a benchmark for financial support by IFIs

4. 4 Background (cont)… WB has announced a feasibility Study on SEE gas economics (existing and anticipated gas market, economics of various regional infrastructure projects) which will be launched very shortly WB has announced a feasibility Study on SEE gas economics (existing and anticipated gas market, economics of various regional infrastructure projects) which will be launched very shortly The EC has distributed a strategy paper for the development of the gas market in the SEE. A second version of the paper is expected The EC has distributed a strategy paper for the development of the gas market in the SEE. A second version of the paper is expected

5. 5 The Scope of the GRG… At this stage, there are two tasks to accomplish: The main priority of this working group is to work on the development of guidelines for the regulation of long- distance gas transmission pipelines in the SEE The main priority of this working group is to work on the development of guidelines for the regulation of long- distance gas transmission pipelines in the SEE PHLG meeting, July 2005: PHLG meeting, July 2005: Protocol on Gas Transmission and Investments Protocol on Gas Transmission and Investments Guidelines for Gas Infrastructure Investment Regulation (GIIR) in Energy Community Guidelines for Gas Infrastructure Investment Regulation (GIIR) in Energy Community Both tasks have been indicated as Output for 2005 The second priority is to work on the strategy for the development of the SEE natural gas market The second priority is to work on the strategy for the development of the SEE natural gas market It is assumed that, following the entry into force of the ECSEE Treaty and the establishment of the ECRB, the tasks of this working group will be transferred to the ECRB (perhaps as a working group of the ECRB?)

6. 6 Guidelines for transit pipelines… Indicative list of issues to be addressed: Indicative list of issues to be addressed: Third Party Access Regime and implementation (including capacity allocation and congestion management) Third Party Access Regime and implementation (including capacity allocation and congestion management) Common approach to possible application of exemptions (Art. 22 of the Directive 55/03/EC) Common approach to possible application of exemptions (Art. 22 of the Directive 55/03/EC) Tariffs Tariffs Balancing regime (including charges) Balancing regime (including charges) Transparency and monitoring Transparency and monitoring Coordination of Regulators (and TSOs) Coordination of Regulators (and TSOs) In parallel, this work should be looked at in relation to the legal framework (national, EU and SEE) In parallel, this work should be looked at in relation to the legal framework (national, EU and SEE)

7. 7 Work on Guidelines for transit pipelines (cont.)… Collaboration with other stakeholders is imperative: Collaboration with other stakeholders is imperative: Gas Infrastructure working group (already established) Gas Infrastructure working group (already established) Gas Industry (has to be organized) Gas Industry (has to be organized) Better information on the possible regional transit projects Better information on the possible regional transit projects Follow-up and input in the gas market economics study Follow-up and input in the gas market economics study Therefore, with the help of the Commission, we need to: Therefore, with the help of the Commission, we need to: Arrange a meeting with industrial stakeholders and TSOs (probably with GTE) to have better insight on their possible plans in the SEE region Arrange a meeting with industrial stakeholders and TSOs (probably with GTE) to have better insight on their possible plans in the SEE region Provide input and feedback to the WB study. It would be very useful for the process if Regulators were kept updated on all stages of the study, even prior to its start. All information included in the study will be part of the input required for assessment by NRAs, especially if applications for exemptions arise in the future Provide input and feedback to the WB study. It would be very useful for the process if Regulators were kept updated on all stages of the study, even prior to its start. All information included in the study will be part of the input required for assessment by NRAs, especially if applications for exemptions arise in the future

8. 8 Work on Natural SEE Gas Market … An initial report on the current state-of-play in the national gas markets of the ECSEE countries has been developed by the Gas TF of the CEER WG SEEER. This report has been approved (with compliments) by the CEER General Assembly and is already available in the CEER Web Site. An initial report on the current state-of-play in the national gas markets of the ECSEE countries has been developed by the Gas TF of the CEER WG SEEER. This report has been approved (with compliments) by the CEER General Assembly and is already available in the CEER Web Site. The EC works on the strategy paper The EC works on the strategy paper We have to define the way of collaboration with the EC on how this WG can contribute to this process We have to define the way of collaboration with the EC on how this WG can contribute to this process ERGEG has already issued a paper on the roadmap for the development of the EU gas market ERGEG has already issued a paper on the roadmap for the development of the EU gas market Since the two processes (in EU and SEE) are parallel, it would be useful to investigate the scope (and the way) of interactions between the two Since the two processes (in EU and SEE) are parallel, it would be useful to investigate the scope (and the way) of interactions between the two

9. 9 Indicative Action Plan for discussion… Next meeting on the guidelines: 3 rd week of October or 2 nd week of November (open to offers on the place). We have to discuss today on how this will be done and who is (are) going to do it Next meeting on the guidelines: 3 rd week of October or 2 nd week of November (open to offers on the place). We have to discuss today on how this will be done and who is (are) going to do it Meeting with industry (early November?): We have to agree with the EC and decide on who would be the counter party (-ies) to such discussions. Perhaps this will also have to wait until the end of the meeting of the Infrastructure working group on the 3 rd and 4 th of October Meeting with industry (early November?): We have to agree with the EC and decide on who would be the counter party (-ies) to such discussions. Perhaps this will also have to wait until the end of the meeting of the Infrastructure working group on the 3 rd and 4 th of October Interaction with the Infrastructure WG (representatives of the chairman will participate to the meeting). Feedback will be disseminated to the members of the GRG Interaction with the Infrastructure WG (representatives of the chairman will participate to the meeting). Feedback will be disseminated to the members of the GRG Follow-up with WB and EC on the SEE gas study (chairman). Updating of the GRG on the evolutions. Follow-up with WB and EC on the SEE gas study (chairman). Updating of the GRG on the evolutions.

10. 10 Indicative Action Plan for discussion (cont.)… Define the corresponding actions (and time table) for the work on the development of the natural gas market in the SEE… Define the corresponding actions (and time table) for the work on the development of the natural gas market in the SEE…

11. 11 Things to keep in mind… The signing of the Treaty in three weeks The signing of the Treaty in three weeks The subsequent establishment of the Regulatory Board (ECRB) The subsequent establishment of the Regulatory Board (ECRB) The provisions of the Treaty, which imply: The provisions of the Treaty, which imply: Involvement of the ECRB Involvement of the ECRB Involvement of ERGEG Involvement of ERGEG Involvement of the EU Council Involvement of the EU Council Involvement of the PHLG and the Ministerial Council Involvement of the PHLG and the Ministerial Council Evolutions on gas in SEE (transit, but not only…) have a great importance for EU Member States. Evolutions on gas in SEE (transit, but not only…) have a great importance for EU Member States. Experience on the field from the EU has to be fully exploited Experience on the field from the EU has to be fully exploited If the work regarding regulation of long distance transmission pipelines is to be adopted as a Measure under the Treaty, then it will have legally binding effects for all ECSEE countries affected by Title III If the work regarding regulation of long distance transmission pipelines is to be adopted as a Measure under the Treaty, then it will have legally binding effects for all ECSEE countries affected by Title IIISo…

12. 12 Conclusion… … We are all facing a big challenge and a lot of work to do and agree on Shall we?