gie annual conference, madrid, 23 november 2007

GIE Annual Conference, Madrid, 23 November 2007

Gas Regional Initiative

Status and outlook towards the 3rd package

Walter Boltz, Chairman ERGEG Gas Focus Group

2 GIE Annual Conference, Madrid, 23 November 2007

OverviewGas Regional Initiative (GRI)3 Regional Energy Markets (REM)

≈ 12%of total natural gasconsumption

≈ 30%

≈ 58%

North-West (NW) South (S) South-South East (SSE)

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Coherence and convergence

All regions work on similar priority topics - reflecting EU wide problems:

Interconnections and insufficient access to capacity

Lack of Transparency

Interoperability as entry barrier (including especially gas balancing)

Development of gas hubs and gas trading

Differences are generally due to local market conditions

Treatment of priority topics broadly similar and in principle allow further integration at later stage

As more solutions are developed convergence and coherence will be closely watched


Practical ResultsMore transparency

• More information made available on storage levels in NW Europe.

• Periodic publication of the progress on the French-Spanish interconnections

• TSOs starting to offer a one-stop shop service for capacity bookings

• The monitoring of Reg. 1775 has improved compliance

Better access to capacity• Co-ordinated open seasons between Fluxys and GRTgaz at Taisnières

• Launch of secondary Day Ahead Pilot planned by APX and/or TRAC-X at Oude Statenzijl/Bunde and Ellund

• TSOs committed to implement a standardized bulletin board for secondary market trading

• Common new infrastructure plan to develop further capacity in the French-Spanish interconnections

More x-border regulatory co-ordination:• MoU between Regulators of the NW region was signed on 23 October 2007


Still many Problems Day-ahead auction of primary and secondary capacity stalled:

• Primary capacity: Dutch as well as German legislation prescribes FCFS principle

• Secondary capacity: German regulation prescribes that prices for capacity on the

secondary market may not be significantly higher than the tariffs on the primary

market

Legal limitations for information exchange between regulators:

• Exchange of confidential information between NRA’s is in most cases impeded by

law. In the work of the regional initiative this proves to be a real bottleneck as it is

difficult to analyse for example interconnection points. These impediments have

been reported to the appropriate ministries. MoU in NW will bring some

improvements

TSO cooperation:

• Missing framework for effective TSO x-border cooperation with regard to capacity

allocation, congestion management, harmonising and bundling of capacity

products and investment only 3rd Package can provide a practical solution


Still many Problems

Still insufficient Transparency:

Only partial compliance with transparency rules from Reg. 1775

The most important transparency requirements – details on

physical use of capacity is not even legally required !

But essential for the use of interruptible capacity!

Coordinated infrastructure expansion still lacking


Why utilities love network business


GRI – in the Context of the 3rd Package

The Role of the RIs is recognized by the EC:

“The regulatory framework should promote, coordinate and develop regional initiatives between transmission system operator and regulatory authorities, as happens with the Regional Initiatives led by ERGEG and initiatives such as the Pentalateral forum in Northwest Europe and as recommended by major stakeholders like Eurelectric.”

The 3rd package includes several “regional provisions” for NRAs, TSOs, Member States and the Agency

Conclusions of the 13th Madrid Forum, October 2007:”The Forum underlined its ongoing support for the Regional Initiatives as a useful interim stepping stone towards a fully integrated and well functioning market”


Regional provisions in the 3rd package (1)

Provisions for Member States

Article 5a (2003/55/EC)In order to safeguard a secure supply on the internal market of natural gas, Member States shall cooperate in order to promote regional and bilateral solidarity

Article 5a (2003/54/EC) / Article 5b (2003/55/EC)Member States shall cooperate among themselves for the purpose of integrating their national markets at least at the regional level. In particular, Member States shall promote the cooperation of network operators at a regional level, and foster the consistency of their legal and regulatory framework.The geographical area covered by regional cooperations shall be in line with the definition of geographical areas by the Commission in accordance with Article 2h(3) of Regulation (EC) No 1228/2003 / Article 2h(3) of Regulation (EC) No1775/2005 (defined by the Commission after consultation with the TSO organisation and the Agency).



Provisions for TSOs (Art 2h(3) of Regulation)

Regional TSOs shall cooperation on a regional level Regional TSOs shall publish a regional investment plan every 2 years; Regional TSOs shall promote operational arrangements in order to

ensure optimum management of the network; Regional TSOs shall promote the development of energy exchanges, Regional TSOs shall promote the allocation of cross-border capacity

through implicit auctions and; Regional TSOs shall promote the integration of balancing mechanisms



Provisions for NRAs

Article 22b (2003/54/EC) / Article 24b (2003/55/EC)(b) NRAs shall take all reasonable measures to achieve the development of competitive and properly functioning regional markets within the Community in view of the achievement of the internal market.

Article 22d (2003/54/EC) / Article 24d (2003/55/EC)1. Regulatory authorities shall closely cooperate and consult with each other, and shall provide each other and the Agency with any information necessary for the fulfilment of their tasks 2. Regulatory authorities shall cooperate at least on a regional level to foster the creation of operational arrangements in order to ensure an optimal management of the network, develop joint electricity exchanges and the allocation of cross-border capacity, and to ensure a minimum level of interconnection capacity within the region to allow for effective competition to develop.



Provisions for the Agency

Article 6 6. The Agency shall monitor the regional cooperation of transmission system operators referred to in Article 2h of Regulation (EC) No 1228/2003 and Article 2h of Regulation (EC) No 1775/2005 (investment plan to be published every two years, operational arrangements, energy exchanges, cross-border capacity allocation through implicit auctions, balancing market).

Article 7 3. The Agency shall promote cooperation between the national regulatory authorities and between regulatory authorities at regional level. Where the Agency considers that binding rules on such cooperation are required, it shall make the appropriate recommendations to the Commission.


5 Steps from the GRI to the IEM

1. Identify and solve practical problems hampering market integration on a regional level

2. Develop, agree and implement harmonized operational and technical standards for network and market operation

3. Monitor and report on compliance

4. Assure effective and harmonized enforcement across the EU

5. Coordinated Infrastructure expansion to improve Security of Supply


The tasks for the future – 1

1.

GRI as platform for

identifying and

solving practical

problems of market

integration

Examples: Assure full implementation of

interconnection agreements and OBAs on a regional level

Implement non-discriminatory balancing on ALL transport systems

Improve hub services and assure impartial hub operation

Implement trading plattforms (PX, etc.)

Assure gas quality concerns do not hamper trading unnecessarily

Transparency and access to LNG



2.

Develop harmonised

(technical)standards

Based on practical experience in some RIs technical and operational standards and approaches can be developed for the whole EU gas market

On a regional level they can be tested and their practicality can be assured

Once proven to work, their adoption will be easier



3.

GRI to serve as a

forum for monitoring

compliance

Monitoring: Directive Regulation Codes issued by the

TSOs on EU level GGPSSO Transparency GGPLNG GGP Balancing Etc.



4.

Regulatory Oversight

and coordinated

enforcement

Monitoring alone is insufficient – as shown at the last few Madrid Fora

Effective enforcement needs to be assured and coordinated at least across the region (e.g. on both sides of an interconnector!!)

Coordinated enforcement actions by NRAs should assure a level playing field for all market participants


Next steps and the Way forward

Public consultation on GRI coherence and convergence report until 17 December

ERGEG Regional Initiative Annual Conference and Annual Report – 27 February 2007

Key challenge for 2008 is to strengthen active stakeholder participation (shippers, governments)

As 3rd package discussion unfolds, regulators are ready to contribute by providing practical experience (and frustration !) from the work in the GRIs


Further information

WWW: www.ergeg.org

Contact: Walter Boltz

Email: [email protected]

Tel.: +43 1 24 7 24 201

Fax: +43 1 24 7 24 900


Extra slides


Several regional initiatives (co)-exist

ERGEG‘s RI TEN initiative of the Commission (regional coordinators) Pentalateral forum New political approach in the CW region Energy Community Medreg

gie annual conference, madrid, 23 november 2007

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