Cost allocation of enabler projects Commissioning dates Gas Regional Group Meetings, Brussels 23-24 February 2015 DISCLAIMER: The opinions expressed in this presentation do not necessarily represent the official views of the Agency.

Cost allocation of enabler projects ACER and the NRAs were asked by the Commission to provide input Preliminary comments provided on 19 December 2015 Further discussions took place in Jan-Feb 2015 within the ACER Gas Infra TF The issue: If an enabler project appears in more than one group, how should its costs be allocated between the groups (for the project-specific CBA)? The following views are preliminary and do not constitute an opinion of the ACER’s Gas Infra TF Explain the process – state of play in the consultation, preliminary views Explain the definition of “enabler project” and “dependent project” ACER understands that the concept of “grouping” is in a test-phase and it may not be the final method of putting projects on the next PCI list ACER in this presentation would like to present the caveats of the “grouping” and the impossibility of the allocation of costs of enabler projects Which are the concrete projects (and Member States) which may be “enablers” but appear in several groups at this time? Eridan (NSI West) – France, Spain Est Lyonnais (NSI West) – France, Spain Compressor station in HR GTS (NSI East) – Austria, Croatia, Slovenia Compressor station Kidricevo upgrade (NSI East) – Austria, Croatia, Slovenia North-South gas corridor in Eastern Poland (in BEMIP and in NSI East) – Lithuania, Poland, Slovakia South Caucasus pipeline expansion (SGC) – Greece, Italy Trans-Caspian (SGC) – Greece, Italy Balticconnector (BEMIP) – Finland, Estonia

Illustration of the issue

Various options considered 100% costs of enabler project taken into account in all groups in which the project appears The CBA would need to be repeated in case all relevant groups are implemented and their promoters ask for a CBCA. The case where at least two dependent projects are implemented is not accounted for. Cost allocation based on the share of benefits according to the project-specific CBA The uncertainties in the CBA methodology may lead to distortions in the results. Cost allocation based on the use of infrastructure between the groups How would the actual infrastructure use be calculated (entry-exit systems, tariffs)? In specific cases (e.g. compressor stations) it may be difficult to clearly identify in the design the needs of the various dependent projects within the enabler. Even allocation of costs  50-50% or 33-33-33%, etc. Excessive costs in one instance and unrealistically lower costs in other instances. Not fair to small projects which only need a small part of the enabler capacity and would benefit from the enabler project to a lower extent, i.e. an issue of fair treatment of projects regardless of their size. Allocating all costs to the group which is realized earlier (negative “winner takes all”) Implementation deadlines may change and this may make the CBA results void. In addition, this may discourage early implementation. Correction is needed once the 2nd group is commissioned. Allocating all the costs to the group that would realize a higher level of benefits Lack of fair burden sharing. Cross-subsidies.

The right option (proposed) Properly define the notions: Enabler project and dependent project Enhancer project Set of interlinked projects (“group” for the purposes of analysis only) Options within a set of interlinked projects Cost allocation of enabler projects (= analysis of cost attribution options, not CBA or CBCA) Proper use of cost allocation of enabler projects: Simply an analytical procedure for examining the available options using the established CBA methodology No recourse on the status of the enabler and the dependent projects as individual PCIs and their respective promoters

Definitions of notions (proposed) Enabler project and dependent project: An “enabler” makes (an)other project(s) technically feasible - the “dependent project(s)” - and implementing the projects does not lead to negative net benefit Enablers may be implemented on their own, dependents may not If the projects are mutually dependent on each other, they are “twinned” If there are several enabler projects, they are the “enabling core” Should be implemented concurrently or shortly one after the other Enhancer project: Feasible regardless of (an)other project(s) and whose implementation leads to greater positive net benefits than the sum of the positive net benefits from the stand-alone implementation of the projects. Enhancers are not enablers - should be treated on their own merits (no cost allocation within analytical groups). Set of interlinked projects: an enabler (or an enabler core) and all its dependents together (may include projects in several existing groups) Options within a set of interlinked projects: all possible combinations for implementing the projects

Proposed solution (analytical procedure)

Conclusions regarding cost allocation of enabler projects The CBA should be carried out for all possible combinations of enabler and dependent projects within each set of interlinked projects (with the costs of the enabler fully taken into account in each option); Based on the results for each option, Regional Groups would then be in a position to decide on how to group the projects on the final PCI list (no a priori “cost allocation”); Analyses should be without prejudice to the individual PCI status of each project as such, regardless whether enabler or dependent.

Commissioning dates 14 NRAs provided feedback in December 2014, feedback informed on 15 December 2014 Comments regarding commissioning dates (including comments regarding necessity of projects): TRA-N-013, TRA-N-044 TRA-F-041 TRA-N-047 TRA-N-168 TRA-N-207, TRA-N-208, TRA-F-213, TRA-F-214, TRA-N-230 TRA-N-285 TRA-N-314, TRA-N-316 LNG-N-227 Comments also received in December regarding other topics (relevance of grouping, etc.), no more recent comments

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