1st RCC Meeting – Region South-South East Part II – Technical Issues Rome, June 1st 2006

1. 1st RCC Meeting – Region South-South East Part II – Technical Issues Rome, June 1st 2006

2. Preliminary discussion of the Consultation Document • “A la carte“ approach: Chairs propose some topics and all regulators choose the most relevant ones • “Cooking contest” approach: Regulators choose some common dishes and each of them cooks it in its own way (e.g. Balancing “Italian Style”)

3. Preliminary discussion of the Consultation Document • Should be limited to priorities – cannot digest too fatty meals in just few months • Diagnosis of main problems by regulators • Consultation document drafted • Fact finding study: • Common information background to be achieved • In depth information exchange among regulators • Limited data collection from TSOs and other sources, to be undertaken by each regulator, if necessary • Outcome: an Action Plan to solve the problems over 3-4 years

4. Preliminary discussion of the Consultation Document • Milestones and deliverables • Preliminary diagnosis from regulatory staff: 15.6 • Draft consultation document circulated 22.6 • Documents approved 30.6 and published • Fact finding activity by regulators, TSOs and others 31.8 • Public hearings and discussion 25-26.9 • Draft Action Plan 10.10 • Action plan approved 31.10

5. Preliminary assessment of the SSE market (2004) Total market size 134.9 Bcm/y (*) 2003 data 15.0* 9.6* 7.0* 8.9 14.6 1.1 76.9 2.4

6. Preliminary assessment of the SSE market Main market features: • Limited self sufficiency (17%) • High dependence on the largest supplier (Russia, 46%) • High market concentration (80% on average controlled by dominant companies) • Uneven unbundling • Highly differentiated regulation (tariffs, capacity allocation, congestion management) • Good interconnection but with exceptions and bottlenecks: • Poland not well connected with Czech and Slovak Republics • Greece isolated • Italy-Austria-Slovenia connections congested and inadequate

7. Preliminary assessment of the SSE market Is somebody eating too much in the SSE region?

8. Preliminary assessment of the SSE market

9. Preliminary assessment of the SSE market - Regulation

10. The SSE market in detail – An example: balancing

11. Priority I: Monitoring of Regulatory Implementation • Update on implementation of Directive 2003/55: • Infringement procedures? • Regulators to select shortcomings… • Action triggered by Regulation 2005/1775 • New tariffs? • Convergence of tariff structures and balancing charged? • New TPA rules? New capacity allocation mechanisms? • Interruptible service introduced? • Recent or expected transparency improvements? • New balancing rules? • New regulatory powers, penalty regime?

12. Priority I: Monitoring of Regulatory Implementation • Implementation of Regulation 2005/1775 – Guidelines (already compliant/developments/no change) • Short term capacity • Network codes or standard contracts • Nomination and capacity transfer procedures • Service info available • Inter-TSO coordination • Maintenance info • Technical information for shippers

13. Priority I: Monitoring of Regulatory Implementation • Scope and guidelines of regulatory powers • Detailed unbundling rules • TPA tariffs • Capacity allocation criteria • Balancing regimes: • Set/to be set/only advisory power/Ministerial interference? • Sanctions: • Already used/empowered but did not use/inadequate/not empowered?

14. Priority II: Survey and analysis of the regional market and its problems • Current development of hubs and other trading activities in the region • Main data on trade in existing and developing hubs • Wholesale market participants and their supply share • Share of short term contracts • Development of the main physical and commercial gas flows • Update by country • Current and expected infrastructure development and its regulatory framework • Main planned expansion of capacity, particularly interconnectors, LNG terminals, bottleneck removal • TPA exemptions and its regulation

15. Priority II: Survey and analysis of the regional market and its problems • Practical case studies of gas transportation through the region for specific profiles (routes) by a fictive shipper: check list • Is the selected profile viable? • Used by how many shippers (shares)? • Capacity transparency (published/traffic light/none) • Capacity availability (long terms/short term/scant or none) • Capacity allocation methods (FCFS/auctions/open season/other) • Capacity Release / Use it or lose it (NA/not used/used) • Tariff structure: entry exit, postage stamp, distance • Tariff level: NA/to be provided for selected routings • Rate of returns (NA/negotiated level/regulated level) • Secondary capacity trading (negotiated/public board/none) • Access conflicts (Before regulator/comp authority/Ministry/none)

16. Priority II: Survey and analysis of the regional market and its problems • Practical case studies of gas transportation through the region for specific profiles (routes) by a fictive shipper (cont.): • Backhaul (not available/not used/used) • Upstream gas (not available/shares of upstream sources) • Capacity or tariff: cross border problems (unmatching zones/capacity timing/cap. allocation criteria/balancing/interoperability issues) • Balancing difficulties • Storage access • Overall assessment and critical issues, also by considering issues mentioned under Regulation 1775 and related Guidelines • Backhaul (not available/not used/used) • Upstream gas (not available/shares of upstream sources) • Regulated end user prices (cost reflective/cross subsidies) • Access to gas sources (single/multiple sources/hubs)

17. Priority II: Survey and analysis of the regional market and its problems • After going through the check list a diagnosis could be suggested and included in the consultation paper, for example: • inadequate level of capacity and lack of appropriate tools of congestion management, like an open season approach • lack of information transparency • mismatching of allocation procedures and tariff structure • Most recurring problems to be identified for harmonization within the SSE region and across all regions • Hence the related recommendations for the Action Plan • to identify a minimum set of information starting from the existing guidelines • to agree a path towards a common allocation procedure • in case of congestion, choice and implementation of harmonized management criteria

18. Priority III: Transparency requirements • Access to Storage Services • Separately available • Access by foreign parties (used/available/not available) • Regulation/competition • Public service obligations • Service features (strategic/load management/market oriented/…) • Hub Services available • Title transfer • Matching nomination • Parking/loaning

19. Priority IV: Interoperability issues • Gas quality issues • Infrastructure interconnection agreements • Operational balancing How relevant are these in the region?

20. End of presentation