Thomas Kleefuß (NET4GAS CEO): The regulatory framework for gas TSOs: current status, implications, outlook, Dresden, 16th April 2010

1. The regulatory framework for gas TSOs:
current status, implications, outlook
Dresden, 16th April 2010
Thomas Kleefuss
Managing Director and CEO NET4GAS
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NET4GAS | ee2 | The regulatory framework for gas TSOs: current status, implications and outlook

2. Agenda
1. The 3rd Energy Package and the new regulatory bodies
2. Unbundling of TSOs: options and implications
3. Regulation ahead: Framework guidelines and the new
regulated world
4. Conclusion
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NET4GAS | ee2 | The regulatory framework for gas TSOs: current status, implications and outlook

3. The 3rd energy package is just the final
step of a long development in Europe
First Gas Directive
 Applying first common rules to the energy markets
 Accouting Unbundling
Second Gas Directive
 Introduction of regulated TPA
 Legal Unbundling
Third Gas Directive – Third Energy Package
 Full ownership unbundling + (ISO, ITO)
 TSOs are cooperation under the umbrella of ENTSOG
 ACER is the counterpart for ENTSOG. The European
Regulatory Agency is established in the light of the 3rd
Energy package as well
A possible Fourth Gas Directive ???
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NET4GAS | ee2 | The regulatory framework for gas TSOs: current status, implications and outlook

4. ENTSOG, ACER and the Commission
shape the rules of the gas market
 The Commission and ACER set
priorities for developing rules of
the European gas market
ENTSOG
 ACER is preparing Framework
Guidelines for the network codes
 ENTSOG drafts the Network
Codes considering ACER’s
framework guidelines
Comission ACER  ACER comments and approves
draft codes
 Commission approves processes
ENTSOG, ACER and the Commission need to cooperate closely in
order to met the requirements of the 3rd Energy Package
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NET4GAS | ee2 | The regulatory framework for gas TSOs: current status, implications and outlook

5. ENTSOG has clearly defined tasks
coming from the 3rd Package
 ENTSOG is preparing and delivering the draft network codes for the
European TPA system (network connection rules, third-party access rules,
data exchange and settlement rules, interoperability rules, operational
procedures in an emergency, capacity-allocation and congestion-management
rules, etc.)
 ENTSOG further will adopt:
– common network operation tools to ensure coordination of network
operation in normal and emergency condition;
– a non-binding Community-wide ten-year network development plan
(Community-wide network development plan),including a European
supply adequacy outlook;
– recommendations relating to the coordination of technical cooperation
between Community and third-country transmission system operators;
 Summer and winter supply outlooks
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NET4GAS | ee2 | The regulatory framework for gas TSOs: current status, implications and outlook

6. ACER is influencing ENTSOG’s work
by setting the framework rules and
monitoring
 ACER is providing input for the development of the European
Network Code via the Framework Guidelines:
Framework Guidelines will provide the look-alike of major elements
of the European Network Code (e.g. capacity allocation, balancing,
etc.)
 ACER is revising and monitoring ENTSOG’s work:
The result of ENTSOG’s 10-year network Development Plan and
the Winter and Summer Outlooks are consulted ion a public
process also with ACER
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NET4GAS | ee2 | The regulatory framework for gas TSOs: current status, implications and outlook

7. Agenda
1. The 3rd Energy Package and the new regulatory bodies
2. Unbundling of TSOs: options and implications
3. Regulation ahead: Framework guidelines and the new
regulated world
4. Conclusion
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NET4GAS | ee2 | The regulatory framework for gas TSOs: current status, implications and outlook

8. The 3rd Energy package provides the
member States with three equal options to
unbundle TSOs
Ownership Unbundling Independent system operator Independent transmission operator
(ISO) (ITO)
Vertically integrated company
Vertically integrated company
Network Operator
Vertically integrated company Network Owner Network Owner
Network Operator Network Operator
Network Owner
• Ownership unbundled TSOs are fully An ISO is responsible for • An ITO is equipped with all human, technical,
independent from the vertically integrated entity • granting and managing third-party access, physical and financial resources necessary for
by means of human resources, shareholdings, • including the collection of access charges and fulfilling its obligations and carrying out the
financial power and supervision. congestion charges activity of gas transmission.
• The shareholder of an ownership unbundled • operating, maintaining and developing the • Additionally a strong Supervisory Board with
TSO is not active in any other business field transmission system, excessive power is installed.
then transmission. • ensuring the long-term ability of the system to • A compliance program is in place to ensure non-
• Ownership unbundling is the preferred way of meet reasonable demand through investment discriminatory operations.
unbundling coming from the 3rd Energy Package planning. • The Executive Board of an ITO is installed fully
When developing the transmission system the independently and without any monetary or
independent system operator shall be responsible other connection to the vertically integrated
for planning (including authorisation company.
procedure),construction and commissioning of the
new infrastructure. The asset owner is not
responsible for granting and managing third-party
access, nor for investment planning.
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NET4GAS | ee2 | The regulatory framework for gas TSOs: current status, implications and outlook

9. Agenda
1. The 3rd Energy Package and the new regulatory bodies
2. Unbundling of TSOs: options and implications
3. Regulation ahead: Framework guidelines and the new
regulated world
4. Conclusion
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NET4GAS | ee2 | The regulatory framework for gas TSOs: current status, implications and outlook

10. Various framework guidelines will
significantly influence ENTSOG’s work
and TSOs’ framework condition
 Framework Guidelines on CAM & CMP
(capacity allocation and congestion management)
 Framework Guidelines on Transparency
 Framework Guidelines on Balancing Rules
(including Network-Related Rules on Nomination Procedures, Rules for Imbalance Charges
and Rules for Operational Balancing between Transmission System Operator Systems)
 Framework Guidelines on Network Security and Reliability Rules, Grid Connection
Rules, Data Exchange and Settlement Rules, Interoperability rules, Operational
Procedures in an Emergency and Energy Efficiency Regarding Gas Networks
 Framework Guidelines on Rules for Trading
(Related to Technical and Operational Provision of Network Access Services and System
Balancing)
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NET4GAS | ee2 | The regulatory framework for gas TSOs: current status, implications and outlook

11. ACER is developing three Framework
Guidelines in 2010
Draft Pilot Framework Draft Framework Guideline on Draft Framework Guideline on
Guideline on CAM and Draft gas balancing rules harmonized transmission tariff
Comitology Guidelines on CMP structures
• Develop a pilot framework • Network-related rules on • Framework guideline will
guideline on capacity allocation nomination procedures provide basic principles on
mechanisms (CAM) • Rules for imbalance charges transmission tariffs
• Provide input to the European • Rules for operational balancing methodologies
Commission's Comitology between transmission system • Tariff setting is to be carried by
Guidelines on congestion operators' systems. an independent authority is of
management (CMP) principles. fundamental importance to
• Measures must be transparent Aim of this framework guideline is ensure the maximization of the
and non-discriminatory achieving a greater social welfare.
combining technical and standardisation and
economic efficiency while harmonisation among gas TSOs
addressing the various needs of in Europe.
market participants.
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NET4GAS | ee2 | The regulatory framework for gas TSOs: current status, implications and outlook

12. Agenda
1. The 3rd Energy Package and the new regulatory bodies
2. Unbundling of TSOs: options and implications
3. Regulation ahead: Framework guidelines and the new
regulated world
4. Conclusion
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NET4GAS | ee2 | The regulatory framework for gas TSOs: current status, implications and outlook

13. Conclusion
 The 3rd Energy Package is influencing the regulatory framework
for gas TSOs significantly.
 ACER is playing a key role in the whole process foreseen by the
new energy legislation, especially when looking at basic
principles of the capacity market and access rules.
 ACER carefully has to look at what kind of long-term incentives
are set for network operators as this will influence significantly
security of supply and system flexibility.
 Through a close and constructive cooperation between ENTSOG
and ACER, the gas market in Europe can further developed and
the market functioning (which was achieved until now) can be
further enhanced.
 To be added/updated!!!
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NET4GAS | ee2 | The regulatory framework for gas TSOs: current status, implications and outlook