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Madrid, 7 th February 2011

13th S G Meeting South Gas Regional Initiative. Madrid, 7 th February 2011. Framework guidelines and network codes Latest developments. Context. The 3rd package will enter into force on March 3, 2011 Capacity allocation mechanisms (CAM)

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Madrid, 7 th February 2011

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  1. 13th SG Meeting South Gas Regional Initiative Madrid, 7th February 2011

  2. Framework guidelines and network codes Latest developments

  3. Context • The 3rd package will enter into force on March 3, 2011 • Capacity allocation mechanisms (CAM) • Adoption by ERGEG of the first (pilot) framework guideline on capacity allocation on December 10, 2010 • Letter from the Commission to ENTSOG to start drafting the CAM network code sent on January 27, 2011 • ACER consultation to start in March 2011 • Impact assessment of the "sunset clause"  by ERGEG • Other framework guidelines • Balancing: adoption by ERGEG/ACER foreseen in the coming weeks • Tariffs: preliminary work on the initial impact assessment • Target model for the EU gas market • CEER should publish a paper by next summer • Regulators’ sponsored ongoing studies

  4. Gas Target Model

  5. September 2010 (18th Madrid Forum): the European Commission and regulators were invited to explore, in close cooperation with TSOs and other stakeholders, the interaction and interdependence of all relevant areas for network codes and to initiate a process establishing a gas target model Regulators are preparing a CEER Vision Paper for a conceptual model for the European gas market Process chaired by E-control, BNetzA and OFGEM Stakeholders involvement 4 workshops (03/12 in Vienna, 22/02 in Bonn, 11/04 in London, fourth workshop in June in Brussels) Call for evidence: 42 responses were received Bilateral meetings with associations (ENTSO-G, EFET, EUROGAS, EUROPEX, EURELECTRIC, IFIEC/CEFIC) Two studies (FSR and LECG) launched in parallel Results to be presented in Bonn on the 22nd of February Gas Target Model

  6. Framework guideline on capacity allocation

  7. CAM Framework Guideline Background • Context: need to improve the access to cross border points • Different allocation rules on the two sides of borders • Different types of capacity products • Domination of First Come First Served • More integration to the benefit of competition and security of supply • Preparation of the implementation of the third package: pilot framework guideline • May 2009: CAM selected for the pilot project at the 16th Madrid Forum • Sept. 2009: Invitation letter from the Commission received • Dec. 2009: Consultation on the draft pilot framework guideline launched • June 2010: Final version published

  8. CAM Framework Guideline Commission’s request for modifications • On 9 September 2010 regulators received a letter from the EC asking for the revision of the pilot FG in accordance with the provisions of Article 6(4) of Gas Regulation • “The draft FG does not in all aspects contribute to non discrimination, effective competition and the efficient functioning of the market” • 8 points were raised • The EC gave 3 months to regulators to revise the FG • On 10 December 2010 regulators sent back the revised pilot FG to the EC • No consensus on the final text: 2 dissenting opinions were expressed

  9. CAM Framework Guideline Key points of the FG in its current version • Scope of the Framework guideline: interconnection points between entry-exit zones within the EU ( ) • General principles • All market areas organized as entry-exit zones with virtual hubs • Limited number of capacity products • Capacity allocation by auctions • Standard auction design throughout the EU • Full bundling of capacity products including for already allocated capacity • Virtual IPs replacing physical IPs

  10. CAM Framework Guideline Points raised by the EC and regulators’ response (1/3) • Minimisation of the role of NRAs; highest possible degree of harmonisation • The pilot FG was amended in that direction • NRAs will still have room for decision since the Network Code cannot cover all potential operational arrangements (Gas Regulation, Article 13(1)) • Clarification of the notion of virtual interconnection points and relation with bundled products • The relation between bundled products and virtual interconnection points was clarified • A timeline for the implementation of virtual interconnection points was introduced

  11. CAM Framework Guideline Points raised by the EC and regulators’ response (2/3) • Default rule for the mandatory bundling of all the technical capacity within five years (sunset clause); leave supply contracts intact • Such default rule was developed • Specific impact assessment to be launched on the sunset clause and the default rule • Single allocation mechanism: capacity auctions • Auctions adopted as the standard allocation mechanism (except for within-day allocation) • Interim period before implementing auctions left to Comitology procedure • Reserve prices in auctions • FG on tariffs better suited to handle this issue

  12. CAM Framework Guideline Points raised by the EC and regulators’ response (3/3) • Allocation of capacity yet to be built: auctions not sufficient • Incremental capacity clearly excluded from the scope of the pilot FG • However processes for allocating incremental capacities should be consistent with this pilot FG • Clarification of the rules that apply for firm and for interruptible capacity • Auctions are the single target model for both • Procedures regarding interruptions will be standardized • Clarification of the need for a common gas day • Standard duration for the gas day starting at 6 CET • Further evaluation by ENTSOG left open

  13. CAM Framework Guideline Next steps • Launch of an impact assessment on the sunset clause and the default rule • After the 3rd of March: launch of ACER consultation (2 months) • Finalization by ACER of the Framework Guideline • ENTSO-G has 12 months to draft the Network Code (starting 27/01/2011) • Adoption of the Network Code by comitology Network Code in force around end 2012 • ENTSO-G is already working on the Network Code • Even though the final FG has not been adopted yet, the Commission expects ENTSOG to respect the 12 months delay

  14. Congestion management guidelines for direct comitology Proposals from the European Commission

  15. CMP Comitology Guideline Background • January 2010 (17th Madrid Forum ): ERGEG considered urgent to improve congestion management in Europe and invited the EC to consider adoption of binding guidelines on congestion management via comitology (January 2010) • ERGEG published on 8 September 2010 its recommendations for guidelines to be adopted via a comitology procedure • At the 18th Madrid Forum (September 2010) the EC presented its proposal for these guidelines • EC proposal is partly based on ERGEG recommendations • EC proposal is shorter and, for some aspects, more prescriptive • A consultation should start soon

  16. CMP Comitology Guideline Content of EC proposal • Scope of the Guideline • Capacity calculation • Capacity increase by oversubscription and buy-back arrangements • Surrender of booked capacity • Firm day-ahead UIOLI • Long-term UIOLI

  17. CMP Comitology Guideline Important issues (1/2) • Scope of the Guideline: CMPs shall apply to all interconnection points regardless of whether they are presently congested or not. • ERGEG proposed not to apply CMPs to interconnection points which are not currently congested and where congestion is not expected to occur • Long-term UIOLI: NRAs shall withdraw systematically underutilised capacity • ERGEG proposed that NRAs may establish procedures for withdrawing systematically underutilised capacity • Capacity increase by oversubscription and capacity buy-back: TSOs may implement an oversubscription and buy back mechanism in order to offer additional capacity on a firm basis • ERGEG proposed that TSOsimplementan oversubscription and buy back mechanism at all IPs

  18. CMP Comitology Guideline Important issues (2/2) • Firm day-ahead UIOLI to be applied in all cases • ERGEG proposed that NRAs establish a firm day-ahead UIOLI procedure in case the demand for firm day-ahead capacity exceeds the offer • Nomination schedule: The initial nomination shall be made at XX:XX CET • ERGEG proposed that in case a firm day-ahead UIOLI procedure is established, NRAs set the time of nomination • Limitation of existing re-nomination rights • Firm re-nominations upwards are permissible up to 50% of the fraction of the initially not nominated booked capacity • Re-nominating downwards is permissible down to 50% of the initial nomination. Where the initial nomination exceeds 90% of the total capacity booked, no re-nomination downwards shall be permitted • Exemptions to these limitations can be granted in case of negative interference with the electricity market • ERGEG proposed that NRAs may reduce rights for re-nomination of firm capacity

  19. CMP Comitology Guideline • The EC would consult on its proposal in February-March 2011 • The comitology process could start in Q3 2011 Next Steps

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