Walter Boltz, Chairman ERGEG Gas Working Group 16 th Madrid Forum, 29 May 2009 Storage Capacity allocation & congestion management Criteria to determine access regime to storage

216 th Madrid Forum, 29 May 2009 Background  Improvement of storage access conditions ●Most European storages are fully booked ●Poor transparency on actual use of storage capacity and available capacity ●Capacity hoarding is without consequences ●This results in entry barriers for new entrants  ERGEG Status Report on CAM & CMP to storage published in December 2008  Assessment Report – Public consultation in August 2009  Guidelines on CAM & CMP on storage planned for 2010

316 th Madrid Forum, 29 May 2009 Structural problems identified Long term contracts play a major role in the storage market and impede competition, especially  when capacity is allocated via FCFS  when incumbents / affiliated companies are the main or sole users Level of competition between SSOs is quite limited due to little available capacity and severe geographical constraints Integration of storage operators and supply companies  Possible cross subsidies Dominance of FCFS as CAM:  FCFS gives wide range for discrimination, which cannot be verified  no legal competence for NRAs in developing CAM and CMP in most countries No incentives against hoarding, no effective legal requirements to discontinue hoarding

416 th Madrid Forum, 29 May 2009 GSE Survey and ERGEG Status Report 2008 Conclusion of the 15th Madrid Forum: “The Forum asked ERGEG and GSE to analyse in cooperation the apparent discrepancies in their reports presented at the Forum and report their findings to the next Forum” Meeting of ERGEG with GSE, Eurogas and EFET (invited) in February Differences identified: Agreement to jointly investigate storage users’ needs more thoroughly Eurogas, EFET, GSE and ERGEG questionnaire to storage users Results to be integrated in the ERGEG work on guidelines for CAM and CMP GSE surveyERGEG status report ScopeSSOsSSOs, users and NRAs SSOs coveredonly GSE members18 GSE and 11 non GSE members Effectiveness of CAM & CMPnot analysedanalysed (e.g. FCFS by incumbents)

516 th Madrid Forum, 29 May 2009 ERGEG update of work Joint questionnaire of ERGEG, Eurogas, EFET, GSE for storage users For collecting information on the competition situation and the main problems (with CAM and CMP) in the storage markets from the storage users´ point of view Remarks of GSE, Eurogas and EFET integrated in the questionnaire Addresses: from last survey, addresses of Eurogas and EFET members checked, Eurogas and EFET will send a mail to their members to participate in the survey Sending out the questionnaire on Thursday, 14th May 2009 Response time 5 weeks Results of the survey will be integrated in the assessment paper for CAM and CMP

616 th Madrid Forum, 29 May 2009 Assessment Report 2009 Assessment Report on different CAM & CMP to focus on Defining preconditions under which market situations the various mechanisms are appropriate – information sources  Eurogas, EFET, GSE and ERGEG questionnaire to storage users  Analysis of different national storage markets – Workshop with experiences from UK, Germany, Austria, Hungary, The Netherlands  Findings in economic literature  Assessment of CAM and CMP regarding criteria stated in the GGPSSO BUT assessment not only according to the mechanisms but also regarding the structural problems (integration of SSO and supply) the transport situation (harmonised capacity release for storage and transport, harmonised application of UIOLI) influence capability by NRAs on the competition Mid-August 2009 Public Consultation on Assessment Report

716 th Madrid Forum, 29 May 2009 Analysis of different storage markets I Hungary: rTPA, only 1 SSO competition in 2010 (2 SSOs) / 2012 (3 SSOs)  change to nTPA essential facility Germany: nTPA, 25 SSOs No regular information for the regulator on storage contracts Ex-post regulation in case of misuse No official complaints regarding TPA to storage facilities so far Existence of a variety of products, but very little capacity available Investment situation: new entrants tend to build their own storages

816 th Madrid Forum, 29 May 2009 Analysis of different storage markets II UK: SSOs choose mechanisms on their own – Ofgem can intervene (nTPA + undertakings; TPA arrangement under network code) Limit capacity held by Centrica to 20% (decrease over time with 15% floor) UIOLI: non-nominated capacity offered on bulletin board on an interruptible basis Interruptible space, injection and withdrawal available Capacity typically sold on a Day ahead and Within day basis 3 tiers of services: Price structure (from Rough website):

916 th Madrid Forum, 29 May 2009 Analysis of different storage markets III Austria: nTPA, FCFS applied by all SSOs ex post regulation in case of misuse (also monitoring of storage contracts) main flexibility tool in Austria, has no substitute in seasonal balancing The Netherlands: nTPA:  light  extended, in case of dominant positions (NAM, TAQA) main improvements to be made:  facilities are exempted for TPA because of ‘production tasks’ (SoS)  to which extent can (existing) storages be made available to the market

1016 th Madrid Forum, 29 May 2009 Criteria to determine access to storage Under the 3rd Package, Member States may choose between nTPA and rTPA (Art. 32 of new Gas Directive)  NRAs/MS define which criteria are the basis for the choosen TPA regime and publish which facilities or which part of those is offered under different procedures nTPA: NRAs/MS shall require SSO to publish their main commercial conditions for the use of storage  when developing these conditions, SSOs shall consult the system users rTPA: NRAs/MS shall take measures to give access to storage on the basis of published tariffs and/or other terms for use of storage  NRAs/MS shall consult system users when developing these tariffs or the methodologies for these tariffs

1116 th Madrid Forum, 29 May 2009 Duties and Powers of NRAs 3rd Package foresees the following tasks for NRAs regarding access to storage  Monitoring the correct application of the criteria that determine whether a storage facility falls under Article 32(3) or (4) – nTPA or rTPA  NRAs shall have the authority to require SSOs to modify the terms and conditions, including tariffs and methodologies proportionate and non - discriminatory

1216 th Madrid Forum, 29 May 2009 Possible criteria to assess competition I The following criteria should be assessed when determining the access regime to storage facilities:  Effective competitive behavior among SSOs (products, tariffs)  Alternative flexibility tools e.g. interruptible contracts, flexible import contracts/diversified sources  Sufficient available capacity for storage users - choice between several SSOs  Requested products are actually offered by several SSOs  Independence of SSOs by effective unbundling

1316 th Madrid Forum, 29 May 2009 Possible criteria to assess competition II Sufficient competition  nTPA Tariff benchmarking, tariffs reflect incurred costs Non-discriminatory and transparent CAM & CMP Insufficient competition  rTPA Cost-based tariff setting regime CAM & CMP to be approved by NRAs

1416 th Madrid Forum, 29 May 2009 Thank you for your attention! Mark your diary for the World Forum on Energy Regulation IV October 18-21, 2009 Athens, Greece