1. 13 February 2007, Brussels Electricity Infrastructure Workshop Shaun Kent, co-chair Electricity Regional Initiative TF

2. 2 Electricity Infrastructure Workshop – 13 February 2007  Cross border interconnection capacity needed e.g. :  Develop effective internal market  Security of Supply  Broaden scope for achieving environmental targets  Emphasised since e.g. :  Barcelona Council 2002 10% target  Commission Strategy paper March 2003  ERGEG June 2005 consultation paper “The Creation of Regional Electricity Markets”  “Priority Interconnection Plan”  Hence ERGEG Consultation Paper October 2006:  Description and analysis of current methods / regimes  Particular focus on cross border elements  Two broad themes – Building and Construction Authorisations and Permissions, Regulatory Framework Overview – Cross border infrastructure

3. 3 Electricity Infrastructure Workshop – 13 February 2007  Transmission project triggered by one or more :  Obligation on TSO to plan, build, operate according to operating and security standards  TSO seeking to improve market functioning  Private party profit opportunity – ‘Merchant’ line  Other – environmental, reaction to transmission user request  Infrastructure builder seeks necessary building and construction authorisations and permissions  Investment financed  TSO – ‘regulatory contract’  Private party – access fees / sale of long term right  Infrastructure built  Revenues collected Process for identification and provision

4. 4 Electricity Infrastructure Workshop – 13 February 2007  ERGEG survey of practice in 21 countries :  Regulatory framework, including operating and security standards  Planning  Operation and Maintenance  Financing  Building and Construction : Authorisation and Permissions  Technical, safety and quality standards  + ‘case studies’  ETSO input ERGEG survey of present practice

5. 5 Electricity Infrastructure Workshop – 13 February 2007  Clear that BCAPs major issue  Average time to project realisation 5 – 7 years in many countries  Worst case scenarios up to 10 years  Numerous different setting and approval bodies  Range of criteria :  Economic / competition  Engineering  Environmental  Local  Health  International obligations  Compounded in cross border settings Findings - BCAP

6. 6 Electricity Infrastructure Workshop – 13 February 2007  ETSO paper  Veto powers of the Regions  Effect of local authorities  Number of bodies in charge of permissions and/or Environment assessment  Laws / some country specifics :  Italy legislative initiative 2003  Germay Infrastructure Planning Acceleration Law 2006/07  UK – Energy review Findings - BCAP

7. 7 Electricity Infrastructure Workshop – 13 February 2007 Findings - Case studies ProjectRemarks Completed Estlink, IFA, Italy-Greece, Italy- Switzerland, Italy-France Underlying economics, sufficient authorisations, EU support, desire to improve SoS On course Finland-Sweden, Italy merchant lines, Netherlands – Norway Underlying economics, regulatory treatment On hold Austria (internal, ‘Styria’), France-Spain (Aragon), France-Spain (Baixas) Lengthy / controversial BCAP processes

8. 8 Electricity Infrastructure Workshop – 13 February 2007  Provision of transmission infrastructure generally driven by national requirement on TSO to meet standards  National ‘regulatory contract’ generally exists  Few requirements in ‘cross border’ sense, hence :  Cost and risk allocation  Few obligations to plan / operate in cross border sense  ITC mechanism helps in principle  Points to need for cross border obligations and competences for (at least) regulators, TSOs Findings – Regulatory Framework

9. 9 Electricity Infrastructure Workshop – 13 February 2007  Demands immediate attention  Naturally recognize need for proper expression of national and local concerns  ERGEG first observations :  Need for clear criteria, transparent guidelines, timelines and deadlines and appeals processes  National regulators / ERGEG can provide helpful independent view concerning market impact ?  Necessary and helpful to reconcile in some manner wider economic and security of supply against costs at local level First Recommendations - BCAP

10. 10 Electricity Infrastructure Workshop – 13 February 2007  ERGEG broadly arguing for cross border approach, requiring :  Overarching operating and security standards  Obligation on TSOs to meet them  Joint role for TSOs, subject to regulatory oversight  Joint role for Regulators, to mandate TSO (cross border) cost recovery, enforce standards  Clarity regarding treatment of ‘Merchant’ lines, particularly ‘exemptions’ regime  Views invited First Recommendations – Regulatory Framework

11. 11 Electricity Infrastructure Workshop – 13 February 2007  Consultation closed 1 December 2006  13 Responses received  Broadly supportive of ERGEG initial recommendations concerning BCAPs  Broader range views concerning framework  Presently anticipate ERGEG Conclusions paper to be published March 2007 Next steps

12. Thank you Shaun Kent shaun.kent@ofgem.gov.uk