1st Stakeholder Group Meeting Region South-South East 27th September 2006, Bratislava

2 Agenda

3 A first assessment Gas Regulation 1775/2005 – problems monitored Transport routes – overview

4 Gas Regulation 1775/2005 – TSOs affected  11 TSOs are affected by the Regulation in the REM SSE

5 Gas Regulation 1775/2005 – tariffs (1) TSO tariffs or methodology approved approving authority approval of methodology or tariffs Austria TAG GmbHin processNRmethodology BOG GmbHin processNRmethodology OMV Gas GmbHin processNRmethodology Czech Republic RWE Transgas Net, s.r.o NRmethodology/tariff Greece DEPA Ministrymethodology Hungary MOL Földgázszállító Zrt. meth. + tarrifs prepared by NR, appr. by Ministry methodology/tariff Italy Snam Rete Gas S.p.A. NRmethodology/tariff Società Gasdotti Italia S.p.A. NRmethodology/tariff Poland Gaz-System Sp. z o.o. NR/Ministrymethodology/tariff Slovak Republic SPP preprava, a. s. NRmethodology/tariff Slovenia Geoplin plinovodi, d.o.o. meth. issued by NR, approved by gov. tariff approved by NR

6 Gas Regulation 1775/2005 – tariffs (2) TSO publish tariffs or methodology publish tariff calculator implementation Austria TAG GmbH  BOG GmbH  OMV Gas GmbH  Czech Republic RWE Transgas Net, s.r.o Greece DEPA  Hungary MOL Földgázszállító Zrt.  Italy Snam Rete Gas S.p.A. Società Gasdotti Italia S.p.A.  Poland Gaz-System Sp. z o.o. Slovak Republic SPP preprava, a. s. Slovenia Geoplin plinovodi, d.o.o. (Not E) 

7 Gas Regulation 1775/2005 – TPA services  where TPA services are not yet implemented, implementation is scheduled for beginning of 2007 TSO Firm TPA services interruptible TPA services Long-term services short-term services Austria TAG GmbH BOG GmbH OMV Gas GmbH Czech Republic RWE Transgas Net, s.r.o Greece DEPA   Hungary MOL Földgázszállító Zrt.  Italy Snam Rete Gas S.p.A.  Società Gasdotti Italia S.p.A.  Poland Gaz-System Sp. z o.o. Slovak Republic SPP preprava, a. s.   Slovenia Geoplin plinovodi, d.o.o.  

8 Gas Regulation 1775/2005 – CMP and CAM TSO release unused capacity in case of contractual congestion CAM in case of physical congestion Austria TAG GmbHfrom pro rata, auction BOG GmbHfrom OMV Gas GmbHfrom Czech Republic RWE Transgas Net, s.r.o Merit order/pro rata Greece DEPA  n.a. Hungary MOL Földgázszállító Zrt.  auction Italy Snam Rete Gas S.p.A. Merit order/pro rata Società Gasdotti Italia S.p.A.  Merit order/pro rata Poland Gaz-System Sp. z o.o. fcfs Slovak Republic SPP preprava, a. s.  fcfs Slovenia Geoplin plinovodi, d.o.o.no contr. congestionpro rata

9 Gas Regulation 1775/2005 – Capacity trading  bulletin boards are implemented only by few TSOs TSObulletin board Austria TAG GmbH BOG GmbH OMV Gas GmbHfrom Czech Republic RWE Transgas Net, s.r.o Greece DEPA  Hungary MOL Földgázszállító Zrt.  Italy Snam Rete Gas S.p.A. Società Gasdotti Italia S.p.A.  Poland Gaz-System Sp. z o.o.  Slovak Republic SPP preprava, a. s.  Slovenia Geoplin plinovodi, d.o.o. 

10 Gas Regulation 1775/2005 – Transparency  transparency requirements are implemented to different degrees  ERGEG TF Transperency examines status of compliance with transparency requirements TSO publication of available capacity down to daily periods format 3 minus shipper rule Austria TAG GmbH numerical BOG GmbH numerical OMV Gas GmbH numerical Czech Republic RWE Transgas Net, s.r.o traffic lightYes, appr. Greece DEPA  Hungary MOL Földgázszállító Zrt.  Italy Snam Rete Gas S.p.A.  numerical Società Gasdotti Italia S.p.A.  numerical Poland Gaz-System Sp. z o.o. traffic light Slovak Republic SPP preprava, a. s. traffic light Slovenia Geoplin plinovodi, d.o.o. 

11 Gas Regulation 1775/ penalties  Adequate and effective sanctions/penalties in case of non- implementation of the requirements of the Regulation are missing in most countries      

12 Terms and conditions for TPA services approved? PL: part II of grid code approved by NR (part regarding balancing and congestion management) CZ: no (TPA for transit not regulated) SK: in process HU: yes GR: in process (2007) SI: approved (commercial conditions for transportation) I: approved (network code) A: approval in process

13 Gas Regulation 1775/2005 – conclusions  delayed implementation of the requirements of important requirements such as TPA services, transparency, CAM, CMP, regulatory sanctions  in some countries implementation is expected for January 2007 (e.g. Austria, Hungary, Slovenia)  further monitoring (e.g. Transparency, GGPSSO) on ERGEG level  ERGEG discussing detailed guidelines on balancing, transparency, secondary market trading, open season  stakeholders are invited to explain reason for non- implementation and date of implementation

14 Transportation routes 1.RUS-SK-CZ-GER: Velke Kapusany - Waidhaus or Hora Svate Kateriny capacity is adequate ?  no capacity information (available in SK yes but no capacity information in CZ due to application of 3 minus shipper rule)  route section in SK only partly available for TPA ?  problems at border points (e.g. allocations, OBA)

15 Transportation routes 2.RUS-SK-A-SI-I: Velke Kapusany – Goricia capacity information is published on all parts of the route  physical capacity is inadequate  interoperability problems  long-term capacity rights are a problem

16 Transportation routes 3.RUS-SK-A-I: Velke Kapusany – Tarvisio capacity information is published on all parts of the route  physical capacity is inadequate  interoperability problems  long-term capacity rights are a problem

17 Transportation routes 4.RUS-SK-A-GER: Velke Kapusany – Oberkappel capacity information is published on all parts of the route  no firm capacity is available

18 Transportation routes -conc 5.RUS-PL-GER-CZ: Bobrowniki or Kondratki – Mallnow - Hora Svate Kateriny  capacity information not published  “governmental agreements concluded in the past are not subject to TPA”

19 routes – conclusions  the transportation for new shippers on either of the 5 routes is not possible mainly due to  lack of transparency (information on available capacity)  interoperability problems (OBAs, nomination procedure, different market rules)  no available firm capacities  detailed analysis between regulators and TSOs are necessary  tariff calculation  proposal: organize a workshop to assess problems and possible solutions

20 Agenda

21 Discussion point 1 – Priorities  Stakeholder Position Summary  No stakeholder disagreed with suggested priorities  Some stakeholders recommended the inclusion of additional action points  Preliminary Conclusions  additional points should be considered: 1. investment climate issues 2. SOS 3. hub development and 4. implementation of interconnection agreements and OBAs

22 Discussion point 2 – Regulation Implementation  Stakeholder Position Summary  Stakeholder comments on the implementation of the Regulation differ in accordance from which country they are coming  Most TSOs affirm that they are complying with the requirements of the Regulation  Preliminary Conclusions  Stakeholders should be invited to explain reasons for non- implementation of requirements of the Regulation and date of implementation  The implementation process should be monitored within the REM SSE  Monitoring (e.g. Transparency, GGPSSO) on ERGEG level should not be duplicated

23 Discussion point 3 – Directive Implementation  Stakeholder Position Summary  Most stakeholders agree that correct implementation of the 2nd Directive is essential  Gaps in implementation were identified with regard to unbundling  Preliminary Conclusions  Within the REM SSE implementation gaps should be monitored

24 Discussion point 4 – Five transportation routes  Stakeholder Position Summary  Some stakeholders found the scope of case studies too narrow and proposed to include: 1. upstream infrastructure 2. diversification of supply routes  Transportation for new shippers on either of the 5 routes is not possible mainly due to no available firm capacities, lack of transparency (information on available capacity) and interoperability problems (OBAs, nomination procedure)  Preliminary Conclusions  Detailed analysis between regulators and TSOs to identify the key barriers  The role of Hubs in supporting the utilization of interruptible transportation services by establishment of a backup trading platform should be added to the details analysis.  Network users are invited to provide examples of successful or failed gas shipping cases for the suggested routes

25 Discussion point 5 – Availability of Storage and Hub services  Stakeholder Position Summary  All stakeholders support the development of efficient trading activities at hubs feasible by harmonizing the business environment.  Main barriers are seen in different nomination procedures, gas quality, gas day and missing OBAs.  Additional gas sources as a precondition for liquid hub trading is linked with the question of incentives for new infrastructure investment in the regulatory regime.  Different prices for same storage services  Preliminary Conclusions  Harmonizing the business environment and Interoperability issue should be prioritized to enable efficient trading activities.  Regulators and TSO of the Region should work on harmonization of nomination procedures, gas quality requirements and gas day definitions in Standard Transportation Contracts of neighboring TSOs  pressure should be put on finalization of OBAs between Transit TSOs in the Region

26 Discussion point 11 – Transparency  Stakeholder Position Summary  All stakeholders except Eurogas state that the existing requirements of the Regulation and GGPSSO are sufficient in context of transparency  Preliminary Conclusions  It is recommended to assess the status quo of compliance with the transparency requirements of the Gas Regulation  To identify the need for possibly more detailed transparency requirements and/or modification of existing provisions of the Gas Regulation relevant information will be collected within the Regional Initiative

27 Discussion point 6 – Interoperability issues  Stakeholder Position Summary  All of the stakeholders think that interoperability issues are generally hindering competition in the region  enforcement of OBAs, more consistent and coherent approaches and harmonized regimes and procedures are necessary to more liquid trading activities  gas quality is not a problem, but in the future it may be because of changing flow patterns  Preliminary Conclusions  OBAs are definitely necessary at all interconnection points between neighboring TSOs  All TSOs in the region should indicate when they will conclude Interconnection Agreements with operating and balancing regimes at all interconnection points with the neighboring TSOs

28 Discussion point 7 – Capacity reservation, One-stop-shop  Stakeholder Position Summary  All stakeholders favour a service which would facilitate gas transportation through different TSOs  Most stakeholders propose the performance of the one stop shop service should be left to market initiative in a harmonized regulatory framework  Preliminary Conclusions  To clarify the concept it is suggested to work on the model in two steps: 1. analysis to introduce the concept under the current legal framework in the sense of an one-stop-shop provider acting as an agent for cross- border shippers 2. according to the ongoing discussion on the Green Paper concerning EU Grid/Grid Code and Inter TSO-Cooperation to enable network use over more than one TSO system

29 Discussion point 8 – Tariffs  Stakeholder Position Summary  TSO’s reject the development of a regional entry exit tariff model  Shippers support the idea of a regional entry-exit system but also warn against the risk of cross-subsidies, standard costs, and stranded costs  Preliminary Conclusions  Regulators should undertake a feasibility study for a regional entry-exit tariff model and intermediate steps towards it, with a view to avoiding cross subsidies, and submit it to Stakeholders  In addition the legal requirements to establish such a Regional Entry Exit System for cross border flows should be evaluated

30 Discussion point 9 – Investments  Stakeholder Position Summary  All stakeholders agreed that investment is the key to improved competition and security of supply  TSOs see the award of exemptions as the main way to promote investment  Most respondents support the adoption of Guidelines as a way to stabilise and harmonise regulatory regimes  Preliminary Conclusions  It is proposed to follow the concept of Common Guidelines for the treatment of new gas infrastructure with common conditions to award exemptions from TPA rights  The application of this approach should be based on work already undertaken for the Energy Community

31 Discussion point 10 – Balancing  Stakeholder Position Summary  Most of the stakeholders think that harmonization of balancing rules are essential  Traders demand market-based balancing is needed on regional basis  possible initial role of hubs, as regional balancing points is emphasized  Preliminary Conclusions  It is recommended to monitor the implementation of the ERGEG Balancing Guidelines and whether modifications are necessary from the Regional level point of view  Hubs can serve as regional balancing points

32 Discussion point 12 – Intergovernmental agreements  Stakeholder Position Summary  Most of the stakeholder expressed the opinion that special intergovernmental agreement between SSE countries are not necessary under the current EU legal framework  Preliminary Conclusions  It is recommended not to follow on that issue

33 Agenda

34 Consultation Conclusions – next steps (1)  completion of OBAs asap is necessary  Invitation SG when implemented  Monitoring of implementation of the requirements of the Regulation 1775/2005 and Directive 55/2003  30 Oct  Checklist

35 Consultation Conclusions – next steps (2)  Workshop (IG) assessing detailed barriers for transport through the region (5 routes) to be held between regulators and TSOs  24 Nov 06  Vienna  Long term planning on a Regional level including data from  TSOs  Network Users  Regulators  Investigating in a dynamic way  Available Capacity at the Entry points to the region  Demand in all MS of the region  Available infrastructure capacities (transmission, storage, LNG)

36 Consultation Conclusions – next steps (3)  Assessment of the role of hubs as regional balancing points  Draft till end 2006  Survey on requirements to introduce a regional entry-exit system  Draft till end 2006  Survey on requirements in the sense of an one-stop-shop provider acting as an agent for cross-border shippers  Draft till end 2006