How will the 3rd Energy Package Impact GRI NW ? David Halldearn Energy Market Insights Limited 14 November 2008

Will the 3rd package help? “Regulatory gap” at the borders between national regulatory systems is largely addressed Essential for cross-border investments; system operation; market interactions Codes (probably binding) will set cross border rules National regulators should get the necessary tools to do the job Duties of NRAs broadened to include European ACER created to co-ordinate NRA actions Possibility of binding Guidelines TSOs will have EU level co-ordination bodies

What role will ACER have in Regional markets? Regional Initiatives will probably move from ERGEG to ACER Regional Initiative will remain central to achievement of single market Legal responsibility to co-ordinate activities of NRAs Commission could propose binding Guidelines for co-operation between NRAs Dispute resolution Exemption decisions where NRAs can’t agree Co-ordination of regional and European regulatory policy Could be made binding through Code modifications

Co-ordinating Change to Single Market Framework guidelines and first set of codes will not achieve SEM Task is simply too large, complex and costly Modifications to codes will enable progress to SEM over time Many interested parties can propose code changes with risk of divergent approaches ACER will need to provide clear criteria for assessing code modifications against target of SEM Regional activities will need to take account of these criteria to achieve convergence

Transition to a Single European Market Wide regional and national differences Single market Convergence Now Future

Managing the Transition to a Single Market Co-ordinated change First steps towards SEM First set of codes Modifications to codes Convergence towards SEM Further code modifications Achievement of SEM

Progress will be both bottom up and top down European level Region Region Region Single Market Regional level Region Region Effective co-ordination at all levels will be essential

Bottom up Push for EU Policy In reality progress across EU will be multi speed There is no ‘blueprint’ for a single market – it has to evolve Therefore, interactive nature of transition to single market gives influence to advanced regions GRI NW has great influence: 60% EU gas market Technically most advanced Constituency of big player countries Political involvement inevitable – but not yet fully integrated into GRI NW

Timetable ACER not operational before mid-2010 at the earliest First Codes unlikely before 2012 Regional market development remains important in the interim Sensible companies will not wait for 3rd package implementation Further industry restructuring is likely and may impact on GRI NW

David Halldearn Energy Market Insights Limited david. emil@blueyonder David Halldearn Energy Market Insights Limited david.emil@blueyonder.co.uk 14 November 2008