Madrid, 15 th November 2013

1. 20thSG Meeting South Gas Regional Initiative Madrid, 15th November 2013

2. Agenda

3. II. Capacity Allocation Mechanisms • II.1. Results of the last auction between Portugal and Spain (for information by TSOs) • II.2. Status of CAM Roadmap in SGRI Latest agreements on the CAM for 2014 (for information by Regulators) • II.3. Update information on PRISMA: shippers’ requirements and IT implementation in the SGRI (for information by TSOs) • II.4. Allocation of capacity in Portugal under the new regulation (for information by NRAs) • II.5. Next steps and calendar: information release, training sessions, relevant regulation, etc. (for discussion)

4. II. Capacity Allocation Mechanisms II.1. Results of the last auction between Portugal and Spain (for information by TSOs)

5. II. Capacity Allocation Mechanisms II.2. Status of CAM Roadmap in SGRI. Latest agreements on the CAM for 2014 (for information by regulators)

6. II. CAM • In the 24 IG meeting (23 Sept), it was agreed that Regulators will elaborate a Paper containing the topics agreed in order to progress on the early implementation of CAM NC in the SGRI. • CAM NC wasapprovedon 14 October 2013 – Regulation (UE) nº 984/2013, completingtheRegulation (CE) nº715/2009. Aplicable as fromNov 2015 • A Paper on CAM implementation was shared with TSOs – sent by email last Friday. • Principles: • Allocation will take place via PRISMA • Planned auctions: • Every year, in March: • Yearly products for the following year at PT-ES border • Yearly products for the following 15 years at FR-ES border • Every year, in June: • Quarterly products from October to September at both borders • Every day, at least since November 2015 and when available capacity exits: • Day ahead and intraday products at both borders

7. II. CAM Issues agreed on Capacity Allocation • Bundled capacities: TSOs will offer as much bundled capacity as possible, calculation formula is the one described in CAM NC. • If more available firm capacity on one side firm capacity will be offered as unbundled product with a duration following the existing contract on the other side of the border, if any. Duration limited to one year. Required: TSOs to exchange the necessary information on both sides of the IP. • Split of the capacity offered: • ES-PT: 10% of the technical capacity will be offered at annual quarterly capacity auctions. The remaining capacity will be offered at annual yearly auctions for the next year. • ES-FR: 80% of the available capacity as yearly products until year n+15 • 10% as yearly products for year n+1 to n+5 • 10% as quarterly products.

8. II. CAM Issues agreed on Capacity Allocation • Interruptible capacity: TSOs will propose the amount and duration of capacity to be sold in both directions at both borders, at least on a day-ahead basis. • VIP: capacity will be commercialized in a VIP at both borders. • By October 2014: capacity bookings, publications and nominations will refer to the VIP (physical IP Larrau and Biriatou will be merged into a VIP), existing access contracts will be adapted to the VIP. • Users registration for participating in the auctions: requirements are established in PRISMA General Terms and Conditions. An Energy Identification Code is needed. • There are two types of financial guarantees: • To participate in the auction: TSO can choose the “credit limit check” offered by PRISMA • To contract capacity access: remains as currently in place in each country.

9. II. CAM Issues agreed on Capacity Allocation • Auction process • Yearly, quarterly and monthly products: ascending clock auction, with multiple bidding rounds • Day-ahead and intraday products: uniform-price auction, with a single bidding round • Prices • Reserve price = sum of the regulated prices at both sides • Payable price = reserve price + auction premium (50/50 between TSOs at both sides) • Large and small price steps to be defined per IP and product. Steps established at others European IPs can serve as a reference. • Contracts: Standard contracts at both sides of the border: • Before the auction: rights, obligations and conditions • After the auction: capacity allocated to be signed in a new standard contract or annex

10. II. CAM Issues agreed on Capacity Allocation • Capacity transfer to affiliates: shippers have to sign access contracts (or annexes) when capacity is allocated. • Only the company that has been allocated the capacity can sign the contracts/annexes with TSOs on both sides of the border. • Monitoring by NRAs • NRAs will have access to auctions information via PRISMA. • Coordination between NRAs at both sides of the border. • Stakeholders information: • TSOs will notify the amount of capacity to be offered to users and potential users before the auctions: one month / two weeks / one week before annual yearly / annual quarterly / monthly capacity auctions respectively. • TSO will communicate results of the auctions: aggregated to the market, allocated capacity to the participant • TSOs’ websites will publish a link to PRISMA site. • Information included in TSOs’ regular publication.

11. II. CAM Issues agreed on Capacity Allocation • Capacity not allocated in auctions • In annual yearly auctions: it will be offered in the annual quarterly and monthly auctions. • In annual quarterly auctions: it will be offered in the monthly auctions. • Until the full implementation, capacity not allocated in monthly auctions will be sold as day ahead and within day capacity using the mechanisms in force in each country, only in the VIP. • Secondary market: bundled capacity (CAM NC products) can be offered in the VIP by primary capacity holders. Shipper must be authorised to operate in both countries. • PRISMA secondary market functions will be available in early 2014. • To be decided when secondary trades will be made possible at both borders and type of information to be published.

12. II. CAM Issues agreed on Capacity Allocation • Interim period • Until the first auction in early 2014, available capacity will be booked via the process currently in force. • Until full implementation of CAM NC in Nov 2015, daily and intraday capacity could be allocated outside PRISMA using the mechanism in force in each country in the VIP. • Interaction with other capacity allocations in the region • Shippers can be interested in booking access along corridors inside the Region • TSOs and NRAs will make their best to coordinate the schedule of the allocations in each country and will inform shippers about other capacity allocations in each country.

13. II. CAM Interoperability issues • They will be more relevant when day-ahead and intra-day capacity will be auctioned • GAS DAY. Two options are possible till November 2015 • To unify the gas day at the IP as established in CAM NC • To keep current gas day in each country. Need of agreement on conversion of nominations, renominations and measures into the same reference period. • COMBUSTION REFERENCE TEMPERATURE. Two options: • To adopt the same combustion reference temperature which simplifies matching processes. It can involve investment in equipments and this change in measurement generates consequences for users. • To keep current reference temperatures. Need of conversion factors for nomination and matching. • DATA EXCHANGE: appropriate, automatic communication • NOMINATION/RENOMINATION: IT system to manage: • Establishment of a single nomination • Nomination of net flows • Harmonization of the nomination/renomination calendar according to Balancing NC

14. II. CAM NRAs regulatory development • Spain: • a CNMC Circular to regulate the allocation processes. • France: • a CRE Deliberation will describe the allocation procedures at the IPs with Spain. Also, the tariff related aspects will be reflected in the yearly decision on transmission tariffs by the end of 2013. • Portugal: • a ERSE Deliberation based on the conclusions of the SGRI concerning allocation processes.

15. II. Capacity Allocation Mechanisms II.3. Update information on PRISMA: shippers’ requirements and IT implementation in the SGRI (for information by TSOs)

16. II. Capacity Allocation Mechanisms II.4. Allocation of capacity in Portugal under the new regulation (for information by regulators)

17. II. Capacity Allocation Mechanisms II.5. Next steps and calendar: information release, training sessions, relevant regulation, etc. • Presentations for the SG meetings to be shared with participants in advance. • Regulator’s paper to progress on the early implementation of CAM NC in the SGRIto submit the all shippers – ACER website (20th SG meeting folder). • http://www.acer.europa.eu/Gas/Regional_%20Intiatives/South_GRI/20th%20South%20SG/default.aspx • NRAs encourage shippers to participate in WS on PRISMA training, expected shortly, in cooperation with TSOs in the Region. • Comply with the calendar established in CAM Roadmap in the Region.

18. III. Congestion Management Procedures • III.1. Status of CMP implementation in the SGRI: PT, FR, ES • III.2. Next steps and calendar

19. III. Congestion Management Procedures III.1. Status of CMP implementation in the SGRI: Portugal, France and Spain (for information by regulators)

20. III. Congestion Management Procedures Status of the regulations in each country FRANCE • CRE’s Deliberation was published end of June. • Finalizing the approval process by the Board of CNMC. • ERSE, in cooperation with TSOs and stakeholders, will start working on the implementation of a capacity surrender mechanism. • Since there’s no long term allocations, Portugal considers that they have no need for LT UIOLI. • The need for OSBB mechanism is also questionable, since there is available capacity to be booked at borders. • In any case, CMP will be compatible with their new CAM and coordinated with Spanish mechanism. SPAIN PORTUGAL

21. III. Congestion Management Procedures CMP implementation in France Process for implementation on 1st October 2013 • Public consultation from 4 to 23 April on the TSOs proposal of implementation discussed within the South GRI. • 19 responses received: 10 network users, 3 national associations, 3 TSOs, 2 infrastructure operators, 1 confidential. • Contributions received from CNE, BNetzA and CREG. • CRE’s deliberation published on 27th June, 2013 • Publication of the risk analysis for the OS/BB scheme • Publication of non-confidential responses to the public consultation.

22. III. Congestion Management Procedures CMP implementation in Spain Process for implementation on 1st October 2013 • First draft approved by CNE on 11 July • Detailed mechanisms defined: capacity surrender, LT UIOLI and OSBB. • Public consultation from 15 July to 7 August on the CNE proposal of implementation discussed within the South GRI. • 8 responses received: 1 network users association, 3 public entities, 1 TSO, 1 DSO association, 1 business group and the Technical System Manager. • A new version sent to the Board of CNMC • This version includes comments from public consultation and alignment with the already implemented mechanisms in France.

23. III. Congestion Management Procedures Capacity surrender mechanism (i) • SIMILAR MECHANISMS ON BOTH SIDES OF THE FRENCH-SPANISH BORDERS • Possibility to surrender the initial capacity, fully or in part, without any limitation in volume and duration. • Surrendered products to be allocated under the form of quarterly products (until 4 consecutive products) and monthly products during the regular allocation process on each point. • The surrendered capacity can not be proposed by the initial holder on the secondary market before the end of the commercialisation window by the TSO. • Time stamp rule for the reallocation of surrendered products.

24. III. Congestion Management Procedures Capacity surrender mechanism (ii) • If the surrendered capacity is not reallocated, capacity is given back to the user after the auction. • The user does not have the possibility to unbundle a bundled product. • The TSO shall commercialize the surrendered bundled product in a bundled form. • Financial obligations of the initial holder of the capacity • No systematic fees will be applied on the surrender mechanism. • If the initial price (P1) is lower than the price when reallocated the capacity (P2): the shipper is relieved from any payment obligation • If the initial price (P1) is higher than the price of the reallocated capacity (P2): price invoiced to the shipper is equal to the difference between P1 and P2.

25. III. Congestion Management Procedures Overselling and buy-back mechanism (i) • SIMILAR MECHANISMS ON BOTH SIDES OF THE FRENCH-SPANISH BORDERS • The implementation of the overselling and buy-back mechanism is based on a risk analysis for each IP to be updated regularly. • CRE asked TIGF to cooperate with Enagaswith the view to offering, as soon as possible, the additional capacity at Larrau in the direction of Spain to France in a coordinated manner. • CNMC proposal requires the Technical System Manager and TSOs to coordinate with adjacent TSOs when defining the methodology to determine the additional capacity and the buy back mechanism. • The oversubscribed capacity is offered in addition to the technical capacity through the regular allocation processes. • TSOs will be able to offer additional capacity in form of several products.

26. III. Congestion Management Procedures Overselling and buy-back mechanism (ii) • Buy back procedure: • TSOs make their best efforts to bundle the additional capacity with the additional capacities offered by the adjacent TSOs and to coordinate for the buy-back procedure. • When the buy-back procedure is launched, the users do not have the right to revise upwards their renominations anymore on the concerned point until the end of the gas day. • Cap on the buy-back price • In France: average of the clearing prices of the quarterly, monthly and day-ahead auctions weighted by the booked quantities during these auctions, plus 25%. • In Spain: The price won’t be higher than 25% of a reference price, which will be jointly defined with adjacent TSOs and according to market price.

27. III. Congestion Management Procedures UIOLI long term • Already implemented in France since 2007 and in Spain since 2002 at all IPs including IPs with third countries • DIFFERENCES BETWEEN THE FRENCH AND SPANISH MECHANISMS • CNMC proposal is more detailed and specific in aspects related to how calculate underutilized capacity and how to allocate it than CRE’s deliberation, although, in principle, this would not necessarily mean a non-homogeneous application. • In France, there is an important involvement of NRA in the final withdrawal decision, while CNMC proposes an automatic process performed by TSOs where NRA involvement is only necessary in case of conflict and for monitoring purposes. In any case, this aspect wouldn’t also affect the results of the mechanism application. • In any case, it will be necessary to monitor the impact of the application of this mechanism, in order to improve coordination.

28. III. Congestion Management Procedures UIOLI long term in France • Implementation of LT UIOLI has involved minor adjustments included in CRE Deliberation • The TSOs inform CRE in case of systematic underutilization, and if capacity has not been offered in the secondary market under reasonable conditions, and if no proper justification is provided by the network users. • In case other users request firm capacity on the entry-exit point, the TSO analyses the congestion situation of the entry-exit point. • The withdrawal is proposed by the TSO to CRE. • The final decision is taken by CRE, after consultation/coordination of this withdrawal in case of bundled products with adjacent NRAs. • TSOs regularly provide to CRE data on individual subscriptions and flows.

29. III. Congestion Management Procedures UIOLI long term in Spain (i) • Every April, TSOs will review the capacity utilization of those users with annual and quarterly products whentheir contracted capacity lasts more than one year. In two periods: from 1 April to 30 Sept (previous year) and from 1 Oct in the previous year to 30 March in the current year. • There will be systematic underutilizationif one of the following happens: • In the both periods the utilization level is under 80% • In both periods there are, at least, 60 days when the user firstly nominates above 80% of the contracted capacity, and later renominates half or less than its initial nomination • TSOs will check if unused capacity has been offered in the secondary market under reasonable conditions- the user has offered the capacity at a price equal to or lower than the maximum between: price paid by the user and the reserve price at the moment the user offers the capacity in the secondary market. • If there is capacity underutilization and capacity has not been offered in the secondary market under reasonable conditions, the TSO will withdraw user’s capacity. • Capacity will be withdrawn during the following gas year and offered firstly in the quarterly auction and afterwards in the monthly auctions.

30. III. Congestion Management Procedures UIOLI long term in Spain (ii) • Withdrawn capacity will be reallocated in the allocation process after all the available technical capacity and the surrendered capacity have been allocated. • When in the allocation process demanded capacity is lower than withdrawn capacity, a pro-rata mechanism will be applied. • When the capacity reallocation involves a price lower than the original, the primary capacity holder will cover the difference. • Primary holders retain rights and obligations till the withdrawn capacity is allocated. • In order for TSOs to offer withdrawn capacity in the ordinary allocation processes, withdrawn capacity won’t be offered in the secondary market in the periods: 15 days before the auction for quarterly products and 10 days before the monthly products auction.

31. III. Congestion Management Procedures III.2. Next steps and calendar

32. IV. Developing hub-to-hub trading in the South region IV.1. Iberian Gas Hub: study on models for integration of the Spanish and Portuguese gas markets

33. IV. Developing hub-to-hub trading in the South region MIBGAS: Models for the integration of the Spanish and Portuguese gas markets in a common Iberian Natural Gas HUB (for information by regulators)

34. IV. Developing hub-to-hub trading in the South region • In order to assess the feasibility of the development of a gas hub, the study analyzes different aspects of the current gas market situation in Spain and Portugal, including prices in the gas market, as the most important factors. • The study covers three different models of market integration and its possible application to the Iberian gas market, comparing the advantages and disadvantages of each model. • Market Area Model. • Trading Region Model. • Market with Implicit Capacity Allocation. General Objective

35. IV. Developing hub-to-hub trading in the South region IBERIAN GAS HUB: Work in progress • Draft document analyzing the advantages and drawbacks of the possible models, the regulatory harmonization requisites for its implementation by CNMC – ERSE (2013 - Q4) Document is pending on approval by NRAs • Public hearing (2014 – Q1) • Analysis of stakeholders responses to the public hearing (2014 - Q2) • Final document to be approved by CNMC- ERSE (2014 - Q2)

36. V. Infrastructures • IV.1. Update on 2013 South Gas Regional Investment Plan (GRIP) • IV.2. Latest news on PCIs

37. V. Infrastructures V.1. Update on 2013 South Gas Regional Investment Plan (GRIP) (for information by TSOs)

38. V. Infrastructures V.2. Latest news on PCIs (for information by European Commission and regulators)

39. V. Infrastructures V.2. Latest news on PCIs • Firstlist of PCIswasapprovedby EC on14 October 2013.

40. V. Infrastructures V.2. Latest news on PCIs PCIs affecting the SGRI - allowing bidirectional flows among Portugal, Spain, France and Germany Other PCIs in France

41. V. Infrastructures V.2. Latest news on PCIs • Article 12 of Regulation347/2013 of 17 April 2013 on guidelines for trans-European energy infrastructure allows project promoters to submit to the concerned NRAs a cross border cost allocation – CBCA - request as soon as the project has reached sufficient maturity and requires the NRAs to take coordinated decisions on the allocation of investment costs. • Forprojectsincluded in thefirst PCI list: thedeadlinewas 31 October 2013. • Published in September 2013: ACER Recommendation regarding the CBCA requests submitted in the framework of the first union list of electricity and gas PCIs • Information to be submitted with a CBCA request and • High-level principles for NRAs’ handling of CBCA requests. • Approvedon 5 Nov: ACER InternalDocumenton further guidance on CBCA for electricity and gas PCIs • Steps, timeline and ways of coordination between NRAs as to how to implement the provisions • Documents to be developed within the CBCA request assessment and approval process, approach and timing for payments

42. V. Infrastructures V.2. Latest news on PCIs • ENTSOG isdevelopingthemethodology of cost-benefitanalysis – CBA - toevaluatetheprojects (accordingtoarticle 7 of Regulation 715/2009 onconditionsforaccesstothe natural gas transmissionnetworks). • CBA submittedto PC untilSeptember 2013, currentlyunderrevision • Candidateprojects to PCIswillbeevaluatedusing ENTSOG CBA. • List of PCIswillbeupdatedeverytwoyears and candidatesmustbeincluded in the TYNDP. • ENTSOG is in charge of adoptingtheTYNDPeverytwoyears (accordingtoarticle 7 of Regulation 715/2009 onconditionsforaccesstothe natural gas transmissionnetworks). • TYNDP 2013-2022, in elaboration. A Draftwassubmitted to ACER in July 2013. ACER Opinionwasadopted in September 2013.

43. VI. LNG market changes and cross-border flows in the SGRI (for information by TSOs)

44. VII. AOB and next meetings • Nextmeetings: • 25 IG, by videoconference, in December? • 21 SG meeting in February?