CMP COUNTRY ANALYSIS 13 th SG meeting

1. CMP COUNTRY ANALYSIS 13th SG meeting Madrid 7th February 2010

2. Index Introduction France Portugal Spain

3. 1 Introduction

4. Introduction • At the 15th Implementation Group meeting of the South Gas Regional Initiative that took place on 19th October 2010, French, Portuguese and Spanish TSOs were asked to start working in the harmonisation of the Congestion Management Procedures according to what is being discussed in Europe. The mandate includes two parts: • Detailed description of current CMP in France, Portugal and Spain. • Proposals for harmonisation.

5. 2 France

6. CMPs in France at a glance…

7. Long Term UIOLI • Object: To market the non-used subscribed capacities in the long term. • Every Shipper can trigger the implementation of the procedure of Use-It-Or-Lose-It (UIOLI) when: • no available capacity published on the web site of TIGF/GRTgaz in the entry/exit points or when TIGF/GRTgaz was not able to satisfy the totality of the demand requested in firm capacity, • the request is duly justified, • the requested period is superior or equal to a season/annual • the Shipper was not able to acquire on the secondary market capacities requested at a price lower or equal to the reference price. • If all these conditions are fulfilled, TIGF/GRTgaz applies the rule defined in the appendix of the contract and makes its best efforts to meet the needs at best of all the Shippers by taking into account their contractual obligations, under the view of the competent authorities.

8. Interruptible day ahead UIOLI • A Shipper can request for additional capacities beyond its subscriptions (firm and interruptible). These capacities can be allocated to him (totally or partially) if another Shipper does not use all his capacities for a given day. • The following points are concerned by the offer (supply) UIOLI CT: • TIGF: all Entry/Exit Points (GRTgazSud, Larrau and Biriatou) • GRTgaz:all PIR and links from April 2011 • TIGF:The offer UIOLI is proposed only in the physical direction (or forward) by the flow. The UIOLI service does not exist for the back direction. • GRTgaz:UIOLI is proposed in both direction at links • TIGF:In case there is not an available firm daily capacity anymore (period of reduction of capacity included), capacities reserved by a Shipper for annual, seasonal, monthly subscriptions and not nominated the day before can be assigned by TIGF to the other Shippers in this point, having made the demand of capacities UIOLI CT. This demand is considered equal to the difference between the effective nomination of the Shipper and the rights which he holds. • GRTgaz:Offer UIOLI does also apply to the points subjected to a reduction of capacities (case of maintenance for example). In this case, a nomination beyond the reduced subscribed capacity is considered as a UIOLI capacity request and only the capacity beyond the initial rights is charged

9. Interruptible day ahead UIOLI • The Shipper who holds the capacity originally keeps the right to make renominations which are priority with regard to the recently assigned capacity. Consequently, capacities allocated in UIOLI are interruptible. • Only the nominations beyond the rights made between 2 pm the day before the D-Day and 3 hours the D-Day are considered as demands of UIOLI capacities for the D-Day. In case capacities requested within the framework of the UIOLI cannot be completely served, capacities are assigned on the basis of a pro rata made on the received demands. • The available capacity UIOLI is daily published on the TIGF site. • The available capacity UIOLI is published after every nomination cycle on GRTgaz site.

10. Interruptible capacity • Interruptible Capacity is capacity whose use is not guarantee by the TSO. • The main factors affecting the availability of Interruptible Capacity are as follows: • Level of consumption, • Network configuration • Unless otherwise expressly stipulated in the Special Terms and Conditions, the obligations of the Shipper, particularly the balancing obligations as well as the obligations to pay the Price, shall not be modified as a result of such implementation

11. Interruptible capacity TIGF

12. Interruptible capacity GRTgaz

13. Secondary market • TIGF/GRTgaz offers to the Shipper, having signed a Transport Contract with TIGF/GRTgaz the possibility of buying or selling on the secondary market of the multiannual, annual capacities, multi-seasonal, seasonal, monthly and daily in the IPs (Entry or Exit) (except at the IP with Storage facilities). • On TIGF’s side the transactions (transfers) can be made on the TETRA platform. • On GRTgaz side the transactions (buying or selling) can be made on the CAPSQUARE platform. • The shipper can give in to another Shipper having a current Shipping agreement capacities signed according to the following methods: • User’s Right, • Complete Transfer

14. Secondary market • TIGF • For the Complete Transfers, the transactions are concluded on a bilateral base (over-the-counter OTC) before the maturity date. • For the Transfers of User’s Right, the transactions are one-side concluded but by informing the counterpart. • GRTgaz • All transaction can be made on CAPSQUARE Platform • Capacities which can be sold are the Entry or Exit capacities or, Firm or interruptible in the Interconnection Points (PIR GRTgaz South, PIR Biriatou and PIR Larrau and all PIR and links for GRTgaz)

15. Shippers who have subscribed more than 20% of total firm annual capacity of an IP, undertake to make part of their firm annual capacity available in the form of an x percentage (dependant on the IP) of releasable capacity for use by other shippers. This Releasable Capacity is allocated under the capacity subscription and allocation rules. The price of Releasable Capacity is 90% of the price of the corresponding annual Firm Capacity. Releasable Capacity is considered to be firm capacity. It is sold for periods of 1 year to 4 years. Releasable capacity (GRTgaz)

16. 3 Portugal

17. Valença do Minho Porto Lisboa Campo Maior LNG Background • Two IPs IP43 - Valença do Minho and IP42 - Campo Maior; • Until the end of 2002, Portugal natural gas supply was crossing the spanish system from Algeria by pipeline. The LNG terminal started operation in 2003 and is now responsible for 55% of the Portuguese supply. Consumption growth was accommodated by the LNG terminal mainly until 2009; • Gas liberalization in portugal has opened the market to traders in Iberia and there is a growing demand at the existing Ips; • Beeing a new system ( Portuguese Natural gas network started in 1997 based on 28 inch pipe there are no internal congestions in the system;

18. Country specific issues Specificities of the Portuguese Capacity Allocation Mechanism established by the NRA regarding CMP: • The existing CAM in Portugal as established by the local NRA has profound implications in the applicable CMP rules: • capacity requests in any of the established planning phases (Year, month, week, day), once accepted by the TSO for each detail period, are considered firm obligations of the TSO. The nomination at D-1 acceptance by the TSO is the final stage. • Only capacity not yet requested or freed voluntarily in the meanwhile by a shipper, is made available for the next planning phase. • if the requests exceed the remaining available capacity, CMP applies to it and an auction will be set by the System Manager; • Once allocated via auction procedure, this capacity right becomes tradable by the shipper on the secondary market under a bilateral agreement

19. Country specific issues Specificities of the Portuguese Capacity Allocation Mechanism established by the NRA regarding CMP (cont.): • The Portuguese system is relatively new (=> surplus of available capacity), which explains the reason why there haven’t been any contractual or physical congestion events until today; • Interruptible capacity is therefore not available yet, as an instrument to manage congestions or security of supply issues; • These procedures and principles apply to all infrastructures; • Congestion is expected in the near future regarding international IPs and once it occurs the existing mechanisms are adequate to settle the problem

20. CMP contained in the Commission Proposal Review for Portugal of the relevant mechanisms regarding capacity availability on IPs (in accordance to the Commissions Proposal) • Capacity increase by oversubscription and buy-back arrangements. • Surrender of booked capacity. • Firm day-ahead UIOLI. • Long term UIOLI.

21. CMP contained in the Commission Proposal • Capacity increase by oversubscription and buy-back arrangements Portuguese practice: • For any requests above the existing capacity, an auction must take place for that particular period; • This methodology regarding capacity allocation never leads to oversubscription or buy-back arrangement..

22. CMP contained in the Commission Proposal • Surrender of booked capacity Portuguese perspective: • capacity is not owned by the users, therefore it cannot be surrendered; • capacity that is not reserved within a nomination or planning period is automatically defined as free and published as available for nomination/planning within the next period; • shippers pay for their capacity based on its effective use ex-post .

23. CMP contained in the Commission Proposal • Firm Day-ahead UIOLI Portuguese perspective: • day-ahead UIOLI is implicit on a firm basis; • when the nomination procedure on d-1 is closed, the Global System Manager publicises the available capacity, meaning that all unused capacity is immediately available for renomination, whatever the user requiring it; • All other procedures and concepts described are not implemented.

24. CMP contained in the Commission Proposal • Long-term UIOLI Portuguese perspective: • Long term UIOLI is not possible or required in the Portuguese System at present, because the allocation process resets all shippers rights on an annual basis.

25. Other CMP arrangements and related tools • Interruptible UIOLI Portuguese perspective: • There is no interruptible UIOLI - capacity that is not reserved within a nomination period is set free and published as available for nomination within the next nomination period;

26. Other CMP arrangements and related tools • Interruptible capacity Portuguese perspective: • Interruptible capacity is available on all backflow nominations for each interconnection point between the transmission network, international IPs and the connecting point to the existing LNG terminal.

27. Other CMP arrangements and related tools • Secondary market Portuguese perspective: • Non allocated capacity is not paid and users are always free to not use the booked capacity without any penalty , therefore: • The secondary market is only necessary under congestion, where an auction takes place; • The winning bidder actually gets a price for the capacity allocation before he uses it. In this case this capacity is tradable as recognized in the published rules and may be exchanged on the secondary market; • The Portuguese secondary market is bilateral ;

28. Other CMP arrangements and related tools Portuguese perspective (cont.): • Particular case of LNG ship unloading capacity allocation: • regulated swaps - the new user may force the incumbent LNG supplier into an agreement to swap gas quantities within certain rules at a regulated price; • users trend to negotiate a bilateral agreement before the regulated swap procedures have to be enforced.

29. 4 Spain

30. EC CMP proposals not applied in Spain • Capacity increase by oversubscription and buy-back arrangements • Their implementation has never been considered or discussed • Surrender of booked capacity. • Its implementation has never been considered. • This might be due to the fact that in Spain users are allowed to release the booked capacity one year after the start of the service without making any Ship-or-pay payment. • Firm day-ahead UIOLI • A proposal to implement a type of Firm day-ahead UOILI has been included in a Royal Decree about to be approved.

31. Long-term UIOLI • 1st UIOLI • Article 6.4 of the Royal Decree 949/2001 establishes that if six months after the start of the service, or six months after any modification in the capacity booked, the capacity actually used is below 80% of the capacity booked by the user, contractual capacity shall automatically be reduced in the percentage not used and the user will automatically lose the proportional part of the bail. This mechanism is applied by the TSO only for long term contracts. • This mechanism is mandatorily applied by the TSO to both congested and non-congested points.

32. Long-term UIOLI • 2nd UIOLI • Article 6.5 of Royal Decree 949/2001 • Applied by Enagás in its role as Technical System Manager • This mechanisms is applied if Enagás observes an existing or potential continuous underutilisation of the capacity booked by a user, and considers that maintaining such capacity booking could prevent access by other users to the infrastructure. • Other users must have already requested access to the infrastructure in order to applied this mechanism. • Enagás, in its role as Technical System Manager, will release the underutilised capacity (contractual capacity will automatically be reduced in the percentage not used). • Users will lose the part of their booked capacity which has not been used and the corresponding part of the bail.

33. Other CMP arrangements and related tools • Interruptible UIOLI • Resolution of 30th July 2010 from the DGPEyM established the obligation for TSOs to to apply interruptible UIOLI at IPs from 1st November 2010. • At IPs, for each of the possible flow directions and only after all the available capacity has been contracted, the TSO shall offer to third parties at least one day-ahead the unused capacity on interruptible basis. • TSOs shall offer to users on interruptible basis the backhaul capacity that might be available. • If requested interruptible capacity is above the available interruptible capacity, capacity shall be allocated under prorata basis. • If initially the capacity was contracted as interruptible capacity, this capacity will not be turned into firm capacity. However, day-ahead UIOLI capacity will be directly offered as firm capacity if the initial holder of the capacity informs the TSO about its intention of NOT using the non-nominated capacity.

34. Other CMP arrangements and related tools • Interruptible capacity • Enagás offers what is so called in the Spanish System “interruptible tariff”. The “interruptible tariff” is implemented through an agreement between the end user, the shipper, and Enagás in its role as System Technical Manager in order to solve situations of lack of natural gas in the system due to unavailability or congestion in the transmission facilities. • Interruptible tariff can only be requested by shippers whose consumers are located in areas subject to this tariff. • Each year Enagás publishes the areas where congestion might occur and the maximum volume subject to interruption. • Interruptible tariff can only be contracted for a maximum duration of a year, from 1st October to 30th September next year. • There are 2 types of interruptible tariff depending on the maximum duration of the interruption during 12 month agreement: type A of interruptible tariff (5 days) and type B of interruptible tariff (10 days). • The tariff to be paid for this service is yearly established by the NRA • It should be note that the interruptible tariff does not apply to IPs.

35. Other CMP arrangements and related tools • Secondary market • Enagás offers at its website a Bulleting Board which facilitates the exchange of contracted capacity at its facilities (transmission network, UGSs and LNG terminals). • Interested parties can submit capacity offers and request for capacity in the secondary market. • There are 2 trade structures: • Sublet of capacity: the capacity holder in the primary market keeps the rights and obligations. Capacity rights might be totally or partially transferred from the initial holder to second holder by means of a bilateral agreement between them. • Resale of capacity: the final capacity holder acquires the rights and obligations. A new contract between the final capacity holder and Enagás should be signed. • Further regulatory developments for the secondary market have been included in a Royal Decree which is about to be approved. • The 2 types of transactions will be maintained: sublet and resale of capacity. • Enagás, in its role of System Technical Manager, will make available to network users a platform where shippers will be able to publish capacity offers and requests.

36. Thank you for your attention!