1. GRI - SSE Workshop on system access Vienna, 24.11.2006 EFET SSE © Copyright 2006 EFET European Federation of Energy Traders 1

2. Vienna, 24 november 2006 2 Regional markets according to ERGEG (Gas Regional Initiative) What should the GRI process achieve according to EFET: 1.Convergence on a consistent EU internal market approach 2.Transparancy with information accessible to all stakeholders on an equal basis 3.Ambitious, but realistic targets, with lessons from the electricity markets and successful gas hubs EFET looks forward to assess the findings of the “reality check”

3. Vienna, 24 november 2006 3 GRI SSE: some of EFET’s concerns (1) Gas Hub Development Effective trading points linked to market Focus on existing trading points with their specific problems As few points as possible to increase liquidity Primary and Secondary Capacity availability/trading No unduly delay for implementation! Transparency Safeguard the interest of all players and the new entrants No unduly delay for implementation!

4. Vienna, 24 november 2006 4 GRI SSE: some of EFET’s concerns (2) Gas Balancing Closely related to hub development Market-based balancing (best online and on a regional basis) Gas Quality Should be a ‘non-issue’ on wholesale level for H-gas! Regulatory Co-ordination and Investments Adequate investments in infrastructure: essential! Consistency of regulation, incl. application of article 22 and open seasons etc...

5. Vienna, 24 november 2006 5 GRI SSE: the workshop The following slides are based on simple questions posed to members of EFET The information was given in confidentiality and not verified by others

6. Vienna, 24 november 2006 6 GRI SSE - Is there available capacity? Is there available capacity (firm)?  Velke Kap – Gorizia (2.2): Not sufficient capacity available  Velke Kap – Tarvisio (2.3): Not sufficient capacity available Assignment procedure of TAG-2008-capacity increase has been less than perfect  Mazara – Velke Kap (2.6): Not sufficient capacity available Equally important as capacity is choice of supply – limited number of producers likely  Velke Kap – Oberkappl (2.5): Not sufficient capacity available Further limited by –capacity calculation methodologies –Artificial (commercial) multi TSO zones split capacity although physically the same pipelines –No multi TSO zone competition possible as not same entry/exit points in all zones – de facto pooling only possible in 1 zone  On most economically interesting entry points throughout SSE: Not sufficient capacity available on a firm basis and secondary trading rather insignificant for the moment  Note: the interest of the network user is to transport gas from one wholesale level before the route to the wholesale system lying after the route as reasonably possible (Ukraine no – SK yes,. etc. ) – and to have capacity throughout the line –> one bottleneck (e.g. 0 capacity) means that this bottleneck determines the whole line

7. Vienna, 24 november 2006 7 GRI SSE Is the level of information transparency sufficient Is the level of information transparency sufficient? (esp. concerning available capacities and tariffs)  2.2/ 2.3 / 2.6 : Basically yes; but regarding capacity it is often not clear if all capacity is really booked, 2.6 is uneconomic currently  2.4: rather unclear on how and why  Other areas currently under scrutiny -> need to implement regulation -> some progress in certain areas visible -> would be nice to have additional services like e.g. online booking of capacities tool based on the information available throughout region

8. Vienna, 24 november 2006 8 GRI SSE Are there balancing requirements problems? Are there problems with balancing requirements? General lack of system harmonisation OBA’s not in place (how about the regulation??): nomination vs allocation Gas day Data format of nomination Nomination/ re-nomination cycles Lack of balancing markets Unstable rules and sometimes evolving into different directions Clearing and settlement Creditworthiness Licensing Intransparent rules for balancing energy charges and occasionaly prohibitely high levels -> clear need for (online based intra period) market-based balancing regime on regional level as a goal -> clear need to allow for pooling of imbalance positions throughout areas as big as possible (region) -> clear need of one central counterpart for balancing issues (except for residual ones) throughout areas as big as possible (region), e.g. via Hubs

9. Vienna, 24 november 2006 9 GRI SSE - Are contractual requirements clear throughout SSE? Are contractual requirements clear throughout SSE? To cut it short: for multizonal activities of a shipper you need to hire an expert per zone at least – completely inefficient Standard transportation contract useful?! -> need for one-stop-shop provider for basic system use services -> need for one-stop-shop best also for regulatory issues to guarantee clear and stable investment climate and to reduce regulatory risk at regional level -> need for a clear mechanism for capacity increase and tarification on a regional level -> need for harmonised and mandatory open season procedures resulting in sufficient capacity being built in time for committed parties (to be incentivised best via marked based mechanisms and lack of regulatory risk)

10. Vienna, 24 november 2006 10 GRI SSE Are storage and flexibility services available Are storage and flexibility services available?  Velke Kap – Gorizia (2.2): it seems there is no flexibility  Velke Kap – Tarvisio (2.3): basically no  Mazara – Velke Kap (2.6): it seems there is no flexibility  Velke Kap – Oberkappl (2.5): it seems that on real term there is only one provider with intransparent pricing regime  Is this really so?? – how about the GGPSO, how about OBA‘s

11. Vienna, 24 november 2006 11 Conclusion GRI necessary intermediate step - but European market goal Therefore need to include parts of Germany, at least the adjacent systems to SSE, in the assessment The introduction of legal requirements should be facts and not discussed again in a time consuming manner EFET SSE considers launching an internal assessment on the costs (and benefits) incurred to the market of non compliance with legislation and the resulting hampering of trade opportunities - who is reliable for these costs? (Regional) balancing markets are key for a transparent evaluation of the value of gas and flexibility services and boost Hub liquidity SSE region lacks availability of gas and physical choice of supply – authorities urged to accelerate the realisation of all projects leading to higher choice of supply and thus security of supply, competition and trade