Strategic rationale According to Roadmap project shall focus on short-tem capacity issues: maximising use of existing capacity including reserve capacity through examination of how unused capacity could be released day-ahead and investigating into how TSOs could be incentivised Aim: make available firm primary capacity on day-ahead market

Discussed Models Day-Ahead Oversubscription TSO has good knowledge on how much capacity will be used TSO slightly oversubscribes the system‘s capacity In (rare) cases where flows exceed the system‘s capability TSO buys back the usage rights from shippers Short-Term Calculation TSOs calculate available firm capacity based on long term assumptions and scenarios In the period running up to real time TSOs have more certainty about network conditions, e.g. Can release additional firm capacity to the market day-ahead

Incentivisation TSOs: Incentive mechanism that compensates the additional financial risks coming along with providing additional capacity is needed If not fulfilled, how does it impact the project? The alternative of an ex-ante cost recovery guarantee requires a high level of detailing (no quick-win) An agreed methodology will probably prove to be sub-optimal for each IP No incentive for the TSO to do more than absolutely required/covered TSOs see incentive mechanism as prerequisite for further steps

Status Quo – according to TSOs France: Regulatory system incorporates an incentive to oversell capacity as long as regulator does not increase its sales forecast each year Belgium: Regulatory system not specific to additional revenues generated from extra sales of capacity. No ex-ante guarantee that TSO would be allowed to retain extra revenues Germany: Additional costs for establishing short-term capacity market are not covered in revenue cap and will in practice lead to lower earnings of the TSO Netherlands: revenues resulting from capacity sold above this estimated quantity can be kept by the TSO

Status Quo – The Wider Picture European Process coincides with GRI NW STC process Framework Guidelines Capacity Allocation contain proposals to strengthen short term markets Aims at harmonised standards on certain capacity related issues Potentially impacts STC pilot Finalised Document to be expected in May 2010 ENTSOG to draft network codes Incentivisation is closely linked to national regulators practices National processes e.g. in Germany

Proposed Way Forward April to August 2010 September 2010 October 2010 Workshop on incentives for TSOs to maximise available short-term capacity September 2010 Re-evaluate and if needed adapt project in light of recent developments on European and national levels October 2010 Core Group to propose detailed project Update Programme Board November 2010 Stakeholder Workshop Draft implementation plan to be prepared by Core Group

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