ERSE General presentation from ERSE about the current natural gas regulatory situation in Portugal 2nd Regional Coordination Committee (RCC) Meeting of South Gas Regional Initiative (S-GRI) 18 May 2007 Entidade Reguladora dos Serviços Energéticos

ERSE 1. Natural Gas Sector Organisation and Legislation 2. Tariffs 3. Some Numbers Presentation contents

ERSE 1. Natural Gas Sector Organisation

ERSE 1. Natural Gas Sector Organisation

ERSE Decree-Law no. 30/2006, February 15 Decree-Law no. 140/2006, July 26  Transposition of Directive no. 2003/55/CE, June 26  General principles for the organization and functioning of the national natural gas sector, the exercise of the activities of reception, storage, transmission, distribution and supply of natural gas and the organisation of natural gas market  Ownership unbundling of reception, storage and transmission activities  Juridical separation of distribution activity, namely from last resort supplier activity  Third party regulated access to the reception, storage, transmission and distribution infrastructures  Logistic operator for switching supplier  ERSE regulation of the activities of reception, storage, transmission, distribution, last resort supply and switching operator 1. Natural Gas Sector Organisation

ERSE Market opening January 1st, 2007 Ordinary electricity producers January 1st, 2008 Annual consumption >= m 3 (n) January 1st, 2009 Annual consumption >= 10000m3 (n) January 1st, 2010 All consumers 1. Natural Gas Sector Organisation

ERSE Evolution towards market Activities separation PROVISION LNG TERMINAL STORAGE TRANSMISSION DISTRIBUTION TRADING / SUPPLY Vertical integrated monopoly Separation of regulated activities Market opening Competition/ market 1. Natural Gas Sector Organisation

ERSE Competition Natural monopoly Regulated Open access Competition Free choice of supplier INFRASTRUCTURES PROVISION SUPPLIER LAST RESOURCE SUPPLIER... CONSUMERS ORGANISED MARKET 1. Natural Gas Sector Organisation New Model

ERSE ACTIVITIES SEPARATION AND REVENUES DEFENITION APPLICATION OF THE TARIFFS ADITIVITY PRINCIPLE DEFENITION OF TARIFFS WHICH REFLECT COSTS PRICES TRANSPARENCY NO CROSS SUBSIDIES BETWEEN ACTIVITIES AND CONSUMERS ADEQUATE ECONOMICAL SIGNALS ECONOMIC EFFICIENCY PROMOTION FAVORABLE CONDITIONS FOR THE DEVELOPMENT OF MARKET COMPETION CONSUMERS CONFIDENCE 1.Natural Gas Sector Organisation New Model - Regulation

ERSE Tariffs General Principles (D.L. 30/2006, February 15)  Equal treatment and opportunities  Tariffs uniformity across continental territory  Tariffs must be cost reflective  Transparency on tariffs establishment  No cross subsidies between activities and consumers trough matching tariffs and costs and additive tariffs principle  Adequate economic signals and efficient use of the infrastructures  Consumers protection from tariffs evolution, maintaining at the same time economic and financial equilibrium of regulated activities, considering efficient management  Establishment of incentives for the efficient performance of regulated activities of the companies  Contribution for the promotion of energy efficiency and environmental quality 2. Tariffs

ERSE  End-user regulated tariffs homologated by the Ministry of Economy and Innovation under companies proposal  1st July 2007 – establishment by ERSE of the access to the infrastructures tariffs (proposal under approval)  1st January 2008 – homologation by ERSE of the end-user regulated tariffs  1st July 2008 – establishment by ERSE of the end-user regulated tariffs 2. Tariffs Establishment – Timetable

ERSE GNL Terminal Costs Storage Costs Costs Transfer Natural Gas Acquisition Costs Provision TransmissionDistribution End-Users Transmission Costs Global System Management Costs Distribution Costs Retail commercial costs Transmission Grid Use Tariff Distribution Grid Use Tariff Market Supplier Non Regulated Energy Costs Regulated Activities Global System Use Tariff Grids Access Tariff Non Regulated Energy Prices Non regulated supply prices End-User Tariff (non regulated) 2. Tariffs Revenues and tariffs Market supplier

ERSE Energy Tariff Supply Tariff Last Resource Supplier End-User Tariff Regulated Activities Last resort supplier Natural Gas Acquisition Costs Provision GNL Terminal Costs Storage Costs TransmissionDistribution Transmission Costs Global System Management Costs Distribution Costs Regulated Energy Costs Retail commercial costs End-Users Costs Transfer Transmission Grid Use Tariff Global System Use Tariff Distribution Grid Use Tariff Grids Access Tariff 2. Tariffs Revenues and tariffs

ERSE Last Resource Suppliers (LRS)Liberalised market Natural gas Supply Activity Natural gas Buy and Sale Activity Supply Tariffs (> 2 million m 3, > m 3, <= m 3 ) Energy Tariff MP & LP LRS Consumer HP LRS Consumer HP Market Consumer MP and LP Market Consumer Natural Gas Distribution Activity Natural Gas Transmission Activity Global Technical System Management Activity Distribution Grid Use Tariff (MP e LP) Transmission Grid Use Tariff Global System Use Tariff Grids Access Tariff HP,MP,LP Free energy and supply prices End-Users Tariff 2. Tariffs Additive Tariffs

ERSE Investments in the Portuguese Gas Sector

ERSE Supply, number of clients and gas sales

ERSE Average price (€/m3 (n)) Evolution of Natural Gas Prices in Portugal

ERSE Natural Gas Flows Previsions for Inflows - 57,5 TWh; Consumption – 51,8 TWh

ERSE ENTIDADE REGULADORA DOS SERVIÇOS ENERGÉTICOS Edifício Restelo Rua Dom Cristóvão da Gama, 1, 3º Lisboa Portugal Telef +(351) Fax +(351) url: