1. Regional Initiative Progress and Next Steps Graeme Steele

2. Background  Following ERGEG Roadmap consultation Gas Regional Initiative launched (25/04/06), with overall aim: “to speed up progress at a regional level as a stepping stone towards a single competitive market”  Designed to identify and remove barriers to competition, in particular seeking to improve hub liquidity and trade between hubs  Generally well supported by all industry stakeholders, although some concerns, in particular the potential to create four incompatible markets

3. The Regions North-West Ireland, United Kingdom, Belgium, France, Netherlands North Netherlands, Germany, Denmark, Sweden South Southern France, Spain, Portugal South-South East Austria, Czech Republic, Greece, Hungary, Italy, Poland, Slovakia, Slovenia Lead regulators are highlighted in bold

4. The Structure EU Commission ERGEG Regional Co-ordination Committee Implementation Group (operators Chaired by RCC) Madrid Forum Member States Stakeholder Group

5. The N/NW Region  The North and North-West regions are initially being run jointly under lead of the Dutch regulator  This joint region is faced with managing a very large group, comprising 37 operators and over 100 stakeholders, which complicates the task of addressing pragmatic issues in a rapid manner  At the end of the year it is intended that the North region will separate and revert to leadership by the German regulator

6. N/NW Region Governance  At present the decision-making process is unclear  This is problematic, especially for operators who are faced with bringing together views from 37 organisations with backgrounds ranging from fully liberalised markets (as in the UK) to markets currently undergoing liberalisation (as in Germany)  Encouragingly this has not proven to be a barrier, and operators have worked well together on a voluntary and cooperative basis

7. The N/NW Region Priorities  7 priorities were identified by the RCC with lead regulators assigned to each:  Hubs  Transparency  Gas Quality  Regulatory Co-ordination  Primary Capacity  Secondary Capacity  Gas Balancing  These were presented at the 1 st IG meeting on July 18 th which was very positive and constructive

8. Redefinition of Priorities Hub A Hub B Prime Objective 1: Increasing liquidity at hubs Prime Objective 2: Increasing trade between hubs Based on a survey of market views we will identify the barriers to each of these objectives, then we need to review the initial priority areas

9. Regional Vs Pan-European Issues  It is vital to ensure that actions are coordinated at a European level  Pan-European aim: to achieve a single European market  Regional aim: to work towards a single European market, whilst making progress on a regional level  Some issues are more suited to a pan-European approach than a regional approach

10. Regional Vs Pan-European Issues Regional Issues  Liquidity between hubs  Gas quality/interoperability  Balancing - compatibility of nomination/allocation process  Regulatory Co-operation  Co-operation between regulators to facilitate cross-border investment Pan-European Issues  Winter outlook  Transparency  Regulatory Co-ordination  Looking at the principles behind this, with the aim of achieving regulatory consistency  Providing a stable investment climate The ultimate aim of the regional initiatives is to address regional specific issues, not all issues

11. N/NW Region Next Steps  RCC held on September 20 th  Preparation for stakeholder meeting on October 9 th and IG meeting on October 10 th  Delivery of work plan

12. Summary  A positive start has been made to the N/NW gas regional initiative  The involvement of all stakeholders remains vital  We need clarity on how the regional initiatives will interact with the movement towards a single European market and the EU energy policy review A joined up approach is essential We are optimistic about the success of the initiative