Gas balancing interactions: Proposal for case studies Cemil Altin (Ofgem)

Background (1) Interactions between gas balancing mechanisms can impact on trade & development of competition Issues of interaction were raised by respondents to the ERGEG questionnaire – e.g. imbalance pricing, balancing period, information At the Bonn workshop it was agreed that further work needed to be undertaken to better understand gas balancing interactions Proposal was for 2 case studies to be developed The gas balancing Enabler Group has prepared an initial terms of reference for the case studies Presented here for feedback from stakeholders

Background (2) ERGEG’s Guidelines for good practice or gas balancing (GGPGB) set out guidance on development of well functioning balancing mechanisms Implementation of the GGPGB will help to overcome many of the problems seen with gas balancing on a national basis – they should be implemented without delay (ERGEG is actively pursuing this) If stakeholders feel that the GGPGB are not being implemented they should tell their national regulator/ERGEG

Aim of the case studies To better understand gas balancing interactions to: –See how differences impact: on cross-border trade development of competition market integration –See whether differences create barriers to entry to the market (particularly for new entrants) –Understand whether differences can be justified (e.g. for system safety and security) To identify whether and how gas balancing mechanisms should be made more consistent Identify ways in which impact of remaining differences can be managed effectively so they do not constitute barriers to cross-border trade and market integration

Case studies chosen The two case studies chosen are: –Germany - Netherlands –France - Belgium The reasons are: –Germany - Netherlands: Significant gas flows/capacity; links in well with work on day ahead capacity auctions (Bunde-Oude Statenzijl). –Significant gas flows/capacity; link with work on primary capacity (Quevy/Blaregnies/Tainieres). This should allow a fuller picture (capacity-balancing) to be developed about these important interconnection points – help facilitate cross-border trade & market integration There will be a need to co-ordinate work effectively across relevant workstreams

Some issue to be investigated Differences in level, nature and timing of information provision Costs of information provision Interaction between balancing periods Differences in: –allocation process –imbalance pricing & penalties –Tolerances levels/services –nomination process –and other balancing rules/arrangements Differences in flexibility tools and services Level of risk exposure between mechanisms Scope for arbitrage and possible impact on prices Operational linkages between the two countries Level of data required to take effective commercial decisions regarding balancing positions

How the work will be undertaken Important that way work will be undertaken is understood: –Need to commitment from relevant TSOs to provide data where necessary –“Interviews” with active shippers (based on standard questionnaire) to gain more focused understanding of interaction issues –Outline/checklist of balancing rules & procedures in both countries –“Interviews” with relevant TSOs (based on standard questionnaire) to clarify understanding of balancing mechanisms and investigate interactions –Looking at actual balancing actions taken by shippers when engaged in cross-border trade to understand on a more quantitative basis interaction between balancing mechanisms

Next steps Enabler Group will now the prepare full draft terms of reference taking into account any views expressed The terms of reference will be published on the ERGEG website Work will then begin on delivering the case studies Key will be to identify lessons learnt – to bring forward, where appropriate, practical proposals for change to improve gas balancing interactions To roll-out lessons learned to other countries within the region (where appropriate & suitably adjusted where necessary)