EU Tariffs Code Update Based on Refined Draft as of 30th October NTS Charging Methodology Forum 31st October 2014

EU Tariff Code Timeline Start 30/11/13 Finish 31/12/14 January March May September November PHASE 1: project plan & launch documentation development 30/11/13 - 31/01/14 PHASE 2: NC development 01/02/14 - 31/07/14 PHASE 3: NC decision-making 01/08/14 - 31/12/14 draft PP consultation 19/12/13 - 20/01/14 publish initial draft NC for consultation 30/05/14 initial draft NC consultation 30/05/14 - 30/07/14 refined draft NC to SSP 07/11/14 - 21/11/14 Deadline for ENTSOG to submit NC and accompanying document to ACER 31/12/14 formal starting date of NC process 01/01/14 kick-off WS 15/01/14 LD Publication 22/01/14 PP Publication 31/01/14 SJWS 1 11/02/14 SJWS 2 27/02/14 SJWS 3 14/03/14 SJWS 4 26/03/14 SJWS 5 09/04/14 consultation workshop 25/06/14 refinement WS 24/09/14 NC supported by stakeholders 21/11/14 NC supported by ENTSOG 17/12/14

Key Refined Definitions ‘allowed revenue’ means the total revenue that a transmission system operator is entitled to obtain for the provision of transmission services and dedicated services within a given time period under a non-price cap regime set or approved by the national regulatory authority;   ‘transmission services’ means the regulated services provided by the transmission system operator to all network users within the entry-exit system for the purpose of transmission;

Key Refined Definitions  ‘dedicated services’ means the regulated services other than transmission services provided by the transmission system operator to specific network users, or infrastructure operators, or at specific entry or exit points;  ‘regulatory account’ means the account aggregating under- and over-recovery of the transmission services revenue; 

Cost Allocation Methodologies Requirement to recover transmission services revenue “primarily” by capacity-based charges now amended. Requirement now is to recover by capacity-based charges and, subject to NRA approval, by commodity-based charges. Complimentary Revenue Recovery Charge Now purely a commodity based charge Unresolved issue re NRA assessment of cost-reflectivity, cross-subsidisation between IPs and non-IPs and ACER’s role.

Cost Allocation Methodologies Variant A of virtual point based methodology Now rewritten but slightly higher level Attempts to write more detailed version simply recorded GB approach including policy decisions within model But – Publication of “simplified” tariff models now in Code This should provide relevant transparency on methodology Rescaling: restriction now removed on application of rescaling where CRRC is used

Cost Allocation Methodologies Cost Allocation Test Text essentially unchanged from previous draft How this works for GB still a concern Should it be assessed in combination with CRRC test? Shorthaul No settled view to include (ENTSOG Board to decide) Text has been drafted to allow discounted tariffs to be applied (allows shorthaul and other products that have restrictions from standard tariffs) Some NRAs consider no explicit mention required in Code

Additional Publication requirements A simplified tariff model enabling the network users to calculate the transmission tariffs applicable for the current tariff period and to estimate their possible evolution in the following tariff periods Model to be accompanied by the explanations on how to use such tool. Or, sensitivity analyses enabling the network users to estimate the possible evolution of transmission tariffs in the following tariff periods.

Publication requirements Publication notice period for transmission tariffs changed: At least 30 days before beginning of tariff period (as before), plus “At least thirty days before  the annual yearly capacity auction, the transmission system operator or the national regulatory authority, as relevant, shall publish the  indicative reference prices and the binding multipliers and seasonal factors applicable for the tariff period following such auction”. 

Revenue Reconciliation Applies to transmission services revenue only “Single regulatory account” now “one regulatory account” Reconciliation carried out in accordance with the applied cost allocation methodology Text now amended to allow reconciliation to include adjusting the CRRC where relevant (i.e. to do the TO/SO split before applying the cost allocation methodology).

Fixed Price to be allowed at IPs  

Aims for including a fixed price Enhance stability of transmission tariffs while taking account of the contribution that the revenues originating from capacity sales under such approach provide for revenue recovery The objective of avoiding cross-subsidisation between network users; Promoting long-term contracts; Facilitating the offer of incremental and new capacity; Promoting financial stability of transmission system operators. Board decision required to ensure that IP can be fixed price only.

* i.e. a floating payable price Entry into Force 1 October 2017 or The first day of the month following the date calculated as twenty four months as from entry into force New line inserted re fixed price contracts: This Regulation shall not affect the price foreseen in the contracts concluded before entry into force of this regulation, where such a price is calculated in a way other than set out in Article 42(1)(a)* * i.e. a floating payable price