1. Kevin Shiels Gas Section Ofreg Energy Forum 12 March 2004

2. Todays Topics 1. Background 2. Current Developments in NI 3. All-island gas issues

3. IC1 Twynholm SNIP IC2 BGE Loughshinny & Gormanston Inch Moffat Coolkeeragh South North North west Phoenix Corrib Galway Irish gas transmission network

4. 1. Background High Pressure Pipelines Entry Points ROI NI 1850 km -135 km SNIP -34 km Phoenix -112 km BGE NW -140 km BGE SN -IC 1& 2 -SNIP -Inch -(BGE SN Pipe 06) -(Corrib)

5. 1. Background Gas Distribution/Supply in NI to date Phoenix - Sole active downstream supplier in NI (Greater Belfast area). Grown from zero customers in 1996 to 66,000 now. Licence issued by Government in 1996 allowing exclusive rights in gas distribution and supply. Gas supply full market opening under existing licence arrangements on 1 January 2005. Other licence holder in Greater Belfast - Energia.

6. Transmission 2. Current Developments in NI Transmission 1. Postalisation of gas transmission charges from October 04: - One single set of exit charges for taking gas from the NI Transmission network. - Postalised cost base includes all NI Transmission related costs. 2. NW Pipeline (BGE NI) - complete in Oct 2004. 3. SN Pipeline (BGE NI) - complete in 2006. Greater opportunity for all-island synergies. 4. Asset refinancing - lower costs for both gas and electricity customers.

7. Distribution 2. Current Developments in NI Distribution 1.- Ongoing development in Greater Belfast area (increasing market share for gas). - Full opening to competition in January 2005. 2.- New Distribution and Supply licence: negotiation with BGE (NI) at advanced stage. - Distribution/Supply in the major towns along the routes of the NW and SN pipelines.

8. All-island Gas Issues 3. All-island All-island Gas Issues Some common issues for NI & RoI –Desire by policymakers to consider all-island gas issues. –Security of Supply considerations. –Price! –At the end of a lengthening supply chain. –EU Legislation/Directives.

9. But many differences 3. All-island But many differences Transmission structures: –ownership structures. charging:- ROI entry/postalised exit NI fully postalised Capacity/commodity –network rules. Maturity of development (distribution & supply) - 450,000 customers vs 66,000. Legislative, regulatory, operational, safety, financial, etc.

10. 3. All-island Harmonised Transmission tariffs Joint Steering Group - Request to Regulators: –consider and report back on the cost and benefits of harmonising gas transmission tariff structures. CER/NIAER Joint Study: –Options, costs and benefits of harmonising gas transmission tariff structures on an all-island basis having regard to any legal, regulatory or operational obstacles to achieving an optimum solution. –Completion May 2004. –Time Horizon: 2007/08 - 10 years.

11. 3. All-island Some Good Questions Does having different gas tariff structures matter? If so: What type of tariffs are optimal in an all-island regime: entry/exit, fully postalised, zonal? How should tariffs be calculated? - time horizon; capacity/commodity. How should flows through the new SN pipe be tariffed? To what degree is an optimal harmonised regime deliverable on the ground?

12. 3. All island Study into transmission tariff structures: Identify existing commonalities and differences. Identify benefits of harmonisation and their distribution. Identify obstacles to harmonisation. Identify any costs of harmonisation and their distribution. Identify options for or alternatives to harmonisation.