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Athens, 9 June 2008

11 th RCC Meeting Meeting Guide. Athens, 9 June 2008. 1. Agenda. 1. Review of agreed action points. 2. Review of the agenda of the 4th SG meeting. Main agenda items: Cooperation and coordination MoU between NRAs of the region Strategic advisory board – Purpose and composition

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Athens, 9 June 2008

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  1. 11th RCC Meeting Meeting Guide Athens, 9 June 2008

  2. 1. Agenda

  3. 1. Review of agreed action points

  4. 2. Review of the agenda of the 4th SG meeting • Main agenda items: • Cooperation and coordination • MoU between NRAs of the region • Strategic advisory board – Purpose and composition • Cooperation between TSOs in the region • EWI - model-based analysis of infrastructure projects and market integration in SSE • Capacity, trading and transparency related issues • Regional network integration – EFET • REETS – Update • Conclusion of IPAs/OBAs in Baumgarten • Development of hubs: CEGH & PSV • Infrastructure development • PwC study impediments to gas trading in SSE

  5. 3. Memorandum of Understanding • Status of intended signatories • Austria Yes • Bulgaria Yes • Czech Republic Yes • Greece Yes • Hungary No response • Italy Yes • Poland Yes • Romania Yes • Slovakia Yes • Slovenia Yes

  6. 3. Memorandum of Understanding Purpose: • Internal consultation • Consultations on decisions which cover more than one jurisdiction • Where regulatory framework might result in incompatible regulation for cross border flows, NRAs will • inform all relevant NRAs • consult with other affected NRAs in order to minimise obstacles to cross border trade • Inter-NRA consultation of Article 22 exemption applications

  7. 3. Memorandum of Understanding Purpose: • Best practice in the region • Contact persons for communication between NRAs for facilitating information exchange • Common understanding on key regulatory functions and exchange of best practice information on • capacity allocation mechanisms • long-term capacity contracts • measures to prevent capacity hoarding • imposition of obligation to network extension • Creation of a platform for easier information exchange on regulatory issues (e.g. gas network losses)

  8. 3. Memorandum of Understanding Purpose: • Harmonisation of market rules • NRAs to consider impact of current regulatory framework and of any proposed changes to this framework on other markets in the Region • NRAs to seek to harmonize the regulatory frameworks where practicable to ensure compatibility and facilitate cross-border gas flows and trade • Possible regional public consultations of all stakeholder in the Region on changes in a regulatory framework in one MS of the Region

  9. 3. Memorandum of Understanding Main areas: • Co-ordination, information and harmonisation • Regulatory Co-ordination • Regulation of the Gas Market • Sharing of Information • Consultation • Avoidance of Inconsistency of Action • Operation of MoU • Term of MOU and Review • Dispute Resolution • Aim should be to make cooperation visible to the outside world • SSE Regulators‘ network

  10. 3. Memorandum of Understanding Next steps • Launch of online platform: SSE Regulators’ Network • Accessible via existing CEER/ERGEG Login • the internal parts of the website are only visible for SSE NRAs • Internal consultation • E-Control invites to comment NIC’s new application for exemption • Best practice in the region (e.g. gas network losses) • All input will edited by Kerstin Wernig(kerstin.wernig@e-control.at)

  11. 4. Strategic advisory panel • Update on nominations received for the strategic advisory panel (‘Programme Board’) • Some nominations received • TSOs unsure as to how to proceed • GRI REM SSE experiences with the process of setting the panel up • Well-balanced representation • Transparency in the selection approach • Transparency in the work itself • Statutes for the work of the panel • Formal statutes being drafted in GRI REM NW • Similar statutes to be considered for GRI REM SSE

  12. 4. Strategic advisory panel Purpose of the panel: • to achieve greater level of stakeholder involvement and commitment • to provide advice and guidance for RCC, eg. prioritization and refining of key areas of work • to better communicate progress to all stakeholders • Well balanced representation!

  13. 4. Strategic advisory panel • Idea still subject to finalisation • Nomintation & composition under discussion • First version of ‚Terms of reference‘ have been drafted • RCC to report back to all stakeholder and implementation group members at the next IG meeting • Nomination period extended until 10 September 2008

  14. 4. Nominations received • Nominations received for the strategic advisory panel(‘Programme Board’) • Producers (OGP – Gazprom?) no nomination • TSOs (GTE) no nomination • SSOs (GSE) no nomination • Suppliers (Eurogas) no nomination • Traders (EFET) Mr. Stephan Ressl nominated • Hub Operators no nomination • Consumers (IFIEC, CEFIC) no nomination • Governments no nomination • Nomination period exended until 10 September 2008

  15. 4. Assessment on Selected Transportation Routes Background • Study conducted by RCC in 2006 in order to prioratize SSE – GRI Action Plan • Consultation with all stakeholders and presentation at the 2nd SG in Milan (March 2007) The need for an up-date (IG, Vienna April 8th, 2008): • To verify improvements after 2 years of SSE – GRI activities • To identify persisting critical issues and to focus on new emerging ones • To support and integrate parallel works (e.g. PwC study on “barriers to entry” into the SSE – GRI)

  16. Which are the transportation routes? • route 1: UKRAINE-SK-CZ-GER • route 2: UKRAINE-SK-A-SI • route 3: UKRAINE-SK-A-I • route 4: UKRAINE-SK-A-GER • route 5: BELARUS-PL-GER • route 6: ALGERIA-I-A-SK • Proposal of assessment on new additional routes, covering Romania, Bulgaria Greece and Hungary

  17. 1 4 3 2 6 Where are the transportation routes?

  18. 5 Where are the transportation routes?

  19. Focus of the current analysis • available capacities • effective congestion management • how tariffs are computed and publication of tariff information • operational balancing agreements at interconnection points

  20. Available firm capacity (2008 vs 2007)

  21. Short term congestion management (2008 vs 2007)

  22. Capacity expansion (2008 vs 2007)

  23. Tariff applied (2008 vs 2007) • Regulated tariffs in Austria since end 2007

  24. OBAs between neighbouring TSOs(2008 vs 2007)

  25. Key findings by route (1) • Route 1: UKRAINE-SK-CZ-GER • Improvements in terms of development of secondary market and congestion mechanisms in the last years, decreasing capacity available in the Slovak part (nearly to zero); capacity increase expected in Baumgarten after the Nord Stream pipelines comes into operation. In the Slovak Republic, balancing and nomination based on Gazprom standards. Route 2: UKRAINE-SK-A-SI • Physical congestion at some interconnection points along the route and lack of appropriate LT congestion management on TAG system. • TAG undertook to build two new compressors which will increase capacity by 1st October 2008 and by 1st October 2009.

  26. Key findings by route (2) • Route 3: UKRAINE-SK-A-I • Viability represents a bottleneck to the Italian market • Lack of appropriate long term congestion management on TAG system despite new capacity available from October 2008 and 2009, also on a short term basis. • Route 4: UKRAINE-SK-A-GER • The transport of natural gas on the whole route from Velke Kapusany to Oberkappel on a firm basis is not possible due to contractual congestion at some interconnection points.Market survey launched to solve the problem. • Route 5: BELARUS-PL-GER • TPA service only under permission of shareholders (Gazprom-Export); infringement procedure on going • Route 6: ALGERIA-I-A-SK • Access conditions to Tunesian and Mediterranean section and related regulation are the main problem. Lack of harmonisation with neighbouring networks may also hinder usage for other markets

  27. Conclusions • Despite progresses in the last two years…. • positive improvements in congestion management • development of secondary markets • standard bulletin boards • market survey • development of IPA/OBA agreements

  28. Conclusions ….there are still difficulties for newcomers in terms of access to transportation routes in the region • secondary markets are still not sufficiently developed and in some case not facilitated by TSOs • UIOLI provisions in contractual congestion are often weak • lack of capacity is still a major shortcoming both in terms of physical capacity (e.g. TAG) and contractual one (BOG) • inadequate LT congestion management provisions even in cases where new investments are planned • IPA/OBA agreements still not sufficiently finalised (i.e.nomination provision based on Gazprom’s standards are still far from EAASE’s) • still no progress on ROUTE 5 where, “TPA service may be provided only under permission of main shareholders, especially Gazprom-Export”

  29. Conclusions • The improvements recorded after 2 years are to a large extent the result of the pro-active dialogue promoted by the SSE – GRI among all stakeholders • The persisting difficulties on major transportation routes in the region confirm the priorities of the Action Plan • There might however be the need to focus more on: • the effective state of development and expected impact of new investments in the region • short term congestion management mechanisms’ effectiveness • additional analysis on: balancing; hub development

  30. 4. Preliminary results of PwC study • Next steps: • Who else is interested in ordering the results of the study? AEEG, AGEN-RS and E-Control have ordered already. • Check country reports before publication • Final report together with a cover letter should be sent to all stakeholders of the REM SSE • RCC to prepare a statement on measures to address the impediments identified in the study • NRAs/MS to derive measures on national level • Refining of priorities of the REM SSE where necessary

  31. 4. Model-based analysis of infrastructure projects • Presentation by Mr. Lochner • Institute of Energy Economics, University of Cologne

  32. 4. Model-based analysis of infrastructure projects Next steps: • Proposal to start a joint project together with TSOs in the region? • Results as important input to future Open Season Procedures • Invitation at SG to participate in the commissioning of an analysis for the SSE region? • Expected costs (for 6-8 scenarios to be modelled):45.000 to 55.000 Euros

  33. 4. Regional E/E system – Background Action Plan – Priority 5 Regional Entry-Exit Tariff System (REETS) • REETS as the final step of a regional integration process which includes interconnection agreements, harmonisation of transmission rules and access rules, co-ordinated investment planning, regional balancing and joint regional network operations • promotion of a cost reflective transportation pricing systems that makes easier market access for new shippers, increases liquidity and foster hub development

  34. 4. Regional E/E system – Background • Milan, March 2007: presentation of the document: “On requirements to introduce a regional one stop shop provider and an entry exit tariff system. A preliminary study.” • Maribor, October 2007: presentation of benchmarking results and simulation of introduction of REETS “Towards a Regional Entry-Exit System in the SSE Gas Market. A preliminary study”, presented at the 3rd IG Maribor 9th October 2007 • Prague, January 2008: presentation of the final version of the paper  and launch of a two months consultation • The revised version, after consultation, presented at the 4th SG in Athens and published on the web site

  35. 4. Regional E/E system – Summary I The study provides theoretical arguments both for and against the introduction of regional entry exit tariff system (REETS) ++ efficiency -- tariffs unstable ++ liquidity -- changes in current users tariffs and impact on final prices ++ market power reduction -- heavily affected by changes of transport patterns induced by pipeline reinforcements or by new routes ++ investment incentives

  36. 4. Regional E/E system – Summary II • The study provides a stylised simulation of a regional entry-exit tariff system, using approximate though plausible data • Main assumptions: no change in total TSO revenue entry points at import points in the region and main domestic and storage areas; exit points at exports points and virtual national consumption areas, revenue = costs • Simulation of increased costs (+20%) to pay for enhancements of selected congested pipelines

  37. 4. Regional E/E system – Simulations I • Transportation costs are generally significantly reduced by the REETS for destinations that are farther from the gas source, and increased for closer ones (increased competition between gas sources) • Increases in transportation costs do not exceed 2.5% of the average European border price in the worse case, (i.e. about 1% of the retail price for small customers and be partly offset by switching to supply sources whose transportation cost was reduced) • Tariffs would be moderately increased by including the incremental cost of pipeline reinforcement • The inclusion in the system of major new routes that substantially affect transportation patterns, could lead to large tariffs increases falling disproportionately on affected areas, at least in the short term: an entry exit tariff system for TPA to transportation services should go hand in hand with a system of exemptions for new infrastructure

  38. 4. Regional E/E system – Simulations II • Ex ante inter TSO compensation mechanisms seems relatively easy to be set up. • Competition would be stimulated also by the transparency and simplicity of the tariff system, and even more by its likely stability. • Most difficulties origin from lack of harmonisation in contract, capacity booking, allocation mechanisms, as well as congestion management and balancing

  39. 4. Regional E/E system – Consultation process • Paper: “Towards a Regional Entry-Exit System in the SSE Gas Market. A preliminary study”, 3rd SG Prague 22rd January 2008 stakeholders invited to comment by 31st March 2008 • Only two comments received by stakeholders • OMV • Geoplin plinovodi OMV position: • strong reservations on the entry-exit methodology itself and its efficacy in managing cross-subsides: LT contracts and distance tariffs are more efficient in the gas market • a clear scenario of current and future shippers is lacking as well as the impact of different flows of gas • inter TSO compensation is a politically sensitive issue and more critical than described in the paper as it has a high conflict potential

  40. 4. Regional E/E system – Consultation process Geoplin plinovodi comments: • Requests of clarifications on • the methodology used to calculate some data referred to Geoplin plinovodi network (tariffs, estimated transmission costs, booked capacity) • how domestic pipelines costs are covered • Provision of alternative data which were welcome and used in new simulation: no major changes in results es expected (Geoplin plinovodi 2% of TSO costs in the region) but more accuracy in the paper

  41. 4. Regional E/E system – Revised version • The study clarifies that it includes costs related to the main lines which are used or might be used for international routes; costs of secondary network are covered by separate tariffs • It discusses cost reflectivity in the case of meshed transport systems and use for backhaul flows • It includes additional considerations on the impact on the EE model of new relevant capacity expansion

  42. 4. Regional E/E system – Role of the study • It provides a medium long term vision and a tool to: • better identify major obstacles in the process of market integration, in the light • verify consistency of the single step of the process • The study might be amended or update in the future in case of significant changes in the underlying assumptions

  43. 6. Closure: Any other business • Croatia as observer in SSE Region

  44. 6. Date and location of next meeting • ANRE has agreed to host the next RCC and IG meeting • Date tbd: beginning of October (week commencing 13 October) in Bucharest

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