Jonas Törnquist EFET Gas Market Transparency Requirements ERGEG Enabler Group Meeting Dublin, April 2007 Törnquist European Federation of Energy Traders 1 Dublin, April 2007

2 Törnquist EFET and Transparency  EFET Paper published in August 2006: Information Transparency in Gas Markets. See  This paper sets out transparency requirements more broadly  General requirements – timing, formats, etc  Gas flow allocations  Balancing  Supply and demand information  Price and trading information  Gas quality information  In this presentation we focus on just three aspects  Transmission transparency  Storage transparency  The ‘less than three’ rule

3 Dublin, April 2007 Törnquist Why transparency is vital  To inform market participants  Creates market confidence in prices and price formation  Improves liquidity as confidence grows  Enables competition on an equal footing  To aid capacity purchases  To enable regulators to carry out market monitoring and regulation of network companies and tariffs  To assist security of supply

4 Dublin, April 2007 Törnquist Transparency requirements  There is a balance between transparency and proprietary commercial information  Information should be released unless there is a very good reason not to release it  Incomplete information restricts its usefulness  Materiality thresholds should be as small as practicable – let the market decide what is material and not

5 Dublin, April 2007 Törnquist Transmission Transparency  Booking capacity  How much is booked/sold? When do these bookings expire?  How much is left to buy? How can I book it?  Timelines must be sensible - 10 days to hear back for buying daily capacity is unacceptable. Virtually instant notification should be possible  If there is congestion, how is this managed?  What allocation method will be used when capacity becomes available? Market participants need to know about what type of capacity is available when and how.  Firmness of capacity  How oversold is the capacity versus physical capability? 110%? 150%?  Preference for having aggregate flows and when interruptions take/took place. This allows independent analysis  But time, location and duration of interruption should at least be published with a short time lag, possibly D+1, but in any case in line with the balancing regime Market participants need to be able to assess the likelihood of interruption

6 Dublin, April 2007 Törnquist Transmission Transparency  Upstream flows, at least in aggregate form at all system import points  Gas demand. Actual demand and forecasts in at least aggregate form for each balancing zone and system as a whole  Information that may materially affect gas supply and demand availability at entry and exit points in aggregate form, including information on unplanned outages  Actual and historic line pack data  Actual pipeline flows across borders/between traded hubs in at least aggregate form  Timing: May depend on market situation but aim is at least daily

7 Dublin, April 2007 Törnquist Transmission Transparency  Interruptions/unplanned outages  Per entry/exit point as soon as possible, but no later than after X (depends on market conditions)  Staged publication as more information comes to light (e.g. about duration/severity of outage)  Publication of factual situation and causes  Of course planned outages should be disclosed well in advance Market participants need this information to derive the amount of gas in the system. This influences important decisions on purchase/sale of gas and flowing gas into/out of storage and increases reliability of the available market data because it enables market participants to undertake their own analysis.

8 Dublin, April 2007 Törnquist Storage transparency  Required storage information  Gas inflows  Gas offtakes  Gas in store levels  Granularity and timing  Preferably information per site, but at least by trading zone/hub  Daily information updated at D + 1 (early during the trading day) for D  Interruptions/unplanned outages  Per facility as soon as possible, but no later than after X (depends on market conditions)  Staged publication as more information comes to light (e.g. about duration/severity)  Publication of factual situation and causes Market participants use storage flow information for optimization of their positions (purchase/sales, storage use)

9 Dublin, April 2007 Törnquist Storage transparency  Information about available capacity need revision  Traffic light system not always helpful  What is technical level of storage available?  How much storage capacity is available now?  How much storage is available in the future? Say three years out?  Beyond this timeframe, what do I need to do to get storage capacity? More of an open season like process if above the technical capacity for example?  What is the indicative price? Market participants need to be able to assess available storage capacity (current and into the future)

10 Dublin, April 2007 Törnquist Good practice in transparency Transmission information  National Grid Storage information  Centrica Storage  GDF DGI has improved recently by publishing storage flow data (but only actual, no historical values)

11 Dublin, April 2007 Törnquist ‘Less than three’ rule  The less than three rule as we understand it  Fewer than three participants  Users have to request non-disclosure  Regulator has to approve the request  In practise, a huge amount of information is withheld as a result Example GTS network: Bocholtz (no data), Oude Statenzijl, s’Gravenvoeren and Zelzate (incomplete data)  Market participants do not know where and why information is withheld  Contractual clauses requiring non disclosure?  Regulator approved less than three case?

12 Dublin, April 2007 Törnquist ‘Less than three’ rule – suggested ‘fixes’  More strict application by regulators  We think there is a lot of scope here  E.g. storage: Information about the physical operation (even if only one user) may not reveal commercial position if some virtual storage has been sold)  E.g. Transit capacity: If a transit pipeline operated by fewer than three have sold gas swaps or virtual capacity this may pave way for publication of the physical use of the pipeline  E.g. Transmission to and from traded hubs. If more than two the commercial sensitivity diminishes significantly to keep physical transport information confidential  The devil is in the detail  The onus of proof in on the owners that their commercial position is significantly compromised  Regulators must publish where/why information is confidential for each case

13 Dublin, April 2007 Törnquist ‘Less than three’ rule – suggested ‘fixes’  Potential to redefine zones more broadly  E.g. publishing storage information by hub/zone/region/country  In some places (e.g. Germany) the issue may still remain as zones are arranged around incumbents  So may also need to redefine hub zone boundaries in some cases  Cross border flows – is it always possible to disclose?  Require publication of exactly what contractual non-disclosure clauses say and where they are applicable  Commercial confidentiality clauses: Need transparency on exactly what those clauses say  Less than three rule may not apply to real time interruption information (no commercial sensitivities given a small time lag

14 Dublin, April 2007 Törnquist Thanks for your attention European Federation of Energy Traders Amstelveenseweg JS Amsterdam Tel: +31 (0)