GRI - SSE Workshopon system access

Vienna, 24.11.2006

EFET SSE © Copyright 2006 EFET

European Federation of Energy Traders

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Vienna, 24 november 2006 2

Regional markets according to ERGEG(Gas Regional Initiative)

What should the GRI process achieve according to EFET:

1. Convergence on a consistent EU internal market approach

2. Transparancy with information accessible to all stakeholders on

an equal basis

3. Ambitious, but realistic targets, with lessons from the electricity

markets and successful gas hubs

EFET looks forward to assess the findings of the “reality check”

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GRI SSE: some of EFET’s concerns (1)

Gas Hub Development

• Effective trading points linked to market

• Focus on existing trading points with their specific problems

• As few points as possible to increase liquidity

Primary and Secondary Capacity availability/trading

• No unduly delay for implementation!

Transparency

• Safeguard the interest of all players and the new entrants

• No unduly delay for implementation!

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GRI SSE: some of EFET’s concerns (2)

Gas Balancing

• Closely related to hub development

• Market-based balancing (best online and on a regional basis)

Gas Quality

• Should be a ‘non-issue’ on wholesale level for H-gas!

Regulatory Co-ordination and Investments

• Adequate investments in infrastructure: essential!

• Consistency of regulation, incl. application of article 22 and open

seasons etc...

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GRI SSE: the workshop

The following slides are based on simple questions posed to members

of EFET

The information was given in confidentiality and not verified by others

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GRI SSE - Is there available capacity?

Is there available capacity (firm)?

Velke Kap – Gorizia (2.2): Not sufficient capacity available

Velke Kap – Tarvisio (2.3): Not sufficient capacity available • Assignment procedure of TAG-2008-capacity increase has been less than perfect

Mazara – Velke Kap (2.6): Not sufficient capacity available • Equally important as capacity is choice of supply – limited number of producers likely

Velke Kap – Oberkappl (2.5): Not sufficient capacity available• Further limited by

–capacity calculation methodologies –Artificial (commercial) multi TSO zones split capacity although physically the same pipelines–No multi TSO zone competition possible as not same entry/exit points in all zones – de facto pooling only possible in 1 zone

On most economically interesting entry points throughout SSE: Not sufficient capacity

available on a firm basis and secondary trading rather insignificant for the moment

Note: the interest of the network user is to transport gas from one wholesale level

before the route to the wholesale system lying after the route as reasonably possible

(Ukraine no – SK yes,. etc. ) – and to have capacity throughout the line –> one

bottleneck (e.g. 0 capacity) means that this bottleneck determines the whole line

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GRI SSE Is the level of information transparency sufficient

Is the level of information transparency sufficient? (esp. concerning

available capacities and tariffs)

2.2/ 2.3 / 2.6 : Basically yes; but regarding capacity it is often not

clear if all capacity is really booked, 2.6 is uneconomic currently

2.4: rather unclear on how and why

Other areas currently under scrutiny

-> need to implement regulation

-> some progress in certain areas visible

-> would be nice to have additional services like e.g. online booking of

capacities tool based on the information available throughout region

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GRI SSE Are there balancing requirements problems?

Are there problems with balancing requirements? General lack of system harmonisation

OBA’s not in place (how about the regulation??): nomination vs allocationGas dayData format of nominationNomination/ re-nomination cyclesLack of balancing marketsUnstable rules and sometimes evolving into different directionsClearing and settlementCreditworthinessLicensing

Intransparent rules for balancing energy charges and occasionaly prohibitely high levels

-> clear need for (online based intra period) market-based balancing regime on regional level as a

goal

-> clear need to allow for pooling of imbalance positions throughout areas as big as possible

(region)

-> clear need of one central counterpart for balancing issues (except for residual ones)

throughout areas as big as possible (region), e.g. via Hubs

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GRI SSE - Are contractual requirements clear throughout SSE?

Are contractual requirements clear throughout SSE? To cut it short: for multizonal activities of a shipper you need to hire an expert per zone at least

– completely inefficient

Standard transportation contract useful?!

-> need for one-stop-shop provider for basic system use services

-> need for one-stop-shop best also for regulatory issues to guarantee clear

and stable investment climate and to reduce regulatory risk at regional level

-> need for a clear mechanism for capacity increase and tarification on a

regional level

-> need for harmonised and mandatory open season procedures resulting in

sufficient capacity being built in time for committed parties (to be incentivised

best via marked based mechanisms and lack of regulatory risk)

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GRI SSE Are storage and flexibility services available

Are storage and flexibility services available?

Velke Kap – Gorizia (2.2): it seems there is no flexibility

Velke Kap – Tarvisio (2.3): basically no

Mazara – Velke Kap (2.6): it seems there is no flexibility

Velke Kap – Oberkappl (2.5): it seems that on real term there is only

one provider with intransparent pricing regime

Is this really so?? – how about the GGPSO, how about OBA‘s

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Conclusion

GRI necessary intermediate step - but European market goal

Therefore need to include parts of Germany, at least the adjacent systems to

SSE, in the assessment

The introduction of legal requirements should be facts and not discussed

again in a time consuming manner

EFET SSE considers launching an internal assessment on the costs (and

benefits) incurred to the market of non compliance with legislation and the

resulting hampering of trade opportunities - who is reliable for these costs?

(Regional) balancing markets are key for a transparent evaluation of the

value of gas and flexibility services and boost Hub liquidity

SSE region lacks availability of gas and physical choice of supply –

authorities urged to accelerate the realisation of all projects leading to higher

choice of supply and thus security of supply, competition and trade