1. Harmonization of Cross Border Transmission Tariffs between
Portugal and Spain (CNE/ERSE)
Public hearing
15th SG Meeting S-GRI
Madrid, 7th February 2012

2. Context – SGRI WP
Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha
SGRI WP includes some short term priorities for SP-PT interconnections:
Harmonized and coordinated mechanisms for capacity allocation and congestion management at interconnections
Regulated TPA tariff harmonization, starting with cross border tariffs in MIBGAS
Hub-to-hub trade development …

3. Context – Joint task of CNE and ERSE
Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha
Some milestones of MIBGAS:
ERSE and CNE approved a position document on the priorities for MIBGAS development, sent to Governments on September, 2011
Portuguese Gov committed in the Memorandum of Understanding (w/ EC, ECB, IMF) to take measures that accelerate MIBGAS development through regulatory convergence, namely promoting the harmonization of tariffs, CAM and CMP in the interconnection networks
CNE and ERSE have done a joint study on CBT tariffs at the SP-PT IPs, with the aim of setting up a public consultation on tariff harmonization and identifying any other obstacles to the internal gas trading
The study was published through Public Hearing process on Jan,18th, 2012

4. Case study methodology
Assessment of case studies based on the supply of a CCGT/industrial cons. from a MIBGAS entry point (LNG terminal/interconnection).
For each case study:
Entry costs into the transmission network are assessed as well as regasification costs
Transmission costs include one country or two countries depending on the origin and destiny of the supply
Costs for using underground storage or for balancing purposes are not considered

5. CBT comparison methodology
Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha
Example of the study results:
Industrial consumer located in Portugal
Gas supply from Portugal
0,95+0,49 = 1,44 €/MWh
Gas supply from Spain
1,37+0,38+1,5+0,54 = 3,79 €/MWh Vs
Supplying the consumer bringing gas from SP has an added cost of 2,35 €/MWh due to CB Tariffs, entering the transmission system

6. CBT comparison methodology
Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha
Example of the study results:
Industrial consumer located in Spain
Gas supply from Portugal
0,95+0,49+0,78+0,61 = 2,83 €/MWh
Gas supply from Spain
1,37+0,54 = 1,91 €/MWh Vs
Supplying the consumer bringing gas from PT has an added cost of 0,92 €/MWh due to CB Tariffs, entering the transmission system

7. Summary results from the case studies
Summary results of the added costs observed by shippers who supply their customers using the interconnection
Importing gas through the neighbouring country represents always an added transmission cost
The added cost depends on the consumption profile (capacity price)
LNG regasification costs can either contribute to lower or raise the added costs since average regasification cost is lower in PT (for the case studies)
% Impact on total grid access prices depends on exit tariff prices in each country

8. Main conclusions
Access costs are higher when the transmission system of the neighbour country is used, partly due to the cost for the use of its transmission system and also because of the cross border tariffs are not harmonized in both systems
Note: Parallel development of harmonized CAM in SP-PT border will help much in establishing convergent and coherent pricing and allocation of capacity at interconnections

9. Harmonization of cross border tariffs
CBT are a particular case of gas network tariff
Should comply at least with the same principles recommended for the development of the gas network tariff
According to the Gas Directive 2009/73/CE, the European Gas Regulation 715/2009, the European Working Group for Tariffs and the recommendations by the Council of European Energy Regulators, tariffs or charges for the use of the gas transmission network should comply with the following principles:
Cost recovery and cost reflectivity
Facilitate efficient gas trade, hub development and market liquidity
Non discriminatory
Ensure high levels of transparency
Adaptability to the specificities of the network
ensure that any differences in tariff conditions applied to different customers for similar services should reflect underlying costs.
Coherence check with the Target Model and the FGs under discussion
Study establishes the baseline on CBT (present situation)
Stakeholder views are welcome designing target scenario & interim steps

10. Building blocks approach to market integration
MIBGAS market integration
Cross Border Tariffs
CMP
CAM
And integrate released capacity in the CAM
Rules of balancing

11. Public hearing poses some questions (I)
Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha
Question 1: Would you agree with the analysis made on current market situation and on the major issues affecting cross border trade between Portugal and Spain?
Question 2: How do you think that transmission network costs should be allocated at cross border IP (both in Spain and Portugal), taking into account the defined principles (coherence, transparency, cost recovery and cost reflectiveness, etc) and the starting situation of the regulatory tariff framework in both countries?
Question 3: Which do you feel are the most important aspects where harmonization (apart from the cross border tariffs harmonization) can contribute significantly to short term market integration?

12. Public hearing poses some questions (II)
Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha
Question 4: How would you implement the proposed step-wise approach, aiming for a more integrated market in the longer term?
Question 5: Would you identify new issues you think are important to create a favorable cross border trade environment? How would you set the timing and prioritization for the discussion on these issues?

13. Participation
Consulta Pública sobre harmonização das tarifas de interligação de gás natural entre Portugal e Espanha
All comments from the stakeholders to the questions raised in the Public Hearing should be sent to ERSE or CNE until February, the 17th, 2012 |
If comments are not to be publicly identified they must be explicitly marked as confidential

14. Next steps
Receive, analyse and publish comments from stakeholders to the Public Hearing
NRAs will issue a proposal, where necessary, of measures to foster market integration through cross border tariff harmonization
European target model for market integration will provide guidance for short term developments