The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Mr Walter Boltz ERGEG Gas Focus Group Chair Status Report of the Gas Regional Initiative

2 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative Structure of Presentation  Background – What do we want to achieve?  Process established – regions, state of evolution  Progress achieved – priorities, tangible results in regions  Measurable Results - Benefits to network users, consumers  Coherence and convergence  Way forward

3 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative Background – What do we want to achieve? PRACTICAL OUTPUT:  IDENTIFICATION of existing barriers to entry/obstacles to regional market integration (Set Priorities)  market liquidity  trading activities and competition, increase number of active traders in the region  TPA efficiency through harmonised TPA rules; market oriented and cost- based offer of transport services and flexibility tools; sufficient availability of transport capacities…  security of supply and competition through diversification of sources and sufficient availability of transport capacities ENSURE COORDINATION AND COHERENCE BETWEEN REGIONS  TOWARDS A SINGLE MARKET

4 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative Gas Regional Energy Markets (REMs) RegionCountriesLead Regulator NorthNetherlands, Belgium, France, Great Britain, Ireland, Germany, Denmark, Poland (aspirant member at present) NL SouthSpain, Southern France, (Portugal) Spain South- South East Italy, Austria, Slovakia, Hungary, Slovenia, Greece, Poland, Czech Republic Italy & Austria

5 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative Current state of evolution Establishment of the Gas Regional Initiative (GRI) April 2006 Action Plans and Priorities have been definedSept 2006 First tangible resultsJanuary 2007 Work on identified priorities (IG, enabler groups)Feb 2007 Assuring coherence and convergencebeyond 2007

6 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative Common GRI Priorities All the regions have identified the following 4 priorities Transparency Inter- connection Inter- operability Hubs 1 GRI 3 regions Identify interoperability problem Improve interoperability Monitor the level of transparency Improve transparency Improve the functioning of existing Hubs Establish the Hubs Identify interconnection problems Increase interconnection capacity (better use of capacity or new capacity

7 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative Tangible results in each Gas REM  North  Day-ahead-auctions for improvement of the secondary capacity market (at IPs Bunde and Ellund)  South  Agreement to increase interconnection capacity  SSE  Detailed monitoring of the Gas Regulation 1775/ improvements in transparency and compliance  Accelerated pace for conclusion of OBAs (Operational Balancing Agreements)

8 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative Translating priorities into measurable results Interoperability Hubs Transparency Interconnection Measurable Results Consumers Traders Network users Producers Priorities:Beneficiaries:

9 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative Measurable Benefits to network-users (e.g. shippers): criteria  One-stop-shop offered by TSOs  Harmonized tariff systems  EASEE Gas standards fully applied Measurable benefits to consumers: criteria  Switching behaviour/rate  Decreasing Price differences between incumbent and alternative suppliers  Harmonisation of general terms and conditions, especially with regard to minimum contract duration  Increased competition between more market actors Measurable results – concrete criteria

10 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative Measuring future success:  High level quantitative measures (e.g. new entrants, number of traders at hubs or price convergence at hubs, market share and concentration ratios) – are indicators to the success of market development and market integration (i.e. the GRI objective).  ERGEG’s “micro-level” assessment of the success of the Regional Initiatives will focus on:  Assessment of the overall process – including stakeholder views  Individual solutions implemented in the regions which reduce barriers (e.g. increase in liquidity from standardising contracts at gas hubs) Measurable results – concrete criteria

11 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative Ensuring convergence and consistency  ERGEG Convergence and consistency report to be presented to the next Madrid (and Florence) Forum  How do specific solutions facilitate trade, market integration?  Assess remaining barriers to market integration across regions  Assess linkages between GRI and ERI

12 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative The next 6 months  Further work on identified priorities  Ongoing monitoring of compliance with Regulation 1775/2005  Enforcement action where necessary  Public consultation on  Regional One-stop-shop service provider  Regional entry-exit system Structuring the dialogue  Regular communication with the European Commission on progress in the regions  Regular communication with Ministries on progress in the region  Strong involvement of all stakeholders The more support - the faster progress will be delivered Way forward

13 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative Source: CEER/ERGEG, Gas Working Group, 2006 Red: No Green: Yes Green & white: only in Flanders Dark grey: Information not available 4% 11% Actual switching rates in percentage terms (in %) <1% 19% 17% Colour coded: Are gas HH customers offered gas by at least one alternative supplier cheaper than the incumbent? 12% Is there real choice for residential gas customers ? 2006

14 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative Source: CEER/ERGEG, Gas Working Group, 2006 Red: No Green: Yes Green & white: only in Flanders Dark grey: Information not available 4% 11% Actual switching rates in percentage terms (in %) <1% 19% 17% Colour coded: Are gas HH customers offered gas by at least one alternative supplier cheaper than the incumbent? 12% Is there real choice for residential gas customers? 2008

15 The Regional Initiatives: Progress and Prospects Conference Brussels, 28 March 2007 Status Report of the Gas Regional Initiative More information on the Gas Regional Initiative (GRI) is available at Become an “Online Subscriber” to automatically receive news from the regions Thank You