1 South Gas Regional Initiative 14 th Stakeholders Group meeting Madrid, 11 th July 2011

2 Agenda

3 I.2. Approval of the agenda and minutes

4 II. Work Plan ACER coordination

5 South Gas Regional Initiative Work Plan – Drafting process. 18 th and 20 th April - Letters from EC to CEER » A European Energy Work Plan must be elaborated and sent to EC and ACER by the end of June. 1 st June - First draft SGRI Work Plan (based on previous Action Plan ) » Proposal sent by Lead Regulator (CNE) to CRE and ERSE » Feedback received on priorities, actions and timetable » First version agreed by RCC on 13th June. 13 th June - Work Plan launched for Public Consultation among stakeholders » Nine responses received from TSOs, shippers and associations. Definitive Work Plan sent to CEER on 1 st July. It will be sent to EC and ACER by mid July

6 South Gas Regional Initiative Work Plan – Comments received in PC General comments (1) » The SGRI should bring forward work on tariff harmonisation and redouble its efforts on commercial interconnection capacity » Cooperation between Spain and Portugal to set out the steps necessary to establish a cross-border balancing zone. A SGRI pilot project to plan the implementation of this approach by mid-2013 » In relation to TYNDP, it is critical for the future of the sector to support new investment, while ensuring that the selected projects are not redundant with others. The first step is to ensure that development projects are following their defined plans. Regular publication and follow-up of project status is crucial (e.g. OS Fr-Sp)

7 South Gas Regional Initiative Work Plan – Comments received in PC General comments (2) » A critical aspect: harmonization of tariffs. All achieved success could be turned off by not harmonized tariffs. It is urgent to remedy the duplication of tariffs or "pancaking effect" existing while supplying natural gas from Sp to Fr or Pt. Support is given to the ERSE-CNE joint study; a similar one between CNE and CRE is requested. Meanwhile, adopt a provisional measure to mitigate the effect of duplication of existing tariffs: it should be increased the existing discount on the transportation and distribution fee associated with natural gas exports by international connections (ITC/3354/2010) to temporarily offset the negative effect of pancaking, without reducing system revenues » On interconnection capacity management: consider the joint management of virtual interconnection points between Sp and Pt/Fr, facilitating optimisation of the existing infrastructure facilites

8 South Gas Regional Initiative Work Plan – Comments received in PC Rationale and objectives » Add, as an objective, the creation of a single balancing zone of Iberian scope (Sp-Pt) in the horizon of 2014, in line with the European work on Network Codes and with the discussions on the Target Model

9. Capacity allocation (CAM) » Go on with annual OSP for ST capacities. Explore pilot CAM in Fr-Sp » Harmonisation and application of joint mechanisms (pilot testing of CAM FG-NC) starting from the interconnection Pt-Sp » Set up a TSOs Common Allocation Platform South Gas Regional Initiative Work Plan – Main contents Capacity allocation mechanisms (CAM) Areas of workRespons.StartingDeadline I.1. OSP France-Spain: annual allocation of short-term capacities TSOs Nov. (yearly) Dec. (yearly) I.2. CAM harmonisation proposal between Spain and Portugal NRAs- TSOs Jan Jan I.2. CAM harmonisation proposal in the whole region NRAs- TSOs Jan Dec I.3. Set up a common TSO Allocation PlatformTSOs Jan Dec. 2014

10 South Gas Regional Initiative Work Plan – Comments received in PC. Capacity allocation (CAM) » Proposal for the application of pilot CAM (auctions) by Enagas and TIGF for Fr-Sp capacity currently under OSP » Joint CAM mechanisms between Sp and Pt should be transitory, as in a second stage there shouldn’t be CAM between both countries » Proposal of new task: analyse CAM harmonisation in entry points to Sp and Pt systems, in view of the creation of a single balancing zone between both countries

11. Congestion management (CMP) » Design of a CMP pilot project in the interconnection Fr-Sp » Extension of this coordinated CMP mechanism to Sp-Pt South Gas Regional Initiative Work Plan – Main contents Congestion management procedures (CMP) Areas of workRespons.StartingDeadline II.1. CMP harmonisation proposal between Spain and France NRAs- TSOs Jan Jan II.2. CMP harmonisation proposal between Spain and Portugal NRAs- TSOs Jan Jan. 2013

12 South Gas Regional Initiative Work Plan – Comments received in PC. Congestion management (CMP) » Proposal of new tasks: -Determine the existence of physical and contractual congestion - Analyse if the transit contract Algeria-Portugal is in accordance with the requirements of Regulation EC/715/ Analyse whether the Spanish pipelines between Tarifa and Badajoz fulfil the unbundling requirements from Directive EC/73/ As a result of the above analyses, set up coordinated CMPs or, alternatively, procedures for a common technical management of Sp-Pt balancing zones » CMP analysis and harmonization proposal between Sp and Pt should be done during 2011 and 2012, before the analysis in Fr-Sp » Proposal of new task for : -Establish mechanisms and measures for maximising interconnection capacity, such as: higher coordination between TSOs, oversubscription, etc.

13. Investment – Ten Year Network Development Plans and projects of common (European) interest » Publication and follow-up of project status from OS Fr-Sp » Input from NRAs-TSOs to the Community-wide TYNDP » Elaboration of Regional investment plans (GRIPs) by TSOs. Evaluate need for new infrastructure, with market mechanisms and other factors » Regulation 994/2010: analysis and implementation in the Region South Gas Regional Initiative Work Plan – Main contents Investment in new infrastructure. Ten-Year Network Development Plans and projects of common (European) interest Areas of workRespons.StartingDeadline III.1.Regular update and publication in CEER website of project status of OS 2013 and 2015 TSOs-NRAs Dec. (yearly) Jun. (yearly) III.3. Drafting of the South Regional Investment Plan 2012TSOsJul. 2011Jan III.2.Feedback to ENTSO-G on contents and methodology of the regional investment plan NRAsJan. 2012Jul III.2. Input to ENTSO-G for the Community-wide TYNDP 2013TSOsJan. 2012Jan III.3. Drafting of the South Regional Investment Plan 2014TSOsJan. 2013Jan III.4. Regulation 994/2010: analysis and implementation in the RegionNRAs-TSOsJan. 2012Jun. 2012

14 South Gas Regional Initiative Work Plan – Comments received in PC. Investment – Ten Year Network Development Plans and projects of common (European) interest » Additional text proposed: reference to the North-South Corridor in Western Europe included in the EC Communication on Infrastructure, which could be developed through MIDCAT. Request for a new evaluation of MIDCAT, once ERIDAN has been approved » Inclusion of two new tasks (also in the timetable of actions) III. 2.Evaluation of MIDCAT as a project of common (European) interest linked to the North-South Corridor in Western Europe III. 3.Evaluation of MIDCAT considering that ERIDAN project is approved and gets the EEPR funds and impact in the economic test

15 South Gas Regional Initiative Work Plan – Comments received in PC. Investment – Ten Year Network Development Plans and projects of common (European) interest » Add references to the active participation of stakeholders in the elaboration of TYNDPs, and their approval by NRAs » Support the application of market mechanisms to evaluate the need for new infrastructure » Evaluate projects that would be justified from a SoS/solidarity perspective, but are unable to attract market-based finance, and may require alternative mechanisms » Reg. 994/2010 (SoS): the competent authority is the Ministry; it is not mentioned how consistency will be ensured

16. Balancing » Contributing to FG-NC, with regional experience and lessons learned » Investigation of the use of the gas markets for balancing purposes » Analyse the current balancing zones and possible integration » Pilot project for a common balancing platform in the three countries South Gas Regional Initiative Work Plan – Main contents Balancing Areas of workRespons.StartingDeadline IV.1. Contributing to the FG and NC, by raising the regional experience and lessons learned NRAs- TSOs Permanent IV.2. Investigation of the use of the gas markets in the region for balancing purposes NRAs- TSOs Jun Jun IV.3. Analyse the current configuration of balancing zones and possible merging of certain areas NRAs- TSOs Jan Dec IV.4. Pilot project for a common balancing platform in the three countries TSOs Jan Dec. 2014

17 South Gas Regional Initiative Work Plan – Comments received in PC. Balancing » Among the objectives: creating a single balancing zone between Sp and Pt for 2014 » Add a new task for the design of mechanisms enabling the integration of balancing zones (such as OBAs), and analysis of regulatory harmonisation

18. Tariffs » CNE-ERSE joint study on tariff regimes in Spain and Portugal » Further studies to evaluate tariff structures and propose improvements South Gas Regional Initiative Work Plan – Main contents Tariffs Areas of workRespons.StartingDeadline V.1. CNE-ERSE joint study on tariff regimes in Spain and Portugal NRAs2010 Dec V.2. Further studies to evaluate the current tariff structures and propose improvements NRAs Jan Dec. 2012

19 South Gas Regional Initiative Work Plan – Comments received in PC. Tariffs » Studies to evaluate the current tariff structures and improvements should be done as soon as possible, and no later than Dec-2012 » While such studies are undertaken, analysis of alternative provisional measures, such as a review of the transmission tariff cost and the structure associated with exports of natural gas through international interconnection establish in Order ITC/3354/2010

20. Interoperability » Contribute with regional experience to the development of FG and NC » Analysis of interoperability aspects and procedures that need to be harmonised among the three countries (in line with FG-NC) » Harmonisation of gas day, communication protocols between TSOs, quality standards, programming and nomination schedules South Gas Regional Initiative Work Plan – Main contents Interoperability Areas of workRespons.StartingDeadline VI.1. Contribute with the regional experience to the development of the FG and the NC NRAs- TSOs Permanent VI.2. Analysis of interoperability aspects and procedures that need to be harmonised among the three countries (in line with the FG-NC) TSOs Jan Jan VI.3. In particular, harmonisation of gas day, communication protocols between TSOs, quality standards, programming and nomination schedules, etc. TSOs Jan Dec. 2014

21. Implementation of the 3rd Package - Transparency » Supervision of compliance in implementation of the new provisions on transparency in the Regulation 715/2009/CE, for transmission, LNG and storage infrastructure operators South Gas Regional Initiative Work Plan – Main contents Implementation of the 3 rd Package Areas of workRespons.StartingDeadline VII.1. Supervision of compliance with the implementation of the new provisions on transparency in the Regulation 715/2009/CE, for transmission, LNG and storage infrastructure operators NRAs Sep Dec. 2011

22. Developing hub-to-hub trading in the South region » Debate on the Gas Target Model within the SGRI, and advise on the general discussions in Europe » Hub development: promotion and endorsement of organised gas markets (hubs) » Final goal: contributing to a true hub-to-hub gas trading in the region South Gas Regional Initiative Work Plan – Main contents Developing hub-to-hub trading in the South region Areas of workRespons.StartingDeadline VIII.1. Debate on the GTM inside the SGRI and advise on the general discussions in Europe NRAsPermanent VIII.2. Hub development NRAs- TSOs- stakeholders Jan.2013 Dec VIII.3. Hub to hub gas trading in the region NRAs- TSOs- stakeholders Jan.2014 Dec. 2014

23 III. Tasks for 2011 III.1 CAM harmonisation proposal – Pilot testing of FG CAM in Portugal-Spain interconnection (for information by TSOs)

24 South Gas Regional Initiative CAM harmonisation. Actions established in the new Work Plan :. Update in last IG (6 th May): Enagas and REN have already started to work on a proposal for harmonising the capacity allocation mechanisms (CAM) between Portugal and Spain. The proposed method, based on a coordinated auction of bundled capacity, would start in June 2012, for allocating capacity from 1 st October 2012 to 30 th September TSOs were requested to provide a timetable with deadlines and deliverables by mid July Capacity allocation mechanisms (CAM) Areas of workResp.StartingDeadline I.1. OSP France-Spain: annual allocation of short-term capacitiesTSOs Nov. (yearly) Dec. (yearly) I.2. CAM harmonisation proposal between Spain and Portugal NRAs- TSOs Jan. 2011Jan I.2. CAM harmonisation proposal in the whole region NRAs- TSOs Jan. 2012Dec I.3. Set up a common TSO Allocation PlatformTSOsJan. 2014Dec. 2014

25 South Gas Regional Initiative CAM harmonisation. Update by TSOs – Enagas, REN

26 III.2 CMP country analysis and harmonisation proposals – Pilot testing of CMP guidelines for comitology

27 South Gas Regional Initiative CMP harmonisation. Actions established in the new Work Plan :. Update in last IG (6 th May): TSOs’ initial proposal for CMP harmonisation between France and Spain, based on the application of long-term Use-It-Or- Lose-It (UIOLI). A number of aspects to be harmonised or analysed for this mechanism to be in place: existing Public Service Obligations (PSOs) in France, possibility to get rid of the long term capacity contracts in Spain after the first year, etc. Legal changes could also be required.. TSOs would provide the SGRI with a more developed proposal in July, based on the findings of this analysis. TSOs will also prepare a short list of the main relevant issues to be tackled in both countries. A first draft to be presented in the next SGRI meeting. Congestion management procedures (CMP) Areas of workResp.StartingDeadline II.1. CMP harmonisation proposal between Spain and FranceNRAs-TSOsJan. 2011Jan II.2. CMP harmonisation proposal between Spain and PortugalNRAs-TSOsJan. 2012Jan. 2013

28 South Gas Regional Initiative CMP harmonisation. Update by TSOs – Enagas, TIGF, GRTgaz, Naturgas

29 III.3 Harmonisation of cross-border tariff structures between Portugal and Spain

30. Actions established in the new Work Plan :. Update in last IG (6 th May): The preliminary study will be completed by NRAs within the following weeks, so that proposals on cross border transmission tariffs that contribute to market integration are included, and to consider other factors, such as the use of all infrastructure tariffs. It will be sent initially to network operators through the IG for comments. After that, it will be shared with stakeholders in a public consultation. South Gas Regional Initiative Harmonisation of cross-border structures Portugal-Spain Tariffs Areas of workRespons.StartingDeadline V.1. CNE-ERSE joint study on tariff regimes in Spain and PortugalNRAs2010Dec V.2. Further studies to evaluate the current tariff structures and propose improvements NRAsJan. 2012Dec. 2012

31 South Gas Regional Initiative Harmonisation of cross-border structures Portugal-Spain. Update by NRAs – ERSE, CNE

32 IV. Presentation on market coupling in France - Powernext

33 V. AOB and next meeting(s)