European Developments

European Developments Transmission Workgroup 5th July 2012

Gas Balancing Update Transmission Workgroup

ENTSOG - Currentproject plan ACER FG Development of Network Code with stakeholder on the basis of the final Framework Guidelines 2011 2012 Nov Jan June July Mar Apr Sep Dec Apr Oct Nov Feb May Jun Jul May Oct Aug SubmitNetwork Code Project launch 13/14 Dec Consultation Invitation from Commission 23SJWS 11-12SJWS 26SJWS Workshop Workshop 7-8SJWS 9SJWS Development of draft network code in cooperation with stakeholders ENTSOG Stakeholder 3

Responses to ENTSOG consultation on draft balancing code • Total of 50 stakeholder responses received by ENTSOG • 2 confidential • 8 UK • Responses are generally supportive of work done to date • 150 issues are being investigated by ENTSOG • Majority of issues are relatively minor in nature • Some text changes will be made as a result of the feedback received

Next steps • ENTSOG response to be presented at Refinement Workshop on 26th July • Legal text to be amended accordingly and will be finalised in August prior to the start of the stakeholder support process in September

EU CAM Network Code and CMP Guideline Update Transmission Workgroup

Capacity Allocation Mechanisms (CAM) - Update • ACER published Reasoned Opinion no. 04/2012 on CAM 5th June 2012 • “.. Generally shows a high degree of compliance with the Agency's Framework Guidelines (FGs).” However.. some specific provisions not in line with the FGs; or with the objectives; or are out of scope.” • Items considered not to be fully in line: • Definitions • Virtual Interconnection points (Entry / Exit systems rather than Transmission networks) • Additional Capacity (CMP definition instead of CAM) • Capacity Contract (Prefer Transport Contract)

Capacity Allocation Mechanisms(CAM) - Update • Application to New Technical Capacity • Code does not include incremental Capacity however opinion considers that incremental Capacity is only exempt from the auction allocation process, allowing for other mechanisms to allocate incremental capacity. • All other sections of the FGs should be applicable to incremental such as bundling and capacity products / durations should apply. • Standard Contracts • Code defines standardised capacity services and allocation mechanism (FGs defines a standardised content and general T&Cs). Assessment needed to see whether full standardisation can be done due to different national legal frameworks.

Capacity Allocation Mechanisms(CAM) - Update • TSO Cooperation • Code defines the sharing of information with Users. Further details required for TSO to TSO information sharing such as flow forecasts, network availability and potential congestion. • Capacity Breakdown • Concerns expressed that auctioning 90% for 15 years could create barriers for new entrants and suggests no room for ‘learning lessons’ • NRAs to review amount of capacity for each long and short term service • Considers that more to be withheld for shorter term horizons (4-5 yrs) • A quarterly product offered more than just year ahead alongside a yearly product would allow Users a ‘second chance’ • More flexibility to implement at IP level shorter term (and more stringent) quotas • Needs to be aligned either side of IP • Subject to consultation with Users, TSOs and NRA agreement.

Capacity Allocation Mechanisms (CAM) – Update • Sale of Unbundled Firm Capacity • FG sets out the objective to progressively bundle the entire technical capacity, including new capacity • The offer of unbundled capacity up to 15 yrs may therefore prevent the objective of progressively bundling capacity at IPs • Suggest that limiting the sale of unbundled to, for instance, up to the rolling monthly auction. • Amendment of Existing Capacity Contracts • Amend NRAs “shall” to NRAs “may” mediate.

Capacity Allocation Mechanisms (CAM) – Update • Interruptible Capacity • Justification and NRA approval to reduce interruption lead times below 2 hours • Relationship to Noms / Renoms process in Balancing Code highlighted. • Tariffs • Removal of the Revenue Equivalence Principle • Equal split of premium revenues • Removal of revenue shortfalls and tariff adjustments • Temporary nature of Tariff aspects contained in CAM due to forthcoming Tariff Code.

Capacity Allocation Mechanisms (CAM) – Update • Incentive Regimes • Recognises the merits of incentives when it will have an effect on the cross-border capacity offer, but consider is not necessary to explicitly include in Code. • Interim Period • Removal of the interim period for applying auctions (subject to NRA decision) as the FGs leaves the decision on interim measures to the Comitology process.

Capacity Allocation Mechanisms (CAM) – Update • Initial discussions already held between ENTSOG and ACER & EC • European Commission (EC) expect Comitology to start no later than Dec 2012 • Early indication is that ACER & EC consider that opinion should be applied and Code amended • Ongoing ENTSOG analysis into impacts and options currently being considered.

Constraint Management Principles (CMP) Update • CMP approved by Member States at the Comitology meeting on 20th April 2012 • GB has to be compliant by 1st October 2013 (July 2016 for Firm Day Ahead UIOLI) • Compliance / Impact Assessment discussed with Ofgem • We understand that Ofgem is also discussing compliance with GB Interconnector Operators.

Constraint Management Principles (CMP) Update • National Grid considering: • How can we make CMP for Oct13 work? • Implications • TSO – TSO cooperation – obligation to work with other TSOs.

Ten Year Network Development Plan 2013 – 2022 Update Transmission Workgroup

TYNDP Background • As per the 3rd Energy Package, ENTSOG has to produce a European Ten Year Network Development Plan every two years, the last report was published February 2011. The next iteration of the report will cover the period of 2013 to 2022. • The proposed TYNDP improvements are based on 3 different types of feedback received from the previous report • ACER Official Opinion • Main improvements expected in, demand analysis, market integration assessment & stakeholder involvement • Stakeholder Joint Working Sessions • ENTSOG organised 7 sessions between January and May this year around demand, supply, infrastructure projects, security of supply and market integration, these session were attended by a wide range of stakeholders • Bilateral Talks with ENTSOG • ENTSOG are always willing to hold bilateral talks to discuss very detailed points or confidential issues

TYNDP Improvements • Demand • Upgraded consistency and transparency in the assumptions and methodologies of the demand scenarios • Attention to power generation dynamics: reviewing the link between the electricity and gas systems • Consideration of EU political goals • Supply • Based on publicly available data, ENTSOG will define a maximum, medium and minimum supply potential by source • Market Integration • The expansion of the supply penetration assessment, investigating in particular to see if every country has physical access to every source, and if not why not.

TYNDP Improvements Continued • Security of Supply • Only a slight evolution in the definition of disruptions (especially technical ones) and UGS low deliverability in comparison with TYNDP 2011-2020 • Infrastructure • The clustering used for modelling will remain based on 2 scenarios: “existing infra. + FID” & “Existing infra. + FID + non-FID” combined with 3 dates: 2013, 2017 & 2022 • At a recent TYNDP Workshop, ENTSOG produced 61 slides on the new TYNDP Concept, it is important to highlight there is a wealth of information available to those that want to know more on the ENTSOG website. • http://www.entsog.eu/events/TYNDP5/presented.html

TYNDP Next steps • Now to Mid-September is the data collection period • All data has to be collected by mid-September 2012. • ENTSOG will gather the supply and demand data, whilst the TSOs’ will submit their infrastructure projects • Third-party (non-TSO) infrastructure project collection is now officially available • From Mid-September to December macro-analysis and simulations to be completed • ENTSOG will analyse the supply and demand scenarios at European level • 200 cases will be modelled and analysed • ENTSOG will then produce the report focusing on the clarity of the results • Finally from January to February the report to be approved and published • A major report like the TYNDP requires extensive internal approval • Targeted public release for February 2013 opening a 3-month formal consultation period before submission to the ACER

EU Incremental Capacity Transmission Workgroup

Incremental Capacity • Council of European Energy Regulators (CEER) have started work on “Identification and Allocation of Incremental Capacity” • Looking at in the context of existing Gas Target Model, EC Energy Infrastructure Proposal, & CAM Framework Guideline • ENTSOG have started preliminary consideration • National Grid will fully participate in process and look to share experience of GB model • Further update when CEER views / plans are made available.

Interoperability & Data Exchange Update Transmission Workgroup

EU Interoperability & Data Exchange Code • ACER’s consultation on Framework Guidelines has concluded • National Grid NTS’ response was summarised at last month’s meeting • We expect the following to be completed in July: • ACER’s final Framework Guideline proposals • ACER’s evaluation of consultation responses • Impact Assessment produced by ACER’s consultant • ENTSOG is preparing its Project Plan and Launch Documentation • The 12 month period for Code development is expected to commence in early September 2012

European Developments