PREVENTIVE ACTION PLAN

required for removing or mitigating

identified risks for providing deliveries

of natural gas in the Czech Republic

30 November 2012

Ministry of Industry and Trade of the Czech Republic

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Abstract:

1. Introduction2. Gas distribution system in the Czech Republic - summary

2.1 Transmission system2.2 Distribution systems2.3 Underground gas storages2.4 Gas extraction2.5 Deliveries from sources2.6 Gas trade2.7 Statistical data for 2011

3. Results of the risk assessment3.1 Standard for infrastructure3.2 Scenarios of exceptionally high gas demand3.3 Scenarios for gas supply interruption3.4 Description of probable consequences by individual scenarios3.5 Simulated emergency training on 12 November 2009

4. Measures, amounts and capacities required for compliance with the standard for infrastructure and standard for supplies and their schedule4.1 Preventive measures for mitigating identified risks4.2 Measures for providing a security standard of supplies

5. Obligations imposed on gas companies and other relevant entities including obligations related to the safe operation of gas systems, emergency plans and maintenance5.1 Gas transmission and distribution5.2 Gas storage5.3 Gas production5.4 Gas trade, security standard for gas supply5.5 Method for providing a security standard5.6 Avoiding emergencies

6. Other preventive measures6.1 Improved interconnection with neighbouring countries6.2 Diversification of resources and gas transmission routes6.3 Cross-border access to storage facilities

7. Obligations of the public service related to providing gas supply8. Consideration of ten-year EU grid development plan developed by ENTSOG9. Impacts of preventive measures

9.1 Economic impact, efficiency and expedience of the measures9.2 Impact on the operation of the internal gas market9.3 Impact on customers9.4 Impact on the environment

10. Discussions with relevant bodies in Germany, Slovakia and Poland11. Conclusion

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List of abbreviations:MPO Ministry of Industry and TradeERÚ Energy Regulatory OfficeOTE Energy Market OperatorTSO Transmission system operator UGS Undeground gas storageVO Wholesale consumptionSO Medium consumptionMO Retail consumptionDOM HouseholdsBR Balance differencePO Direct consumption from the transmission systemGG Green Gas

List of figures:Fig. No. 1 – Gas system of the Czech RepublicFig. No. 2 – NET4GAS transmission systemFig. No. 3 – Capacities on entry and exit points of the transmission system in 2012 (at 20ºC)Fig. No. 4 – Current reverse gas flows in the transmission systemFig. No. 5 – Regional operators of the distribution systemsFig. No. 6 – Underground gas storagesFig. No. 7 – Gas deposits in the Czech Republic

List of tables:Table No. 1 – Total installed output of compressor stationsTable No. 2 – Increasing the capacity of the transmission system to and from UGS in 2012 - 2014Table No. 3 – Connecting individual UGS to individual linked systemsTable No. 4 – Storage capacities of individual UGS, maximum daily extraction output, maximum

daily compression outputTable No. 5 – Import of natural gas by countries in million m3

Table No. 6 – Changes of gas provider at customers in 2005 – 2011Table No. 7 – Evaluation of monthly natural gas consumption in the Czech RepublicTable No. 8 – Evaluation of daily natural gas consumption in the Czech RepublicTable No. 9 – Daily control hourly reading of the gas system of the Czech Republic (23 February

2011)Table No. 10 – Evaluation of monthly natural gas consumption by customers‘ category in the Czech RepublicTable No. 11 – Evaluation of monthly natural gas supply in the gas system of the Czech RepublicTable No. 12 – Evaluation of stored gas in the Czech RepublicTable No. 13 – Evaluation of annual natural gas supply in the gas system of the Czech RepublicTable No. 14 – Evaluation of annual natural gas supply in the transmission system of the Czech

RepublicTable No. 15 – Security of supplies in the Czech Republic in 2012 – 2021 (million m3/day, 0ºC)Table No. 16 – Interruptions of the infracture and consequences

List of graphs:Graph No. 1 – Natural gas consumption in the Czech Republic from 1990 to 2011Graph No. 2 – Share of customers in gas consumptionGraph No. 3 – Share of traders on the gas market in 2011Graph No. 4 – Analysis of security of supplies in the Czech Republic according to the N-1 formula

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1. Introduction:

The Preventive Action Plan affecting the security of gas supplies in the Czech Republic has been prepared based on the requirements of Articles 4 and 5 of Regulation (EU) No. 994/2010 of the European Parliament and of the Council of 20 October 2010 on measures to safeguard the security of the gas supply and repealing Council Directive 2004/67/EC (hereinafter "SoS").

The Preventive Action was prepared by the Ministry of Industry and Trade that is the Competent Authority according to Article 2, clause 2 of SoS and based on Act No. 458/2000 Coll. on business conditions and public administration in the energy sectors and on amendments to other laws (the "Energy Act"), as amended, in cooperation with gas companies and consultations with ERÚ.

The Preventive Action and Emergency Plan for providing a natural gas supply in the Czech Republic is based on the assessment of risks affecting the security of the gas supply prepared according to Article 9 of SoS and submitted to the European Commission on 3 December 2012.

The basic legislation for power engineering in the Czech Republic is Act No. 458/2000 Coll. on business conditions and public administration in the energy sectors and on amendments to other laws (the "Energy Act"), as amended. The latest amendment of the power engineering act No. 221/2011, effective from 18 August 2011, also implements the requirements of Regulation No. 994/2010 of the European Parliament and of the Councilanchoring of which in national legislation was required.

Emergency situations in the gas industry and procedures for emergency situations are dealt with by decree No. 344/2012 Coll. of the Ministry of Industry and Trade on emergencies in the gas industry that divides customers into seven groups depending on gas consumption type and determines five consumption levels for restricting gas supplies and five consumption levels for interrupting supplies to individual groups of customers. At the moment, the decree is being amended to include the provisions of Regulation No. 994/2010 of the European Parliament and of the Council and the applicable wording of power engineering act No. 458/2000 Coll.

Decree No. 365/2009 Coll. of the Energy Regulatory Office on gas market rules determines, among others, the access rules for the transmission system, distribution system and gas storages, the extent of published information for access to the transmission system, distribution system and gas storages and the methods for dealing with capacity insufficiency in the gas system. In addition, it deals with settling balancing gas in an emergency and in emergency prevention.

Considering the quality, reliability and sturdiness of the gas system in the Czech Republic and the diversification of transmission routes and gas sources, a common Preventive Action in cooperation with neighbouring countries is not necessary. The reliability and secure operation of the gas system in the Czech Republic was demonstrated both during the gas crisis in January 2009 as well as during the very cold weather of February 2012. In both cases, it was not necessary to limit supplies to customers and increased demand was covered by higher gas extraction from gas storages.

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2. Gas system of the Czech Republic - summary:

The gas system of the Czech Republic consists of an interconnected group of facilities for production , transmittion and distribution of gas and gas storage, including a control and security equipment system and facilities for transmitting information for IT and IS operation used for operating the facilities.

Fig. No.1 - Gas system of the Czech Republic - summary:

The gas system of the Czech Republic consists of:

A) Transit gas pipelines of the transmission system: total length 2,480 km, DN 800 - DN 1400 pipeline, nominal pressures 6.1 MPa and 7.35 MPa.

B) National gas pipelines of the transmission system: total length 1,183 km, DN 80 - DN 700 pipeline, nominal pressures 4 MPa, 5.35 MPa and 6.1 MPa.

C) Compresion stations in the transmission system: Břeclav, Hostim, Veselí nad Lužnicí, Kralice nad Oslavou, and Kouřim.

D) Border transfer stations in the transmission system: Hora Svaté Kateřiny, Lanžhot, Brandov, Waidhaus (DE) and Cieszyn (PL).

E) Transfer stations between the transit and national transmission system: Hrušky, Uherčice, Olešná, Limuzy, Hospozín and Veselí nad Lužnicí.

F) Gas pipelines distribution systems: nominal pressures 2.5 MPa - 4 MPa, total length 65,000 km.

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G) Underground gas storages: RWE GasStorage – Tvrdonice, Dolní Dunajovice, Štramberk, Lobodice, Třanovice, Háje and Uhřice – MND GasStorage, SPP Bohemia – Dolní Bojanovice (still connected to the Slovak Republic system only)

H) Border transfer points in the distribution systems: Vejprty – Barenstein, Aš – Selb, Alžbětín – Einsenstein, Hevlín – Laaan der Thaa, Úvalno – Branice, Hrádek nad Nisou – Zittau.

2.1 Transmission system:

The transmission system is defined as an interconnected group of high pressure gas pipelines and compression stations and related technological facilities, including control and security system equipment and facilities for transmitting information for IT and IS operation used for operating the facilities, interconnected with gas systems abroad, where gas transport is operated by a licence holder for gas transport; the transmission system is constructed and operated in the public interest.

Fig. No. 2 – NET4GAS transmission system including Gazela gas pipeline

Border transfer stations:

Hora Svaté Kateřiny, Lanžhot, Brandov, Waidhaus(DE) and Cieszyn (PL).

The required gas pressure in the gas pipelines is provided by compression stations built at intervals of about 100 km. On the northern branch these are Kralice nad Oslavou and Kouřim compression stations, on the southern branch there are Břeclav, Hostim and Veselí nad Lužnicí compression stations. The total installed outupt of the compression stations is 297 MW.

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The compression stations permit bi-directional flow in the transmission system of the Czech Republic. They include:

Kouřim compression station - full bi-directional West - East and East - West flow

Kralice compression station - full bi-directional West - East and East - West flow

Břeclav compression station - bi-directional flow, West - East restriction (2x6 MW), discharge pressure only to DN 800

Veselí nad Lužnicí compressor station - bi-directional flow, West - East restriction flow, suction only from DN 800 and DN 1000, discharge pressure only up to DN 1400

Hostim compressor station - bi-directional flow, West - East restriction flow, suction only from DN 800 and DN 1000, discharge pressure only up to DN 1400

Table No. 1 – Total installed output of compressor stations

Northern branch Southern branch

Compression station

Kralice Kouřim Břeclav Hostim Veselí nad LužnicíNumber of turbine

sets5x 6 MW 5x 6 MW 9 x 6 MW 9 x 6

MW9 x 6 MW

2x 13 MW 2x 13 MW

1x 23 MWInstalled output at

the compressor 56 MW 56 MW 77 MW 54 MW 54 MW

Total installed output for transmission

297 MW

Individual branches of the system are interconnected in the key distribution nodes Malešovice, Hospozín and Rozvadov. In addition to the compressor stations, the lines are also interconnected at route enclosures.

At the entry and exit points to and from the Czech Republic, natural gas is received and delivered, i.e. measured with respect to volume and quantity, at the border transfer stations between the Czech Republic and Slovakia in Lanžhot and Lanžhot - Mokrý Háj; between the Czech Republic and Germany in Hora Svaté Kateřiny – Sayda, in Waidhaus and in Brandov from October 2011. Since September 2011, natural gas has been received and delivered at the entry and exit points between the Czech Republic and Poland at HPS Český Těšín.

Capacities for physical gas flow at entry and exit points of the transmission system including capacities of reverse flow at the border points of the transmission system and the potential need to increase these capacities:

Fig. No. 3 shows the individual technical capacities at the entry and exit points of the transmission system. These capacities represent the possibility of reverse flow at the given entrances and exits.

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Fig. No. 3 – Capacities on entry and exit points of the transmission system in 2012 (at 20ºC)

IP Entry[mcm/d] Exit [mcm/d]Olbernhau

22.2 24.4

HSK 14.4 26.3Brandov 33.9 0.0

Note: Pressure from Polish HPS Cieszyn is insufficient for natural gas transport to the Czech transmission system due to pressure limitations of the operator of the Polish transmission system.

Natural gas is fed from the transmission system over 94 transfer stations to the distribution systems, underground gas storages and facilities of directly connected customers. All transfer stations include commercial gas volume measurement. Gas quality (combustion heat) is measured on 15 nodes of the system.

From 2012 - 2014, the capacities of the transmission system will increase due to the increased compression and extraction capacity of several underground gas storages. These increases are shown in Table No. 2. In addition, the entry capacity of the Brandov point will increase in 2013 after the Gazela gas pipeline is connected to. During 2012 - 2014, the capacities of other entry and exit points will not change because no increase is required during the analyzed period.

Table No. 2 – Increasing capacity of the trans. system to and from UGS from 2012-2014Increasing capacity from UGS Increasing capacity to UGS

million m3 [GWh/d] million m3 [GWh/d]

UGS MND GS 14.17 157.8 7.88 87.8UGS RWE GS 0.6 6.7 2.29 25.6

Gas reverse flows in the transmission system:

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IP Entry[mcm/d] Exit [mcm/d]Cieszyn 0.0 W: 2.6/S: 0.4

IP Entry[mcm/d] Exit [mcm/d]Lanžhot 157.2 27.0

IP Entry[mcm/d] Exit [mcm/d]Waidhaus 19.4 102.9

During the gas crisis in January 2009, a temporary reverse flow West - East was started to provide supplies to customers not only in the Czech Republic but also in Slovakia. Gas supplies were taken over BTS Hora Svaté Kateřiny to the Czech Republic. This prevented gas supply shortages to customers in the Czech Republic.

The reverse flow within the EEPR programme consists of six independent structures:

1. Modification at the border transfer station (BTS) in Hora Svaté Kateřiny permitted to increase gas transported from Germany to the Czech Republic from 18 million m3/day to 25 million m3/day.

2. Modification of the pipeline at the Hospozín interconnection point permitted to increase gas volume between Olbernhau and Waidhaus up to 15 million m3/day.

3. Modification of the pipeline in Kralice nad Oslavou compression station permitted to use compression activities for transporting gas from West to East.

4. Modification of the pipeline at the Malešovice interconnection point permitted to increase gas transmission from BTS Hora Svaté Kateřiny to the Rozvadov distribution node.

5. Modification of the pipeline system at the Břeclav compression station permitted to use compression activities for transmission to Slovakia.

6. Modification of the pipeline at the BTS Lanžhot permitted to measure the gas transmitted from the Czech Republic to Slovakia.

Another project to increase the reverse flow was the modification of the compression station in Kouřim finished in 2011.

Fig. No. 4 – Current reverse gas flows in the transmission system

2.2 Distribution systems:

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The distribution system is an interconnected group of high, medium and low pressure gas pipelines, gas connections owned by the operator of the distribution system and related technological facilities, including control and security system equipment and facilities for transmitting information for IT and IS operation used to operate the facilities, not directly interconnected with the compression stations and where gas distribution is operated by a licence holder for gas distribution; the distribution system is constructed and operated in the public interest.

Six regional distribution companies with more than 90,000 consumption points of customers operated licenced gas distribution in the Czech Republic in 2011. The total length of the gas pipelines of these distribution systems was 72,614 km as of 31 December 2011. In addition, there are several tens of local holders of a gas distribution licence with less than 90,000 consumption points of customers.

The total annual output gas volume from the distribtuion systems to all customers was 8.085 billion m3 (85.645 TWh) in 2011.

Regional distribution companies:

RWE Group: RWE Gas Net, s.r.o., VČP Net, s.r.o., JMP Net, s.r.o. and SMP Net, s.r.o.

Pražská plynárenská Distribuce, a.s.

E.ON Distribuce, a.s.

Fig. No. 5 – Regional operators of the distribution systems

2.3 – Underground gas storages

Because of unbalanced gas consumption in summer and winter, the difference between resources and consumption is balanced by the undeground gas storages (UGS) used for storing gas in the summer and extracting gas in the winter if the daily consumption is higher than the contractual daily gas import. The total storage capacity of the underground gas storages in the Czech Republic is 2.881 billion m3 without Dolní Bojanovice underground gas storage, which is about 30% of the annual gas consumption of the Czech Republic and 3.457 billion m3 including the underground gas storage in Dolní Bojanovice. Fig. No. 6 – Underground gas storages

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UGS owned by RWE Gas Storage s.r.o.:UGS Háje, UGS Třanovice, UGS Štramberk, UGS Lobodice, UGS Dolní Dunajovice, UGS Tvrdonice. Within the EEPR programme, the capacity of UGS Třanovice was increased from 240 million m3 to 530 million m3.

Underground gas storage owned by MND GasStorage, a.s.:UGS Uhřice

Underground gas storage owned by SPP Storage:UGS Dolní Bojanovice – interconnected with the gas system of Slovakia only.

Table No. 3 – Connecting individual UGS to individual linked systems

Name of UGS Connection to gas system Operator of the system

Dolní Dunajovice Transmission syst. (impression/extraction) NET4GAS

Tvrdonice Transmission syst. (impressio/extraction) NET4GAS

Háje Transmission syst. (impression/extraction) NET4GAS

Lobodice Transmission system (impression)Distribution system (extraction)

NET4GASSMP Net, JMP Net

Štramberk Transmission syst. (impression/extraction)Distribution system (extraction)

NET4GASSMP Net

Třanovice Transmission syst. (impression/extraction)Distribution system (extraction)

NET4GASSMP Net

Uhřice Transmission syst. (impression/extraction) NET4GAS

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Table No. 4 – Storage capacities of individual UGS, maximum daily extraction output, maximum daily impression output

Underground gas storage / owner Storage capacity(million m3)

Maximum daily extraction output (million m3/day)

Maximum daily impression output (million m3/day)

Háje / RWE GasStorage 64 6 6Dolní Dunajovice / dtto 900 16 12Tvrdonice / dtto 510 7.77 7.5Lobodice /dtto 177 3.6 2.5Štramberk /dtto 480 7 7Třanovice /dtto 530 8 6.5The group of these six underground gas storages is operated as a single virtual storage.

Total2 601

Total39.9

Total29.9

Uhřice/ MND GasStorage 280 6 (12 from 2017) 2.6Dolní Bojanovice/SPP Storage 576 9

2.4 Gas extraction:

Owner Česká naftařská společnost:

All gas production facilities of Česká naftařská společnost s.r.o. (hereinafter ČNS) are connected to the distribution system of Jihomoravská plynárenská Net, s.r.o. (hereinafter JMP Net).

Extraction deposits:Poštorná: maximum daily extraction 50,000 m3

Charvátská Nová Ves: maximum daily extraction 50,000 m3

Charvátská Nová Ves I: maximum daily extraction 50,000 m3

Břeclav I: maximum daily extraction 60,000 m3

Břeclav II: maximum daily extraction 80,000 m3

The Poštorná, Charvátská Nová Ves and Charvátská Nová Ves I deposits are connected to a single consumption point with the daily capacity restricted to 50,000 m3/day based on the contractual terms and conditions.

The Břeclav production facility is connected to a high pressure gas pipeline with a daily capacity of 200,000 m3/day. The Poštoná production facility is connected to a high pressure gas pipeline owned by MND a.s. with a daily capacity of 185,000 m3/day with a contractual limitation of 30,000 m3/day.The maximum capacity of the medium pressure gas pipeline in the Poštorná production facility is 20,000 m3/day.

Owner Moravské naftové doly a.s. (hereinafter MND a.s.):

MND a.s. holds a gas production licence in 14 production facilities, 9 of which are directly connected to the distribution system of JMP Net s.r.o. The other production facilities are

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connected to an internal gas pipeline grid within MND a.s. and the gas from these facilities enters the distribution system through these directly connected production facilities.

Directly connected production facilities:SNaPS Ždánice maximum daily extraction 70,000 m3

SNaPS Mutěnice maximum daily extraction 8,000 m3

SPS Lednice 11 maximum daily extraction 5,000 m3

SPS Podivín 12 maximum daily extraction 50,000 m3

SPS Bílovice B maximum daily extraction 11,000 m3

SNaPS Hrušky 23 maximum daily extraction 18,000 m3

SNaPS Hrušky 46 maximum daily extraction 120,000 m3

SNaPS Lubná maximum daily extraction 8,000 m3

SNaPS Poštorná 7 maximum daily extraction 11,000 m3

The volume of gas recovered from individual deposits does not primarily depend on commodity demand but on the geological and technological possibilities of both extraction probes as well as the capacities of individual extraction centres (SPS - collecting gas centre, SNaPS - collecting crude oil and gas centre).

This planned production is sold based on commercial relationships with individual contractual partners and the daily extraction is managed at the so-called optimal maximum on the understanding that potential drawbacks are covered by a contractual fluctuation band. If the daily extraction is exceeded, MND a.s. has contractually available storage facilities in UGS that can quickly redirect the gas flow from the gas production facility to cover demand in a serious gas supply failure.

It is therefore obvious that gas extraction is not directly influenced by the season, i.e. the affect is already included in individual contracts with customers.

With regard to the SPS Bílovice and SNaPS Hrušky 46 production facilities, they can be changed to the circuits of the MND a.s. internal gas pipeline network and the gas supply can be redirected to a different transfer point and to the distribution system from there.

Fig. No. 7 – Gas deposits in the Czech Republic

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2.5 Supplies from resources:

Supplies of natural gas are available from abroad for the needs of the Czech Republic and a negligible part (1.5% of national consumption) comes from domestic resources. The total volume of imported natural gas was 9,241.4 million m3 in 2011.

In 2011, natural gas was imported from Russia – 5,863.1 million m3 (63.44%), Norway – 273.3 million m3 (2.95%) and the European Union + Germany – 3,010.5 million m3 (33.59%).

Table No. 5 – Imports of natural gas by countries in mil. m3

2008 2009 2010 2011Russia 6 680.9 4 974.3 5 464 5 863.1Norway 2 073.4 2 999.6 1 057.3 273.3Germany + EU 218.1 571 1 988.6 3 105Total 8 972.4 8 544.9 8 509.9 9 241.4

The drop in imports from Norway and the steep increase of imports from Germany + EU, especially in 2011, were caused by the increase of gas traders purchasing natural gas on the spot market with lower natural gas prices, except for high demand in winter, compared to long-term contracts.

Extraction from underground gas storages was 877.5 mil. m3 (9,304.4 GWh). Impression to the underground gas storages was 1,818.8 mil. m3 (19,302.7 GWh). The balance of the operational reserve in national underground gas storages at the end of year was 2,581.4 mil. m3 (27,416.5 GWh). The Czech Republic exported natural gas to Poland, Germany and Slovakia (167,3 mil. m3 (1,771.6 GWh)).

2.6 Gas trade:

Graph No. 1 – Natural gas consumption in the Czech Republic from 1990 to 2011

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Podíl obchodníků na dodávkách plynu(zobrazeni pouze obchodníci s více než 1% podílem na dodávkách)

SPP CZ, a.s.2,63%

United Energy Trading, a.s.2,14%

VEMEX s.r.o.4,72%

Východočeská plynárenská, a.s.6,66%

WINGAS GmbH & Co.KG1,04%

BOHEMIA ENERGY entity s.r.o.2,21%

ČEZ Prodej, s.r.o.4,00%

E.ON Energie, a.s.4,41%

GDF SUEZ Prodej plynu s.r.o.1,96%

Jihomoravská plynárenská, a.s.15,32%

LAMA INVESTMENTS a.s.2,43%

Lumius, spol. s r.o.5,10%

Ostatní2,81%

Pragoplyn, a.s.4,22%

Pražská plynárenská, a.s.9,94%

RWE Energie, a.s.13,63%

RWE Key Account CZ, s.r.o.6,12%

Severomoravská plynárenská, a.s.10,66%

Since market liberalization on 1 January 2005, when large customers were allowed to change their gas suppliers, the natural gas market has undergone great development in the Czech Republic. All customers except households were allowed to change their gas suppliers from 1 January 2006 and all customers including households could change their gas suppliers from 1 January 2007. Launching gas trade liberalization in 2007 ended the monopoly of the exclusive gas importer and trader RWE Transgas, a.s. In 2008, natural gas was already being imported to the Czech Republic by five traders and 13 traders were operating on the national gas market. The gas market liberalization continued in 2009 when the number of importers increased to 12 and the number of gas traders involved in delivering gas to end customers increased to 20. In 2010, the number of traders importing gas to the Czech Republic increased from 12 to 19 and the number of national traders increased to 28. Number of national traders was 47 in 2011 and 35 of them supplied hoseholds.

Graph No. 2 – Share of customers in gas consumption

Graph No. 3 - Shares of traders on the gas market in 2011

Source: OTE

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According to business companies, the total volume of imported gas in 2011 was 10% lower compared to 2010. Supplies from the European Union and Germany and Russia were used to a much larger extent at the expense of imports from Norway. The vast majority of contracted gas supplies for the Czech Republic from Norway was sold abroad.

Full gas market liberalization allowed end customers to change their gas supplier. Since the market was opened on 1 January 2005, this option has been used by customers from all categories at 369,645 delivery points with 84,424 and 361,941 delivery points in 2010 and 2011, respectively.

The numbers of customers according to consumption category, who changed their gas supplier from 2005 to 2011, are shown in table No. 6. The table clearly shows that changes of gas suppliers substantially increased in 2011 for all customer categories - wholesale 31.46%, medium customers 16.24%, retail customers 13.46% and households 12.62%.

Table No. 6 – Changes of customers gas provider in 2005 – 2011

Source: Energy Regulatory Office

2.7 Statistical data for 2011:

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Table No. 7

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Table No. 8

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Table No. 9

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Table No. 10

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Table No. 11

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Table No. 12

Table No. 13

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Table No. 14

The supply security standard was provided for the winter months according to § 73a of the power engineering act at a daily volume of 40.766 – 51.585 mil. m3 (430.11 – 544.313 MWh). This applies to gas traders or gas producers delivering gas to protected customers.

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3. Risk assessment results:

3.1 Infrastructure standards (article 6):

According to clause 1, Member States or, where a Member State so provides, the Competent Authority will ensure that the necessary measures are taken so that by 3 December 2014 at the latest, if the single largest gas infrastructure is disrupted, the capacity of the remaining infrastructure, determined according to the N – 1 formula, can satisfy the total gas demand of the calculated area for a day of exceptionally high gas demand occurring with a statistical probability of once in 20 years.

3.1.1 Determining the single largest gas infrastructure:

The single largest gas infrastructure in the Czech Republic with the highest gas supply capacity is the entry point in Lanžhot with entry transmission capacity of 156.4 mil. m3/day.

3.1.2 Description of the provision of the N-1 standard:

The calculation model will govern by the following formula N-1 according to Appendix No. I of the Regulation:

Definition of the parameters of the formula:

Dmax = the total daily gas demand of the calculated area during a day of exceptionally high gas demand occurring with a statistical probability of once in 20 years,

EPm= the sum of the technical capacity of all border entry points,Pm = the sum of the maximum technical daily production capability of all gas production facilities in the Czech RepublicSm = the sum of the maximum technical daily withdrawal capacity of all storage facilities that

can be delivered to the entry points in the Czech Republic,Im = the technical capacity of the single largest gas infrastructure with the highest capacity to

supply the Czech Republic.All parameters of the formula are given in mil. m3/day.

3.1.3 Ability to provide N-1 at the national level:According to the requirements of Appendix No. I of the Regulation, the results calculated according to the N-1 formula should be either higher or at least equal to 100%. For 2012 - 2021, the Czech Republic fulfils the minimum requirement of the Regulation and exceeds it by more than 150%. This means that the security of supplies according to the infrastructure standard defined by the Regulation is guaranteed in the Czech Republic, see clause 3.5.

3.1.4 Ability to provide N-1 standard at the regional level:Considering the sturdiness and high quality of the transmission system in the Czech Republic, which fully provides the N-1 standard at the Czech Republic level, it is not necessary to provide the N-1 standard for the Czech Republic at the regional level.

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3.1.5 Data required for calculating the N-1 formula and N-1 formula:

a) Definition of the calculated area:

The calculated area is the geographical area for which the N – 1 formula is calculated, as determined by the Competent Authority. In case of the Czech Republic this is the area of the country. The Regulation stipulates that the risk assessment must be updated at the latest 18 months after adopting the Preventive Action and Emergency Plans to be issued by 3 December 12 at the latest, i.e. by 3 June 2014. With regard to these deadlines, the first risk assessment must be performed for 2012, 2013, and 2014 at least.

b) Definitions on the demand side: Dmax (1in20):

The Dmax parameter has been defined based on historical consumption data in the Czech Republic over the last twenty years. The day of highest consumption was identified as 23 January 2006 with a value of 67.639 mil. m3/day (15 °C). This value has been recalculated based on the future expected annual consumption of natural gas in the Czech Republic.

c) Definitions on the offer side: EPm,Pm, Sm, Im:

The EPm parameter is the sum of all border entry transfer capacities, more specificially the entry transfer capacities at the following points: Hora Svaté Kateřiny - Olbernhau, Hora Svaté Kateřiny – Sayda, Brandov, Waidhaus, Český Těšín and Lanžhot.

The Pm parameter has been specifed based on data from the biggest producers of natural gas in the Czech Republic.

Individual Sm parameters represent the maximum daily technical and applicable capacities for supplying the underground gas storages in the Czech Republic of the following companies: RWE GasStorage, MND GasStorage and České naftařská společnost.

The Im parameter is the infrastructure with the highest capacity for gas supplies i.e. the Lanžhot entry point.

Calculating the N-1 formula according to the Regulation:

Table No. 15 - Security of supplies in the Czech Republic in 2012-2021 (in mil. m3/day,0°C)2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Pm 0.4 0.4 0.4 0.5 0.6 0.6 0.6 0.4 0.3 0.3Sm RWE GS

47.4 47.8 49.3 53.1 55.9 57.8 60.6 61.6 63.5 63.5

Sm MND GS

7.5 8.0 8.5 9.0 10.0 12.0 12.0 12.0 12.0 12.0

Sm ČNS - - - - 0.9 0.9 2.0 2.0 2.0 2.0EPm 292.1 292.1 319.8 319.8 319.8 319.8 319.8 319.8 319.8 319.8Im Lanžhot 156.4 156.4 156.4 156.4 156.4 156.4 156.4 156.4 156.4 156.4Dmax 66.2 71.3 75.2 75.2 79.3 82.3 82.3 82.3 82.3 82.3

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N-1 [%] 288.4 269.3 294.5 300.3 291.0 285.2 290.0 290.9 293.1 293.1Graph No. 4 – Analysis of the security of supplies in the Czech Republic according to the N-1 formula

3.2 Scenarios of exceptionally high gas demand

a) Consumption of the customers portfolio of gas traders in the Czech Republic - annual for the last two years, average daily winter for last two years and maximum daily for the last 20 years (for new gas traders for as long as they have been operating):

We have selected the scenario for the last two years because only after liberalization of the market in 2007, were new licences for gas trading issued and new gas traders started their gas supplies in 2009.

Natural gas consumpion in the Czech Republic:

in 2009 – 8.161 billion m3, 86,213 GWhin 2010 – 8.979 billion m3, 95,138 GWhin 2011 – 8.058 billion m3, 85,645.6 GWh

Maximum historical daily consumption on 23 January 2006 at -16.9°C:

67.6 million m3, 713 GWh

Maximum historical daily consumption on 23 February 2011 at the average daily demperature of -10.1°C:

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52.816 million m3, 559.738 GWhb) Customer consumption in the households category to which a gas trader supplies gas -

annual for the last two years, maximum daily for the last two years and maximum daily for the last 20 years (for new gas traders for as long as they have been operating):

We have selected the scenario for the last two years because only after liberalization of the market in 2007, were new licences for gas trading issued and new gas trader started their gas supplies in 2009.

Natural gas consumption in the Czech Republic for the households customer category:

in 2009 – 2.514 billion m3, 26,641 GWhin 2010 – 2.905 billion m3, 30,785 GWhin 2011 – 2.4439 billion m3, 25,889 GWh

Maximum daily consumption of households customer category over the last two years:

20.3 million m3, 214 GWh

Maximum daily consumption of the households customer category - historical:

23.7 million m3, 250 GWh

c) Interruption of supplies over the main transmission infrastructures or from underground gas storages used by a gas trader in different seasons (summer, winter)

In relation to the value of the N-1 coefficient for the Czech Republic of 288%, the failure of any individual transmission infrastructure would not substantially affect the supply of natural gas to end customers as was verified during the January 2009 crisis followed by a simulation training in November 2009, see chapter 3.5. The following mechanisms for securing the natural gas supply would be used if a failure occurred:

Increased gas extraction from underground gas storages Use of reverse flow of the northern branch of the transmission system

If these steps are not sufficient, the transmission system operator would limit gas supplies to a group of customers according to the decree on gas industry emergencies.

d) The frequency and length of interrupted supplies and a historical description of supply interruptions including the duration, volume of gas, affect on customers:

Historically, the Czech Republic has recorded two cases of a serious breach in the supply of natural gas. The first case dates back to January - March 2006 where the deviation between the nominal value and the actual gas supply from Russia ranged from 10% to 30%, which meant that of 23.25 million m3/day up to 7 million m3/day was not delivered and on 9 January - 17 January and then 30 January - 1 February and 20 February – 22 February no supplies were recorded.

The second case dates back to January 2009 when no gas from Russia was supplied from 7 January to 19 January. The operator of the transmission system reversed the flow of natural gas from West to East and 18 million m3 was supplied to the Czech Republic via BTS

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Sayda and extraction from underground gas storages was increased up to 34 million m3/day to cover the demand of the Czech Republic which was slightly over 50 million m3/day at that time. The worst situation was reported on 12 January 2009 when the consumption increased to 57.3 million m3 and the extraction from the underground gas storage was increased to the maximum. The Czech Republic also transmitted 33 million m3 of gas daily from Olbernhau to Waidhaus for Bayerngas. None of these supply breaches affected customers in the Czech Republic because increased gas extraction from the underground gas storages and reverse flow of natural gas from Germany via the border trasnfer station Hora Sv. Kateřiny was successfully arranged to supply all customers and no one had to be limited in any way.

e) A potential future supply breach by gas producers in third countries affecting gas traders with regard to their occurrence in the past and likelihood:

Considering the high N-1 coefficient, continued expansion of capacity of the underground gas storage and prepared construction of new underground gas storage as well as construction of the Gazela gas pipeline to supply natural gas from NordStream and OPAL gas pipelines, the affect of a serious supply breach will further decrease. Several points will be used on the Gazela gas pipeline to interconnect with the transmission system of the Czech Republic so if there is insufficient gas, customers will also be supplied from this gas pipeline. Also, the reverse flow of the northern branch of the gas transmission system must be mentioned, it can be used in emergencies to supply Slovakia with a daily capacity of up to 25 million m3. Last but not least, is a project for constructing a north-south gas pipeline corridor, connecting LNG terminals in Swinoujscie (Poland) and Krk (Croatia) and finally the assumed interconnection of the Břeclav compression station with the virtual trade point Baumgarten in Austria where the Nabucco and/or SouthStream gas pipeline should end.

f) Description of the potential consequences of the breaches by individual scenarios (for this year and the next two years):For the above reasons our opinion is that terminating supplies from the main transmission infrastructures or underground gas storage as defined in Regulation (EU) No. 994/2010 on measures to safeguard the security of gas supply would not cause serious problems in supplying customers.

3.3 Gas supply interruption scenarios

Terminating supplies from the main transmission infrastructure (particularly gas flow termination via BTS Lanžhot, Hora Svaté Kateřiny, Brandov, Waidhaus, Těšín) or the impossibility of using one or more underground gas storages in the Czech Republic in different seasons (summer, winter):

The main transmission infrastructures of the Czech Republic are BTS Lanžhot, HPS Hora Svaté Kateřiny, BTS Brandov, BTS Waidhaus in Germany and BTS Cieszyn in Poland. Each scenario of exceptionally high gas supply demand considered an interruption of natural gas supply from one of these border transfer stations.

To analyse the consequences of the impossibility of using one or more underground gas storage during exceptionally high natural gas demand, scenarios for the failure of individual underground gas storages connected to the transmission system of the Czech Republic (UGS Uhřice, UGS Dolní Dunajovice, UGS Háje, UGS Lobodice, UGS Štramberk, UGS Třanovice, UGS Tvrdonice) as well as a scenario of the combined failure of multiple underground gas

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storages affecting gas supplies in the Czech Republic (UGS Lobodice, UGS Štramberk and UGS Třanovice) were considered. 3.4 Description of the probable consequences of the above failures by individual scenarios:

The failure of individual border points has no affect on the natural gas supply in the Czech Republic but affects the supply to Germany or Poland. The only possible natural gas supply risk in the Czech Republic would be the concurrent failure of supplies via BTS Lanžhot and BTS Hora Svaté Kateřiny. However, this scenario is highly unlikely.

Table No. 16 – Interruptions of the infracture and the consequences

Interruption of infrastructure

Consequence

BTS Lanžhot No danger to the natural gas supply in the Czech Republic even in winter

BTS Hora Svaté Kateřiny

No affect on the natural gas supply in the Czech Republic

BTS Brandov No affect on the natural gas supply in the Czech Republic, affect on natural gas transit to Germany only

BTS Waidhaus No affect on the natural gas supply in the Czech Republic, affect on natural gas transit to Germany only

BTS Český Těšín No affect on the natural gas supply in the Czech Republic, affect on natural gas transit to Poland only

UGS Uhřice No affect on the natural gas supply in the Czech Republic

UGS Dolní Dunajovice No affect on the natural gas supply in the Czech Republic

UGS Háje No affect on the natural gas supply in the Czech Republic

UGS Lobodice No affect on the natural gas supply in the Czech Republic

UGS Štramberk No affect on the natural gas supply in the Czech Republic

UGS Třanovice No affect on the natural gas supply in the Czech Republic

UGS Tvrdonice No affect on the natural gas supply in the Czech Republic

According to this table, the failure of a single underground gas storage will have no affect on the natural gas supply in the Czech Republic both in the summer and winter. Problems could arise only if concurrent failures of UGS Lobodice, Štramberk and Třanovice occur. If this combined failure occurs, the natural gas supply to Northern Moravia would be impaired (in the case of the highest winter consumption, up to 38% of the daily consumption could be missing in this region). However, this situation is almost impossible.

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In relation to the interruption of natural gas supplies in January 2009 and to prepare the gas industry of the Czech Republic for a repeat of the natural gas supply termination from Ukraine to Western Europe, a review of the preparedness of new mechanisms of declaring and the activities of the Competent Authorities during emergencies in the gas industry according to decree No. 334/2009 Coll. on emergencies in gas industry was requested. 3.5 Simulated emergency training on 12 November 2009:

A first consumption level alert resulted in natural gas supply savings in the Czech Republic (1.2% of the natural gas consumption), however some customers need two days to switch to alternative fuels (about 3).

A fourth consumption level alert led to total natural gas savings at distribution companies and direct customers of about 12% in the transmission system on the actual natural gas consumption under current conditions (climatic, production, heating etc.).

The simulated training only included customers with annual natural gas consumption over 5 million m3.

Limiting consumption, during the gas industry emergency training, applied to A, B1, B2 end customers according to decree No. 334/2009 Coll. of 12 November 2009 because the average temperature was 7.1°C on 12 November 2009. Heating customers (type C) could not decrease natural gas consumption because the vast majority of facilities were not operating. If the temperatures had been lower, we assume actual natural gas consumption savings at the fourth alert level of about 25 %.

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4. Measures, volumes and capacities required to comply with the infrastructure and supplies standards and their schedule

4.1 Preventive measures for mitigation of identified risks:

The identified risks (see clause 3.3) are highly unlikely because they would have to occur concurrently to affect supplies to customers. The analysis shows that at least three adverse circumstances would have to occur at the same time, i. e. failure of the highest infrastructure, substantial extraction reduction from underground gas storages and bad weather conditions for a long time. The potential, but still very low likelihood, can be further decreased in several ways.

With regard to the risk of concurrent failures of BTS Lanžhot and BTS Hora Svaté Kateřiny, the following measures could be taken:

increase the volume and extraction capacities of the underground gas storages in the Czech Republic;

direct connection of the Czech transmission system to Nabucco / SouthStream gas pipeline;

or a combination of these.

One way of reducing the potential risk of a concurrent failure of UGS Lobodice, Štramberk and Třanovice would be constructing a "Moravia" gas pipeline to northern Moravia (see "Ten-year development plan in the Czech Republic 2012 - 2021" published on the website of the transmission system operator, http://www.net4gas.cz).

Interruption of supplies from Slovakia (BTS Lanžhot):

Considering the actual gas flows, this interruption would only affect supplies to Germany and France, however, these countries have other resources available and therefore, interrupting the natural gas supplies would not seriously affect the natural gas supply in these countries. The situation will greatly improve after the Gazelado gas pipeline is commissioned in 2013 when substantial amounts of natural gas for Germany will be supplied via this new gas pipeline via BTS Brandov and BTS Waidhaus and any interruption of the supplies via BTS Lanžhot will be marginal for supplies to Germany.

Interruption of supplies to Poland via (BTS Cieszyn):

Considering the 0.5 billion m3/year supplied, daily supplies from the Czech Republic to the Polish transmission system are not substantial and limitations applicable to some Polish customers can only occur if the natural gas supply is terminated long-term.

Interruption of supplies to Germany via BTS Waidhaus

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Significant amounts of natural gas are transmitted to southern Germany and then to France via BTS Waidhaus partially from BTS Lanžhot and partially from BTS Hora Sv. Kateřiny. In an infrastructure failure, there could be some problems with the natural gas supply to customers in these countries, particularly if the termination lasts for a long time. In January 2009, when natural gas supplies via BTS Lanžhot were terminated, southern Germany was supplied via BTS Hora Sv. Kateřiny, which would, however, be impossible if BTS Waidhaus failed. This situation would result in a risk for the natural gas supplies of customers especially in southern Germany.

Interruption of natural gas supplies via BTS Hora Sv. Kateřiny to Germany

Historically, BTS Hora Sv. Kateřiny was very important in supplying natural gas to the Eastern part of Germany when Germany was separated. Over time, the situation has changed and today, the gas pipelines between BTS Hora Sv. Kateřiny and the Olbernhau compression station as well as BTS Hora Sv. Kateřiny and the Sayda compression station are used bi-directionally and they also supply natural gas to the Czech Republic.

4.2 Measures for supplies security standard:

a) under extraordinary temperature conditions over a seven-day period of peak demand occurring with a statistical probability of once in 20 years:

Because switching from town gas to natural gas took place in the Czech Republic from 1990 to 1995, natural gas consumption statistics are only available from 1995.The daily value for a seven-day period of peak demand at -14°C, according to the security standard of supplies for the Czech Republic, is 47,982 thousand m3, or 506,315 MWh.

b) During an extraordinary high gas demand period of at least 30 days occurring with a statistical probability of once in 20 years:

A period of extraordinary high gas demand only occurs for a short time and has never lasted for more than 10 days; during this period, the daily consumption was about 50 - 57 million m3 for approx. 10 days in January 2009. As the consumption of protected customers accounts for about 35% of the total natural gas consumption during winter, the security standard would have to be 19.95 million m3/day. This can be secured for 30 days even if all cross-border supplies are interrupted by extraction from underground gas storages.

c) During a breach of the single largest gas infrastructure for at least 30 days under average winter conditions:

No such period has occurred in the Czech Republic, however, the experience of the interruption of the natural gas supply in January 2009 followed by the simulation training in November 2009, see above, has shown that supplies from underground gas storages would be sufficient to supply the natural gas to protected customers under average winter conditions, see also clause b).

4.2.1 The options of arranging the security standard in the Czech Republic are as follows: a) diversification of natural gas resources:

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The original scheme of 75% natural gas supplies from Russia and 25% natural gas supplies from Norway significantly changed after liberalization. Short-term contracts on the EU spot market are used to a great extent and were 33.59% in 2011, whereas Russian and Norwegian shares were 63.44% and 2.95%, respectively. The Nord Stream and OPAL gas pipelines have greatly contributed to the diversification of transmission routes and they will be connected to the Gazela gas pipeline constructed in the Czech Republic for transmitting about 30 billion m3 of gas each year and to the Czech transmission system at several connection places.

b) storage of natural gas in underground gas storages: Storing natural gas in underground gas storages is the second most important measure for the supply security standard because the capacity of all underground gas storages in the Czech Republic is 2.881 billion m3, which is about 30% of total annual consumption.

c) long-term natural gas supplies contracts: Gas traders from the Czech Republic have concluded long-term contracts for natural gas supplies with Russian gas producers of 8 billion m3/year until 2035 and Norwegian gas producers of 2 billion m3/year until 2017.

d) increasing gas extraction: Increasing gas extraction is not effective for the Czech Republic to arrange the supply security standard because national gas extraction's share is just 1.5% of the annual natural gas consumption.

e) the use of alternative fuels combined with contracts under which the natural gas supply can be terminated:Because of the reliable natural gas supply to date, this possibility is not widely used in the Czech Republic.

4.2.2. Proof of arranging the security standard with the energy market operator and the Energy Regulatory Office to which supervision was delegated:

a) for gas stored in underground gas storages in the Czech Republic, confirmation of the amount of stored gas from the underground gas storage operator and a document that proves the arrangement of fixed transmission capacity at the virtual gas storage entry point;

b) for gas stored in underground gas storages other than in the Czech Republic, confirmation of the amount of stored gas from the underground gas storage operator and a document that proves the arrangement of the fixed transmission capacity to the Czech Republic;

c) for diversified gas resources, confirmation of the amount of gas from the supplier as well as a document that proves the arrangement of fixed transmission capacity to the Czech Republic;

d) for increasing gas production, confirmation from the relevant gas producer;e) agreement on a swap operation with reference to the instrucments according to a) to

d); f) confirmation of the involved protected customer on the possibility of using alternative

fuels and a copy of a gas supply contract based on which the supply can be interrupted.

4.2.3. Definition of a protected customers according to Article 2, clause 1, paragraph a) and b) of the Regulation (EU): Based on the decision of the Competent Authority mentioned in § 2 of the decree on emergencies in the gas industry, this group includes the following C1, D and F:

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a) group A is the consumption points of customers with a predicted annual consumption of more than 630 MWh with the possibility of fully or partially switching to an alternative fuel;

b) group B1 is the consumption points of customers mainly with technological consumption up to a predicted annual consumption of more than 52,500 MWh not included in groups A or D; these consumption points are included in this group if the sum of actual needs in the last quarter of the previous year and the first quarter of this year is less than 70% of the total consumption for the period from 1 April of the previous year to 31 March of this year; if no actual consumption is available, it will be replaced by the planned monthly consumption specified in the distribution contract;

c) group B2 is the consumption points of customers mainly with technological consumption up to a predicted annual consumption of 4,200 MWh to 52 500 MWh not included in groups A or D; these consumption points are included in this group if the sum of needs in the last quarter of the previous year and the first quarter of this year is less than 70% of the total consumption for the period from 1 April of the previous year to 31 March of this year; if no actual consumption is available, it will be replaced by the planned monthly consumption specified in the distribution contract;

d) group C1 is the consumption points of customers mainly with consumption for heating up to a predicted annual consumption of more than 4,200 MWh not included in groups A or D; these consumption points are included in this group if the total consumption for the last quarter of the previous year and the first quarter of this year is 70% or more of the total consumption for the period from 1 April of the previous year to 31 March of this year and if the customers in this group provide more than 20% of their total produced thermal energy to households, health care facilities and social service facilities; if no actual consumption is available, it will be replaced by the planned monthly consumption specified in the distribution contract;

e) group C2 is the consumption points of customers mainly with consumption for heating up to a predicted annual consumption of more than 4,200 MWh not included in groups A or D; these consumption points are included in this group if the total consumption in the last quarter of the previous year and the first quarter of this year is 70% or more of the total consumption for the period from 1 April of the previous year to 31 March of this year and they are not classified in group C1; if no actual consumption is available, it will be replaced by the planned monthly consumption specified in the distribution contract;

f) group D is the consumption points of customers with a predicted annual consumption per year of more than 630 MWh producing foods for daily consumption, including but not limited to perishable food processing, animal production operations with animal death hazard, producing fuels, communal incinerator plant waste, power for public transport vehicles, health care facilities, social service facilities2), basic elements of the Integrated Emergency Response system, reconstruction facilities, crematoriums as well as the Czech National Bank; specific customers are classified by the transmission system operator for the consumption points of the customers connected directly to the transmission system or distribution system operator for the consumption points of the customers connected directly to the distribution system (hereinafter the "competent operator") for informing the local and competent regional authority or the Prague Municipality Office.

g) group E is the consumption points of customers with a predicted annual consumption of 630 MWh to 4,200 MWh not included in groups A or D;

h) group F is the consumption points of customers with a predicted annual consumption per year of up to 630 MWh and households.

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The supply security standard was provided for the winter months of 2011 according to § 73a of the Energy Act at a daily volume of 40,766 – 51,585 mil. m3 (430.11 – 544.313 MWh). This applies to gas traders or gas producers who supply gas to protected customers. 5. Obligations imposed on gas companies and other relevant entities

including safe operation of gas systems, emergency plans and maintenance obligations:

The basic assumption for being prepared for a crisis is a reliable, safe, economic and thoroughly maintained gas system. The rights and obligations of the transmission system operator, the distribution system operator, the underground gas storage operator, the gas producer and the gas trader are specified in Act No. 458/2000 Coll. on the business conditions and public administration in the energy sector and on amendments of other laws (the "Energy Act"), as amended.

The Act defines the liability of the operators to provide the Ministry of Trade and Industry and the Energy Regulatory Office with an annual report on the quality and maintenance level and to prepare, send to the Ministry and annually review the emergency response plan.

In addition, the Act stipulates the following obligations:

5.1 Gas transmission:

The following rights and obligations are stipulated for the transmission system operator in §58 of the Act:

(1) The transmission system operator will have the right

a) to access gas storages under the conditions stipulated in this Act for arranging equilibrium between the volume of natural gas entering the gas system and the volume of natural gas exiting the gas system,

b) to information from other participants on the gas market needed to properly fulfil its obligations,

c) to establish and operate an internal telecommunication network for administration, measurement, security and automation of the gas system operation and for transmitting information needed to operate IT and IS,

d) to establish and operate gas facilities on non-own real estate in conformity with special legislation 4d),

e) to enter and drive on non-own real estate to establish, construct, repair and operate the transmission system,

f) to remove trees and branches and other vegetation, to dispose of removed and cut trees and other vegetation that pose risks for the safe and reliable operation of the transmission system if either the owner or user did not carry out the work after a prior notice and specification of the extent,

g) in conformity with special directives, to enter enclosed spaces and facilities used for the

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activities and services of the bodies of the Ministry of Defence, Ministry of the Interior, Ministry of Justice, Security Information Service and railway bodies, as well as to enter real estate where special telecommunication equipment is located to the extent and in the manner necessary to carry out a licenced activity,

h) in emergencies, to use the gas facilities of customers to which the operator transmits gas to the required extent,

i) to either limit or interrupt gas transport in the following cases: 1. if there is an immediate hazard to life, health and property and for mitigating these conditions, 2. in an emergency or for activities immediately preventing an emergency, 3. to carry out and plan construction modifications and scheduled repairs of the transmission system facilities, 4. if faults occur in the transmission system equipment and to remove them,5. if gas is consumed using devices hazardous to life, health or property, 6. if unauthorized gas consumption or unauthorized gas transport occurs, 7. in the case of gas consumption when the customer repeatedly and without serious reason did not allow access to the measuring device or non-measured sections of the gas consumption device although the customer was demonstrably notified and requested to allow access at least 15 days in advance, to inspect, read, maintain, replace or remove the measuring device, 8. due to the limitation or termination of gas transport of the transmission systems interconnected by the operators,

j) to purchase and sell gas to cover losses in the transmission system or for its consumption or for equilibrium between the gas volume entering and exiting the gas system; this is not regarded as gas trade.

(2) The transmission system operator must create an easement allowing the use of other owners’ property or part of it for the purposes referred to in Subsection 1 Clause d) on the basis of a contract concluded with the property’s owner; if the owner is not known or identified or is definitely inaccessible or inactive or no contract could be negotiated with the owner, and the conditions for a limitation of the ownership title to land or property according to special legislation 4e), then the appropriate building authority will issue, at the transmission system operator’s proposal, a decision on creating an easement.

(3) If the transmission system operator damages the property of a freeholder or leaseholder by exercising its rights as referred to in Subsection 1 Clauses d) to i), or the transmission system operator limits the freeholder or leaseholder‘s normal use of the property, then the holder will be entitled to a lump sum compensation 5), 10), including the costs of an expert opinion. The compensation claim must be filed with the transmission system operator that damaged the property or limited its use within six months from the date the freeholder or leaseholder first learned of the damage or limitation, otherwise the right expires.

(4) In the cases referred to in Subsection 1 Clauses d) to i), the transmission system operator must respect to the maximum extent possible the rights of the owners of the property and must immediately notify them of entering their property. When work is completed, the transmission system operator must return the property to its previous state, and if that is impossible because of the type of work, the operator must bring the property to a state

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appropriate for its previous purpose or use and must immediately notify the owner of the property of this. When removing or cutting back trees, the transmission system operator must dispose of the trees and cuttings produced at its own expense.

(5) In the cases referred to in Subsection 1 Clause i) Point 3, the transmission system operator must notify the customers for whom the operator transports gas of the commencement and end of the limitation or interruption of gas transmission no later than 30 days in advance.

(6) In the cases referred to in Subsection 1 Clause i), the transmission system operator must resume gas transmission as soon as the causes of the limitation or interruption of gas transmission are removed.

(7) In the cases referred to in Subsection 1 Clause i), no damages and compensation for the loss of profit may be claimed. This provision will not apply if the transmission system operator fails to comply with its reporting duty referred to in Subsection 5 or the failure was obviously caused by the transmission system operator.

(8) The transmission system operator must also:

a) secure the safe, reliable, economic operation, maintenance, extraction and development of the transmission system,

b) secure a supply based on concluded contracts ,

c) connect to the transmission system any applicant who/which so requests and meets the connection conditions ,

d) connect to the transmission system any applicant who/which so requests and meets the connection conditions except for a demonstrable insufficiency of free capacity for gas transmission or a threat to the safe and reliable operation of the transmission system; a refusal of access to the transmission system must be made in writing and justified,

e) provide equal conditions for access to the transmission system under the conditions laid down in this Act,

f) secure gas measurement in the transmission system including evaluation and providing the measured and evaluated data to the market operator and gas market participants used for gas transport,

g) provide information needed to mutually secure the operability of their systems to the operators of distribution systems with which the transmission system is interconnected,

h) maintain and publish the quality parameters of gas supply and related services,

i) prepare and submit to the Energy Regulatory Office the data needed for decisions on the prices charged for gas transmission ,

j) keep for regulatory purposes in accordance with the legal regulation separate accounts for gas transmission,

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k) prepare a daily, monthly, annual and ten-year balance of the transmission system, review it and provide it to the market operator,

l) prepare contingency plans for the transmission system within 6 months of being granted a gas transmission licence, send them to the Ministry, and update them annually,

m) notify sufficiently in advance market participants whose gas equipment is directly connected to the transmission system of the extent and dates of down time for gas transmission facilities, and inform them about expected reductions of transmission capacity,

n) set up and operate a technical dispatching centre to be responsible for the central control of the transmission system,

o) establish and operate gas quality monitoring points,

p) create technical prerequisites for the provision of gas imports from various sources,

q) control and manage the gas system of the Czech Republic in a state of emergency,

r) protect any proprietary information that is a trade secret that the transmission system operator may have learned of during its activities,

s) prepare and publish every year the estimated development of the transmission system to the extent according to subsection 58k, clause 3 and publish it after approval; the provisions of subsection 58l, clause 5 must be used accordingly.

t) prepare the Transmission System Operator Code, submit it to the Energy Regulatory Office for approval, publish it and carry out the licenced activity pursuant to the Transmission System Operator Code,

u) in cooperation with the distribution system operators and underground gas storage operators, prepare a gas system contingency plan, update it annually, and submit it to the Ministry,

v) prepare and submit to the Ministry and the Energy Regulatory Office every year not later than 1 March of the following calendar year a report on the quality and level of maintenance of the transmission system equipment,

w) develop sufficient cross-border capacity in compliacne with the transmission system development plan and secure the infrastructure standard according to the directly applicable regulation of the European Union,

x) cooperate with other transmission system operators at the regional level covering two or more member states in order to assign transmission capacities and exchange information on the secure operation of the transmission system,

y) separately offer entry and exit capacity at individual entry points to the transmission system and exit points from the transmission system,

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z) separately charge payments for entry and exit capacity at individual entry points to the transmission system and exit points from the transmission system,

(9) A legal entity incorporated for cooperation according to subsection 8, clause x) will adopt and operate an internal directive on equal treatment if an operator of the transmission system, who is also a part of a vertically integrated gas business company, is involved in incorporation or the activities of the legal entity. The provisions of sections 58i and 58j will apply accordingly.

Organization of transmission system maintenance:

Maintenance of the transmission system is carried out according to the Organization Rules and the internal management documents of NET4GAS, s.r.o. The transmission system is divided into operational areas and maintenance is provided by the maintenance centre and contractors. The maintenance is carried out according to the internal management documents of the operator. These internal management documents respect the applicable: - laws- decrees of MPO, MV, SÚIP, ČÚBP1,MMR, ERÚ and other state administration institutions- government regulations- guidelines- ČSN, ČSN ISO, ČSN EN technical standards- TPG technical rules- recommendations of equipment manufacturers

Basic list of NET4GAS, s.r.o. management documents for the maintenance process, effective from 1 January 2011 to 31 December2011:- Asset Management directive

o Project Management guideline

- Gas System Operation directive

- NET4GAS, s.r.o. gas system contingency plan

- Monitoring and evaluating the reliability and condition of technical equipment - methodical instruction

- Revision Rules for reserved technical equipment

o Special maintenance of the gas system - directiveo Special repairs and assemblies - guidelineo Maintenance of the transmission system control system - guidelineo PKO systems maintenance - guidelineo Pipeline Integrity Management System - PIMS - guidelineo DTGN Control system operation and management - guideline

- Special maintenance, repairs and assembly - directive

- Project management - directive

- NET4GAS, s.r.o. gas system technical description

1 On 1 July 2005, Act No. 251/2005 Coll. on labour inspection and Act No. 253/2005 Coll., amending act No. 174/1968 Coll. became effective. The act establishes the State Labour Inspectorate Office and regional labour inspectorates. The application of rights and obligations of ČÚBP passes to the State Labour Inspectorate Office (SÚIP).

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Material and financial plans of the main operation and maintenance activities of the transmission system have been prepared based on these management documents and the generally applicable legislation, external technical directives and other documents,:

- annual maintenance plan for operational areas- schedule of activities that restrict the capacity of the transmission system in 2011- work and inspection procedures.

Post-failure maintenance is carried out as needed according to the requirements of the relevant operational area.

Cooperation with transmission system operators of neighbouring countries:

If preventive measures are adopted, the operators of interconnected transmission systems of neighbouring countries must inform and coordinate with each other about the measures taken.

5.2 Gas distribution:

The following rights and obligations are stipulated for the distribution system operator in § 59 of the Act:

(1) The distribution system operator will have the right

a) to connect to the transmission system or other distribution system if the connection conditions have been met,

b) to information from other participants on the gas market needed to properly fulfil its obligations,

c) to access the transmission system, other distribution system and underground gas storage under the conditions laid down in this Act and to secure equilibrium between the volume of gas entering and exiting the distribution system,

d) to establish and operate an internal telecommunication network for administering , measuring , security and automation of the distribution system operation and for transmitting information needed for the operation of IT and IS,

e) to establish and operate gas facilities on non-own real estate in conformity with the special legislation,

f) to enter and drive on non-own real estate to establish, construct, repair and operate the distribution system and gas connections,

g) to remove trees and branches and other vegetation, to dispose of removed and cut trees and other vegetation that pose risks for the safe and reliable operation of the transmission system if either the owner or user did not carry out the work after a prior notice and specification of the extent,

h) in conformity with special directives, to enter enclosed spaces and facilities used for the activities and services of the bodies of the Ministry of Defence, Ministry of the Interior,

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Ministry of Justice, Security Information Service and railway bodies, as well as to enter real estate where special telecommunication equipment is located to the extent and in the manner necessary to carry out a licenced activity,

i) in emergencies, to use gas facilities of customers for which the operator distributes gas to the extent required,

j) Limit or interrupt gas distribution in the following cases:1. if there is an immediate hazard to life, health and property and for mitigating these conditions, 2. in an emergency or for activities immediately preventing an emergency, 3. to carry out and plan construction modifications and scheduled repairs of the transmission system facilities, 4. if faults occur in the transmission system equipment and to remove them,5. if gas is consumed using devices hazardous to life, health or property, 6. if unauthorized gas consumption or unauthorized gas transport occurs, 7. in the case of gas consumption when the customer repeatedly and without serious reason did not allow access to the measuring device or non-measured sections of the gas consumption device although the customer was demonstrably notified and requested to allow access at least 15 days in advance, to inspect, read, maintain, replace or remove the measuring device, 8. due to the limitation or interruption of gas transmission by the transmission system operator, 9. if gas is suppled from a gas production facility with a hazardous affect on the safe and reliable operation of gas devices,

k) to buy gas to cover losses in the distribution system or for its own consumption; this is not regarded as gas trade,

l) to close the main gas valve to avoid an immediate threat to human life.

(2) The disribution system operator must create an easement allowing the use of other owners’ property or part of it for the purposes referred to in Subsection 1 Clause d) on the basis of a contract concluded with the property’s owner; if the owner is not known or identified or is definitely inaccessible or inactive or no contract could be negotiated with the owner, and the conditions for a limitation of the ownership title to land or property according to special legislation 4e), then the appropriate building authority will issue, at the disribution system operator’s proposal, a decision on creating an easement.

(3) If the distribution system operator damages the property of a freeholder or leaseholder by exercising its rights as referred to in Subsection 1 Clauses d) to i), or the distribution system operator limits the freeholder or leaseholder‘s normal use of the property, then the holder will be entitled to a lump sum compensation 5), including the costs of an expert opinion. The compensation claim must be filed with the distribution system operator that damaged the property or limited its use within six months from the date the freeholder or leaseholder first learned of the damage or limitation.

(4) In the cases referred to in Subsection 1 Clauses d) to i), the distribution system operator must respect to the maximum possible extent the rights of the owners of the property and must immediately notify them of entering their property. When the work is completed,

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the distribution system operator must return the property to its previous state, and if that is impossible because of the type of work, the operator must bring the property to a state appropriate for its previous purpose or use and will immediately notify the owner of the property of this. When removing or cutting back trees, the distribution system operator must dispose of the trees and cuttings produced at its own expense.

(5) In the cases referred to in Subsection 1 Clause j) Point 3, the distribution system operator must notify customers for whom the operator distributes and supplies gas of the commencement and end of the limitation or interruption of gas distribution and supply, no later than 15 days in advance, unless a shorter notification period has been agreed. Planned refurbishment, relocation, and repairs between 1 October and 30 April of the following calendar year may only be carried out if the customers concerned are notified of this in writing .

(6) In the cases referred to in Subsection 1 Clause j), Point 6 the distribution system operator must resume gas distribution and supply as soon as the damage caused by unauthorized consumption or gas distribution immediately after removing the causes of the limitation or interruption, have been paid.

(7) In the cases referred to in Subsection 1 Clause j), no damages or compensation for the loss of profit may be claimed. This provision will not apply if the distribution system operator fails to comply with its reporting duty referred to in Subsection 5 or if the failure according to Clause b), Point 4 is demonstrably caused by the distribution system.

(8) The distribution system operator must also:

a) secure the safe and reliable operation and development of the distribution system in the area delineated in the licence,

b) distribute gas on the basis of concluded contracts and at a defined quality,

c) pay the transmission system operator or operator of another distribution system a share of the eligible expenses for connection to the transmission system or distribution system,

d) connect to the distribution system any applicant who/which so requests and meets the connection conditions ,

e) connect to the distribution system any applicant who/which so requests and meets the connection conditions except for a demonstrable insufficiency of free capacity for gas distribution or a threat to the safe and reliable operation of the distribution system or transmission system; gas distribution must be refused in writing and justified.

f) provide equal conditions for access to the distribution system under the conditions laid down in this Act,

g) maintain and publish the quality parameters of gas quality supply and related services,

h) provide the transmission system operator, the operators of distribution systems and underground gas storage operators and gas producers with the information needed to mutually secure the operability of their systems,

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i) secure gas measurement in the distribution system including evaluation and provide the measured and evaluated data to the market operator and gas market participants used for gas distribution,

j) prepare and submit to the Energy Regulatory Office the data needed for decisions on the prices charged for gas distribution,

k) keep, for regulatory purposes in accordance with the legal regulation, separate accounts for gas distribution,

l) secure gas transmission and gas distribution for distribution system operators not connected directly to the transmission system to the extent of gas consumption by gas market participants with a gas consumption facility connected to its distribution system,

k) prepare a daily, monthly, annual and ten-year balance of the distribution system, review it and provide it to the distribution system operator,

n) prepare contingency plans for the distribution system within 6 months of being granted a gas distribution licence, send them to the Ministry, and update them annually,

o) announce the extent and dates of gas distribution facilities’ down time and report the expected reduction of distribution capacity,

n) set up and operate a technical dispatching centre to be responsible for the central control of the distribution system,

q) setup and operate points for gas quality monitoring if the points set up and operated by the transmission system operator are insufficient for monitoring the gas quality,

r) at the request of a supplier, to provide the ultimate information about a customer and its consumption point to the extent required to secure the ultimate supply,

s) declare a state of emergency within the respective distribution system,

t) prepare and publish every year the estimated development of the distribution system for at least 5 years,

u) have its gas facility connected to another distribution system at its own expense,

v) protect any proprietary information that is a trade secret which the distribution system operator may have learned of during its activities,

w) prepare the Distribution System Operator Code, submit it to the Energy Regulatory Office for approval, publish it and carry out the licenced activity pursuant to the Distribution System Operator Code,

x) prepare and submit to the Ministry and the Energy Regulatory Office every year not later than 1 March of the following calendar year a report on the quality and level of maintenance of the distribution system equipment,

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y) promote power engineering services and their offers to customers at competitive prices,

z) at the request of a gas trader or gas producer, terminate the gas supply in the case of unauthorized gas consumption.

Organization of distribution systems maintenance (RWE GasNet, s.r.o.):

The distribution system operator will be governed by the internal maintenance organization directives and the guidelines. The distribution system operator maintains the distribution systems in conformity with the generally applicable legislation, particularly TPG 901 01 in the internal management directives: - DSO_SM__B04_07_06 – DSO Contingency Plan- DSO_SM_B04_03_03 – Rules for planning and reporting PZ activities - Contract on providing technical control centre services - Contract on providing network documentation services - Contract on providing measurement services - Contract on providing operative management of gas industry assets services - Contract on providing PZ (PNP) structures services - Contract on providing network operation and maintenance services - Contract on providing PZ construction and non-gas industry assets services

5.3 Gas storage:

The following rights and obligations are stipulated for the underground gas storage operator in § 60 of the Act:

(1) The underground gas storage operator will have the right

a) to establish and operate an internal telecommunication network for administering , measuring, security and automation of the underground gas storage operation and for transmitting information needed for the operation of IT and IS,

b) to establish and operate gas facilities on non-own real estate in conformity with the special legislation 4d),

c) to enter another owner’s property with personnel and vehicles to set up and operate an underground gas storage facility,

d) to remove trees and branches and other vegetation, to dispose of removed and cut trees and other vegetation that pose risks for the safe and reliable operation of the underground gas storage if either the owner or user did not carry out the work after a prior notice and specification of the extent,

e) in conformity with special legal directives, to enter enclosed spaces and facilities used for the activities and services of the bodies of the Ministry of Defence, Ministry of Justice and railway bodies, as well as to enter real estate where special telecommunication equipment is located to the extent and in the manner necessary for the licenced activity,

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f) to restrict or suspend to the necessary extent underground storage of gas activities in the following cases:1. if there is an immediate hazard to life, health and property and for mitigating these conditions,2. if an emergency occurs or for activities immediately preventing the emergency,3. to carry out and plan reconstructions and scheduled repairs of underground gas storage facilities,4. if faults occur in the underground gas storage equipment and to remove them,5. in the case of unauthorized gas consumption or unauthorized gas storage,

g) connect its facility to the transmission system or the distribution system at its own cost and under the conditions specified,

h) purchase gas to cover losses in the underground gas storage facility or its own consumption or to create and maintain the basic content of the underground gas storage facility and sell gas to the extent of the obligations stipulated herein; this is not regarded as gas trade,

i) to information from other participants on the gas market needed to properly fulfil its obligations,

(2) The underground gas storage operator must create an easement allowing the use of other owners’ property or part of it for the purposes referred to in Subsection 1 Clause d) on the basis of a contract concluded with the property’s owner; if the owner is not known or identified or is definitely inaccessible or inactive or no contract could be negotiated with the owner, and the conditions for a limitation of the ownership title to land or property according to special legislation 4e), then the appropriate building authority will issue, at the underground gas storage operator’s proposal, a decision on creating an easement.

(3) If the underground gas storage operator damages the property of a freeholder or leaseholder by exercising its rights as referred to in Subsection 1 Clauses d) to i), or the underground gas storage operator limits the freeholder or leaseholder‘s normal use of the property, then the holder will be entitled to a lump sum compensation 5), including the costs of an expert opinion. The compensation claim must be filed with the underground gas storage operator that damaged the property or limited its use within six months from the date the freeholder or leaseholder first learned of the damage or limitation.

(4) In the cases referred to in Subsection 1 Clauses d) to i), the underground gas storage operator must respect to the maximum possible extent the rights of the owners of the property and must immediately notify them of entering their property. When the work is completed, the underground gas storage operator must return the property to its previous state, and if that is impossible because of the type of work, the operator must bring the property to a state appropriate for its previous purpose or use and will immediately notify the owner of the property of this. When removing or cutting back trees, the underground gas storage operator must dispose of the trees and cuttings produced at its own expense.

(5) In the cases referred to in Subsection 1 Clause f) Point 3, the underground gas storage operator must notify in writing the customers for whom the operator stores gas of the commencement and end of the limitation or interruption of gas storage activities no later than 30 days in advance.

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(6) In the cases referred to in Subsection 1 Clause f), the underground gas storage operator will resume gas storage activities as soon as the causes of the limitation or interruption of gas transmission are removed.

(7) In the cases referred to in Subsection 1 Clause j), no damages or compensation for the loss of profit may be claimed. This provision will not apply if the underground gas storage operator fails to comply with its reporting duty referred to in Subsection 5 or the failure was obviously caused by the underground gas storage.

(8) The underground gas storage operator must also:

a) secure the safe, reliable, economic operation, maintenance, extraction and development of the underground gas storage,

b) secure a storage based on concluded contracts ,

c) pay the transmission system operator or operator of another distribution system a share of the eligible expenses for connection the underground gas storage to the transmission system or distribution system,

d) provide the operator of the transmission system or the operator of the distribution system to which its underground gas storage facility is connected with the information needed to mutually secure the interoperability of their systems and facilities,e) meter the delivered and withdrawn gas and submit the data needed to settle differences to the transmission system operator and the gas market participant to whom gas storage is provided,

f) keep separate accounts for the underground storage ,

g) prepare a daily, monthly, annual and ten-year balance of the capacities and performance of the underground gas storage, review it and provide it to the distribution system operator,

h) within 6 months of being granted the underground gas storage licence, prepare contingency plans for the underground gas storage facilities, send them to the Ministry, and update them annually,

i) announce the extent and dates of down time at the underground gas storage facility and state the expected reduction of storage capacity,

j) set up and operate a technical dispatching centre to be responsible for the central control of the underground gas storage facility,

k) secure equal conditions for access to the underground gas storage under the conditions defined herein and allow access to the underground gas storage to everyone who asks for it and complies with the access conditions except for a demonstrable insufficiency of free capacity or a hazard to the reliable and safe operation of the underground gas storage, any refusal of access to the underground gas storage must be in writing and justified,

l) sell the gas of a market participant if the gas stored for reasons of the gas market participant was not recovered from the gas storage on the expiry of the contract,

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m) declare a state of emergencys within the underground gas storage facilities,

t) prepare and publish every year the estimated development of the underground gas storage for at least 5 years,

o) protect any proprietary information that is a trade secret the transmission system operator may have learned during its activities,

p) prepare the Underground Gas Storage Operator Code, submit it to the Energy Regulatory Office for approval, publish it and carry out the licenced activity pursuant to the Underground Gas Storage Operator Code,

q) prepare and submit to the Ministry and the Energy Regulatory Office every year not later than 1 March of the following calendar year a report on the quality and level of maintenance of the underground gas storage equipment,

r) maintain and publish the quality parameters of gas quality supply and related services,

s) publish information about the operation of the underground gas storage necessary for effective competition and effective operation of the gas market, which is not a business secret, this does not affect the obligations under point o).

Organization of underground gas storage maintenance (RWE Gas Storage, s.r.o.):

The storage system is divided into individual underground gas storages (UGS) maintained by each UGS maintenance centre and based on contracts (with third contractors) in 2011. The UGS maintenance was carried out in compliance with the applicable internal management documents of RGS. These internal management documents respect the applicable: - laws - decrees of MPO, MV, SÚIP, ČBÚ and other state institutions- government regulations- guidelines- ČSN, ČSN ISO, ČSN EN technical standards - TPG technical rules- recommendations of the equipment manufacturers

A basic list of RWE GasStorage, s.r.o. management documents for the maintenance process, Basic act ZA 2_3_3 Operative management of gas industry assets

o Directive SM_E03_14_01 Capex projects managemento Directive SM_E03_01_01 Maintenance and repair planning guidelines

- Basic act TGN_SM_E02_02_01 Operation of the gas storage systemo Directive SM 2_4_2_3 Monitoring and evaluating the reliability and condition of

technical equipment o Directive SM 2_4_2_4 Revision rules for reserved technical equipment

- Basic act TGN_SM_E02_01_01 Maintenance of the gas storage systemo Directive TGN_MP_E02_02_01 Maintenance of the transmission control systemo Directive SM 2_4_3_3 PKO system maintenanceDirective SM 2_4_3_4 Maintenance management

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- Operation documents of individual UGS in compliance with the rules of ČBÚo Contingency plan of RWE Gas Storage, s.r.o.o Contingency plan of individual UGS

Material and financial plans of the main operation and maintenance activities of the underground gas storage have been prepared based on these management documents and the generally applicable legislation, external technical directives and other documents:

- annual maintenance plan- work and inspection procedures.

Post-failure maintenance is carried out as needed based on the requirements of the operation of the underground gas storage.

5.4 Gas producer:

The following rights and obligations are stipulated for the gas producer in § 57 of the Act:

(1) The gas producer will have the right

a) to set up and operate gas upstream pipelines, connect and access the gas production facility or extraction pipeline to either transmission system or distribution system or a gas upstream pipeline of another gas producer or underground gas storage, b) to sell gas produced in a gas production facility operated by the gas producer to other gas market participants and to other countries,

c) to limit or interrupt the operation of the gas production plant and gas upstream pipelines to the extent necessary in the following cases:1. if there is an immediate hazard to life, health and property and for mitigating these conditions,2. if an emergency occurs or for activities immediately preventing the emergency,3. if defects occur in gas upstream pipelines or facilities producing or extracting gas and for removing them,4. for carrying out scheduled construction modifications and repairing gas upstream pipelines or facilities used for gas production or extraction,

d) to information from other participants on the gas market needed to properly fulfil its obligations,

e) to restrict, suspend or terminate the gas supply to its customers if unauthorized gas consumption occurs,

f) to enter and drive on other owners’ property to establish and operate gas upstream pipelines or a gas production plant, including refurbishment and repairs,

g) to remove trees and branches and other vegetation, to dispose of the removed and cut trees and other vegetation that poses risks for the safe and reliable operation of gas upstream pipelines or a gas production facility if either the owner or user did not carry out the work after a prior notice and specification of the extent,

h) to establish and operate a gas upstream pipeline or gas production facility on non-own real

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estate in conformity with the special legislation 4d),.

(2) The gas producer must create an easement allowing the use of other owners’ property or part of it for the purposes referred to in Subsection 1 Clause h) on the basis of a contract concluded with the property’s owner; if the owner is not known or identified or is definitely inaccessible or inactive or no contract could be negotiated with the owner, then the appropriate building authority will issue, at the gas producer’s proposal proposal, a decision on creating an easement for the property or any part of it.

(3) If the gas producer damages the property of a freeholder or leaseholder by exercising its rights as referred to in Subsection 1 Clauses f) and g), or the gas producer limits the freeholder or leaseholder‘s normal use of the property, then the holder will be entitled to a lump sum compensation 5), including the costs of an expert opinion. The compensation claim must be filed with the gas producer that damaged the property or limited its use within six months from the date the freeholder or leaseholder first learned of the damage or limitation otherwise the right expires.

(4) In the cases referred to in Subsection 1 Clauses f) and g), the gas producer must respect to the maximum possible extent the rights of the owners of the property and must immediately notify them of entering their property. When the work is completed, the gas producer must return the property to its previous state, and if that is impossible because of the type of work, the operator must bring the property to a state appropriate for its previous purpose or use and will immediately notify the owner of the property of this. When removing or cutting back trees, the gas producer must dispose of the trees and cuttings produced at its own expense.

(5) In the cases referred to in Subsection 1 Clause c) Point 4, the producer must notify its customers in writing of the commencement and end of any limitation or interruption of the gas supply at least 30 days in advance.

(6) In the cases referred to in Subsection 1 Clause c), the gas producer must resume the gas supply as soon as the causes of the limitation or interruption of gas transmission are removed.

(7) In the cases referred to in Subsection 1 Clause c), no damages or compensation for the loss of profit may be claimed. This provision will not apply if the gas producer fails to comply with its reporting duty referred to in Subsection 5 or the failure was obviously caused by the gas producer.

(8) The gas producer must also:

a) pay the transmission system operator or distribution system operator or underground gas storage operator or other gas producer a share of the eligible expenses for connection to the transmission system or distribution system or gas upstream pipeline of another gas producer or to the underground gas storage,

b) ensure that its gas production plant and gas upstream pipeline operate safely and reliably and ensure equal conditions for access to the gas upstream pipeline,

c) provide the operator of the transmission system or distribution system to which its gas

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upstream pipelines are connected with any information needed to mutually facilitate the operability of the systems,d) have a metering device installed for the gas supplied by the operated gas upstream pipeline, including evaluating and delivering the evaluated information to the market operator and gas market participants provided with gas transmission via the gas upstream pipeline,

e) prepare a daily, monthly, annual and ten-year balance of gas production, review it and provide it to the distribution system operator,

f) prepare contingency plans for gas production within 6 months of being granted a gas production licence, send them to the Ministry, and update them annually,

g) set up and operate a technical dispatching centre to be responsible for the central control of the gas production facility,

h) declare a state of emergency within the gas production plant and gas upstream pipelines,

i) keep separate accounts for gas production,

j) connect to the gas upstream pipeline any applicant who/which requests it and meets the connection conditions, except for a demonstrable insufficiency of free capacity; a refusal of access to the gas upstream pipeline must be in writing and justified,k) provide the market operator information about the volume and progress of the gas supply based on gas supply contracts and other information needed for compliance with the market operator's obligations,

l) comply with the provisions of § 61, subsection 2 if gas is supplied to customers.

5.5 Gas trade:

The following rights and obligations are stipulated for a gas trader in § 61 of the Act:

(1) The gas trader will be entitled

a) to purchase gas and sell it to other gas market participants,

b) to purchase gas from other countries and sell it to other countries,

c) to access the transmission system, distribution systems, underground gas storage facilities under the conditions set out herein,

d) to suspend or terminate the gas supply to a customer if unauthorized gas consumption occurs,

e) to information from the market operator, transmission system operator, distribution system operators needed to settle the gas supply to customers whose consumption point is connected to the transmission system or distribution system,

f) to the information from other participants on the gas market needed to properly fulfil its

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obligations,

(2) The gas trader must a) prepare daily, monthly, annual and five-year balances of gas trading, including information on gas exports from and gas imports to the Czech Republic including specifying the gas sources, review them and submit them together with monthly data about the number of customers with an annual consumption of less than 400 thousand m3, who changed their gas suppliers to the market operator and the transmission system operator,

b) observe the instructions issued by the dispatching centres of the appropriate operators, when a state of emergency is declared,

c) maintain the balance between the volume of gas entering the gas system and the volume of gas leaving the gas system at the same time,

d) ensure a safe and reliable gas supply to end customers to which the trader supplies gas while keeping the safety standards,

e) submit to the transmission system operator, the appropriate distribution system operator or the underground gas storage facility operator information needed for the safe and reliable operation of the gas system,

f) carry out the activities of the ultimate supplier according to § 12a,

g) keep separate accounts for the ultimate gas supply,

h) maintain and publish the quality parameters of the gas quality supply and related services,

i) provide the market operator information needed to carry out its obligations according to § 20a,j) register for gas trade activities with the market operator within 30 days of being licenced for operation; the gas trader becomes a registered market participant when registered,

k) promote power engineering services and their offers to customers at competitive prices,

l) provide its customers with information in a way allowing remote access to the Energy Consumer Checklist developed by the Commission and published by the Energy Regulatory Office,

m) if a customer wants to change gas supplier, inform the customer intending to withdraw from the gas supply contract of the date of terminating the contract if information about the beginning and duration of the notice period is not specified in the business terms and conditions.

Furthermore, the gas trader must secure the security standard of supplies in the following way according to Section 11 of the Decree on emergencies:

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(1) The extent of the security standard for protected customers according to the directly applicable legislation2) will be stipulated according to appendix No. 3 of the Decree.

(2) From 1 May of a particular year, the market operator will update and publish input information for calculating the security standard in way allowing remote access. A sample of the input data for calculating the security standard published by the market operator is given in Appendix No. 4 of the Decree.

(3) From 30 September to 1 April, the security standard is at least 20% of the stored gas in the underground gas storages in the European Union.

(4) A gas trader and gas producer, who deliver gas to protected customers, must inform the market operator and the Energy Regulatory Office of the extent of the security standard specified according to clause 1 and its provision by the 15th day of the following month; provision of the security standard will be demonstrated as follows:a) for gas stored in underground gas storages in the Czech Republic, confirmation of the

amount of stored gas from the underground gas storage operator and a document showing the arrangement of fixed transmission capacity at the entry point of virtualgas storage,

b) for gas stored in underground gas storages out of the Czech Republic, a copy of a gas storage contract or confirmation of the amount of stored gas from the underground gas storage operator and a document showing the arrangement of fixed transmission capacity to the Czech Republic,

c) for diversified gas resources, a copy of a contract for a specified gas volume or confirmation from a foreign supplier for this gas supply as well as a document proving the provision of fixed transmission capacity from the supply point to the Czech Republic,

d) for an increased amount of gas production, a copy of a contract or confirmation from the gas producer,

e) confirmation of the protected customer on using alternative fuels and a copy of a gas supply contract through which the gas supply can be interrupted,

f) confirmation of providing the security standard by another gas market participant. (5) The gas market participant who undertakes to provide the security standard according to

section 4, point f), must include in its gas supply security standard the extent of the security standard of the gas trader or gas producer for whom the confirmation of providing the security standard has been issued.

(6) The security standard specified in Appendix No. 3, subsection 1 point c) must be provided other than through the gas industry structure used by the gas trader for the largest portion of supplies in the month for which the extent of the security standard is determined. If a virtual sale point is used by the gas trader for the highest proportion of supplies, the security standard must be demonstrated according to clause 4.

The security standard is determined according to Appendix No. 3 to the Decree.

5.6 General obligations of a gas market participant:

Section 3 of the emergencies decree lists the activities for preventing a state of emergency for transmission system operators, distribution system operators, underground gas storage operators, gas traders and the market operator:

2 ) Article 8 clause1 Regulation (EU) No. 994/2010 of the European Parliament and of the Council of 20 October 2010on measures to safeguard the security of gas supply and repealing Council Directive 2004/67/EC.

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(1) Preventing a state of emergency in the prompt warning3) phase for the countrya) transmission system operators use an accumulation of the transmission system,

distribution system operators use an accumulation of distribution systems, b) underground gas storage operators check the preparedness of underground gas storage

facilities for the maximum extraction value, gas producers check the preparedness for a maximized operation of gas production and gas upstream pipelines and inform the transmission system operator of the results of the check results without undue delay,

c) gas traders check their possibilities of increasing gas imports and submit a report on the results of the check to the transmission system operator without undue delay,

d) based on instructions from the transmission system operator, the market operator will immediately notify electronically all entities and registered gas market participants that on the next gas day a business settlement of deviations will be launched to prevent an emergency.

(2) When preventing an emergency state in the warning phase at the national level:

a) the agreed gas volume transmission or distribution as well as the agreed gas supply to all consumer points of customer group A to the extent of their possibilities of switching to an alternative fuel via consumption level 1 are limited,

b) the agreed gas volume transmission or distribution and the agreed gas volume to all consumer points of customer groups B1, B2, C1, C2 and E, which the trader notified about preventing a state of emergency due to no gas supply or substantial gas supply variations are suspended.

(3) Preventing a state of emergency in the prompt warning or warning phases will be governed by the contingency plan of the gas system of the Czech Republic and the contingency plans of the transmission system operator, distribution system operators, underground gas storage operators and gas producers.

(4) The transmission system operator or distribution system operator must inform connected distribution system operators, underground gas storage operators, gas producers, the market operator and gas traders delivering gas to customers in the area, about preventing a state of emergency in the prompt warning and warning phases without undue delay by sending an electronic message or otherwise.

(5) Within one hour of launching activities to prevent a state of emergency at the latest, the transmission system operator or distribution system operator announces the preventive phase of the state of emergency via Czech Radio, ČRo 1 station in a way allowing remote access or using other mass media communication, to the Ministry, the Energy Regulatory Office, the Ministry of the Interior, the local regional authority or the Prague Municipality Office. A similar procedures will be used to end the state of emergency.

Section 5 of the decree on a state of emergency specifies consumption levels starting with the basic level, i.e. unlimited consumption of the contractually agreed daily gas consumption, followed by the consumption levels for limiting supplies and consumption levels for suspending supplies. 3 ) Article 10, subsection 3 of Regulation (EU) No. 994/2010 of the European Parliament and of the Council of 20 October 2010on measures to safeguard the security of the gas supply and repealing Council Directive 2004/67/EC.

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The following consumption levels are used for preventive measures:

a) basic level i.e. unlimited consumption of the contractually agreed daily gas consumption,

b) consumption levels for limited gas supplies:1. comsumption level 1, i.e. limited gas supply to consumption points of customer

group A to the extent of their possibilities of switching to an alternative fuel, 2. comsumption level 2, i.e. limited gas supply to consumption points of customer

group A to the extent of their possibilities of switching to an alternative fuel and limited daily gas consumption on consumption points of customer group B1 to value of permitted daily consumption,

3. comsumption level 3, i.e. limited gas supply to the consumption points of customer group A to the extent of their possibilities of switching to an alternative fuel and limited daily gas consumption on the consumption points of customer groups B1 and B2 to value of permitted daily consumption,

4. comsumption level 4, i.e. limited gas supply to consumption points of customer group A to the extent of their possibilities of switching to an alternative fuel and limited daily gas consumption on the consumption points of customer groups B1 and B2 to value of permitted daily consumption, and a 70% reduction of the daily gas consumption on the consmption points of customer group C2 compared to the daily value of the previous business day,

5. comsumption level 5, i.e. limited gas supply to the consumption points of customer group A to the extent of their possibilities of switching to an alternative fuel and limited daily gas consumption on the consumption points of customer groups B1 and B2 to value of permitted daily consumption, and a 70% reduction of the daily gas consumption on the consmption points of customer group C2 compared to the daily value of the previous business day, and a 20% reduction of the daily gas consumption on the consumption points of customer group E compared to the value specified in the gas distribution contract,

The consumption levels for interrupting supplies are specified in the Emergency Plan.

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6. Other preventive measures

6.1 Improved interconnection with neighbouring countries:

STORK gas pipeline and its reinforcement:

On 14 September 2011, the interconnection of the Czech and Polish gas systems was commissioned with a DN500, 6.3MPa pipeline Třanovice – Cieszyn – Skoczów (STORK) with an annual capacity of 0.5 billion m3. The project was implemented within the EEPR programme and for now, no reverse flow is used (gas supplies from the Czech Republic to Poland only). The north-south gas corridor takes into account an increase in the capacity to 2.5 – 3 billion m3/year and the capacity will be bi-directional. This project is also associated with the proposed construction of the Morvia gas pipeline.

BTS Brandov and Gazela gas pipeline:

The Brandov border transfer station (commissioned on 1 October 2011) was constructed in the Czech Republic because of the construction of the Nord Stream gas pipeline from Vyborg (Russia) to Greifswald (Germany) linked to the OPAL pipeline in Germany, which significantly improved the security of natural gas supplies to the Czech Republic. The Gazela gas pipeline will be connected to this border transfer station.

The LBL gas pipeline:

Extending the Nabucco gas pipeline from Baumgarten (Austria) to Břeclav - the LBL gas pipeline - will contribute not only to improving the security and reliability of gas supplies to the Czech Republic but also to Poland, Slovakia, and Germany. This project is supported by the government of the Czech Republic.

The LBL gas pipeline should be about 52 km long (12 km in the Czech Republic and 40 km in Austria) with an annual capacity of 4 – 7 billion m3 and would represent a synergy of two international projects - the Nabucco project and the North-south gas corridor project.

6.2 Diversification of resources and gas transmission routes:

In 2011, natural gas was imported from Russia – 5,863.1 million m3 (63.44%), Norway – 273.3 million m3 (2.95%) and the European Union + Germany – 3,010.5 million m3 (33.59%).

One way to diversify routes is a supply of Russian gas via Belarus and Poland (Yamal gas pipeline) to Germany and via BTS Hora Svaté Kateřiny to the Czech Republic using reverse flow for the Czech Republic. This route was used in January 2009 during a natural gas supply interruption flowing from the Ukraine.

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The construction of the Nord Stream gas pipeline from Vyborg (Russia) to Greifswald (Germany) linked to the OPAL pipeline in Germany and the border transfer station Brandov in the Czech Republic significantly improved the security of natural gas supplies to the Czech Republic (more route diversification). BTS Brandov was commissioned on 1 October 2011.

The Gazela gas pipeline with an annual capacity of 30 billion m3, which will connect the Olberhnau transfer station and Waidhaus (Germany) via the Czech Republic, will contribute not only to the security of natural gas supplies from the Nord Stream gas pipeline to southern Germany but also to the security of the Czech Republic if supplies of natural gas from the Ukraine fail; the Gazela gas pipeline will be connected at four points to the Czech transmission system.

The interconnection of the Czech and Polish gas systems is already running with a DN500, 6.3MPa pipeline Třanovice – Cieszyn – Skoczów (STORK) with an annual capacity of 0.5 billion m3. The project was implemented within the EEPR programme and for now, no reverse flow is used (gas supplies from the Czech Republic to Poland only). The north-south gas corridor assumes an increase in the capacity to 2.5 – 3 billion m3/year and the capacity will be bi-directional. The importance of this interconnection was increased by the finishing of the construction of UGS Třanovice capacity expansion within the EEPR programme. This underground gas storage can be used for supplies to Poland.

Another option of diversifying resources and routes is the north-south gas corridor in Central and Eastern Europe. This gas pipeline will interconnect the LNG Swinoujscie terminal with the LNG terminal on Krk island (Croatia). The gas pipeline will cross Poland, the Czech Republic, Slovakia, Hungary, and Croatia.

Construction of the Nabucco gas pipeline and extending it from Baumgarten (Austria) to Břeclav - the LBL gas pipeline will contribute not only to improving the security and reliability of gas supplies to the Czech Republic but also to Poland, Slovakia, and Germany.

6.3 Cross-border access to storage facilities:

RWE Transgas can supply natural gas from UGS Třanovice where the capacity has been increased from 240 million m3 to 530 million m3 by the EEPR programme to Poland if Poland is interested in the capacity. The underground gas storage in Dolní Bojanovice, owned by SPP Storage, is connected only to the gas system of Slovakia and supplies gas to Slovakia only. The Czech Republic does not have any direct cross-border access to underground gas storage abroad but gas traders can store gas in underground gas storages in neighbouring countries provided that gas transmission to the Czech Republic is contractually guaranteed.

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7. Public service obligations providing a gas supply

Section 12 of Act No. 458/2000 Coll. on the business conditions and public administration in the energy sectors and on amendments to other laws (the "Energy Act"), as amended states the obligations beyond the licence of the licence holder for distributing gas and electricity and for heat supply:

Obligations beyond the scope of the licence:

(1) The obligation to supply heat energy, distribute electricity and distribute gas beyond the scope of the licence will mean the obligation whereby another licence holder assumes the obligations of a licence holder that has ceased to carry out the licensed activities.

(2) In an urgent need and in the public interest a heat energy generator or heat energy distributer licence holder will supply energy beyond the scope of the licence on the Energy Regulatory Office’s decision.

(3) In an urgent need and in the public interest the electricity distribution or gas distribution licence holder will distribute electricity or gas beyond the scope of the licence through the Energy Regulatory Office’s decision.

(4) The Energy Regulatory Office’s decision according to Subsections 2 and 3 will be issued for a definite time which will not be more than 12 months. No legal remedy against such a decision shall have a suspensory effect.

(5) Any provable loss of the heat energy generation or heat energy distribution licence holder as a result of assuming the obligations of securing supplies beyond the scope of the licence will be covered by the resources of the Energy Regulatory Fund (hereinafter "Fund") in accordance with Section 14. Any provable loss of the electricity distribution or gas distribution licence holder or the last resort supplier is a reason for adjusting the regulated prices.

(6) If the licence holder also carries out activities other than fulfilling its obligation to secure supplies beyond the scope of the licence, the licence holder must keep separate accounts of supplies beyond the scope of the licence.

(7) The obligation of making energy facilities available in urgent situations and in the public interest for obligations beyond the scope of the licence also applies to an individual or legal entity who/which is not a licence holder and has ceased to carry out, or is about to cease carrying out, activities for supplying electricity, gas or heat energy. The provisions of Section 10 Subsection 7 and 8 apply.

Section 12A of the Energy Act stipulates the obligations of the last resort supplier (gas, electricity):

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Last resort supplier:

(1) The last resort supplier in the delineated area of the electricity or gas distribution licence holder, whose equipment is connected to the transmission system or transport system, will be an electricity and gas sale licence holder who is or was part of the same vertically integrated undertaking or vertically integrated gas undertaking, such as an electricity and gas distribution licence holder at the supply point of the end customer.

(2) The last resort supplier supplies electricity or gas to a customer whose electricity or gas supplier is no longer authorized or can no longer supply electricity or gas or has stopped supplying eletricity or gas. This obligation commences on the day the market operator informs the last resort supplier about the registration point of the consumption point of the customer where no one is responsible for deviation, lasts not longer than 6 months and does not apply to a customer whose gas consumption was higher than 60 thousand m3 in the last 12 months.

(3) The last resort supplier will immediatelly inform the customer and the distribution system operator of Startig of the supply, the amount and other supply conditions.

(4) If electricity or gas is supplied by the last resort supplier, the distribution system operator will provide the last resort supplier with the identification data of the customer.

(5) The last resort supplier is not obliged to supply electricity or gas if the supplier detects unauthorized consumption at the consumption point.

(6) The last resort supplier supplies electricity or gas for at least 6 months to a household with a new consumption point to which neither electricity nor gas were ever supplied and if the ultimate supplier was asked to supply the household.

(7) When the last resort supplier starts to supply electricity or gas the supplies from the original supplier to the customer are terminated.

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8. Consideration of the ten-year EU grid development plan developed by ENTSOG

The Czech transmission system operator (TSO) NET4GAS, s.r.o. has produced a "Ten-year development plan for the Czech Republic 2012 - 2021" (the "Development plan"). The results of the plan were used to produce this Preventive Action Plan.

Before working on the development plan, TSO considered the production development, storage, consumption and supplies of natural gas as well as the investment plans and the plans of the distribution system operators, underground gas storage operators and the gas system development plan for the EU ("TYNDP").

The TSO development plan summarizes individual projects carried out in 2011 and new pipeline investment projects to increase the capacity of the Czech transmission system in the next ten years.

For this plan TSO used the worst possible scenario - i. e. the highest possible demand - when determining Czech Republic consumption. Based on this scenario PPS analyzed the adequacy of the entry and exit capacity of the system and found that all entry and exit capacities of the transmission system in all regions of Bohemia and Southern Moravia sufficiently cover the expected development of the maximum daily gas consumption. Only Northern Moravia is sensitive to an increased maximum daily consumption and therefore, TSO is preparing a project to increase the exit transmission capacity of this region by 2017. This project is also related to the scheduled V4+ north-south gas corridor.

TSO NET4GAS, s.r.o. was involved in preparing the TYNDP EU network development 2011 - 2020 as a member of ENTSOG. In addition, TSO led a regional group developing the Regional Investment plan for Central and Eastern Europe (CEE GRIP – http://www.net4gas.cz/en/1206).

The ten year development plan 2012 - 2021 of the Czech Republic is compatible with the needs of the region as well as those of the EU.

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9. Impacts of preventive measures:

9.1 Economic impact, efficiency and expedience of the measures:

Considering the above facts, the preventive measures have almost no economic affect and are very good for maintaining the proper operation of the gas system in the Czech Republic.

9.2 Impact on the operation of the internal gas market:

The preventive measures have no serious affect on the operation of the gas market in the Czech Republic.

9.3 Impact on customers:

As mentioned in chapter 5.6 General obligations of a gas market participant, the preventive measures include declaring consumption levels 1 to 5 affecting customers:

Consumption level No. 1 affects customer group AConsumption level No. 2 affects customer groups A, B1Consumption level No. 3 affects customer groups A, B1, B2Consumption level No. 4 affects customer groups A, B1, B2, C2Consumption level No. 5 affects customer groups A, B1, B2, C2 and F

The measures will never apply to protected customers according to the SoS directive as customers with consumption points in customer groups C1, D and F in the Czech Republic.

9.4 Environmental impact:

The environment may only be affected when switching to an alternative fuel other than natural gas. However, this solution is used in the Czech Republic only for the customer group A, i.e. customers with a predicted annual consumption of more than 630 MWh with the option of fully or partially switching to an alternative fuel.

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10. Negotiations with the relevant bodies in Germany, Slovakia and Poland:

According to the requirements of Article 4, clause 2 of SoS, the Competent Authorities of the Czech Republic, Germany, Slovakia and Poland exchanged the Plan draft on 3 June 2012 and a copy of the Plan draft was also submitted to the Commission.

Results of the Competent Authorities consultations:

1. Federal Republic of Germany:

Prevetive Action Plan of the Czech Republic was discussed during meeting with representatives of the Federal Ministry of Economics and Technology on 12. October 2012 in Prague and no comments were raised. It was noted that Preventive Action Plan of the Czech Republic is comprehensive and well organized.

2. Slovakia:

No comments received.

3. Poland:

Comments of the polish Ministry of Economy concerning gas supplies to Poland in case of disruptions of deliveries through Ukraine and Slovakia were answered in writing. The capacity of interconnection between the Czech Republic and Poland can be fully used in present era even during disruption of gas delivery through Ukraine. In case of realization of Nort South corridor the capacity of this interconnector will be increased to 2.5 – 3 billions m3/year. According to respektive interconnecting agreement between the czech and polish Transmission System Operator there is possible in case of necesity to tranport gas in certain quantity physicaly from Poland to the Czech Republic in border transfer point Ciezsyn in present time i.e. in reverse direction than the conventional direction of gas flow is in this point. Reverse flow is therefore made possible in BTS Cieszyn according to Article 6, patagraph 6 SoS Regulation.

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11. Conclusion:

The tasks and obligations of gas undertakings in a state of emergency are defined both in Act No. 458/2000 Coll. business conditions and public administration in the energy sectors and in amendments to other laws (the "Energy Act"), as amended as well as the decree on emergencies in the gas industry and providing the security standard. The obligations of the Energy Act and the decree applicable to gas industry undertakings are continuously audited by the Ministry of Industry and Trade of the Czech Republic as well as the Energy Regulatory Office.

At the preventive measures level for the market are higher imports flexibility, increased extraction from underground gas storages and reverse flow in the transmission system on the offer side and using contracts with optional interruption on the demand side. With regard to preventive measures, no non-market measures are applied.

The Czech transmission system is sturdy, high quality and properly maintained and seamlessly complies with the N-1 standard; in fact, this standard is much higher in the Czech Republic than requested by Regulation No. 994/2010.

Gas storage, which is 30% of the annual natural gas consumption in the Czech Republic, significantly assists in providing gas supplies to end customers if gas supplies are interrupted or limitated. At present, gas storages is undergoing expansion projects and the total storage capacity will be 40% of the annual consumption after they are finished. The percent of gas storage capacity of the total annual natural gas consumption places the Czech Republic among the leading EU member states.

The Czech Republic uses diversified natural gas supplies from Russia, Norway and the European Union + Germany and the former dependence on a single gas source, i.e. Russia, has been removed.

The reversion flows in the Czech Republic transmission system were established for supplies not only to Czech but also Slovak customers if the Ukraine gas supply fails.

Diversification of routes is underway as well and commissioning the Nord Stream gas pipeline, the linked OPAL gas pipeline and the BTS Brandov pipeline can supply gas to the Czech Republic if needed.

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These supplies could be extended after the construction of the Gazela gas pipeline in 2013, which will interconnect BTS Brandow across the Czech Republic to BTS Rozvadov - Waidhaus and connect the Czech transmission system at several points.

Electricity production is not in danger from a gas supply failure because electricity production in gas power plants accounts for only 5.62% of the total electricity production.

The risk analysis reveals that limited or suspended supplies from the Ukraine will not endanger gas supplies to customers in the Czech Republic. A cumulation of failures such as the natural gas supply from the Ukraine failing as well as the natural gas supply from BTS Hora Svaté Kateřiny failing is highly unlikely as well as several underground gas storage facilities failing at the same time.

The gas system of the Czech Republic fully complies with the requirements of the Regulation (EU) of the European Parliament and of the Council No. 994/2010 of 20 October 2010 on measures to safeguard the security of gas supplies and repealing Council Directive 2004/67/EC.

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