EU Tariff Code Update

23rd June 2014

2

EU Tariff Code Update – early feedback

Informal ACER feedback:

Draft code not on line with FG and insufficient harmonisation

Not coherent and “trying to please everyone”

Fixed price: don’t like indexation but use of premium could have merit

“open for discussion” on one-off reset of capacity (Commission thinks stakeholders

have good arguments so want to hear counter arguments from TSOs)

Informal Prime Movers feedback

Draft code too open with no harmonisation and little progress

For Cost Allocation Methodologies it would be better to have general

principles rather than writing methodologies into law

Confusion over which revenues subject to code and which are not

3

EU Tariff Code Update

Draft Tariff Code open for consultation

Stakeholder workshop 25 June ENTSOG shall focus on:

Scope and interaction with CAM

Mitigating measures (including discussion of one-off capacity reset)

Capacity Allocation Approach (including how capacity/ commodity

split could work for revenue recovery)

Multipliers

Interruptible (including justification for use of ex-post discount and

pricing of non-physical back-haul the same as physical)

Use of fixed prices at IPs

4

Mitigating measures

Spread increase or decrease in tariffs over a couple of

years so that there is a glide path for tariff changes

Use the auction premium, if any, to mitigate against

tariff increases

While ENTSOG is not in favour of the one off capacity

reset option, it is open to discussing other mitigating

measures that would not undermine contractual

commitments

5

One off capacity reset option

ENTSOG concerns include:

Could lead to severe instability in the market and impact on tariff stability in

the future

Could cause cross-subsidisation between different users and a non-cost

reflective redistribution of costs

Penalises network users needing gas, the remaining gas users will pay for

the choices of other gas users

Discourages new entrants from coming into the market

Impact on investments. Those that triggered investment in the past and

made commitments to underpin that investment may return the capacity and

then that investment would have to be paid for by those that rebook capacity

or keep their existing capacity bookings.

6

Transmission services definition

ACER want:

clarity of what is in scope and what is out.

cap on amount of allowed revenue not included in definition of

“transmission services”

detailed list of what is not part of “transmission services”

Prime movers want to know:

how revenue recovery works for services that are not part of

“transmission services”

how does “complementary revenue recovery charge” work

how one regulatory account works with other rules

Total Allowed Revenue

Transmission Services Revenue

Revenue from other regulated activities

(exclusions from Trans services definition)

CAP Part of Transmission

Services Revenue

COM Part of Transmission

Services Revenue

CRRC

CAP Part of Transmission

Services Revenue

Reference Prices

€90m €80m €60m €40m

€10m

€20m

€20m

€2/u

Cap/Com split = 75%:25%

€1/u

€1/u

Cost Allocation Approach – with Capacity, Commodity and Complementary ReRe Charge

AssumptionsBooked capacity: 20 unitsThroughput: 20 units

Multipliers

8

• Concern from TSOs over multipliers• Definition of congestion (link to CMP)• Safeguard to allow multipliers greater than 1.5 if certain criteria met

9

Some suggested fixed price mechanisms could be:

(1)fixed price + indexation

(2)fixed price + a risk premium

(3)fixed price + a variable charge

(4)fixed price + a combination of indexation, and a premium or variable charge.

Fixed Price Mechanisms

10

Payable Price = Fixed Price + A Combination