Gas Transmission Developments - the role of GTE Milano, 21st November 2001

Overview of presentation Background to GTE Work with other organisations Current initiatives Concluding thoughts

Some background on GTE …

Gas Transmission Europe Formed in July 2000 At request of Madrid Forum European wide body representing gas transmission interests Independent of suppliers (and Eurogas) Separate budget & statutes from 2002

Membership Companies operating gas transmission systems with national borders Transportation arms of integrated companies Transmission not distribution Representatives of EU and accession countries Approximately 30 companies in total

GTE Members

Objectives Contribute to the development of a fully operational European gas market Enhance cross-border transmission Provide information on gas transmission Voice the opinion of the gas transmission industry in Europe

Organisation Chairman – Geert Joosten, Gasunie Plenary 5 seats per country Working groups & Vice Presidents Tariffs Bernard Brelle, Gaz de France Capacity Fritz Gautier, Ruhrgas Balancing Brian Withington, Transco Interoperability Patrick Wailliez, Distrigas

Activities Promoting communication & dialogue Madrid Forum & Joint Working Group Network user organisations Producing Workgroup Reports Providing information Web site www.gte.be Developing guidelines for good practice

Working with other organisations …

Madrid Forum Fourth Meeting 2nd/3rd July GTE tabled 4 main workgroup reports Meeting welcomed contribution of GTE, but: More & faster progress needed … Transparency of capacity & gas flow information Infrastructure plan & capacity constraints Cost reflective tariffs Guidelines for good practice European Gas Industry Standards Board Next meeting in February 2002

Network users Bilateral meetings with: EFET IFIEC Eurelectric OGP Eurogas First joint workshop 15th November 2001

Issues arising from 15th November Network Users Workshop …

Tariff Issues Tariff levels Tariff design Non discriminatory treatment Basis of asset values Tariff design Flexibility of entry/exit versus “point to point” Benefits of “back-haul” Clarity, stability & predictability Pancaking More concern with multiple contracting than pricing?

Capacity Issues Facilitation of secondary market Standard shorter term products Anti-hoarding measures, “use it or lose it” Short versus long term allocations Fixed versus variable quantities Adequate investment Avoid constraints and price shocks Non discriminatory access & information

Balancing issues Availability of linepack & storage services Hourly versus daily balancing Facilitation of balancing markets Level of imbalance charges Cost reflective versus punitive Financial neutrality of TSOs Operational Balancing Agreements

Interoperability issues Gas quality harmonisation Communication protocols Interconnection Agreements & OBAs Development of EASEE-gas organisation Membership, scope and constitution Need for “quick wins”

Network User Reflections Valuable initiative & constructive meeting Welcome further dialogue, but … “Proof of the pudding is in the eating” “Storage access is a worry” “Let’s see more gas to gas competition”

What else is GTE doing at present?

Current GTE Initiatives (1) Tariff Group Commissioning US study Gas flows at design conditions Capacity Group Publication of available capacities Allocation principles Balancing Group Imbalance charge comparisons & principles Security of supply review

Current GTE Initiatives (2) Interoperability Group Supporting formation of EASEE-gas body Gas quality Train ticket study Barriers to cross system transactions Guidelines for good practice Formalising GTE statutes

Meanwhile back at the ranch …

Recent market initiatives Italy Entry/exit regime Holland Modified entry/exit “Daily” balancing UK Periodic review & investment for flexibility Bunde-Emden hub proposal a catalyst for change?

Concluding comments …

Some GTE remarks Provision of transmission infrastructure is a long term business Secure funding is vital Long term contracts have been an integral element of the development of systems Incentives for TSOs to continue to invest must be maintained as markets liberalise Electricity industry solutions do not necessarily translate to gas

Some personal thoughts Successful liberalisation cannot ignore the Security of Supply dimension “Just leave it to the market” is too risky Centralised intervention isn’t the answer either A clear policy framework is needed within which the market can then operate freely Minimum EU infrastructure standards Storage inventory obligations? “Just enough is not enough”