1. Achievements and next steps in the Central-South Region Central-South Region 3rd SG meeting Milan, November 16 th 2010

2. 2 The CS Region, a complex structure…

3. 3 n 2 important markets as France and Germany belong to other 3 Regions – the harmonization process can’t be carried on independently and needs to follow the progress in other regional markets. n A non-Member State at the heart of the region: Unclear Regional structure: borders identification (Germany is part of the Region but with which borders?) Different arrangements allowed for different borders (CH-FR, CH- AT, CH-DE, CH-IT) A problematic structure /2

4. 44 CB CA in Central South Region n So far only Italian borders have been treated in the frame of the CS allocations n Despite Germany being a member of the Region, no German border have so far been considered in the scope of Capacity Allocation. n A good level of harmonization has been achieved for the auction rules; some “border-specific” provisions still exist mainly for administrative (e.g. guarantees) and nomination (timing) rules. Different compensation rules on the IT-FR border.

5. 5 LT capacity products Transfer Capacities are defined yearly by the Pentalateral Agreement (Austria, France, Italy, Slovenia and Switzerland) Italian electricity prices are regularly higher than bordering markets  clear market interest in maximizing capacity allocated on LT timeframes BordersAverage Volume allocated in MW Average volume allocated in LT in MW Percentage of products allocated in LT timeframe in 2009 Percentage of products allocated in LT timeframe in 2008 France – Italy2701230085%79% Austria – Italy22621896%94% Slovenia – Italy36032289%87% Switzerland – Italy178691651%66% Italy - Greece73937250%58%

6. 6 “ A common coordinated congestion-management method and procedure for the allocation of capacity to the market at least annually, monthly and day-ahead shall be applied by 1 January 2007…” CM Guidelines A long story n In 2008 a Single Auction Office for CSE Region had been proposed but one TSO, RTE (already involved in the creation of CASC-CWE), rejected the proposal n Several alternatives had been investigated: a TSO auction office, a Service provider agreement, but none has achieved unanimity n In 2010 a final agreement has been reached by the TSOs in having CASC as single auction office with a 2 step approach: from 2011 Italian and Swiss borders with separated rules and from 2012 full harmonization with CWE regions

7. 7 CASC to be the CS common auction office n Single point of contact for market participants of the CS region n Single auction office for other Swiss borders (Austria and Germany) from 2011 n Push to the harmonization of Swiss, CS and CW auction rules from 2012

8. 8 CASC to foster CWE and CSE cooperation n Already 2 RCC joint meeting held in 2010. A joint workshop on LT allocations to be held June 8 th 2011 – Stakeholders involvement in identifying priorities (i.e. working towards a fully centralized nomination platform??)

9. 9 The new EU “Top-down” approach n The typical approach by which the Regional markets have developed so far will be integrated by the new European legislative framework, with special reference to the network codes

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11. 11 Next steps – short term n Fully exploit CASC potential to foster LT auction rules harmonization (CWE + CSE), no downwards harmonization will be tolerated – possible further developments to be assessed together with the Stakeholders n Launch the price-coupling between Italy and Slovenia – identify a possible extension of the coupling in consideration of the governance guideline and the new congestion management framework guideline n Intraday: implement a quick solution to react to the infringement procedure by the EC, assessing the market interest. Further development of a market based solution in accordance with the FG on capacity allocation

12. 12 Next steps / longer term n Capacity calculation. European framework to be developed (FG on capacity allocation + ENTSO-E project) – There might be scope for cooperation CWE-CSE also on this subject to develop a common grid model n Balancing – FG to be developed in 2011 – Many ongoing projects in several borders in EU – Identification of a possible approach for our region