Walter Boltz, Chairman ERGEG Gas Working Group 18 th Madrid Forum 28 September 2010 Pilot framework guideline on capacity allocation in natural gas transmission networks

2 18th Madrid Forum, September 2010 Invitation by the Commission to draft FG on CAM Pilot FG on CAM shall describe: General principles and the scope and level of TSO cooperation in capacity allocation. In particular the joint/coordinated offering of capacity on IPs of borders and/or systems (e.g. nature, and level of bundling of products), the optimisation of available capacity by enhanced operational coordination, the harmonisation of transportation contracts and codes, and relevant communication procedures. A reasonably small set of capacity products to be offered to network users, Set framework for harmonisation of the range of capacity products to be developed and applied by all EU TSOs, the nature and level of bundling of such products, and the contents, structure, and duration of harmonised capacity contracts, including possible quotas Relevant procedures and tools for booking procedures Including the timeline to be followed (e.g. number of rounds per product, requesting periods, reaction time), the details of the allocation mechanisms to be applied (e.g. auction, OSW, FCFS), and the facilitator (e.g. booking platforms)

3 18th Madrid Forum, September 2010 Target model for the European gas market - I Need for an overall European target model FGs / NCs are the ideal instrument to define detailed rules on specific matters and enable market integration A conceptual model should be the tool to quickly solve the Gordian knot of European gas market integration Work Programme 2011 Broad involvement of stakeholders Call for evidence will be launched this autumn

418 th Madrid Forum, September 2010 General principles All market areas are organized as entry-exit zones with virtual hubs Reduction of market areas to as few as technically and economically feasible, based on physical characteristics rather than political boundaries Facilitation of hub-to-hub trading Target model for the European gas market - II

518 th Madrid Forum, September 2010 Experiences with process Huge interest of stakeholders in FG itself, as well as in process for developing FGs and NCs Transparency and sufficient information of stakeholders necessary 3 years plan is an important step in this direction Need to have sufficient up-to-date information (as far as possible) However, danger to overburden stakeholders with too many activities at the same time

618 th Madrid Forum, September 2010 Cooperation with ENTSOG Cooperation with ENTSOG is very good Continuous discussions with ENTSOG Capacity Product Coordination Taskforce on the substance Monthly meetings took place Both, ERGEG and ENTSOG, benefit from the fruitful discussions ENTSOG and ERGEG will continue to cooperate throughout the process to develop framework guidelines and network codes

718 th Madrid Forum, September 2010 ERGEG public consultation on the pilot FG was finished by 26 February More than 100 participants in public workshop 37 responses received (more than 230 pages) All received responses have been evaluated Informal "ad hoc" expert group to provide expert support during the development of FGs. 11 experts coming from the different stakeholder groups and regions of Europe very fruitful discussions Framework guideline has been published by ERGEG on 17 June FG has been submitted to the Commission together with an evaluation of all responses Commission will invite ENTSOG to develop network codes (12 months) Stakeholder interest

818 th Madrid Forum, September 2010 Lessons learnt Stakeholders show much more interest in the work on FGs than they did in our non-binding work. We need to do as much preparatory work as possible prior the official invitation by the EC. PC needs to last at minimum 2 months (in reality many stakeholders ask for extension of the deadline), which leaves at the maximum 4 months for incorporating the comments of the market and streamlining the framework guideline. The drafting team need to have enough human resources to fulfil the six months deadline. Internal approval processes need time.

918 th Madrid Forum, September 2010 Expectations towards ENTSOG ERGEG’s expectations towards ENTSOG and its network code development process To be pro-active To closely involve stakeholders, especially regarding Breakdown of capacity services Percentage of available capacity to be set aside for firm short-term services The capacity allocation methodology used at each IP To continue the good co-operation of ENTSOG and ERGEG on all levels To deliver a good piece of work Auction design Bundling of products Harmonisation of transportation contracts Relevant communication procedure

1018 th Madrid Forum, September 2010 Thank you!