European Developments Transmission Workgroup 2 nd February 2012

EU CAM Network Code and CMP Guideline Proposal Update Transmission Workgroup 2 nd February 2012

Content  ENTSOG Capacity Allocation Mechanism (CAM) Network Code Update  Introduction  High Level Principles  Timescales  Congestion Management Procedures Guidelines (CMP) Update  Introduction  High Level Principles  Timescales

Introduction  ENTSOG CAM Development Progress  Following on from December’s Workstream update regarding the re- consultation on the CAM Code and Stakeholder responses  ENTSOG have amended the Code in-line with Stakeholder feedback  Moves away from GB Entry regime (as was originally proposed in the draft Code)  Both CAM and CMP relate to IP points only within the European Union  Timelines described later in presentation

Summary of Responses (from Dec Workstream update) ProductsStart dateAlgorithmLimit price steps Quarterly141 st Jan5Multiple28Unlimited35 Yearly241 st Oct29Single6Limited1 No preference Minimise unsold Default Rule Auction Premium Split Minimise9Max12Proportional13 Draft NC24Partial5Equal9 No preference 5 21No preference 16  Full consultation responses available at:

(CAM) - High Level Principles  Principles of Co-operation  Standardisation of communication - Included an agreed approach to communication procedures within NC. The Code would commit TSOs to working together to develop agreed communication procedures  Gas Year - 1 st Oct  Allocation of firm capacity  Capacity reservation – at least 10% of technical capacity to be released for shorter duration products* subject to ACER clarity on definition  Standard Capacity products – Yearly (15yrs), then quarterly (for Year 1), monthly (month ahead), Daily (Day ahead) and Within Day.

(CAM) - High Level Principles  Allocation of firm capacity (cont)  Within-day capacity allocation - Sell within-day firm capacity via auctions and (due to the Guideline text) a potential to nominate interruptible capacity within-day via a non-auction method (although needs to be the same method either side of the IP)  Auction algorithm  Longer duration products - Multiple round ascending clock - greater perceived simplicity, lower vulnerability to strategic bidding (since price discovery measures are embedded in the design) and ability to adjust bids or step out of an auction in response to the progress of auctions at other IPs  Number of price steps in a volume based auction - Unlimited number of price steps, included is a time limit to avoid an overlap with the next relevant auction  Minimisation of unsold capacity - Small price steps. Approach reduces unsold capacity while avoiding pro rata  Short Term Products – Day Ahead & Within Day – Uniform price

(CAM) - High Level Principles  Cross-border contracted capacity  Mandatory bundling - Partially unbundled default rule approach  Under this approach, the capacity to be bundled after implementation of the default rule would be determined by the lower of the aggregated bookings on either side of the IP  Non-matching capacity would remain unbundled and would be split proportionally amongst network users  Sunset Clause  Now included in final CAM Code to satisfy CAM Guideline  Forces Users to agree amongst themselves the capacity held (as a bundle) either side of the IP point  Max timeline 5 yrs (after Code comes into force)

(CAM) - High Level Principles  Tariffs  Revenue Equivalence - Introduces a non-arbitrary and reasoned approach to setting the tariffs for different product duration  Allows system users to procure capacity according to their identified needs by minimising any undue incentive to book capacity before such a need is identified  Avoids cross-subsidies between network users – Users who require highly variable gas flows, the levels of which are only known shortly before the actual gas flow, will be able to match capacity bookings to their requirements by building a highly variable product profile

(CAM) - High Level Principles  Booking Platforms – The Code includes next steps and timings  Sets out Next steps in the process to achieving a single EU platform  No later than 1 year after the Code comes into force, ENTSOG shall publish a report describing the number and operation of existing and planned booking platforms  Based on this report – a market consultation process to identify the market’s needs with respect to booking platforms; which shall last at most 12 months and shall end with the publication of a comprehensive report setting out the market’s requirements for booking platforms by ENTSOG  The report will also provide an assessment of costs and time needed to reduce the number of platforms or to eventually establish an EU-wide booking platform meeting the market’s requirements. A corresponding action plan towards a single EU wide booking platform, and a timetable for its implementation shall be part of this report.  Interaction with CMP Guidelines?  ACER tasked Frontier Economics to review ENTSOG CAM auction design

CAM Timescales ActivityBy when ENTSOG Finalise Network Code19/01/12 Internal Governance Approval26/01/12 Stakeholder Workshop – Brussels (CAM Launch) 31/01/12 Stakeholder Support Process (2 weeks)Ends 13/02/12 ENTSOG Board Approval06/03/12 Deliver Network Code to ACER09/03/12

Capacity Allocation Mechanisms (CAM) - Potential Timescales Network Code Provided to ACER 09/03/12 ACER Review NC 3 mths? Comitology 12 mths? Amend Codes 9 mths System Implementation [18mths?] June MarSept

Introduction  ENTSOG CMP Update  Continued to influence the Commission on the content and impacts of the Guideline Proposal  Held discussions in particular on the direct impacts to the CAM Code  European TSOs lobbying relevant Ministries in preparation for the Comitology process  Commission issued Impact Analysis documents mid Jan 12

CMP – High Level Principles  Capacity increase via oversubscription and buy-back  Provides TSO’s with an incentive to make additional amounts of Firm Capacity available over and above the technical capacity  Additional amount above technical capacity to be offered ‘upfront’ in an auction  The technical capacity is to be allocated before any oversubscribed incentive based capacity  Joint Regulator & TSOs to co-operate to develop best practices  Incentive schemes needed within and across member states IPs

CMP – High Level Principles  Firm Day-ahead use-it-or-lose-it mechanism  Restriction of re-nomination rights (w.e.f 1 st July 2016) subject to Regulator decision at IP  Surrender of booked capacity  Users can surrender capacity at any time to the TSO  Obligations remain until reallocated  Unsold capacity to be sold before surrendered capacity

CMP – High Level Principles  Long Term use-it-or-lose-it mechanism  Removes current firm contractual rights where Users do not utilise the capacity over a defined period  Information provision  Data is to be made available on one central platform  Interaction with CAM?

CMP Guidelines  The Commission published the latest version of the Draft Guidelines – 19 th December 2011  GB Stakeholder meeting held with DECC 13 th January 2012  Written views provided to DECC  The first Comitology meeting for Member States held 26 th January 2012

Congestion Management Procedures (CMP) - Potential Timescales Comitology Starts 26 th January 2012 Comitology lasts for ??? Agree CMP regime with relevant NRA(s) by / Implementation by 1 st July 2013? July

EU Tariffs Update Transmission Workgroup 2nd February 2012

ENTSOG response to ACER Tariff Scoping consultation  ACER is expected to issue a Tariff Scoping consultation – January 2012  Responses are invited by [x] March 2012  Following response analysis by ACER the Commission will decide whether ACER will be invited to write the Framework Guideline or use the Comitology guideline route.

Potential tariff codification process(es) ACER Consultation on FG scope Commission decides whether to invite ACER to write FG or go COM guideline route MarchSummer 2012 Response analysis by ACER September FG drafting by ACER, 2 month formal consultation, 6 months overall until submission to COM Invitation letter Timeline is very indicative COM scrutinizes FG and invites ENTSOG February 2013 ENTSOG runs 12 month Network code process Commission drafts guidelines and sends them directly to comitology Alternative or cumulative

Interoperability Update Transmission Workgroup 2 nd February 2012

Interoperability Framework Guideline  We now expect ACER’s consultation on the Framework Guideline to be published in March  This is to allow the regulators more time:  To complete ‘problem identification analysis’ – i.e. what are the genuine technical barriers  To take further views from the Interoperability Expert Group (meeting scheduled this month in Ljubljana)  To finalise their thinking on the scope  National Grid NTS will continue to argue that the scope should be limited to interconnectors, not all entry / exit points

ENTSOG TYNDP – Stakeholder Joint Working Sessions

TYNDP : Stakeholder Joint Working Sessions  The Ten Year Network Development Plan (TYNDP) will be the 3rd edition of the non-binding Union-wide plan of infrastructure development and will build on the past experience and feedback received.  Based on ENTSOG best practices a series of Stakeholder Joint Working Sessions have been set-up on the following topics:  Infrastructure  Demand  Supply  Market Integration  Security of Supply

TYNDP : Stakeholder Joint Working Sessions  The first of the TYNDP SJWS took place on 24 th January.  The morning session was focused on the ‘Infrastructure’ topic. The methodology used in the previous TYNDP and the feedback received from stakeholders was discussed.  The afternoon session covered both ‘Supply and Demand’, and again an overview of the process and methodology used in the previous TYNDP was discussed. Stakeholders then outlined some potential improvements.

TYNDP : Stakeholder Joint Working Sessions  ENTSOG will take away high level proposals from stakeholders and at the next SJSW on these topics come back with a solid proposal, encompassing the key points from the discussion  The next SJWS is going to be on Wednesday 15 th February in Brussels  The topics covered will be Market Integration, Security of Supply and an overview of the ENTSOG Network Modelling Tool  As always the SJWS are open to all stakeholders who wish to take part  ENTSOG maintains a register and will pro-actively notify those on the register about developments in this and other areas of ENTSOG’s work. Please write to if you want to be included in this ing list.

EU Updates Timetable  Timetable aims to highlight the key items (consultations, workshops, decisions, etc.) National Grid NTS expect to cover via this agenda item in the forthcoming months TopicTX Workgroup Gas Regional Investment Plan (GRIP) Consultation Feedback. Winter Outlook update March 2012 Balancing update Interoperability update April 2012