1. 1 Madrid, 19 th February 2014 21 st SG Meeting South Gas Regional Initiative

2. 2 Agenda

3. 3 II. Capacity Allocation Mechanisms Area of workResponsibleStartingDeadline OSP France-Spain: annual allocation of short-term capacities TSOsNov. (yearly)Dec. (yearly) CAM harmonisation proposal PT-SPNRAs-TSOsJan. 2011 Jun. 2012 (COMPLETED) CAM harmonisation proposal in the whole regionNRAs-TSOsJan. 2012Dec. 2013 Set up a common TSO Allocation Platform: Roadmap and Implementation TSOsJul. 2012Dec. 2014 II.1. 2014 OSP ST between France and Spain II.2. Status of regulatory framework to develop auctions in the Region II.3. Arrangement for the first auction II.3.1 Using PRISMA: training session, shipper’s registration. II.3.2 Auction details for yearly products: capacity offered, bidding rounds, price steps, contracts, etc.

4. 4 II. Capacity Allocation Mechanisms II.1. 2014 OSP ST between France and Spain (for information by TSOs)

5. 5 II.2. Status of regulatory framework to develop auctions in the Region (for information by Regulators) II. Capacity Allocation Mechanisms

6. 6 II. CAM Spain: a CNMC Circular has been approved on 12 February. It will be published in the BOE (Bulletin Official of the State). “Circular 1/2014, de 12 de febrero de 2014, de la Comisión Nacional de los Mercados y la Competencia, por la que se establecen los mecanismos de asignación de capacidad a aplicar en las conexiones internacionales por gasoducto con Europa” France: a CRE Deliberation has been approved on 13 February. “Deliberation of the Commission de Régulation de l’Énergie of 13 February 2014 on rules for the progressive implementation of the European network code on the allocation of gas transmission capacity at interconnection points between entry-exit systems” Portugal: The Information Memorandum elaborated by Spanish and Portuguese TSOs, in coordination with NRAs, was submitted to Public Consultation. ERSE will approve the document and will be published by the end of this week “Coordinated implementation of the Network Code on Capacity Allocation Mechanisms. Information Memorandum. January 2014” II.2. Status of regulatory framework to develop auctions in the Region

7. 7 II. Capacity Allocation Mechanisms II.3. Arrangement for the first auction (for information by TSOs) II.3.1 Using PRISMA: training session, shipper’s registration. II.3.2 Auction details for yearly products: capacity offered, bidding rounds, price steps, contracts, etc. (for information by TSOs)

8. 8 III. Congestion Management Procedures III.1. Supervision of CMP implementation in the SGRI Area of workResponsibleStartingDeadline CMP harmonisation in the whole regionNRAs-TSOsOct 2012Oct.2013 CMP harmonisation in the whole region (including UIOLI firm ST) NRAs-TSOsOct 2012Jul. 2016

9. 9 III. Congestion Management Procedures III.1. Supervision of CMP implementation in the SGRI (for information by Regulators)

10. 10 III. Congestion Management Procedures  The ACER Monitoring Report on CMP implementation is in process, according to CE Decision of 24 August 2012 : To check the legal implementation of CMPs (implementation deadline was 1 Oct 2013) To receive TSO data on contractual congestions and occurrences for each applied CMP, that resulted in an offer of capacity, in order to elaborated the ACER Congestion Report – the publication is expected by the end of February.  For those objectives, an online survey was launched by ACER/TF CAM: TSOs answer the questions by mid February. NRAs will review the answers and complete their part by the end of February. The responses will be analysed and evaluated. The Report on CMP implementation will be finished by May/June.

11. 11 IV. Developing hub-to-hub trading in the South region IV.1. Iberian Gas Hub: update on the study on models for integration of the Spanish and Portuguese gas markets (for information by Regulators) Area of workResponsibleStartingDeadline Hub developmentNRAs-TSOs- stakeholders Jan.2013Dec. 2013 Hub-to-hub gas trading in the regionNRAs-TSOs- stakeholders Jan.2014Dec.2014

12. 12 IV.1. Iberian Gas Hub: update on the study on models for integration of the Spanish and Portuguese gas markets 0. GENERAL OBJECTIVE. In order to assess the feasibility for the development of a gas hub, the study analyzes different aspects of the current gas market situation in Spain and Portugal, including prices in the gas market, as the most important factors.. The study covers three different models for Iberian gas market integration, comparing the advantages and disadvantages for each model.  Market Area Model.  Trading Region Model.  Market with Implicit Capacity Allocation.

13. 13 1. The Market Area Model (full integration) Market Area A Country A Country B Market Area AB Cross- border market area National market area Final customers (A) Final customers (B) VP Final customers (A) VP Features. The adjacent transmission and distribution networks situated in the same geographical area (and well interconnected) are forged into a single entry/exit system.. The market area includes all gas transmission and distribution systems of participating countries (one single market area).. The market area enables a single wholesale market with a single virtual point.. The market region has a single balancing system (with a single balancing entity and balancing rules). IV.1. Iberian Gas Hub: update on the study on models for integration of the Spanish and Portuguese gas markets

14. 14 2. The Trading Region Model (full integration, except balancing) Country ACountry B Trading Region AB End user zone A End user zone B Final customers (A)Final customers (B) VP Features:. The adjacent transmission and distribution networks that are situated in the same geographical area and that are well interconnected are forged into a single entry/exit system with a single virtual point.. The Trading Region has two end-user balancing zones. The balancing in each end-user zone is performed according to the respective national rules (imbalances are managed by the national balancing entities). IV.1. Iberian Gas Hub: update on the study on models for integration of the Spanish and Portuguese gas markets

15. 15 3. Common Wholesale market with implicit allocation of capacity Features:. A certain amount of the interconnection capacity is reserved for implicit allocation.. In this model, gas trade and allocation capacity are assigned simultaneously via a gas exchange (or a gas trading platform).. The implicit allocation mechanism will allocate cross- border capacity on the basis of the bids and offers to buy and sell gas on a functioning gas exchange on either side of the border. Thus, capacity allocation (and gas flow) will follow the market signals. Market participants make “bids” and “offers” for buying or selling of gas Interconnection capacity is being reserved for implicit allocation The implicit mechanism matches those bids and offer with the highest price differences Capacity is automatically assigned once a trade is made until cross-border capacity is sold out or prices have converged IV.1. Iberian Gas Hub: update on the study on models for integration of the Spanish and Portuguese gas markets

16. 16 4. Preliminary evaluation of the models Market Area ModelTrading Region Model Wholesale market with implicit allocation of capacity Requires substantial legal and regulatory alignment among Spain and Portugal (implementation will take many years). Requires very good interconnection capacity. Can be considered a long term objective for the Iberian Market. Requires substantial legal and regulatory alignment among Spain and Portugal. Requires very good interconnection capacity. Co-habitation of one single virtual point with two end-user balancing zones (possibly with different balancing rules) is really a challenge. Can be applied with limited interconnection capacity (the markets will decouple when the interconnection capacity is fully used). Does not require a high level on harmonization of national legislations (implementation can be faster). Will directly promote market liquidity in the common Iberian gas hub. Can be a first step for the Iberian gas market integration. IV.1. Iberian Gas Hub: update on the study on models for integration of the Spanish and Portuguese gas markets

17. 17 V. Next NC implementation V.1. Balancing and Interoperability: implementation priorities (for information by TSOs) (for discussion)

18. 18 VI. Infrastructures Area of workResponsibleStartingDeadline Regular update and publication in CEER website of project status of OS 2013 and 2015 TSOs-NRAsDec. (yearly)Jun. (yearly) Drafting of the South Regional Investment Plan 2012TSOsJul. 2011 Jan. 2012 (COMPLETED) Feedback to ENTSO-G on contents and methodology of the regional investment plan NRAsJan. 2012 Jul. 2012 (COMPLETED) Input to ENTSO-G for the Community-wide TYNDP 2013 TSOsJan. 2012Apr. 2013 Creation of a working group in the region in order to test the process of PCI identification NRAs -TSOsMar. 2012March 2013 Drafting of the South Regional Investment Plan 2014 TSOsJan. 2013Apr. 2014 VI.1 2013 South Gas Regional Investment Plan (GRIP) VI.2 Regulators’ opinion on 2013 GRIP

19. 19 V.1. 2013 South Gas Regional Investment Plan (GRIP) (for information by TSOs) VI. Infrastructures

20. 20 VI.2. Regulators’ opinion on 2013 GRIP (for information by Regulators) VI. Infrastructures

21. 21 VI.2. Regulators’ opinion on 2013 GRIP The Draft 2013 South GRIP was submitted to Public Consultation until 20 Jan 2014. The Regulators in the Region adopted their Opinion on 30 Jan:  General comments Data on demand and regional supplies are referred to 2011 (updated with 2012 is recommended). Some wording clarifications and sources references in figures/tables. Consistency in the scenarios considered: further description.  Demand forecast Welcome the revision of the demand forecast taking into account the current economic situation in the Region. It would be useful to have a clear picture on the overall demand trends.  Comments on: Supply, Infrastructure, Capacity Subscription (data revision is advisable) and Economic aspects (more data on cost of the foreseen projects) VI. Infrastructures

22. 22 Next meetings: 27 th IG meeting: 28 March - telco 28 th IG meeting: 30 April - telco 22 nd SG meeting: 21 May VII.AOB and next meetings - 2014