1. 1 24 th November 2015 Videoconference 34 th IG Meeting South Gas Regional Initiative

2. 2 Agenda

3. 3 (for information by NRAs) II. CMP: Common methodology of OSBB for the Region. Evaluation of responses from the public consultation

4. 4 II. CMP: Common methodology of OSBB for the Region. OSBB SUMMARY:  OVERSUSCRIPTION (OS):  Methodology applied the D-1 for the following day D.  After last nomination TSOs compute & publish the additional capacity.  Calculation of Additional Capacity: Additional Capacity = function (nominal capacity, risk index, operating margin). Trigger value Capacity to offer = Technical Capacity – Capacity sold + Additional Capacity  Additional Capacity offered after last nomination (D-1) for day D.  Firm Capacity.  Bundled Capacity.

5. 5 II. CMP: Common methodology of OSBB for the Region. OSBB SUMMARY:  BUY BACK (BB):  Applied if  net nominations in the VIP > technical capacity.  Merit Order (Before applying BB): 1.Management of the OBA. 2.Interruption of interruptible capacities: 1.Within Day interruptible capacities 2.Daily interruptible capacities 3.Monthly interruptible capacities 4.Quarterly interruptible capacities 5.Yearly interruptible capacities  BB Market Based Procedure: 1.Restrict renomination rights (upwards & downwards) 2.TSOs will submit a proposal to buy (bundled, max. price & users) 3.Users will submit proposals to sell (bundled, amount, price<max. price) 4.Clearing price = lowest successful offer to sell. 5.If offers are not sufficient: pro-rata rule (bundled and unbundled capacities). Price = Regulated tariff.

6. 6 II. CMP: Common methodology of OSBB for the Region. Evaluation of responses from the public consultation The Proposal was submitted to public consultation until 30 October 2015. 8 responses have been received from: 2 associations, 4 shippers, 1 LSO, 1 TSO. General comments:  All participants welcome the opportunity to comment the proposal.  Participants support explicitly the target to maximise capacity at the IPs: To review physical capacities at the IPs would have more impact than OSBB. Need to perform hydraulic analysis, transparent criteria and coherent with ENTSOG’s. Also impacts in new infrastructures More involvement of operators potentially affected by decisions taken by TSOs of the IPs.  Transparency of the process must be ensured: notifications to the shippers  Increase of TSOs coordination. Offer a unique contact point, a common contract model and a unique nomination linked to the use of the bundled capacities.  NRAs must supervise the maximisation of the offered capacity by the TSOs

7. 7 II. CMP: Common methodology of OSBB for the Region. Evaluation of responses from the public consultation  Methodology for offering additional capacity (I) Generous security margin to cover the TSO’s risks (5 comments): NRAs should supervise the applied margin and its effects. Probability of occurrence could have been taken into account to calculate those margins (according to the EC). Ask for amendments (3 comments): ( page 7) “Additional capacity will be offered at VIP Ibérico and/or VIP Pirineos jointly with through auctions after the available capacity has been allocated through auctions. Both additional capacity and available capacity will be treated as firm capacity and there will not be any distinction between them”. (page 9) More detailed description and definition of the cases when the additional capacity will not be offered.

8. 8 II. CMP: Common methodology of OSBB for the Region. Evaluation of responses from the public consultation  Methodology for offering additional capacity (II) The bundle of capacity is questioned. It leaves the unbundled capacity without use:  Pag. 7: “The methodology proposed for calculating the additional capacity ensures that the amount of additional capacity to be offered at both sides of the VIP Ibérico and/or VIP Pirineos will be the same. In order to maximize the offer of bundled capacity, all the additional capacity will be offered always as bundled capacity in a first stage.”  Pag. 8: “Each TSO will upload the capacity to be offered in the rolling day ahead capacity auction (one value each TSO); then, PRISMA will apply the lesser value to determine bundled capacities. If after the rolling day ahead capacity auction there is still OS capacity left, it would be offered to the market in a second stage as unbundled OS capacity.” Ask for assessment of the probability of curtailment at the VIP Pirineos as consequence of restrictions within France market areas (association).

9. 9  Buy back methodology (I) The list of exceptional events in which the BB process is not triggered must be closed. (page 10) “(…)situations where the actual capacity (i.e. operational capacity) is below the technical capacity caused by exceptional events such as, failures, breakdowns, etc. If this is the case, no buy back procedure shall be triggered” Technical and commercial measures. Three proposals related to the order to apply the measures. (page 11): the OBA would be managed after the interruption of interruptible capacities. They propose a voluntary BB process where all capacity holders can participate offering capacity (firm and OS). II. CMP: Common methodology of OSBB for the Region. Evaluation of responses from the public consultation

10. 10  Buy back methodology (II) Technical and commercial measures. Proposal: 1.Management of OBA. 2.Interruption of interruptible capacity: daily; monthly; quarterly; yearly. 3.Voluntary BB process: all capacity holders (firm/OS) could participate in this process. 4.If the problem is solved the process will end 5.If the problem is not solved (there is not sufficient capacity), two default rules are proposed: A.TSO would BB firm capacity at regulated price from each shipper holding “daily firm capacity” meaning available capacity plus additional capacity (OS) offered in the daily auction on the IP, in proportion to the daily firm capacity it holds. B.TSO would mandatory BB capacity from shipper holding OS capacity on the IP in proportion to the OS capacity it holds. The step will not be necessary if cap of maximum price TSO can pay is avoided. II. CMP: Common methodology of OSBB for the Region. Evaluation of responses from the public consultation

11. 11  Buy back methodology (III) Market based procedure: the renomination limitation for shippers is considered contradictory to market competition / it is the most relevant difference between firm day ahead UIOLI and OSBB (page 12) “As soon as the TSOs have identified the need to trigger the market based mechanism, they will restrict network users renomination rights upwards and downwards in both flow directions until the end of the gas day. (…)” The pro-rata mechanism is not supported by 4 respondents. It should not undermine the firmness of annual, quarterly or monthly capacity rights for shippers. (page 13) “ If users do not offer enough capacity in the buy back procedure (…) TSOs will reduce all firm bundled and unbundled capacities the daily firm capacity (the available capacity plus the additional or “oversubscription” capacity allocated) according to pro-rata rule up to the amount of capacity that needs to be bought back. TSO shall pay network users the regulated tariff for this capacity”. The amount of capacity that will be reduced should be clarified: Is it the difference between the capacity offered by users and the capacity needed for the BB procedure or the total capacity needed for the BB procedure? II. CMP: Common methodology of OSBB for the Region. Evaluation of responses from the public consultation

12. 12  Buy back methodology (IV) Call For Orders: The functionality is not dynamic in PRISMA. The OTC method is more used to inform TSOs, market and register the trade. The functionality of Reverse Auction on the primary market in PRISMA could be a solution.  A shipper proposes an amendment in page 13 in relation to offers to sell: “TSOs shall only consider valid “offers to sell” that fulfill both conditions below: [...] and The amount of capacity included in the “offers to sell” submitted is equal to or lower than the nominated capacity. II. CMP: Common methodology of OSBB for the Region. Evaluation of responses from the public consultation

13. 13  Pricing Definition of the clearing price It should be the highest successful “offer to sell” or the price of the last successful bid “offer to sell” needed to fulfill the TSOs request. (page 13) “When two or more “offers to sell” (…) The clearing price shall be defined as the price of the lowest highest successful “offer to sell”. (page 16) “The clearing price shall be defined as the price of the lowest highest successful “offer to sell”. Maximum price TSOs are allowed to pay The default rule should be described in the section of the maximum price that TIGF is allowed to pay (page 15). Split of costs The criteria used to split the cost related to VIP Pirineos should be explained (as established for VIP Iberico, page 16).  Timeline Adding the reference to the product “day ahead capacity” to clarify the points 4 to 7 in the section 5 (page 18). II. CMP: Common methodology of OSBB for the Region. Evaluation of responses from the public consultation

14. 14 Next steps TSOs will review the Proposal taken into account the comments received from the public consultation TSOs will submit the final version to the NRAs by mid December NRAs will discuss the proposal, impacts and development in the Region in a RCC meeting on the 19 th January 2016 Follow up the IT systems and developments to implement the OSBB in the Region NRAs will decide next steps and deadlines. II. CMP: Common methodology of OSBB for the Region. Evaluation of responses from the public consultation

15. 15 III. Interoperability NC. Latest developments and next steps in the Region (for information by TSOs)

16. 16 IV. Infrastructures (for information by NRAs and TSOs) IV.1 Update of the second list of PCIs in the Region

17. 17 IV. Infrastructures IV.1 Update of the second list of PCIs in the Region Priority Corridor North-South Gas Interconnections in Western Europe ('NSI West Gas') The second list of PCIs has been published on 18 November. PCIs in the Region:

18. 18 IV. Infrastructures (for information by TSOs) IV.2 Update of the infrastructure status of the OS 2013-2015

19. 19 Next meetings: 16th RCC meeting:19 January 2016 35th IG meeting: 16 February 2016 V. AOB and next meetings 2016