1. Benoît Esnault Commission de Régulation de l’Energie (CRE) - ERGEG 19th Madrid Forum, 21-22 March 2011 Preparatory work for Framework Guideline Tariffs

2. 219th Madrid Forum, 21-22 March 2011 Agenda Background Identification of problems Identification of objectives Scope Process

3. 319th Madrid Forum, 21-22 March 2011 Background Legal requirements on transmission tariffs De-coupled entry-exit systems; No distinction between domestic transport and “transit”; Qualitative requirements (Commission Staff Working Document). KEMA study 2009 Evaluation of existing differences in the methodologies for gas transmission network tariffs in Europe; and If these lead to barriers to cross-border trade. 17th Madrid Forum invited ERGEG to start preparatory work on framework guideline on tariffs ACER to launch official FG development process

4. 419th Madrid Forum, 21-22 March 2011 Main legal requirements Article 41 Gas Directive (2009/73/EC) The NRA shall ensure that TSOs are granted appropriate incentive, over both the short and long-term, to increase efficiencies, foster market integration and security of supply and support the related research activities. Article 13 Gas Regulation (EC) 715/2009: Transmission tariffs or methodologies Shall facilitate efficient gas trade and competition, while at the same time avoiding cross-subsidies between network users and providing incentives for investment; Reflect the actual costs incurred; Tariffs may also be determined through market-based arrangements, such as auctions, provided that such arrangements and the revenues arising from them are approved by the NRA.

5. 519th Madrid Forum, 21-22 March 2011 Identification of problems Tariffs can act as barriers to efficient gas trade and competition Premium on short term capacity products allocated with a short lead time may frustrate arbitrage flows and price alignment; But: need to assess the relation between prices for short term and long- term capacity products and the risks associated to optimisation strategies by shippers; Pricing of interruptible and non-physical backhaul capacity. Need to find a proper balance between facilitating short term gas trading and providing long-term signals for covering costs and promoting efficient investments Cross subsidies between cross-border and domestic network usage Cross subsidies within a market; and Cross subsidies between two adjacent markets.  Cost-reflectivity as a main principle

6. 619th Madrid Forum, 21-22 March 2011 Identification of problems: Further issues Issues resulting from FG on CAM and Balancing: Cost recovery and revenue sharing among TSOs: under- and over-recovery of allowed revenues, risk of sunk costs, articulation between capacity and commodity, definition of the appropriate reserve price; Split of auction revenues between TSOs for bundled capacity products. Infrastructure development: to ensure a proper remuneration and investment incentivisation Relation with the work on the Energy Infrastructure Package.

7. 719th Madrid Forum, 21-22 March 2011 Analysis of national charging systems Ongoing complementary analysis to the KEMA study (10 Member States until now); Picture of current situation – changes are foreseen with the implementation of the 3rd Package; Entry and Exit capacity separately bookable in some cases – for others distinction between tariffs on cross-border and domestic network  No common rule for the breakdown of costs Between entry and exit on the IPs; Between domestic exits and exits on the border. Different role for distance in tariffs calculation; Short term vs. long-term prices: Higher prices for daily and monthly products, with seasonality factor in some cases; Discount for interruptible products based on the probability of interruption; Few TSOs offer non-physical backhaul products.

8. 819th Madrid Forum, 21-22 March 2011 Identification of objectives Objective 1: Harmonised transmission tariff structures shall facilitate efficient gas trade and competition; Objective 2: Harmonised transmission tariff structures shall avoid undue discrimination between cross-border and domestic network usage; Objective 3: Harmonised transmission tariff structures shall provide incentives for new and efficient investments Objective 4: Harmonised transmission tariff structures shall guarantee recovery of allowed revenues associated to cross-border interconnection points. The work on the Gas Target Model to be taken into account in the Tariff FG development process.

9. 919th Madrid Forum, 21-22 March 2011 Proposed scope Cross-border interconnection points IPs between two or more Member States as well as IPs between adjacent entry-exit-systems within the same Member State; IPs to LNG and storage facilities may be included, if relevant for market integration and the contribution to non- discrimination, effective competition and the efficient functioning of the market. Contribute to recovering the allowed revenues (associated to interconnection points) ; However, detailed rules for the determination of costs (or allowed revenues) are not within the scope.

10. 1019th Madrid Forum, 21-22 March 2011 Process Process so far Preparatory work by ERGEG; 5 bilateral meetings with ENTSOG; Initial scoping discussion with the Commission. Next steps (according to 3-year plan) Q1/2011: Finalisation of scoping discussion; April-October 2011: Official FG development process by ACER.

11. 1119th Madrid Forum, 21-22 March 2011 Thank you for your attention! www.energy-regulators.eu