athens, greece, 10 june 2008 4th sg meeting meeting guide

Athens, Greece, 10 June 2008

4th SG Meeting

Meeting Guide

2 4th SG meeting, Athens, 10 June 2008

Agenda

Agenda Topics Rapporteur

10:00 Welcome and opening RAE/Co-chairs

10:15 1. Opening Approval of the agenda of the 4th SG meeting Approval of minutes of the 4th IG meeting Review of action points from the 4th IG meeting

Co-chairs

10:45 2. Cooperation and coordination Cooperation of regulators: MoU, strategic advisory panel: Composition and representation Cooperation of TSOs Regional Infrastructure planning: Gas flow Scenarios for SSE – EWI (University of Cologne)

RCC

TSOs

12:00 3. Capacity, trading and transparency related issues (I) Regional network integration Update on the REETS, comments received and moving ahead Conclusion of IPAs/OBAs in Baumgarten

EFETAEEGCEGH

13:00 Lunch


Agenda

Agenda Topics Rapporteur

14:00 4. Capacity, trading and transparency related issues (II) Development of hubs: CEGH & PSV Infrastructure development: pilot project for SSE region PwC study impediments to gas trading in SSE

CEGH & IBP TFAEEGPwC

14:45 Coffee break

15:15 5. Wrap up session Moving forward Organisation of work, including input from the strategic advisory panel Key outcomes of the meeting Suggested date and location of next IG meeting

Co-chairs

16:00 6. Closure Co-chairs


1. Opening: Review of action points

Action Description Who Status

AP1RCC to provide all members of the SG with an update on the progress made regarding the MoU at the next SG meeting.

RCC

AP2

EFET to circulate an updated version of its R_ISO paper to all members of the SG via the RCC. This version is to include all comments received during the consultation period. An update is to be provided at the next SG meeting.

EFET today

AP3TSOs involved into the work on the NETS to provide an update at the next SG meeting.

TSOs today

AP4TSOs to provide an update reg. the TSO-MOU at the next SG meeting. TSOs and RCC to share their MOU to compare the areas addressed prior to the next SG (once the text has been finalised).

TSOs today

AP5AEEG to provide an updated version of the paper on REETS that contains all comments made by stakeholders at the next SG meeting.

AEEG


1. Opening: Review of action points

Action Description Who Status

AP6BOG GmbH to provide an update on the envisaged OS procedure for the WAG at the next SG meeting.

BOG today

AP7

CEGH GmbH to provide an update reg. the conclusion of IPAs/OBAs at the next SG meeting.IBP TF (Aiget, EFET, Eurelectric) to provide an update on the development of the PSV.E-Control GmbH to act as a mediator in the discussion regarding the conclusion of IPAs at the gas hub in Baumgarten

CEGH

IBP TF

E-Control

today

AP8RCC to assist EASEE-gas with the organisation of the workshop by sharing names/contact details of potential attendants.

RCC AP9

AEEG to provide an update on strategic routes and transparency to the EC. Update to be given to all SG members at the next SG meeting.

AEEG

AP10RCC to circulate an invitation to all SG members asking for voluntary participation in the strategic advisory panel. The panel is to be set up prior to the next SG meeting.

RCC

AP11PwC study: RCC to provide SG members with an update on progress made at the next SG meeting.

RCC today


2. Memorandum of Understanding

Memorandum of Understanding (MoU) to set up a Network of SSE Regulators: Concluded on 9 June 2008

Signatories: Austria, Bulgaria, Czech Republic, Greece, Italy, Poland, Romania, Slovak Republic, Slovenia



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

Internal consultation of Article 22 exemption decisions


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




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



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 transparent SSE Regulators‘ network – website



Next steps Launch of online platform: SSE Regulators’ Network

the internal parts of the website are only visible for SSE NRAs Internal consultation Best practice in the region


2. 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!

A senior representative of each group of stakeholders (e.g. from TSOs, traders, suppliers, ministries,...) should form part of the panel

The main task of the panel would be to provide advice on the strategic topics to be dealt with within the region and to set priorities for future work

Strategic advisory panel has been set up in the NW region(‘Programme Board’)



Regional Co-ordination Committee (RCC)

Regional Co-ordination Committee (RCC) Implementation GroupImplementation Group Stakeholder GroupStakeholder Group

RegulatorsGovernmentsEuropean Commission

RCC members+TSOs Hub operatorsStorage operators

IG members+Representatives of:

consumers (IFIEC)traders (EFET)suppliers (Eurogas)distributors

Strategic advisory panelStrategic advisory panel



Idea still subject to finalisation

Nomination & 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


2. Cooperation of TSOs

17

SK

I SLO

H

Eisenstadt

Graz

Klagenfurt

Salzburg

St. Pölten

MS Arnoldstein

WIEN

CS MS Baumgarten

CS Grafendorf

CS Ruden

CS Weitendorf

CS Eggendorf

A

SOL

New compressor Stations (2+1 PGT 25; Power: ~ 70 MW)Already existing compressor stations

Measuring Station

faciIities subject to variations

Connection with SOL (36”; 1,5 Km)

TAG EXP 04 2nd StepAllocation Procedure

TAG Pipeline System

The allocation Procedure related to the TAG EXP 04 Project, 2nd Step has been elaborated according to the indications of the European Commission, Directorate General for Competition, with the involvement of the Austrian Regulator Energie-Control GmbH and the Italian Regulator Autoritá per l‘Energia Elettrica ed il Gas.


Total offered transporation capacity

Offtake Point A/I Border [Cm³/h] Offtake Point Weitendorf [Cm³/h] 410.000 Cm³/h 186.000 Cm³/h

Repartition

Long Term approx. 90% (approx. 3,3 A/I Border and 1,45 Weitendorf).Short Term approx.10% (Yearly allocation starting in spring 2009).

Offered transportation Capacity long term

Offtake Point A/I Border [Cm³h] Offtake Point Weitendorf [Cm³/h]25 lots of 15.000 Cm³/h each 11 lots of 15.000 Cm³/h each

equal to: 375.000 Cm³/h equal to165.000 Cm³/h

Offered transportation Capacity short term

The allocation for capacity Short term will be carried out in spring of each Year, independently from the Long Term Allocation Procedure.The offered capacity is about 10% of the Total offered capacity for each of the two Offtake Point.


Long Term Transportation Contract

Start up of the transportation service: 01.10.2009.

Transportation Contract duration: 20 Years.

Transportation Contract on Ship or pay basis.

Monthly Transportation Fee: According to the Tariff Methodology approved by E-Control Kommission on 02.10.2007.


General Terms and Conditions: General Terms and Conditions of Trans Austria Gasleitung GmbH for Cross Border Transportation” approved by ECK on 23.05.2007.

Procedure

The long term capacity will be allocated according to the TAG’s Terms and Conditions published on TAG’s website on June 3rd 2008.


Application of Lottery

In case the number of requested lots is higher than the number of offered lots, the lots will be assigned according to the lottery procedure described in the Allocation Procedure.


Thank you for your attention


2. Model-based analysis of infrastructure projects

Presentation by Mr. Lochner

Institute of Energy Economics, University of Cologne


2. Model-based analysis of infrastructure projects

Next steps:

RCC decided to start a project with EWI

RCC to involve stakeholders in the definition of scenarios to be modeled


3. Regional network integration

EFET


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

3. 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

3. Regional E/E system – Background


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

3. Regional E/E system – Summary I


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

3. Regional E/E system – Summary II


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

3. Regional E/E system – Simulations I


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

3. Regional E/E system – Simulations II


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

3. 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

3. Regional E/E system – Consultation process


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

3. Regional E/E system – Revised version


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

3. Regional E/E system – Role of the study


3. Conclusion of IPAs/OBAs in Baumgarten

E-Control opened a procedure against OMV Gas GmbH TAG GmbH and BOG GmbH

according to Section 31a (2) of the Austrian Natural Gas Act in combination with Section 10 (1) of the Austrian Energy Regulatory Authorities Act

Section 31a (2) obliges TSOs“to supply adequate information to the operator of line or storage facilities connected to their own facilities so as to ensure safe and efficient operation, co-ordinated extension and interoperability of the systems, and to enter into contracts on the transfer and acceptance modalities with the operator of such connected facility”.


3. Conclusion of IPAs/OBAs in Baumgarten

1. Which measures have been taken by your company to implement the agreement proposed by CEGH?

2. Which alternative proposals have been tabled by your company in the discussion process and in which way do your proposals differ from the proposal made by CEGH?

3. Which parts of the last proposal tabled by CEGH (Service Provider) cannot be implemented by your company? Please state the reasons.

4. Which technical preconditions hinder the implementation of the proposed agreement? Which measures have been taken by your company to create the technical preconditions?

5. In case an agreement has been reached, please indicate the date of implementation of the agreement.

6. If you do not agree with the proposals tabled by CEGH, please state the points on which your opinion differs from their proposal and submit your suggestions on these points.


4. Development of hubs

Update by CEGH GmbH Update by IBP TF (Aiget, EFET, Eurelectric)


4. PwC study on barriers to market entry

Update by PwC (Mr. Erwin Smole)


4. Preliminary results of PwC study

Next steps: 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 Conclusions to be drawn as task for strategic advisory panel and

possible refining of priorities of the REM SSE where necessary


4. Assessment on Selected Transportation Routes

BackgroundBackground

• 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 The need for an up-date (IG, Vienna April 8(IG, Vienna April 8thth, 2008):, 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)


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


4

6

Where are the transportation routes?

1

23


5

Where are the transportation routes?


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


Available firm capacity (2008 vs 2007)

Eustream

SK

RTN

CZ

BOG

A

TAG

A

OMV

A

GP

SI

SRG

I

GAZ System

PL

route 1UK-SK-CZ-GER

Yes Yes

route 2UK-SK-A-SI-I

Yes

No

(physical cong.)

Yes No

route 3UK-SK-A-I

Yes

No

(physical cong.)

route 4UK-SK-A-GER

Yes

No

(contr. cong.)

route 5BE-PL-GER

Yes

route 6AL-I-A-SK

No

(backhaul) Yes


Short term congestion management (2008 vs 2007)

Eustream

SK

RTN

CZ

BOG

A

TAG

A

OMV

A

GP

SI

SRG

I

GAZ System

PL

route 1UK-SK-CZ-

GER

bulletin boardinterr. UIOLI,

bulletin board

route 2UK-SK-A-SI-I

bulletin board

interr. mandatory

UIOLI, bulletin board

interr. UIOLI,

bulletin board

capacity goes with

customers, interr.

route 3UK-SK-A-I

bulletin board

interr.

mandatory UIOLI,

bulletin board

route 4UK-SK-A-GER

bulletin board

interr. UIOLI,

bulletin board

route 5BE-PL-GER

interr. UIOLI

route 6AL-I-A-SK

No

(backhaul)

bulletin board


Capacity expansion (2008 vs 2007)Eustream

SK

RTN

CZ

BOG

A

TAG

A

OMV

A

GP

SI

SRG

I

GAZ System

PL

route 1UK-SK-CZ-GER

no plansno

plans

route 2UK-SK-A-SI-I

no plans

on going not

demand driven

no plans planned

route 3UK-SK-A-I

no plans

on going not

demand driven

route 4UK-SK-A-GER

no plansopen

season

route 5BE-PL-GER

no plans

route 6AL-I-A-SK

backhaul planned


Tariff applied (2008 vs 2007)SPP

SK

RTN

CZ

BOG

A

TAG

A

OMV

A

GP

SI

SRG

I

GAZ System

PL

route 1UK-SK-CZ-GER

E/E distance

route 2UK-SK-A-SI-I

E/Edistance

*distance distance

route 3UK-SK-A-I

E/Edistance

*

route 4UK-SK-A-GER

E/E distance

route 5BE-PL-GER

distance

route 6AL-I-A-SK

distance*

E/E

•Regulated tariffs in Austria since end 2007


OBAs between neighbouring TSOs (2008 vs 2007)

Eustream

SK

RTN

CZ

BOG

A

TAG

A

OMV

A

GP

SI

SRG

I

GAZ System

PL

route 1UK-SK-CZ-GER YES

NO

route 2UK-SK-A-SI-I

NO NO YES YES

route 3UK-SK-A-I

NO NO

route 4UK-SK-A-GER

NO NO

route 5BE-PL-GER

NO

route 6AL-I-A-SK

NO NO


Key findings by route (1)

Route 1: UKRAINE-SK-CZ-GERRoute 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 capacity increase expected in Baumgarten after the Nord Stream pipelines comes expected in Baumgarten after the Nord Stream pipelines comes into operationinto operation. In the Slovak Republic, balancing and nomination based on Gazprom standards.

Route 2: UKRAINE-SK-A-SIRoute 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.


Key findings by route (2)

Route 3: UKRAINE-SK-A-IRoute 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-GERRoute 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-GERRoute 5: BELARUS-PL-GER TPA service only under permission of shareholders (Gazprom-Export);

infringement procedure on going

Route 6: ALGERIA-I-A-SKRoute 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


Conclusions

Despite progresses in the last two years….Despite progresses in the last two years….• positive improvements in congestion management positive improvements in congestion management

• development of secondary markets

• standard bulletin boards

• market survey

• development of IPA/OBA agreementsdevelopment of IPA/OBA agreements


Conclusions

…….there are still difficulties for newcomers in terms of .there are still difficulties for newcomers in terms of access to transportation routes in the regionaccess 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”


Conclusions

• The improvements recorded after 2 years are to a The improvements recorded after 2 years are to a large extent the result of the pro-active dialogue large extent the result of the pro-active dialogue promoted by the SSE – GRI among all stakeholders promoted by the SSE – GRI among all stakeholders

• The persisting difficulties on major transportation The persisting difficulties on major transportation routes in the region confirm the priorities of the routes in the region confirm the priorities of the Action Plan Action Plan

• There might however be the need to focus more on:There might however be the need to focus more on:

• the effective state of development and expected impact of the effective state of development and expected impact of new investments in the regionnew investments in the region

• short term congestion management mechanisms’ short term congestion management mechanisms’ effectivenesseffectiveness

• additional analysis on: balancing; hub development additional analysis on: balancing; hub development


6. Closure: Review of priorities in the region

Priority Description Status Responsible

P1Launch of online platform: SSE Regulators’ Network

RCC

P2

RCC to start project with EWI

RCC to involve stakeholders in the definition of scenarios to be modeled

RCC

P3Removing remaining obstacles to implementation of IPA/OBAProgress report

CEGHTSOsE-Control

P4 TSO cooperation to prepare a MoU TSOs


6. Closure: Review of priorities in the region

Priority Description Status Responsible

P5

REETSThe study might be amended or updated in the future in case of significant changes in the underlying assumptions

RCCSG

P 6

Final report Trader Survey Gas 2008 together with a cover letter to 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

Conclusions to be drawn as task for strategic advisory panel and possible refining of priorities of the REM SSE where necessary

RCC


6. Date and location of next meeting

Next RCC/IG Meeting Mid October In Bucharest, Romania Hosted by ANRE

athens, greece, 10 june 2008 4th sg meeting meeting guide

Documents

sg meeting meeting guide

regulatory issues

regulatory frameworks

key regulatory functions

network of sse regulators

cross border flows

crossborder gas flows

information exchangecommon