Gas balancing – where next Gas balancing – where next? ERGEG input to Framework Guidelines on gas balancing Pamela TAYLOR Ofgem 17th Madrid Forum Madrid, 15 January 2010

Outline ERGEG previous work on gas balancing The Third Package and gas balancing Barriers to market based and cross-border balancing Issues to be considered Framework Guidelines: Next steps

ERGEG previous work on gas balancing – key principles Residual role of the TSO TSO procurement using market mechanisms Cost-reflective imbalance charges with incentives to balance Non-discriminatory application of rules Timely information to shippers Preference for daily balancing periods Proxies for flexibility: trading of imbalances, tolerances TSOs to seek greater harmonisation through action plans GGPGB implementation report in 2008 showed low level of compliance

Third Energy Package: gas balancing Balancing rules shall be market-based TSOs to provide information to users free of charge Imbalance charges shall be cost-reflective whilst providing appropriate incentives to balance ENTSO-G will develop a network code for balancing rules based on Framework Guidelines prepared by ACER Regional Cooperation (including cross-border) of TSOs for integrating their national markets The Third Package reflects closely the GGPGB principles What needs to be done now?

Barriers to market based and cross-border balancing Imbalance charges decoupled from costs Limited size of balancing zones / market areas TSO procurement of gas through long term contracts Incompatibility of products for residual balancing Use of different balancing periods Lack of access to storage and flexible gas Lack of access to cross border capacity ERGEG agrees with many issues identified by KEMA

Issues to be considered How TSOs procure gas? Auctions, via markets or longer term reserves Is the TSO procurement non-discriminatory? How flexibility (storage) is released to the market? Different amounts of national flexibility Common approach storage access? Calculation of imbalance charges? Based on costs of balancing, common ‘incentives’ Nomination procedures? Including balancing periods and gas days Integration of balancing in neighbouring balancing-zones? What needs to be done to create liquid pan-European short-term markets and to promote cross-border trading?

Framework Guidelines: Next steps Review our policy approach in the light of the Third Package Informal discussions held with stakeholders in 2009 Policy options and Initial Impact Assessment (IIA) Consultation document and stakeholder workshop during 2010 Draft Framework Guidelines on Gas Balancing Expected Autumn 2010

Thank you for your attention