8th sg meeting, gri sse rome, italy, 17 june 2010 gri south south-east region

8th SG Meeting, GRI SSE

Rome, Italy, 17 June 2010

GRI South South-East Region

28th SG Meeting, Rome, Italy, 17 June 2010

Agenda Topics Rapporteur

08:45 Arrival and registration

09:00 1. Openinga) Approval of the agendab) Approval of minutes of the 7th IG meeting c) Review of action points (OBAs)

Co-chairs

09:15 2. Market Model for Wholesale Trading in the Region SG

09:30 3. Stakeholder discussion on a Cross Border Market Model SG

10:15 4. New capacity allocation rules - ERGEG Pilot Framework Guideline

Co-chairs

10:30 5. The new Italian gas trading platform P-GAS P-Gas

10:45 6. CEGH Update on Futures Market CEGH

11:00 7. Transparency – Update on revised Annex Co-chairs

11:30 8. Hungarian Network Code – the SHELL Case Co-chairs

12:30 LUNCH

1. Agenda


1. Agenda

Agenda TopicsRapporteur

13:30 9. The role of the Regional Initiatives – ERGEG conclusions Co-chairs

13:40 10. IP Assessment Arnoldstein/Tarvisio – Update TSOs

13:50 11. TSO Working Group Update TSOs

14:00 12. Updates on Infrastructure projects SG

14:45 13. AoB Co-chairs

15:00 Closure Co-chairs


1.b) Approval of minutes of 7th IG meeting

http://www.energy-regulators.eu/portal/page/portal/EER_HOME/EER_INITIATIVES/GRI/South_South_East/Meetings1/SG_meetings/6supthsup%20SSE%20SG/AD


1.c) Action Points


1.c) Action Point IP Arnoldstein / Tarvisio

Status• SNAM identified four important issues to be faced to

introduce the OBA:

• Modify the current practice in use at Italian Customs offices for accounting of imported gas volumes;

• Increased SNAM Rete Gas storage capacity needs to manage the differences between nominated and measured volumes;

• Possible amendment to be proposed to the Italian Network Code and balancing rules:

• Management of the imbalance volumes “nomination/measured” if exceeding a certain tolerance.


1.c) Monitoring OBAs at IPs

Status ImplementationIP Hora Svaté Kateriny: RWE TGN and Wingas Transport IP Lanžhot: RWE TGN and eustream OBA haltedIP Lasow, Ontras/GazSystem ImplementedIP Waidhaus: RWE TGN and EGT/ GRTgaz Deutschland IP Oberkappel: BOG and EGT/ GRTgaz Deutschland Dec 2010IP Burghausen/Überackern: OMV Gas and bayernets ImplementedIP Mallnow: EuRoPolGaz and Wingas Transport IP Gorizia/Sempeter: Geoplin plinovodi and Snam Rete Gas Jan 2011IP Negru Voda: Transgaz and Bulgartransgaz IP Nickelsdorf/Hegyesshalom, HAG, OMV-MOL ImplementedIP Kula/Sidirokastron: Bulgartransgaz and DESFAIP Arnoldstein/Tarvisio, TAG/Snam Rete Gas Kick off 10th MarchIP Murfeld, OGG, Geoplin ImplementedIP Baumgarten, Eustream, TAG, BOG, OGG Implemented


Hub AHub B

Hub CHub D

Hub AHub B

Hub CHub D

• General principles • All market areas are organized as entry-exit zones with virtual hubs

• Reduction of market areas to as few as technically and economically feasible, based on physical characteristics rather than political boundaries

• Facilitation of hub-to-hub trading

• Regional dimension of that approach in SSE ?• Transition from physical to virtual Trading points ?• Creation of Regional E/E zones (cross border) ?• Scope of market area (transmission and

or distribution systems) ?• Project to be launched: Who is

interested to participate ?

2. Market Model for Wholesale Trading in the Region


3. Stakeholder discussion on a Cross Border Market Model

Discussion for SG meeting GRI SSE

Name Surname Rome, June 2010

European Federation of Energy Traders

10

Rome, June 2010 11

What’s the best environment for trading What’s going on? A regional snapshot What’s missed and which obstacles do we meet? Quick wins

Regional trading improvements

Summary:

Rome, June 2010 12

What’s the best framework/environment for trading

Entry/Exit systems in place

Bundled Entry/Exit capacity available on x-border points

Transparent and market-based rules for capacity allocation

Free access to flexibilities Storage Other tools (i.e. Peak shaving,...)

Harmonised balancing rules

Harmonised operational practices

“Freedom” to act in wholesale markets

Fundamental transparency (i.e. Flows and infrastructure

availabilities) accessible to market participants

Rome, June 2010 13

What’s going on?

Entry/Exit systems Third package requirement

Capacity definition

Capacity booking FG on CAM & CMP on

devel.

Capacity contracts

Gas balancing period FG on balancing on develop.

Transparency guidelines Ongoing Comitology

Procedure on Reg.715/09

(ex1775) update

Rome, June 2010 14

Regional Snapshot

Many immature markets

Highly fragmented Region

Lack of commitment in RI

Different operational practices

Only a few IPs are “completely”

part of the Regional Initiative

Several recent positive

developments in mkt dev.

Different gas sources

New investments for SoS & to

diversify sources/routes

psv

cegh

ote

?

?

?

Rome, June 2010 15

What’s missed and which obstacles do we meet?

“Operational” issues

Nomination & Renomination

Gas allocation rules

OBAs

Obstacles to market entry

National licensing for trading:

is it really necessary? No wholesale specific Branch in the country Exams to pass!

Reporting language,

contents, no automate

Areas where to concentrate efforts

for Regional

harmonisation and integration

Rome, June 2010 16

Some quick wins?

No licensing or simplified regime for trading/wholesale

Stop reporting requirements and work for harmonisation at EU

level

Start harmonisation on operational practices (gas day,...)

Improve trading opportunities between existing hubs CEGH & PSV: Is it possible to optmize the use of transportation capacity between

the two hubs by making available to the market the unused capacity on a short

term (day ahead/within day) basis?

Rome, June 2010 17

Thanks for the attention!

European Federation of Energy Traders

Amstelveenseweg 9981081 JS Amsterdam

Tel: +31 (0)20 5207970Email: [email protected]

www.efet.org

mailto:[email protected]


4. New capacity allocation rules - ERGEG Pilot Framework Guideline


Hub AHub B

Hub CHub D

Hub AHub B

Hub CHub D

• General principles • All market areas are organized as entry-exit zones

with virtual hubs• Reduction of market areas to as few as technically

and economically feasible, based on physical characteristics rather than political boundaries

• Facilitation of hub-to-hub trading

4. Target model for the European gas market


• Scope of the Framework guideline• interconnection points between entry exit

zones within the EU• General principles

• Auctions as preferred CAM• Limited number of capacity products• Coordinated allocations throughout the EU• Cross-border capacity services

4. Framework guideline on capacity allocation – 1


• TSO cooperation• Harmonisation of capacity products and allocation• Coordination of maintenance• Information exchange to maximize available capacity• Communication procedures

• Adaptation of existing transportation arrangements• Where needed, amendment of existing capacity contracts

and/or relevant clauses of general terms and conditions• Definition of capacity services

• Objective: make access to capacity more simple• Small number of capacity services of various durations, from

short term to multiannual• Firm and interruptible products• 10% of available capacity shall be set aside for firm short

term capacity services



• Cross-border services• Capacity services at each interconnection point to be

jointly offered by TSOs (bundled service)• Bundled service enables to transport gas from one

system to an adjacent system on the basis of• a single allocation procedure• a single nomination

• The entire technical capacity shall be bundled 5 years after entry into force of legally binding network codes

• Several physical interconnection points connecting the same entry-exit zones shall be integrated into a single capacity service (virtual interconnection point)



• Capacity allocation• Regular points in time with appropriate lead times for

allocation of firm capacity services• Auction as standard allocation methodology• Pro-rata as interim step when necessary• FCFS:

• For intraday capacity services• Otherwise only if certain conditions are met and if

approved by the NRAs concerned• Booking platforms



• ERGEG public consultation on the pilot framework guideline was finished by 26 February 2010

• All received responses have been evaluated

• Framework guideline has been approval by ERGEG on 9 June 2010

• Framework guideline will be published by ERGEG on 17 June 2010

• Framework guideline will be submitted by ERGEG to the Commission end of June together with an evaluation of all responses

• Commission will invite ENTSOG to develop Network Codes (12 months)

• Comitology procedure to be initiated by Commission in 2011

4. Process


5. The new Italian gas trading platform P-GAS

The new Italian gas trading platform P-GAS

Rome, June 17, 2010

Manuela GusmerottiMarket Operations

- 27 -

27Balance of natural gas in Italy (Million Sm3)

Source: MSESource: MSE

YEAR 2007 2008 ∆% 2009 ∆%

Domestic production 9,706 9,255 -4.6% 8,118 -12.3%

Import 73,950 76,867 3.9% 69,251 -9.9%

Export 68 210 208.8% 125 -40.5%

Variation of storage - 1,309 1,029 -178.6% -886 -186.1%

Consumption 84,897 84,883 0.0% 78,129 -8.0%

- 28 -

28 Composition of natural gas consumption in Italy for country of origin (%)

YEAR 2002 2006 2007 2008

Domestic production 20.1 12.3 11.6 10.7

Algeria 32.5 31.2 29.4 30.2

Russia 27.9 25.5 27.1 28.5

Libya 0.0 8.7 11.0 11.5

Netherlands 10.5 10.6 9.6 9.3

Norway 6.6 6.5 6.7 6.1

Others (European Union) 2.3 3.5 3.7 2.8

Others (no UE) 0.1 1.7 0.9 0.9

Source: MSESource: MSE

- 29 -

29Points of import of natural gas in Italy

- 30 -

30

Demand of natural gas in Italy by sector

- 31 -

31

• Since the 1st October, 2003, Snam Rete Gas has been offering the

possibility of trading daily gas quantities and respective transport

capacities at its virtual hub the Virtual Trading Point (PSV).

• The PSV is an ICT platform:

– It allows Shippers to perform bilateral energy transactions of discrete lots of

natural gas, both “on the day” and “day ahead” (up to 30 days before the

relevant gas day);

– Prices are agreed between the two contracting Shippers off-line: not visible

on-line to other Shippers and SRG.

Virtual Trading Point (PSV)

- 32 -

32

• In order to enhance the liquidity of the PSV the Italian Government issued a decree by which

– royalites on domestic production are to be sold on the PSV via a public auction;

– shippers, which import natural gas from non UE Member States, are obliged to sell from 5% to 10% of the gas quantities imported at the PSV. The percentage depends on the geographical source of supply (new sources – lower percentage) and on the duration of the import contracts (short term– lower percentage)

Liquid tradable gas market

The decree came into force on 1 October 2008

- 33 -

33Share of PSV trades on the national consumption (Million Sm3)

YEAR 2006 2007 2008 2009

Gas exchanged on PSV 7,424 12,065 16,417 24,500

Consumption 84,483 84,897 84,883 78,129

PSV share (%) 8.8 14.2 19.4 31.4

Source: elaborations on MSE and SRG dataSource: elaborations on MSE and SRG data

- 34 -

34Developments: Law 99/09 on "Provisions for the development and internationalization of enterprises, and energy“

• Article 30, paragraph 1, states that:

“The management of the natural gas market is entrusted, exclusively, to the GME, under Article 5 of Legislative Decree 16 March 1999 N. 79. GME organizes the natural gas market under criteria of neutrality, transparency, objectivity, and competition. The Discipline of the natural gas market, prepared by the GME, approved by decree of the Minister of Economic Development, after hearing the competent parliamentary committees and the Authority for Electricity and Gas”

• Article 30, paragraph 2, states that:

“GME, within six months from the date of entry into force of this Law, shall assume management of bids and selling natural gas and all related services according to criteria of economic merit”

GME has the economic management of the gas market. The guidelines, prepared by GME, are approved by MSE with decree, after hearing the competent parliamentary committees and AEEG

GME also responsible for managing services related to the sale of gas based on criteria of economic merit MD March 18 2010: GME organizes the obligation to offer import shares

- 35 -

35P-GAS Regulation: general aspects

Participants:• all ones enabled to operate on PSV

Trading Methods• Continuous trading

Products• Annual Year• Month

Role of GME• Platform Manager• No central counterparty role played by the GME• The management of the guarantees, of the invoicing and the payment are

carried out directly by the operators Trading Platform

• web-based, accessible via digital certificate 2 types of operators

• Sellers• Buyers

- 36 -

36

Sellers on P-GAS

They can be both operators subject to the obligation to offer import shares and other operators

To obtain the status of sellers of the P-GAS, an operator must submit to GME, which will post on its website, the supply conditions

For each seller and each sale contract (month and t. y.) GME organizes a book of trade on the P-GAS

P-GAS Regulation: sellers and buyer

Buyers on P-GAS

Each operator not qualified as seller Each buyer

• can access and view all the books of the sellers

• may submit demand bids to (and conclude negotiations in purchase with) the sellers who have previously enabled him

- 37 -

37

The following contracts are simultaneously quoted on P-GAS

• 1 Month, referring to the second month after the current one

• 1 Thermal Year, referring to the next thermal year

Minimum lot of trading

• expressed as 3.6 GJ / day and their multiples (eg 3.6 GJ / day corresponds

to lots of 108 GJ for a monthly contract concerning a month composed of 30

days and 1,314 GJ for an annual contract)

P-GAS Regulation : microstructure (1/2)

- 38 -

38

P-GAS operates in continuous trading

• Operators present bids specifying Number of contracts

Kind of transactions (purchase or sale)

Unit price (with a cap price or without a cap price)

• Offers ranked by priority price/ time supply offers are ranked in increasing price order

demand bids are ranked in decreasing price order


• Matching of demand bids and supply offers A demand bid (a supply offer) matches when it is presented with a price

greater than or equal to the best supply offer (demand bid) on the book

Matching with the price of the offer having time priority

Transactions concluded on the P-GAS are definitive and binding between contracting operators

- 39 -

39

GME publishes the following data on its website

• the list of operators admitted with the specification of the

qualification (seller, buyer)

• supply conditions applied by each seller

• data and results at the aggregate level

Minimum and maximum price, reference price of the closed contracts, volume

traded


- 40 -

40P-GAS: current situation

• Number of the operators registered: 36, including:– 13 sellers and/or buyers;

– 23 buyers.

• Contracts published for sale:

- 41 -

41Gas Exchange

• From 1 October 2010 GME will act as a central counterparty of the natural gas market, this will encourage:

– Transparency in all the market

• Prices – one real price for one market

• Volumes.

– Anonymous trading

– Clearing

– No counterpart risks

– Decoupling of the price of natural gas from crude oil price


6. CEGH Update on Futures Market

Central European Gas Hub

GRI SSE 8th SG Meeting

June 17th 2010

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Development of OTC Trading at CEGH …

CEGH – Monthly Title Tracking - Volume

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CEGH – Churn Rate

~ 3

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Cus

tom

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CEGH - Active MembersCEGH - Registered Members


CEGH – Members

6

87

104

CEGH - Memberships terminated (credit worthiness)

0,000,05

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0,350,400,45

0,500,55

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CEGH – Herfindahl Index

HHI < 0.05: de-concentrated marketplace

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CEGH – Daily Base Hub Nominations

2,641

Including intraday re-nominations:5000 total hub nominations per day

CEGH Plattform

Control area

WAG

TAG

eustream

HAG

MAB

storage

HUB

CEGH as distribution center between TSOs

TAGcc

cc cc

cc

cc

cc

WAG

Regulatory Zone Austria

HAGMABStorage

eustream

Since December 2009:

CEGH acting as central matching agent

… Shipper

… Trader

CMA: Central Matching Agent:

Matching accurate for 1kWh for the first time ever

More than 300 nomination schedules (nominations and confirmations) exchanged every day between eustream and CEGH

schedules per day

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700

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3 layers interacting with each other

Shipper Shipper

OTC: Shipper Trader Trader

Exchange: anonymous cleared

Settlement of gas exchange transactions …

GTS

Back Up / Back Down service

TradeTrade

TSO

matching

CMCM

TSO

TSO

TSO

netting

matching

customercustomer

Clearing Fees

Clearing Fees

Frankfurt

Market DataCEF – Data Feed

Data VendorsReuters,

BloombergMark

et Data

ADHAlliance Data Highway

Index Machine

BMfWAlamo Market Supervision

Market MaintenanceMember & Product Setup

MISS Infrastructure WBAG

MM Supervision Application

Access PointVienna

Indices

Orders / Quotes

Trades

CEGHSystem Access

Mem

ber /

Tra

der s

ynch

roni

zatio

n,

billi

ng, d

ata,

sta

tistic

s

Mar

ket

Con

trol

EXODAT

CMTBilling System

Pay

men

ts

Clearing HousePosition Keeping Risk Management Netting

Settlement BankSettlement AccountsCollateral Accounts

Clearing Fees

Margin requirem

entsCollaterals

Trad

es

Paym

ents

Trading MemberTrading Member

Trading Member

XETRA Backend System FFM

Clearing MemberClearing Member

Trades

Payment Instructions (Trading, Connectivity, Membership fees)

Phys. Nomination

Data for Billing

100 OTC tradersanywhere

4 TSOs

Market C

on

trol

Ord

er / Qu

otes &

Trad

es

Market Supervision Reports

Vienna

Vienna

Exchange Traders anywhere

Leipzig

GCMs anywhere

Clearing Fees

Margin requirem

ents

Concept for international data flows

EUREXBackend System

22 exchange members

http://images.google.at/imgres?imgurl=http://www.rag-austria.at/uploads/tx_templavoila/RAG_Logo_schwarz_10cm_03.jpg&imgrefurl=http://www.rag-austria.at/presse/downloads.html&usg=__KErYDI5q7rpMcMRhH4XQf5X6OEU=&h=1200&w=1200&sz=220&hl=de&start=4&um=1&tbnid=5pRj7G57dAqeCM:&tbnh=150&tbnw=150&prev=/images%3Fq%3Drag%26hl%3Dde%26cr%3DcountryAT%26sa%3DN%26um%3D1

http://www.kelag.at/?pck=true

Historical Exchange Development - Spot

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

01.0

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08.0

1.10

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22.0

1.10

29.0

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05.0

2.10

12.0

2.10

19.0

2.10

26.0

2.10

05.0

3.10

12.0

3.10

19.0

3.10

26.0

3.10

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09.0

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16.0

4.10

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30.0

4.10

07.0

5.10

14.0

5.10

21.0

5.10

28.0

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6.10

11.0

6.10

EUR/MWh

Baumgarten Day-Ahead Closing PriceBaumgarten Gas Index BGX (Volume Weighted Average)Baumgarten OTC Day-Ahead Price (I CI S Heren - Volume Weighted Average)

Historical Price Development - Exchange vs. OTC

Del

iver

yD

ay

BMWFJ

FMABaFin

WBAG

BrokernetEUREX

XETRA

ECC

DB Systems

RORC

Trayport / GV Portal

ITABBU/BD

Completing the puzzle will raise tremendous potentials

Capacity

Future Market

Intraday

EXCHANGESPOT

CEGH

CMTAllocation

CMA

Title Tracking

EFET

GRP

TSO

E- Control

ERGEG

OTC

Nomination

SSONabucco Balancing South

Stream

Inter

Hub

trading

Exchanges: stepping into balancing

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Baumgarten - Day Ahead

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Gaspool - Day Ahead

Net Connect Germany - Day Ahead

MWh / d

EEX NCG – Day Ahead Trading Volume

CEGH BMGT – Day Ahead Trading Volume

October 2009: Start of Procurement by NCG on EEX

Spread Development - CEGH Gas Exchange vs. Balancing Energy Prices

0

1

2

3

4

5

6

7

8

14.1

2.20

09

21.1

2.20

09

28.1

2.20

09

04.0

1.20

10

11.0

1.20

10

18.0

1.20

10

25.0

1.20

10

01.0

2.20

10

08.0

2.20

10

15.0

2.20

10

22.0

2.20

10

01.0

3.20

10

08.0

3.20

10

15.0

3.20

10

22.0

3.20

10

29.0

3.20

10

05.0

4.20

10

12.0

4.20

10

19.0

4.20

10

26.0

4.20

10

03.0

5.20

10

10.0

5.20

10

delivery day

EU

R/M

Wh

Balancing Energy - Spread (interpolated) High/Low-Spread CEGH Gas Exchange

Spread CEGH ( day ahead) versus balancing platform

One stop shop for tradeServing different zones and systems

Nabucco

Southstream

Thank you very muchfor your attention

Relation between Zeebrugge, EEX (NCG), TTF, CEGH Gas Exchange der Wiener Boerse, OTC (BMGT) and ICAP (BMGT)

Benchmark (Day Ahead Spot Market)

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

02.03

.201

0

09.03

.201

0

16.03

.201

0

23.03

.201

0

30.03

.201

0

06.04

.201

0

13.04

.201

0

20.04

.201

0

27.04

.201

0

04.05

.201

0

11.05

.201

0

18.05

.201

0

25.05

.201

0

01.06

.201

0

08.06

.201

0

15.06

.201

0

Delivery Date

[€/M

Wh

]

Zeebrugge est. Closing price

TTF est. Closing priceEEX (NCG) Exchange Settlement Price

CEGH Gas Exchange Closing PriceOTC BDARP

ICAP (Baumgarten - MS2; vol. weighted average price)ICIS Heren; average Price


7. Transparency – Update on revised Annex


• 3rd package (Regulation 715/2009/EC) extended transparency requirements.• Article 18 – Transparency requirements concerning TSOs.• Article 19 – Transparency requirements concerning storage facilities and

LNG facilities.• New requirements are applicable since 3 September 2009 (old Regulation

will be repealed from 3 March 2011).

• Annex to Regulation 715/2009/EC is currently being changed via comitology procedure.• Agreement in comitology committee reached.• New Annex will be applicable from 3 March 2011.• Parliament has 3 months time for comments now. The procedure will end

at 7 October 2010.

7. New transparency requirements


7. Regulation 715/2009/EC – Article 18

• What is new in Article 18?

• 3-shipper rule was abolished.

• Paragraph 6: The TSO shall make public:

• Ex-ante and ex-post supply and demand information, […]• Measures taken as well as costs incurred and revenue generated

to balance the system.

The market participants concerned shall provide the TSO with the data referred to in this Article.


7. Annex III Guidelines on Transparency – The new world (1)

Information has to be provided

• On a website […], free of charge and without any need to register […];

• On a regular/rolling basis […];

• In a user-friendly manner;

• In a clear, quantifiable, easily accessible way and on a non-discriminatory basis;

• In downloadable format that allows for quantitative analyses;

• In consistent units;

• In the official language(s) of the Member State and in English.



TSOs have to make public

• Description of the different services offered and their charges;• Different types of transportation contracts available […];• Network code and/or the standard conditions […] including:

• Harmonised transportation contracts and other relevant documents;• If relevant for access […]

• A specification of relevant gas quality parameters, including at least the GCV and the Wobbe index, and the liability or costs of conversion for network users in case gas is outside these specifications;

• Information on pressure requirements; • The procedure in the event of an interruption of interruptible capacity […];

• The harmonized procedures applied […], including the definition of key terms;• Provisions on CAM and CMP and anti-hoarding and re-utilisation procedures;• Rules applicable for […] 2nd market vis-à-vis the TSO;




• Rules on balancing and methodology for calculating imbalance charges;

• If applicable, the flexibility and tolerance levels […] without separate charge, as

well as any flexibility offered […] and the corresponding charges;

• Detailed [system] description […] as well as the names of the [adjoining]

operators […];

• Rules applicable for connection […];

• Information on emergency mechanisms […];

• Procedures agreed upon by TSOs […], relating to interoperability […] [e.g.

OBAs];

• […] Methodology and process, […] used to calculate the technical capacity.



Relevant points• All entry and exit points […];

• […] Points connecting different networks balancing zones […];

• All points connecting […] with an LNG terminal, physical gas hubs, storage and production facilities, […];

• All points connecting […] to infrastructure necessary for providing ancillary services […].

• Information for single final customers and for production facilities [...] shall be published in aggregate format, at least per balancing zone. […]

• [For] points […] with no contractual or operational involvement of system users […] and […] no contractual congestion […], TSOs [do not have to fulfil] […] the requirements […]. The NRA may require the TSO to publish […] for groups or all of the exempted points. […]




• […] For all services and ancillary services provided […] on a numerical basis, in hourly or daily periods. […] ("near real time")

a) Technical capacity for flows in both directions;

b) Total contracted firm and interruptible capacity, in both directions;

c) Nominations and re-nominations in both directions;

d) Available firm and interruptible capacity in both directions;

e) Actual physical flows;

f) Planned and actual interruption of interruptible capacity;

g) Planned and unplanned interruptions to firm services as well as the information on restoration of the firm services […]. Planned interruptions shall be published at least 42 days in advance.




• [Technical; booked; and available capacities] shall be published […] at least 18 months ahead.

• […] Historical information on […] [all points listes] for the past 5 years on a rolling basis.

• […] Measured values of the GCV or the Wobbe Index […], on a daily basis […].

• […] Available capacities, booked and technical capacities, on an annual basis, […] at least for the next 10 years […].




• […] On a daily basis […] capacities offered, and contracted on the 2nd market […]:a) IP where the capacity is sold;b) Type of capacity, i.e. entry, exit, firm, interruptible; c) Quantity and duration of the capacity usage rights;d) Type of sale, e.g. transfer or assignment; e) The total number of trades/transfers; f) Any other conditions known to the TSO […].

• […] Harmonised conditions […] [for transaction] […] must at least include:a) A description of standardised products […];b) Lead time […]. In case of delays the reasons have to be published;c) The notification to the TSO […] about name of seller and buyer and capacity

specifications […].• In so far such information is provided by a 3rd party, TSOs shall be exempted

from this provision.


TSOs have to make public• […] To each network user, for each balancing period, its specific

preliminary imbalance volumes and cost data […], at the latest one month after the end of the balancing period. Final data […] may be provided up to 14 months later. […]

• […] Daily forecasts on a day-ahead basis of the maximum amount, […] booked level […] and availability of flexibility [others than tolerances], for the next gas day. […] ex-post information on the aggregate utilisation […]

at the end of each gas day. [Possibility to exempt for NRA]

• […] Per balancing zone, the amount of gas in the […] system at the start of each gas day and the forecast for […] at the end of each gas day. The forecast […] shall be updated on an hourly basis […]. Alternatively, TSOs shall publish, per balancing zone, the aggregate imbalance position of all users […]. [Possibility to exempt for NRA]




TSOs shall

• Provide user-friendly instruments for calculating tariffs.

• Keep […] for at least 5 years, effective records of all capacity contracts and

all other relevant information […] in particular individual nominations and interruptions. TSOs must keep documentation of all relevant information, [measured values of the gross calorific value or the Wobbe Index and available capacities, booked and technical capacities] for at least 5 years and make them available to the NRA upon request. Both parties shall respect commercial confidentiality.


Lunch


8. Hungarian Network Code – the SHELL Case


8- Controversy on the allocation of entry capacity to the Hungarian gas transmission

system.

Early outcomes of the analysis performed


8. The Hungarian natural gas system

Import deliveries are subdivided among two borders:

a) Western border (Austria): connection with the HAG pipeline from Baumgarten, entry point at Moson;

b) Eastern border (Ukraine): connection with Brotherhood and Cooperation Pipeline system, entry point at Beregdaróc


8. 80-20 Rule

Before the modification of HGGC, the so-called 80-20 rule was applied: import capacity obtainable by shippers was in fact a single product automatically split up between the two borders, almost proportionally to the available physical capacity. As an example, a shipper requesting 100 of import capacity, was assigned automatically 80 at Beregdaróc and 20 at Moson.


8. The Gas Act

• The Gas Act 2008/XL reformes the Hungarian natural gas market and amends HGGC;

• This law, among other provisions, suppresses the 80-20 rule and introduces a new split of capacity products between long term (LT>1 year) and short term (ST1 year) without any mandatory quantity splitting.


8. Gas Act enforcement Decree

• The Enforcements Decree 19/2009 imposed to Foldgazsallito

(FGSZ), the Hungarian TSO, to amend the HGGC;

• According to this Decree, ST capacity is allocated by auction, while the LT capacity is allocated on FCFS basis;


8. The new Grid Code Approval

• On 25th January 2010 was approved the new Grid Code, but the official date of its effectiveness seems in fact unknown;

• Some operators take immediate advantage of the new rules. In fact, two traders fully booked the capacity at Moson entry point on a LT basis for the following three years. On 1 February 2010 no more available capacity for ST booking.


8. Problems and misinterpretations caused by new Grid Code

• The capacity at entry point at Moson is fully allocated.

• The impossibility for some traders to import gas purchased in E-On gas release, jeopardizing their take-or-pay obligations.

• According to shippers there has been a serious “asymmetry of information” but a committee of stakeholders followed the amendment procedure of the code.

• There has been a misinterpretation about the deadline for capacity request.

• The HGGC seems ambiguous because it states that FCFS is applied as a rule to allocate capacity but also deals with auctions in case of congestion, this lead shippers to rely on auctions also for LT allocation.


8. 98/2010 Resolution

• The problem of lack of capacity imposed to HEO an urgent resolution.

• According to 98/2010 resolution, for the gas year 2010 20% of available entry capacity at Moson previously fully booked by two traders on FCFS basis is to be assigned by auction.

• On 1th April 2010 the Auction for 20% ST capacity is carried out.

• The remaining 80% continue to be allocated to traders that have full booked on FCFS principle in respect of the grid code provisions.

• The resolution states also that the full capacity for the following years must be allocated by a multi-round ascending auction, according to transparent procedures.


8. Updates

• The opening of bids received is going to be set and keeps being postponed.

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85

Hungarian Network Code – the Shell CaseHungarian Network Code – the Shell Case

Rome, 17. June 2010.

Gyula SztankóGyula Sztankósenior advisersenior adviser

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8th GRI SSE Stakeholder Group Meeting

What happened?

86

Cheap spot gas appeared at Baumgarten hub

Competition started for HAG capacity

HEO changed the network code

Three ‘losers’ turned to court and

Shell complained

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Gas supply (peak day 09.02.2005)

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10 M m3

The Hungarian Network Code

88

System Operator is toprepare the Code

ask for the opinion of the Code Committee

submit the Code to HEO for approval

show results of votes in the Committee to HEO

show the counter-advice of Committee members

to HEO

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The Code Committee

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It consists ofrepresentatives of licensees*:

•transmission system operators•storage operators•distribution system operators•natural gas traders•universal suppliers

and representatives of•natural gas end-users•natural gas producers (no voting right)

* Holders of licence of the same type have to elect a representative from themselves

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Preparation of the Code

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Committee members are to prepare their text proposals relating to their activity.Committee is to discuss and vote on text proposalsSystem Operator is to compose final text and submit it to HEO together with

results of votes andcounter-advices of Committee members

System Operator is responsible for organizing the Committee work and for the CodeH

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Role of HEO

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HEO approves the submitted network code if the rules in the code

do not violate any regulation in forceand

are implementableIn practice, HEO approves the code with prescription of modification of the rules which do not meet these requirements.HEO is allowed to intervene and change rules directly only in the case if it turns out that some rules in the code seriously endangers security of supply or/and competition and no time for normal procedure.

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Congestion on the HAG

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Technical capacity 12.1 MMCM/day. 2.5 MMCM/day was booked previously by One+ years contracts25.01.2010.

HEO approves network code (CAM&CMP rules on the next slide)

29.01.2010. - 02.02.2010. three shippers submitted One+ years demands of a total of 21 MMCM/day16.02.2010. TSO informed HEO

22.02.2010. HEO issued a resolution on changing the rules

28.02.2010. Deadline for long term demands

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CAM & CMP rules

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HEO resolution on HAG CAM&CMP

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1. FCFS for the first gas year of the One+ years demands and on the 80% of available capacity of HAG (9.6 MMCM/day)

2. Auction for the one year demands on the 20% of available capacity

3. Working out a new procedure for auction

4. Auction of new type for the second+ gas years

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Purposes of HEO resolution

95

1. Give opportunity for „sleeping” shippers having TOP commitment

2. Make room for one year demands

3. Improve CAM&CMP

4. Not disturb capacity allocation too much just before deadline

The HAG resolution is considered by HEO as

„least bad solution”.HU

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Reaction of shippers

96

Became indignant at the resolution Promised to read the network code Three shippers took legal proceedings One shipper – Shell – complained with HEO,

EFET and ERGEG and sent useful proposal to creation of new auction procedure

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The Shell case

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Shell (Shell Energy Europe Limited) has the following objection to network code capacity booking process:

1.The new allocation of capacities is a complete turn-round from the previous system which harms shippers

2.The justification for the new allocation is not convincing

3.The new rules have negative effects on competition, security of supply and prices

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1. The new allocation rules

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1.a. The old 80/20 allocation rule has been eliminated

80/20 rule. Before market opening (01.01.2004.) public

supply The ratio of eastern/western imports was 80% to

20% The eastern entry point was almost fully booked. Philosophy: capacities had to be sufficient just

after market opening as they were before it. HU

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1. The new allocation rules (2)

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1.b. HEO chose to allocate 80% of free capacity to One+ years capacities and 20% to One year capacities

The other - new - 80/20 ruleAccording to the network code One+ years capacities can be allocated on the basis of FCFSAccording to the network code One+ years demands are preferred to One year demandsThese rules were created by the Code Committee

HEO made the 80/20 split to make room for One year demands

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2. Justification not convincing

100

HEO argues that the new 80/20 split comes from a comparison with the German system HEO cannot imagine where this statement comes

from. No comparison with the German system Late intervention justifies 80% One year demand dominates the market One+ years means 2 and 3 years in the Shell case Code Committee decided to prefer One+ years

demand to One year demands

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3. Effect on competition and SoS

101

3.a. Shippers are not able to book according to their supply commitment HAG capacity is 12.1 MMCM/day and it is going to

be fully booked Booking rules cannot increase the capacity Code resolution approved the rules created by

the Code Committee HAG resolution made some room for One year

demands for HAG capacities

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3. Effect on competition and SoS

102

3.b. Impeding flows from Baumgarten into Hungary and increases customer prices New rules do not impede the possible flow into

Hungary Some end-users may gain by the cheap gas in

Baumgarten, others cannot Gain of end-users depends also on the shippers’

intention to share profit End-users can receive gas for higher price also if

take-or-pay commitments are not met

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Summary

103

Network code contains CAM&CMP rules created by the Code Committee

These rules do not violate any law and are implementable

HEO has not received any counter-advice relating to the rules in question

There was not any appeal to the law against the resolutions approving the network code

HAG resolution is to handle an unexpected congestion situation, to make some room for One year capacity demands

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104

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Thank you for your kind attention!Thank you for your kind attention!

[email protected]@eh.gov.hu..


9. The role of the Regional Initiatives – ERGEG conclusions

• This Topic has been postponed to the next meeting..


10. IP Assessment Arnoldstein/Tarvisio - Update

• This Topic has been postponed to the next meeting..


11. TSO Working Group Update

• Harmonization of Gas Day ?• Implementation of Easee Gas Standard ?• Network Code-> TSOs in SSE should come up with a

propsal in ENTSOG


12. Updates on infrastructure projects

SK-HU Interconnector: status of the project

• Open Season procedure going on

• deadline foir submitting binding bids extended by 30 June 2010

• results to be evaluated by 15 July 2010

• FGSZ and Eustream provide consultations and discuss draft contracts with the applicants

• both TSOs continue in engineering preparations and acquisition of permits

• the main issues include differences in the tariff policy and regulatory method (in Hungary, the stand-alone tariffs are to be calculated on the basis of minimum 70% booking of capacity for 20 years, what had to be reflected also in the allocation method and corresponding financial guarantees)

SK-HU Interconnector: preliminary tariffs

SK:• tariffs fully consistent and integrated into the valid entry/exit tariff system• the new entry/exit point Veľké Zlievce can be combined with any other entry/exit point(s) of the Eustream network entry tariff 0,8019(EUR/(m3/d)/y)

exit tariff 0,8179 (EUR/(m3/d)/y)

HU:• the interconnector treated as a stand-alone tariff solutiondomestic entry tariff 13 229 HUF/m3/h/yearinitial specific fee for the SK-HU Interconnector 6 300 HUF/m3/h/year


13. AoB

• Next Meeting: Vienna, November/December 2011


Closure

Thank you very much!


Michael Schmöltzer

Head of Gas Department E-Control gmbH+43(0)1 – 24 7 24 / [email protected]

www.e-control.atwww.ceer.org

Contact

8th sg meeting, gri sse rome, italy, 17 june 2010 gri south south-east region

Documents