Capacity Allocation and Congestion Management Monitoring results & proposal for new measures Stefanie Neveling (BNetzA) Benoît Esnault (CRE) Madrid Forum, 29 May 2009

2 XVI Madrid Forum, 29 May 2009 Monitoring Results ERGEG Principles Public Consultation

3 XVI Madrid Forum, 29 May 2009 Early Monitoring Art. 5 & 8 Implementation Monitoring on basis of questionnaire to NRAs 2008, update May 2009 Crossing borders is often difficult for shippers Capacity fully booked in the long term mostly by incumbents Different legal frameworks appear to be an obstacle Lack of cooperation between TSOs in capacity calculation Inconsistencies hamper TPA Different allocation mechanisms: First come first served, pro-rata, auctions Short term capacity products mandatory in some countries Different designs for interruptible capacity Different nomination procedures Implementation of congestion management procedures insufficient

4 XVI Madrid Forum, 29 May 2009 Example 1: Contractual Congestion HAG Fully booked point which is physically underutilised

5 XVI Madrid Forum, 29 May 2009 Example 2: Contractual Congestion HAG Emden Fully booked point which is physically underutilised

6 XVI Madrid Forum, 29 May 2009 Monitoring Results ERGEG Principles Public Consultation / Way Forward

7 XVI Madrid Forum, 29 May 2009 CAM & CMP: A Priority for European Regulators Two main objectives Propose amendments to the existing Guidelines annexed to the Regulation: Possible comitology procedure on general issues Prepare the implementation of the 3rd Package: input to the Framework Guidelines Underlying principles Pragmatism and harmonisation: Comprehensive European approach while coping with various national situations: toolbox Security of access to capacity, visibility and flexibility

8 XVI Madrid Forum, 29 May 2009 CAM & CMP Proposals Scope of proposals Apply to cross-border points and points connecting balancing zones only Apply to congested or potentially congested points. Do not apply to storage and LNG facilities or to exit points to end consumers Some detailed proposals are optional and shall be applied by virtue of NRA decision only Overview of proposals Increase of available capacity and enhanced compatibility of products and procedures Offer of capacity products adapted to shippers’ needs and improved allocation procedures Reduction of transaction efforts Improved congestion management

9 XVI Madrid Forum, 29 May 2009 Increase of Available Capacity Co-operation of adjacent TSOs in order to increase available capacity Dynamic calculation of available capacity Over-subscription and capacity buy-back TSOs offer specified amount of capacity above the calculated technical capacity In case of physical congestion TSOs buy back capacity Procurement of physical energy TSOs procure gas to physically balance the system and to overcome congested situations

10 XVI Madrid Forum, 29 May 2009 Product Design, Allocation Definition of products adapted to market needs Compatible products and compatible procedures to be implemented Alignment of contracts and codes for firm and interruptible capacity Bundling of capacity at all points connecting adjacent systems Allocation during an open subscription period (OSP) In case of congestion the OSP is followed by auction or pro-rata allocation => Restriction of FCFS

11 XVI Madrid Forum, 29 May 2009 Use-It-Or-Lose-It Firm day-ahead UIOLI Requires at least partial restriction of re-nomination rights Allows for re-allocation of non-nominated capacity Offer of day-ahead firm capacity via explicit auction; auction- design has to be aligned to activities on trading markets Long-term UIOLI Preconditions inter alia: Systematic underutilisation, no justification Withdrawal of contract or restriction of nomination Freeing up capacity (capacity release)  Some ERGEG’s proposals will impact existing contracts but do not question their existence

12 XVI Madrid Forum, 29 May 2009 Monitoring results ERGEG principles Public consultation

13 XVI Madrid Forum, 29 May 2009 Public Consultation Public Consultation launched from January to March 2009 Stakeholder workshop in Brussels, 18 February 2009, over 100 participants Bilateral meetings or phone conferences with stakeholders (GTE+, GEODE, EFET) 36 answers to the public consultation BDEW, BNE, BP, CEDEC, Centrica, DONG Energy, Econgas, EdF, Edison, EDP Gas, EEX, EFET, EirGrid, EnBW, Endesa Ireland, Eni, E.ON, Eurelectric, Eurogas, ExxonMobil, Gas Natural, Gaselys, Gaslink, GasTerra, GDF SUEZ, GEODE, GTE+, Iberdrola, NationalGrid, Naturgas Energia, Nederlandse Gasunie, Scottish and Southern Energy, Shell, Statkraft, Statoil Hydro (plus two confidential answers)

14 XVI Madrid Forum, 29 May 2009 Supportive Answers Respondents support ERGEG’s proposals with regard to: Approach and scope of proposed measures; identification of the relevant problems Increase of cooperation between TSOs A more dynamic capacity calculation combined with capacity buy-back  Role and price of interruptible to decrease Allocation procedure: FCFS discriminatory; auctions slightly preferred over pro-rata Capacity products of various duration: -harmonisation of products and procedures and bundled products -reservation of short term capacity Transparency on flows close to real-time

15 XVI Madrid Forum, 29 May 2009 Hesitant Feedback and Additional Proposals Respondents hesitant to or reject the following ERGEG’ proposals: Restriction of existing re-nomination rights Freeing up and withdrawal of underutilised capacity  Modification of existing contracts mostly rejected Toolbox approach: extensive harmonisation required; Respondents propose additional measures: Consistency throughout Europe; if not, risk of inconsistency Closer NRA co-operation required for cross-border harmonisation Tariffication and investment issues to be addressed Many comments received regarding the development of secondary markets

16 XVI Madrid Forum, 29 May 2009 Conclusion and Way Forward Conclusion Market participants largely supportive of ERGEG’s approach and proposals but react hesitantly on some specific proposals ERGEG will redraft its principles accordingly Way forward July 2009: Publication of ERGEG’s evaluation of comments September 2009: 2nd stakeholder workshop if needed October 2009: Publication of ERGEG’s principles on CAM and CMP, to be presented at the next Madrid Forum From end 2009: Possible launch of a comitology process Preparation of the 3rd package implementation (Framework Guidelines and cooperation with GTE+ / ENTSOG)

17 XVI 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