European Developments: Capacity Transmission Workgroup 6th October 2011

Content  Provides an overview of:  ACER Framework Guidelines  ENTSOG CAM Update  Potential key GB impacts  Summary & GB Stakeholder involvement

Framework Guideline  ACER final CAM Framework Guideline published 3 rd Aug  ENTSOG original Code delivery date 27 th Jan 12  New Commission invitation to ENTSOG to deliver a CAM Code now extended to 9 th March 12

Changes from Previous Version  The relevant clauses shall be amended within nine months after entry into force of the network code(s)  The standardisation is based on a daily capacity product’s duration from 5:00 to 5:00 UTC/GMT, or any other time period harmonised across the EU as defined by European Network of Transmission System Operators for Gas  At least 10 percent of the available firm capacity at each interconnection point shall be set aside for firm capacity services with a duration of less than one quarter  These rules on mandatory bundling also apply, to the extent that they are relevant, to secondary capacity markets  Sunset Clause revised: Parties to agree, NRAs to mediate Default rule in case users to not reach agreements Sanctions allowed by NRAs to enforce agreements  Commission Guidelines for tariff methodologies related to cross-border trade of natural gas or in the Framework Guidelines for network codes on rules regarding harmonised transmission tariff structures  Web-based platform for primary capacity allocation and secondary capacity trading  Timetable for the implementation of a single EU-wide platform required

European Network Code Development Process Work programme ENTSOAgency Framework guidelines Commission Preparation of draft Network Code Commission Agency Comitology Legally binding Network Code Commission Stakeholder workshops Consultation Stakeholder Consultation & workshops DECC GB Code Change process ENTSOEU CommissionACER (ERGEG/CEER) Stakeholder Consultation CAM Code Current Phase

CAM Consultation  Capacity Allocation Mechanism (CAM)  Entsog consultation on CAM draft EU code received 56 responses  GB well respondents + Associations  Next Steps:  Publish analysis of responses – now completed 26 th Sept  Continue stakeholder dialogue on key aspects  Sunset clause ‘default’ meeting 6 th Oct (Brussels)  SJWS Stakeholder meeting planned for 20 th Oct (Brussels)  The final EU code is still expected to be published in Jan 2012  Commission extended Code deadline until 9 th March  ENTSOG may use additional timeline to carry out a short re-consultation period?

7 Key CAM Documents  Project Plan  Launch Document  All stakeholder (SJWS) meeting material  Draft CAM network code & supporting documents  Consultation responses &  Analysis report  Available from 

8 ENTSOG Draft CAM Network Code  Overview  In principle similar to GB Entry arrangements however:  Will have impacts to current arrangements  Guidelines applicable to Interconnection Points only

GB Regime  Governance  3 rd package Code development / changes  Commitology timelines may not be appropriate for changes  Lighter change process needs consideration  Handbook approach?  UNC Code change process  T&C – Code amendment timeline 9 months  Implementation?  Different rules for IPs  UNC to differentiate between IPs / Non IPs?  Separate IP Code?

GB Regime  Sunset Clause  Within 5 years of the Code coming into force Users need to agree split of contracts either side of the IP to combine (bundle) capacity  ENTSOG to provide a default rule if capacity is not bundled  Does this effect capacity bookings (as already carried out via transparent auction process)?

GB Regime  Mandatory Bundling  Primary and secondary capacity via bundled products  No opportunity to book / trade at flange  Currently capacity sold in aggregate at an ASEP  Bundling applicable to IPs only (Bacton)  Current bookings out to 2025  Licence Baselines  Implications to interconnector operators  Art.22 exemptions

GB Regime  Enduring Exit  Need changes to regime to incorporate auctions  Auction Design  Different to GB Entry auction  Available capacity only no incremental (note: CEER Workplan 2012)  Differing Stakeholders views on key draft Code principles:  LT and MT products  Volume based auction single round, ascending clock multi round, others

ENTSOG Draft CAM Network Code  Standard Products  Concept similar to Entry but differences in the detail design For LT - Users favoured Quarterly

ENTSOG CAM Consultation Auction - Products

ENTSOG CAM Consultation Auction - Design

GB Regime  Interruptible  No obligation to bundle  Only align interruptible services  Min obligation for day ahead (where firm sold out)  CMP v CAM interaction - within day nom

GB Regime  Incentive Regime  Buy back on a bundled capacity product?  Sale of non-obligated with a bundled product?  Interoperability (CET) 05:00 – 05:00 gas day alignment  CMP  Commission undertook consultation during summer  [New CMP document to be issued soon] - tbc  [Restriction of renom rights not mandatory] – tbc  [Oversell / Buy backs & incentives] - tbc

GB Regime  Other 3 rd Package Code Interaction  Tariffs  Framework Guideline – then straight to commotology  Code development step not included  Implementation Timelines  Code changes  IT systems timeline  Joint platform(s) / Separate

Summary  Key Summary Points  GB engagement via forums  Process still open  Potential changes to GB regime at IPs  Multiple Code development & interaction  GB engagement & support in EU Code development welcomed  Further EU engagement needed to make stakeholders views understood  More to come!