1. Walter Boltz, Chairman ERGEG Gas Working Group 17 th Madrid Forum 14 January 2010 Capacity allocation and congestion management in natural gas transmission networks

2. 217 th Madrid Forum, 14 January 2010 Starting point DG Competition’s energy sector inquiry report sets out some of the problems in accessing gas transmission capacity It highlighted contractual congestion and presented evidence of this occurring on a number of key pipelines Access to capacity is key to development of a competitive European gas market and facilitation of cross-border gas trade Mechanisms applied today have not been successful in facilitating a functioning capacity market Two recent antitrust-settlements by DG Competition against incumbents show that long-term capacity booking which prevents access of competitors to infrastructure needed to supply gas to customers can be considered as abuse of a dominant market position

3. 317 th Madrid Forum, 14 January 2010 Capacity allocation and congestion management Capacity allocation mechanisms (CAM) and congestion management procedures (CMP) are closely related Within ERGEG, one team works on both issues to ensure consistency Initial ERGEG principles on CAM & CMP, January 2009 Draft framework guideline on CAM, December 2009 ERGEG recommendations on CMP, December 2009 16 th Madrid Forum May 2009

4. 417 th Madrid Forum, 14 January 2010 Transparency of the process Feedback from January 2009 public consultation (37 responses received) All ERGEG documents and non-confidential responses are published on our website Feedback from February 2009 stakeholder workshop (more than 100 participants) All presentations are published on our website 1st “ad hoc” expert group meeting – 28 October 2009 Minutes of the meeting are published on our website 2nd “ad hoc” expert group meeting – 16 December 2009 Minutes will be published shortly Monthly meetings with GTE+ Minutes will be published in the future Please see www.energy-regulators.eu

5. 517 th Madrid Forum, 14 January 2010 FG development process Commission letter to ERGEG to launch process and topics for capacity pilot FG Draft FG incl. initial impact assessment Set-up of ad-hoc expert group Finalise draft FG Discuss draft input to FG with ad-hoc expert group Discuss draft input to FG with GTE+ 22 Sep 2009 November 2009 RegulatorsStakeholdersTSOs 17th Madrid Forum Presentation on draft pilot FG for public consultation Public Consultation until 26 February 2010 January 2010 Q1 2010 October 2009

6. 617 th Madrid Forum, 14 January 2010 CAM – Problem Identification Problems: Capacity products and capacity allocation mechanisms differ widely from one country to another and sometimes even from one TSO to another within the same country Capacity mismatches at many interconnection points represent a major obstacle to cross-border gas trading and lead to sub-optimal use of infrastructure First-come-first-served not an appropriate allocation mechanism in cases of congestion  ERGEG believes that the capacity products offered and CAM currently used by many European TSOs do not allow for efficient cross-border trading

7. 717 th Madrid Forum, 14 January 2010 CMP – Problem identification Problems: All capacity is booked long-term at most IPs but often not fully used Currently, in many countries there are no mechanisms to bring unused capacity back to the market Market participants ask for firm capacity The more shippers book the existing capacity the more severe the impact of contractual congestion will be Secondary markets do not work properly  Capacity should link markets and not result in a barrier to market integration

8. 817 th Madrid Forum, 14 January 2010 Thank You!