Gas Transport Services

West European Gas Transmission Tariff Comparisons

Appendix to the report to Gas Transport Services March 2012

Arthur D. Little Limited One Bedford Avenue London WC1B 3AU United Kingdom Telephone +44 (0)20 7766 0200 Fax +44 (0)20 7766 0201 www.adlittle.uk.com Reference P11000867

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Table of Contents

Appendix A: Company tariff overviews 5

1.1 Austria - OMV 6

1.2 Belgium – Fluxys 8

1.3 Denmark – Energinet.dk 9

1.4 France – GRTgaz 10

1.5 Germany 12

1.5.1 Open Grid Europe (E.ON Gastransport) 12

1.5.2 Gasunie Deutschland (GUD) 14

1.5.3 Ontras VNG Gastransport 15

1.5.4 Thyssengas (RWE Transportnetz Gas) 17

1.5.5 Wingas Transport 18

1.6 Ireland – BGE 19

1.7 Italy – Snam Rete Gas 20

1.8 Luxembourg – Creos 21

1.9 Netherlands – Gas Transport Services 22

1.10 Spain – Enagas 24

1.11 Sweden – Swedegas 25

1.12 United Kingdom – National Grid 25

Appendix B: Tariff philosophies 28

Appendix C: Matrix tariff methodologies 29

Appendix D: Methodology for calculating 1 million m3 cases 31

Appendix E: Methodology for ‘free balancing tolerance’ 33

Appendix F: Calculation of results 45

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List of Tables Table 1: Example of tariffs for > 6 bar – Zone Upper Austria 7

Table 2: Fluxys transportation tariff elements from January 2011 8

Table 3: Percentage of Fluxys customers paying the pressure reduction (DPRS) fee 9

Table 4: Danish transportation tariff elements 9

Table 5: GRTgaz transportation tariff elements 11

Table 6: GRTgaz daily limit tolerance 11

Table 7: Open Grid Europe entry-exit system 12

Table 8: GUD entry-exit system 14

Table 9: Ontras entry-exit system 15

Table 10: Thyssengas entry-exit system 17

Table 11: BGE transportation tariff elements 19

Table 12: Italy transportation tariff elements 20

Table 13: Creos transportation tariff elements 21

Table 14: Gas Transport Services transportation tariff elements 22

Table 15: GTS free tolerance levels 1 January 2011 to 31 March 2011 24

Table 16: Enagas transportation tariffs 24

Table 17: Swedegas transportation tariff elements 25

Table 18: London Distribution Network LDZ capacity and commodity charges 26

Table 19: London Distribution Network customer charges 26

Table 20: Alternative sources of flexibility to the free tolerance regimes of TSOs 35

Table 21: Summary of results using low, base and high case storage valuations 36

Table 22: Summary of results using low, base and high case storage valuations – cold weather 39

Table 23: Summary of results using base case storage valuation (cleansed tariffs) and uncleansed tariffs 43

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List of Figures Figure 1: Open Grid Europe transportation tariffs, 100 million m3, 8,000 hours, HTL offtake 13

Figure 2: Open Grid Europe transportation tariffs, 100 million m3, 8,000 hours, RTL offtake 13

Figure 3: GUD transportation tariffs, 100 million m3, 8000 hours, HTL offtake 14

Figure 4: GUD transportation tariffs, 100 million m3, 8000 hours, RTL offtake 15

Figure 5: Ontras transportation tariffs, 100 million m3, 8000 hours, HTL offtake 16

Figure 6: Ontras transportation tariffs, 100 million m3, 8000 hours, RTL offtake 16

Figure 7: Thyssengas transportation tariffs, 100 million m3, 8000 hours, HTL offtake 17

Figure 8: Thyssengas transportation tariffs, 100 million m3, 8000 hours, RTL offtake 18

Figure 9: Wingas Transport transportation tariffs, 100 million m3, 8000 hours, HTL offtake 19

Figure 10: Snam Rete Gas transportation tariffs, 100 million m3, HTL offtake only (all entry and exit points) 21

Figure 11: Gas Transport Services tariffs, 100 million m3, 8000 hours, HTL offtake (all entry and exit points) 23

Figure 12: Illustrative scattergram of GTS and Snam Rete Gas, 100 million m3, 8000 hours 29

Figure 13: Example of method for establishing characteristics of the alternative storage facility 34

Figure 14: Alternative storage tariffs 36

Figure 15: Summary of gas transportation tariff comparisons with Gas Transport Services – low and high storage valuations 37

Figure 16: Summary of gas transportation tariff comparisons with Gas Transport Services – low, base and high storage valuations, cold weather 40

Figure 17: Summary of gas transportation tariff comparisons with Gas Transport Services – no adjustment for free tolerance (uncleansed tariffs) 44

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Appendix A: Company tariff overviews In this appendix, we review the tariffs of the main companies in each country, focusing on what has changed since 2010. In the interests of brevity, we have not included all the details of each company’s carriage regime and tariffs, nor do we describe each company. We only report the tariff elements for firm transportation service for a contract duration of one year, though we recognise that many companies now offer both interruptible contracts, and contracts for a duration of less than, or more than, one year. These details can be found on the specific company website, given below: Company Country Website

OMV (tariff information published by the regulator, E-Control) Austria www.e-control.at

Fluxys Belgium www.fluxys.be

Energinet.dk Denmark www.energinet.dk

GRTgaz France www.grtgaz.com

GUD Germany www.gasunie.de

Open Grid Europe (E.ON Gastransport) Germany www.open-grid-europe.com

Thyssengas (RWE Transportnetz Gas) Germany www.thyssengas.com

Ontras Germany www.ontras.com

Wingas Transport Germany www.wingas-transport.de

BGE Ireland www.bge.ie www.gaslink.ie

Snam Rete gas Italy www.snamretegas.it

Creos (Soteg) Luxembourg www.creos-net.lu

Gas Transport Services Netherlands www.gastransportservices.nl

Enagas (tariff information published in Royal Decrees) Spain www.boe.es www.cne.es

Swedegas Sweden www.swedegas.se

National Grid UK www.nationalgrid.com

Note: in case of recent changes of company name, the previous name is given in brackets for information

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1.1 Austria - OMV The regulatory authority, E-Control, sets the postage stamp tariffs for transportation in Austria. In the document “Verordnung der Energie-Control Kommission, mit der die Tarife fur die Systemnutzung in der Gaswirtschaft bestimmt werden“, E-Control publishes the transportation tariffs to be paid in each of 9 regions in Austria. The latest Order came into force on 1st February 2008 (updated for 2011 in December 2010) and the tariffs have already been set in accordance with an incentive-based regulation. In autumn 2011 revisions to the system of gas tariff determination will be made in line with the EU Third Energy Package. There are 3 pipeline categories, corresponding to the following pipeline pressures: Level 1 transmission pipelines defined by decree. Level 2 distribution pipelines higher than 6 bar. Level 3 distribution pipelines below 6 bar. Tariffs are published for both Level 2 and Level 3 pipelines and include the domestic use of the transmission system. The transmission pipelines (Level 1) are owned by OMV Gas, Oberösterreichische Ferngas, EVN, Steirische Gas/Wärme and Begas. The E-Control publishes for each grid area (Burgenland, Kärnten, Niederösterreich, Oberösterreich, Salzburg, Steiermark, Tirol, Vorarlberg and Wien) two tariffs (levels 2 and 3) which also include the costs of the transmission system. Each postage stamp tariff is dependent on volume and consists of a commodity fee and a capacity fee. The unit charges are banded, and each successive band up to the level of annual consumption applies in turn. Thus the band 1 tariff applies to the first 8,000 kWh, the band 2 tariff to the next 7,000 kWh, the band 3 tariff to the following 25,000 kWh, and so on. The amended Load Profile Order came into force on 1st February 2008. The threshold for the installation of a load profile meter according to article 3 (3) was reduced from a minimum consumption of 1,107,001 kWh to 400,000 kWh (the transition period lasted until the beginning of 2011). From this volume upwards, the first seven bands no longer apply, as the banding begins afresh with band A. But even if a customer is below this new threshold and is also load profile metered, band A has to be applied. The graduated charges up to band F follow the same principle as those in bands 1–7. Charges for settlement periods diverging from 365 (or 366) days are made on a pro rata basis. The basis for billing of the capacity-related component of the use of system charge is the arithmetical average of the peak hourly average loads metered in each month of the settlement period. For the RTL comparisons, we take the average of the 9 published Level 2 tariffs.

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Table 1: Example of tariffs for > 6 bar – Zone Upper Austria

Consumption (kWh/year) Unit charge (€ cents/kWh)

Capacity charge (€ cents/kWh/h)

0 – 8,000 Band 1 0.0645 Tier 1 -

8,001 – 15,000 Band 2 0.0645 Tier 2 -

15,001 – 40,000 Band 3 0.0645 Tier 3 -

40,001 – 80,000 Band 4 0.0645 Tier 4 -

80,001 – 200,000 Band 5 0.0645 Tier 5 -

From 200,001 Band 6 0.0645 Tier 6 -

0 – 5,000,000 Band A 0.0645 Tier A 431

5,000,001 – 10,000,000 Band B 0.0638 Tier B 431

10,000,001 – 100,000,000 Band C 0.0598 Tier C 431

100,000,001 – 200,000,000 Band D 0.0547 Tier D 431

200,000,001 – 900,000,000 Band E 0.0517 Tier E 431

from 900,000,001 Band F 0.0513 Tier F 431

Since there is no separate tariff for using the transmission system published (because it constitutes part of the levels 2 and 3 tariffs), following discussions with E-Control, in previous years we have used for our analysis a tariff which was published by the regulator for transmission of gas within Austria on the Oberösterreichische Ferngas network from domestic production facilities. This was published within the paper “Verordnung der Energie-Control Kommission mit welcher ein Systemnutzungsentgelt für die Durchführung von grenzüberschreitenden Transport von Erdgas aus inländischer Produktion festgesetzt wird, Sept. 2004”, and featured a tariff for access to the border. This has since been replaced by the “Verordnung der Energie-Control Kommission mit der die Sonstige Transporte-Gas-Systemnutzungstarife-Verordnung 2007 geändert wird (SonT-GSNT-VO Novelle 2011)”. Two tariffs are published, for distances below and above 150 km. For our case at 50 km we use the tariff for distances below 150 km; for our cases at 200 km and 350 km we use the tariff for distances above 150 km. We use a calorific value of 39.6 MJ/m3 for Austria. Balancing tolerance No free balancing tolerance is provided in Austria.

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1.2 Belgium – Fluxys Fluxys has continued with its “enhanced entry-exit” tariff system in 2011. An indexation formula has been applied to the 2010 tariffs on the basis of the Belgian consumer price index; this has been supplied by Fluxys in its 2011 tariff update. This tariff philosophy consists of four balancing zones with each entry and exit point connected to a single balancing zone. We have continued to categorise Fluxys as having a postalised tariff in our analysis, although we recognise that for balancing purposes Fluxys has a matrix tariff system. In 2011 Fluxys has two entry tariffs, one for entry points with compression, one for entry points without compression. We have calculated a simple weighted average of these for use in our calculations (7.62 €/m3/h/y), based on the number of points of each type as listed on the Fluxys website. From April 2010, Fluxys has applied different commodity fee percentages to entry points with and without compression also, so we have taken a similar weighted average approach (0.159% total commodity fee percentage applied). The exit fees for Belgian domestic supply are uniform. Note that for ‘border to border’ transportation another tariff structure and tariffs are provided by Fluxys, which is not included in the scope of this study. The specific tariff elements for the Fluxys transportation tariff are set out in Table 2. Table 2: Fluxys transportation tariff elements from January 2011

Tariff element Unit price (€/m3/h/y)

Entry capacity

Firm entry capacity – with compression 13.83

Firm entry capacity – no compression 6.19

Exit capacity

High pressure firm exit capacity (SLP) 14.43

High pressure firm exit capacity (non-SLP) 14.43

Medium pressure firm exit capacity (SLP) 8.00

Medium pressure firm exit capacity (non-SLP) 8.00

Pressure reduction services (DPRS) 8.03

Throughput charge (as % of energy, charged at Zeebrugge price)

Entry commodity fee 0.075%

+ additional ( if Entry point has compression) 0.050%

Exit commodity fee 0.075% Note: SLP = synthetic load profile, in other words, non-metered customers. All our cases are non-SLP customers

When travelling on both high and medium pressure pipelines, both the high and medium pressure capacity components apply: in other words, they are additive. In our assumptions we have excluded charges for odorisation services, as Fluxys has informed us that this tariff is more likely to be used on the low pressure distribution networks and is not normally used by shippers serving industrial customers.

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We continue with our methodology from 2005 for dealing with the Fluxys pressure reduction fee (DPRS fee). In previous years, we had applied the full DPRS fee to all shippers delivering gas from the medium pressure network, and no DPRS fee to those shippers on the high pressure network. Since 2005, Fluxys has informed us of the percentage of shippers paying the DPRS fee for each customer volume in our analysis. These 2011 percentages are set out in Table 3 below. In our analysis, we multiply the DPRS fee by these percentages. So for example, a shipper moving 10 million m3 on the high pressure network will pay 18.1 % of the DPRS fee in addition to other tariff elements, and a shipper moving 100 million m3 on the medium pressure network will pay 49.7 % of the DPRS fee. Table 3: Percentage of Fluxys customers paying the pressure reduction (DPRS) fee

% of customers paying DPRS fee

1 million m3 p.a. 10 million m3 p.a. 100 million m3 p.a.

HTL 35.8% 18.1% 43.5 %

RTL 2.6% 15.4% 49.7% Source: Fluxys

We have used the 2010 average Zeebrugge spot price of 18.47 €cts/m3 (at 39.5 MJ/m3) to calculate the commodity term. Balancing tolerance In Belgium, hourly free balancing tolerance is provided at a rate of 50% of hourly exit capacity up to 20,000 m3/h and 16.7% above 20,000 m3/h. Cumulative free tolerance is equal to 100% of exit capacity. A daily free tolerance is also provided at 16.7% of exit capacity.

1.3 Denmark – Energinet.dk Energinet.dk uses a postalised tariff for transportation service. The tariff elements for 2011 are set out in Table 4 below. Table 4: Danish transportation tariff elements

Tariff elements Unit price

Commodity charge 0.122 ore/kWh Capacity charge for transportation – entry 10.54 DKK/kWh/h/y Capacity charge for transportation – exit 10.54 DKK/kWh/h/y

In our analysis we compare only tariffs for firm transportation, though interruptible tariffs are also available. The security of supply commodity charge is not included in the analysis. The Danish “Regional Gas Companies” are not analysed as we understand they are closer to the functionality of the low pressure distribution grids in the Netherlands. Energinet.dk assumes that the gas in its system has a calorific value of 44 MJ/m3, but this is not required for the calculations. We have converted from DKK to Euros at an exchange rate of 7.4467 DKK/€, which is the annual average rate for 2010.

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Balancing tolerance Energinet.dk provides free tolerance on a daily basis at a rate of 5% of daily capacity (which is equal to 24 times the hourly capacity booked).

1.4 France – GRTgaz GRTgaz has retained its “entry-exit tariff by zone”. The tariff elements were updated in April 2010, and were valid until April 2011, so we use these tariffs for our calculations representative of 1 February 2011. There are 8 entry points to the French system: Taisnieres B Taisnieres H Dunkerque Obergailbach Montoir Fos Midi/TIGF (previously Herault and Dordogne) Oltingue (backhaul) Each entry point has an associated annual entry charge, ranging from 65.33 to 93.62 €/year per MWh/day. For the entry point TIGF, seasonal entry tariffs apply, at 31.25 €/year per MWh/day in winter, and 43.75 €/year per MWh/day in summer. In 2011, there are 42 exit zones from the French high pressure system, grouped into 2 regions, or balancing zones: North and South. A “proximity term” gives a reduction if the gas exits the system close to where it entered. There is also an additional charge for transporting across zones. The regional network tariff is postalised. The complete set of GRTgaz transportation tariffs, for both the high pressure and the medium pressure networks are set out in Table 5.

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Table 5: GRTgaz transportation tariff elements

Tariff element Unit price

Entry charge 65.33 – 93.62 €/MWh/day/y (annual) 31.25 €/MWh/day/y (seasonal, winter) 43.75 €/MWh/day/y (seasonal, summer)

Exit capacity charge 69.17 €/MWh/day/y

Proximity term (reduction)

Entering and exiting Dunkerque – 0.25 €/MWh Entering and exiting Obergailbach – 0.25 €/MWh Entering and exiting Taisnieres B – 0.187 €/MWh Entering and exiting Taisnieres H – 0.25 €/MWh

Transporting across zones North – South 208.04 €/MWh/day/y South – North 156.03 €/MWh/day/y

Regional network capacity charge NTR * 49.93 €/MWh/day/y

Fixed delivery charge 3,952.82 €/year

Capacity related delivery charge 21.84 €/MWh/day/y

* NTR is the “transport tariff band” on the regional network. GRTgaz has advised us that for the average customer off taking from the regional transmission network, NTR is between 2 and 3

In the main report, we show a scattergram for GRTgaz charges, taking all the combinations of entry and exit points. We can therefore take a maximum and a minimum case for France in our calculations. In our analysis of the regional network, we base our NTR comparisons on a level of 2 (NTR = 2). This is the lower level advised by GRTgaz. We assume there is one delivery station. We assume a calorific value of 38 MJ/m3 for GRTgaz, though this is not required in our calculations. Balancing tolerance Free tolerance is calculated on the basis of a daily limit on daily capacity and a cumulative imbalance mid-range applied to this to provide the free tolerance. The daily limit varies by balancing zone (North H-gas, North L-gas and South) and is based on buckets of capacity, as shown in Table 6. For our calculations we have used the daily limit for North H-gas zone. Table 6: GRTgaz daily limit tolerance

Zone 0-500 MWh/d 500-1000 MWh/d

1000-2000 MWh/d

2000-50000 MWh/d

>50000 MWh/d

North H 30% 20% 20% 5% 4.5%

North L 30% 20% 5% 5% 5%

South 30% 20% 20% 5.5% 5% Source: GRTgaz

The cumulative imbalance mid-range is set at 70% of the daily limit. Cumulative free tolerance is five times the cumulative imbalance mid-range derived free tolerance.

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1.5 Germany For Germany, we describe 5 supra-regional companies. Open Grid Europe (formerly E.ON Gastransport), GUD (formerly BEB), Thyssengas (formerly RWE Transportnetz Gas), ONTRAS and Wingas Transport continue to operate entry-exit systems, with some changes made since 2010. Balancing tolerance Since October 2008 the same balancing regime has been employed by the German TSOs. There is no daily tolerance. However, hourly free tolerance is applied at 15% of exit capacity for customers <300 MWh/h and 2% of exit capacity for customers >300 MWh/h.

1.5.1 Open Grid Europe (E.ON Gastransport) Open Grid Europe is the new name for the system operator previously known as E.ON Gastransport. It has updated its entry-exit system for 2011. There are a total of 53 entry points and 467 exit points to the system, grouped as H-Gas and L-Gas. Entry and exit tariffs vary according to the point used. Table 7: Open Grid Europe entry-exit system

Market area

Number of entry points

Number of exit points

Range of entry fees (€/kWh/h/y)

Range of exit fees (€/kWh/h/y)

Gas quality (kWh/m3)

H-Gas 41 184 0.93 – 3.55 0.86 – 2.99 11.4

L-Gas 12 283 1.29 – 2.08 0.78 – 2.69 10.2

In 2011, metering and billing fees are itemized, totaling 0.04 €c/kWh. Open Grid Europe has published pressure levels for most exit points, enabling us to categorise them into the equivalent high and medium pressure groups as operated by Gas Transport Services. If the pressure level at an exit point was not published, the point has been excluded from our calculations. Transfer of gas between different gas quality zones was not available at 1 February 2011 and therefore we have only considered entirely H-Gas or L-Gas transactions within each area. The combination of all entry points to HTL exit points is given in Figure 1 below. The combination of all entry points to RTL exit points is given in Figure 2.

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Figure 1: Open Grid Europe transportation tariffs, 100 million m3, 8,000 hours, HTL offtake

Figure 2: Open Grid Europe transportation tariffs, 100 million m3, 8,000 hours, RTL offtake

Entry and exit fees have been quoted by Open Grid Europe in €/kWh/h. We have converted these fees into €/m3/h using the stated gas quality for each market area.

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1.5.2 Gasunie Deutschland (GUD) Gasunie Deutschland (GUD) was formerly known as BEB prior to its acquisition in July 2008. GUD is a supra-regional gas transporter. Its 2011 entry-exit system consists of two market areas with different levels of gas quality. Table 8: GUD entry-exit system

Gas quality Number of entry points

Number of exit points

H-Gas 17 86

L-Gas 11 82

The GUD transportation system has two tariff elements: the entry and the exit charge. Entry and exit fees to the system are either 21.63 for the H-Gas network and 19.40 €/m3/h/y for the L-Gas network. For the purposes of this study, we have looked at every combination of entry and exit points within each market area where capacity fees are publicly available. We include only combinations of entry and exit points from the same market area for our calculations, though once the tariffs have been adjusted to 35.17 MJ/m3 we can show all the entry and exit combinations on one chart. GUD publishes information which shows whether exit points are located in its regional or supra-regional network. In Figure 3 and Figure 4 below we show all entry-exit combinations at HTL and RTL offtake levels. Figure 3: GUD transportation tariffs, 100 million m3, 8000 hours, HTL offtake

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Figure 4: GUD transportation tariffs, 100 million m3, 8000 hours, RTL offtake

Calorific values for each entry and exit point are given by GUD, and so we have been able to calculate an average conversion rate for each market area. These are 40.24 MJ/m3 for H-Gas and 35.43 MJ/m3 for L-Gas.

1.5.3 Ontras VNG Gastransport Ontras is the operator of the entry-exit system for VNG. There are 11 entry points and 110 exit points. The exit points may also be ‘exit point zones’, within which a number of actual locations are accessible at the same exit fee and pressure. In constructing our point to point model, we have had to select individual locations within the exit point zones on an arbitrary basis in order to measure distances. Table 9: Ontras entry-exit system

Number of entry points

Number of exit points

Range of entry fees (€/kWh/h/y)

Range of exit fees (€/kWh/h/y)

11 110 1.46 – 1.95 1.11 – 2.35

Fees are constructed by the addition of the entry fee and the exit fee plus metering fees totalling 0.026 €/kWh/h/y, with the exception of the route between Steinitz and the Peckensen storage facility. The special ‘short trip fee’ for this journey is 0.24 €/kWh/h/y (plus metering). This is excluded from the study as a short-haul tariff and storage point related fee. The combination of all entry points to HTL offtake is given in Figure 5 below. The combination of all entry points to RTL offtake is given in Figure 6.

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Figure 5: Ontras transportation tariffs, 100 million m3, 8000 hours, HTL offtake

Figure 6: Ontras transportation tariffs, 100 million m3, 8000 hours, RTL offtake

We have used the calorific value published by Ontras of 11.15 kWh/m3 (40.14 MJ/m3).

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1.5.4 Thyssengas (RWE Transportnetz Gas) Thyssengas was formerly known as RWE Transportnetz Gas. In February 2011, it operated two market areas: Thyssengas H-Gas and Thyssengas L-Gas. The entry-exit system continues from 2010 with updates. There are 12 entry points (including sub-points) and 1027 exit points (including sub-points), according to the Thyssengas web portal. We have taken 7 main entry points and 277 main exit points for our analysis. Table 10: Thyssengas entry-exit system

Market area Number of entry points

Number of exit points

Range of entry fees (€/kWh/h/y)

Range of exit fees (€/kWh/h/y)

Thyssengas H-Gas 5 208 2.21 - 2.46 2.29

Thyssengas L-Gas 2 69 1.77-1.97 1.97

Metering and billing fees have been itemised in 2011. Some points have specific published fees and we have used these where applicable. For the other points, there are fixed fees of 219.33 €/y for metering and 432.00 €/y for billing, plus a charge varying according to the size and type of meter and pressure level of offtake. For this we have determined which meter would be relevant for our customer cases according to industry norms and calculated a weighted average fee based on the pressure level of exit points. As an example, the total charges are around 6,000 €/y for our largest customer case, around 1% of the transportation tariff. Thyssengas publishes pressure levels for most exit points. Points for which this information was not published have been excluded from our calculations. In Figure 7 and Figure 8 below we show the HTL and RTL offtake fees for all point combinations. Figure 7: Thyssengas transportation tariffs, 100 million m3, 8000 hours, HTL offtake

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Figure 8: Thyssengas transportation tariffs, 100 million m3, 8000 hours, RTL offtake

We have used a calorific value of 35.17 MJ/m3 for L-Gas and 40.36 MJ/m3 for H-Gas as these were the average values for our journeys on the Thyssengas network (overall average of 39.86 MJ/m3).

1.5.5 Wingas Transport Wingas introduced an entry-exit system on 1 July 2005, which has been modified again for 2011. Excluding the part of the network on the SEL pipeline, which is not yet connected to the rest of the Wingas Transport system, there are 9 entry points and 76 exit points. These are located in one market area. Fees are uniform throughout the system: 2.39 €/kWh/h/y for entry and 2.17 €/kWh/h/y for exit. There is a billing fee of 25 €/invoice for each exit point. Metering fees totaling 0.03293 €/kWh/h/a are applied to 13 specified exit points. The biogas levy of 0.54 €/kWh/h/y has not been included in our calculations. We have used the full range of entry and exit points for Wingas Transport (shown in Figure 9 below). No distinction is made between high and medium pressure networks (a range of pressure levels is given at offtake points). Therefore we do not review separate results for the Wingas Transport medium pressure system.

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Figure 9: Wingas Transport transportation tariffs, 100 million m3, 8000 hours, HTL offtake

As in previous reports, we assume a calorific value of 39.6 MJ/m3 for Wingas Transport.

1.6 Ireland – BGE Bord Gáis Eireann (BGE) has a postalised tariff, with separate tariffs for onshore transmission and the offshore interconnector with the UK. Shippers pay a capacity charge and a throughput charge for the onshore network, and both a capacity charge and a throughput charge for either the Interconnector or the Inch entry point. The tariff components effective 1 October 2010, are set out in Table 11. Table 11: BGE transportation tariff elements

Tariff element Unit price

Onshore network capacity charge 446.809 €/peak day MWh

Onshore network throughput charge 0.214 €/MWh

Interconnector entry – capacity charge 215.833 €/peak day MWh

Interconnector entry – throughput charge 0.090 €/MWh

Inch entry – capacity charge 68.297 €/peak day MWh

Inch entry – throughput charge 0.065 €/MWh

As the Inch charges are the lower of the two charges, we have chosen Inch for our examples.

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As was the case last year, shrinkage charges still apply to the transportation tariffs, but these are re-billed to the client at cost after the event. There is no typical percentage covering all volumes and load factors in our calculations, and we have therefore excluded these charges from our calculations. Furthermore, shrinkage gas is provided on the basis of a competitive tender and therefore market related rather than to transmission tariffs. Balancing tolerance No free balancing tolerance is provided.

1.7 Italy – Snam Rete Gas Snam Rete Gas (SRG) has retained its entry-exit approach to tariffs from 2010, although the tariff elements have been updated. Of the entry points, 7 are the major import routes to Italy: Tarvisio (imports from Russia). Passo Gries (imports from the Netherlands and Norway). Panigaglia (LNG imports from Algeria and Nigeria). Mazara del Vallo (pipeline imports from Algeria). Gorizia (by Tarvisio). Gela (pipeline imports from Libya). Cavarzere/Adriatic LNG (LNG imports from Qatar). We include the Cavarzere entry point for the first time in 2011. The remaining entry points pipe domestic production to the Italian grid. Entry charges range from 0.065189 to 2.776370 €/Sm3/day. Exit charges range from 0.346153 to 2.637864 €/Sm3/day. The variable commodity unit charge, CV, used in the calculations was 0.003168 €/Sm3, decreased slightly from 2010. There is also a further variable throughput charge (CVP at 0.000261 €/Sm3) and an additional charge for 2011 (CVFG at 0.000012 €/Sm3). When only the national high pressure network is used, the throughput charge is reduced by 40%. For the regional network, there is a capacity charge, with a reduction if the distance travelled is less than 15 km. This discourages the shipper from building a new pipeline when travelling short distances from the high pressure network. A metering charge of 0.059114 €/Sm3/d is also included in the 2011 tariffs and applied at the regional network level. Table 12: Italy transportation tariff elements

Tariff element Unit price

Entry point capacity charge 0.065189 - 2.776370 €/Sm3/day

Exit point capacity charge 0.346153 - 2.637864 €/Sm3/day

Throughput charge 0.003168 + 0.000261 + 0.000012 €/Sm3

Metering charge 0.059114 €/Sm3/day

Regional network capacity charge: 15 km and above 1.201596 €/Sm3/day

Regional network capacity charge: below 15 km 1.201596* (D/15) where D is the distance travelled in km

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In the main report, we showed the combinations of the main entry and all exit points in a scattergram. For completeness, the full scattergram is shown below, for all entry (including domestic production) and exit points to the Italian network. Figure 10: Snam Rete Gas transportation tariffs, 100 million m3, HTL offtake only (all entry and exit points)

We assume a calorific value of 38.1 MJ/m3 for Snam Rete Gas. Balancing tolerance Free tolerance is provided at a rate of 6,000 GJ per day. In our calculations, we assume that for cases where less capacity than this is required by the shipper, the free tolerance is limited to the capacity booking (i.e. the shipper could inject no gas to the system).

1.8 Luxembourg – Creos Creos, formerly known as Soteg, is the main importer of natural gas in Luxembourg, selling to both distribution companies and large scale industrial users. Creos has a postalised transportation tariff which includes a capacity element and fixed fee. The tariff structure has remained unchanged from 2010, but the capacity charge has been updated. The fixed charge is dependent on the number of exit points. We have assumed one exit point for the tariff calculation. The tariffs for firm transportation capacity are shown in Table 13. Table 13: Creos transportation tariff elements

Tariff element Unit price

Capacity charge 56.35 €/m3/h/y

Fixed charge 2000 € + Number of exit points x 200 €/exit point/year

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The public distribution companies of Luxembourg are not analysed in this report as we understand they are closer to the functionality of the low pressure distribution grids in the Netherlands. We assume a calorific value of 42 MJ/m3 for Creos, in line with company information. Balancing tolerance A 50% hourly free tolerance is provided. Daily and cumulative free tolerance is provided at different rates for winter (5 months) and summer (7 months), at 3% and 5% respectively. For our calculations we have created a simple weighted average free tolerance.

1.9 Netherlands – Gas Transport Services Gas Transport Services (GTS) has retained its entry-exit tariff structure. There are separate charges for both entry to and exit from the system. There is also an additional charge for network connections, which covers the cost of connecting pipework and gas receiving stations. The GTS tariff information on the internet includes individual connection charges per exit point. However, this list is incomplete as a significant proportion of these fees cannot be made public due to confidentiality agreements between GTS and its industrial customers. We have therefore used in our calculations the annual fixed sum for connection, which has been published on the internet by the regulator, Energy Chamber (formerly DTe), in the document: ‘Besluit tot vaststelling van de tarieven voor het jaar 2006 voor Gas Transport Services B.V.’ From 2010, the transport tariffs have included a socialised quality conversion fee. Previously this fee was charged separately to shippers who used the quality conversion service. It means that, similar to our 2010 analysis, in 2011 we can look at results from matching all entry points to all exit points rather than only those with the same gas quality, and therefore we review a far larger sample of data points. The tariffs for firm transportation capacity are shown in Table 14. Table 14: Gas Transport Services transportation tariff elements

Tariff element Unit price

Entry charges 12.20 – 20.59 €/m3/h/y

Exit charges 4.25 – 36.70 €/m3/h/y

Connection charge – standard formula 21,202 €/y

Connection charge - <1,031m3/h 20.56 €/m3/h/y

There are 52 entry points to the network and over 600 exit points. The GTS tariff methodology does not have separate elements for the high and medium pressure networks, and therefore the regional network is also subject to the entry-exit tariff approach. GTS has supplied us with data to enable us to differentiate between the high pressure and medium pressure networks for our calculations.

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In the main report, we analysed the scattergram of GTS’s tariffs for the major entry points: Bocholtz (reverse flow) OSZ OGE Balgzand HC Balgzand Nogat Maasvlakte Uithuizen Groningen Zelzate Emden NPT Emden EPT For completeness, Figure 11 also includes the minor entry points to the Dutch system. Figure 11: Gas Transport Services tariffs, 100 million m3, 8000 hours, HTL offtake (all entry and exit points)

We assume a calorific value of 35.17 MJ/m3 for Gas Transport Services. Balancing tolerance For our period of study, focusing on tariff and balancing systems in place at 1 February 2011, free tolerance was provided on an hourly, daily and cumulative basis, depending on the level of capacity booked. Tolerances were defined by the average of the shippers’ monthly booked entry and exit capacities (i.e. summing the shippers’ portfolio of entry and exit capacities then dividing by two). The daily tolerance was set at 10%.

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Table 15: GTS free tolerance levels 1 January 2011 to 31 March 2011

Tolerance bracket (m3 n;35.17)/h Percentage hourly tolerance Percentage cumulative tolerance

0 - 250,000 m3 19.9% 79.6%

250,000 - 1,000,000 m3 11.5% 46.0%

> 1,000,000 m3 5.8% 23.2%

Both hourly tolerance and cumulative tolerance were temperature-dependent. At temperatures below 0° Celsius they decreased linearly to 2% for hourly tolerance and to 4% for cumulative tolerance at -17° Celsius (effective daily period temperature in De Bilt (NL) for a gas day). The cumulative tolerance was equivalent to four times the hourly tolerance at normal temperatures and became twice the hourly tolerance at -17° Celsius. We note that from 1 April 2011 GTS introduced a revised balancing system.

1.10 Spain – Enagas The Spanish Royal Decree of September 2001 (949/2001) outlined the structure of the current transportation tariffs. The most recent tariff elements were published in December 2010. The Spanish transportation tariffs are postalised, and consist of a capacity fee and a throughput charge, depending on pipeline pressure and volume. The current tariffs associated with the high and medium pressure networks are outlined in Table 16 below, with the tariff elements relevant for our study highlighted in bold and red. Table 16: Enagas transportation tariffs

Band Annual Volume (MWh)

Capacity term €/kWh/day/mth

Throughput term €/kWh

Group 1: > 60 bar

1.1 ≤ 200,000 0.030528 0.000748

1.2 200,000 < x ≤ 1,000,000 0.027273 0.000603

1.3 > 1,000,000 0.025314 0.000543

Group 2: 4 < x ≤ 60 bar

2.1 ≤ 500 0.223530 0.001709

2.2 500 < x ≤ 5,000 0.060670 0.001363

2.3 5,000 < x ≤ 30,000 0.039724 0.001103

2.4 30,000 < x ≤ 100,000 0.036402 0.000990

2.5 100,000 < x ≤ 500,000 0.033466 0.000868

2.6 > 500,000 0.030783 0.000753

We assume the high pressure network covers Group 1 above, and the medium pressure network relates to Group 2, although in reality Group 2 (4 to 60 bar) covers both the medium and low pressure networks. The Group 1 and Group 2 tariffs are not additive, meaning that when the medium pressure network is used in our examples, the Group 2 tariffs apply instead of Group 1.

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There is also a reserve capacity charge of 0.009582 €/kWh/day/month, which applies across all the categories. Balancing tolerance Daily free tolerance is provided at 50% of daily capacity.

1.11 Sweden – Swedegas Swedegas publishes tariffs for third party access to the gas pipeline system in Sweden. The tariffs are postalised and include an administration fee, a capacity charge, an additional “winter supplement” fee for gas volumes transported between November and March, and a fixed regulatory fee. Where appropriate, a one-off ‘pressure reduction’ charge is also applied. The winter supplement and regulatory charges are two-tiered – differing according to whether pressure reduction has been applied (i.e. high-pressure to medium pressure). The tariffs have not altered since 2010 (Table 17). Table 17: Swedegas transportation tariff elements

Tariff element Unit price

Administration charge 23,000 SEK p.a.

Pressure reduction charge 70,000 SEK p.a.

Capacity fee (1 annual contract) 805 SEK/m3/h/y

Winter capacity fixed fee (before pressure reduction station) 37 SEK/m3/hr/yr

Fixed fees to regulatory authorities (before pressure reduction station) 0.001+0.001+0.0005 SK/m3

Winter capacity fixed fee (after pressure reduction station) 74 SEK/m3/hr/yr

Fixed fees to regulatory authorities (after pressure reduction station) 0.001+0.002+0.001 SK/m3

We assume a calorific value of 40 MJ/m3 for Sweden and an exchange rate of 9.5454 SEK per Euro, which is the average rate for 2010. Balancing tolerance The Swedish market model is such that Swedegas does not provide the balancing tolerance on its system; this is provided by Svenska Kraftnät, who also set the free tolerance band, which varies according to available line pack in the system. The complexities of the relationship between Swedegas and Svenska Kraftnät mean we cannot be sure the free tolerance is provided as part of the transportation tariff we have analysed. Also, there is no set and guaranteed level of free tolerance in Sweden. Therefore we have excluded any free tolerance adjustment from our calculations for Sweden.

1.12 United Kingdom – National Grid The basic structure of the National Grid tariff remains unchanged from the Transco entry-exit tariff system in 2010, though the tariff levels have been updated to reflect the recent entry capacity auctions. National Grid’s high pressure charges are made up of three components: Entry charge Exit charge Commodity charge

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The NTS entry charges result from an auction process. The reserve prices for the entry tariffs range from 0.0001 to 0.0402 p/kWh/day. Exit charges, for exit from the NTS into an LDZ, are between 0.0001 and 0.0340 p/peak day kWh/day. There is also a throughput charge of 0.0276 p/kWh. In our NTS entry tariff calculations, we are interested in yearly tariffs for firm capacity, and have considered National Grid’s MSEC auctions, for monthly system entry capacity. We have analysed the weighted average auction results over a whole year. If shippers wanted capacity for certain months only, they would bid at auction for entry capacity for those months. If there was a difference between the reserve and auction price over the year, it was generally very small. We use the auction results in our analysis, as this is the tariff the shippers will pay in practice. The regional network in the UK consists of 8 regional distribution companies, 4 of which are owned by National Grid. Regulatory changes have meant that separate LDZ tariffs are now published for each of the 8 regional networks. Each network has the same structure, but the specific tariff levels are slightly different. An example of the LDZ capacity and commodity charges published by London Distribution Network is summarised in Table 18. Table 18: London Distribution Network LDZ capacity and commodity charges

Load size Capacity charge (pence per peak day kWh per day)

Commodity charge (pence per kWh)

Less than 73,200 kWh p.a. 0.1325 0.0216

73,200 to 732,000 kWh p.a. 0.1226 0.0201

Above 732,000 kWh p.a. 0.5817 * SOQ-0.1806 (where SOQ is the Supply Point Offtake Quantity)

0.1244 * SOQ-0.2121

Subject to a minimum rate of: 0.0131 0.0018

Customer charges are primarily intended to recover costs associated with metering. Customer charges for London Distribution Network are summarised in Table 19. Table 19: London Distribution Network customer charges

Load size Unit price

Less than 73,200 kWh p.a. Capacity charge

0.0833 p/peak day kWh/day

73,200 to 732,000 kWh p.a. Non-monthly read supply points Monthly read supply points Capacity charge

26.2770 p/day 27.9790 p/day

0.0029 p/peak day kWh/day

Above 732,000 kWh p.a. 0.0639 * SOQ^-0.2100

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LDZ charges comprise throughput, capacity and customer charges (customer charges only apply to customers taking delivery from the LDZ system). The LDZ charges cover the Local Transmission System (LTS, which is the 38 bar system: the equivalent of the Dutch RTL network) and three other tiers of distribution pipes. There is a single charge for the use of all four networks, though this charge varies between customers according to volume and load factor. In other countries, a separate charge would be levied for the use of the distribution pipelines, which would enable a fairer, like-for-like comparison to be made between the tariffs in each country. We have therefore looked closely at the LDZ charges, to try to remove the tariff for the three lower pressure tiers of distribution, and allowing us to isolate the LTS components and add them to the NTS entry/exit charges. Each regional company has published the information needed to make this adjustment in its transportation tariff publication, and is the same for each regional operator. We take 51% of the LDZ tariff for our cases of 100 million m3 p.a., 37% of the LDZ tariff for the calculation of our 10 million m3 p.a., and 21% of the LDZ tariff for the calculation of our 1 million m3 cases in order to isolate the LTS component in the LDZ charges. It is important to remember that these adjustments are purely for the purposes of establishing a like-for-like comparison, and that a shipper will actually pay the official LDZ charge appropriate to the volume and load factor as outlined above. For our regional tariff calculations, we consider each exit point from the national network, and the corresponding regional tariff. This enables us to create a scattergram of entry and exit points for both the national and regional networks in the UK. For the regional network, we consider only those companies which are owned by National Grid (London, East of England, West Midlands and North West). This enables us to maintain consistency with previous years by looking at the same TSO and also means we review a single company for high and medium pressure transportation tariffs. As in the previous reports, we assume a calorific value of 39 MJ/m3 for National Grid, though it is not required for our calculations. We have used an exchange rate of ₤0.85840 per € for the UK, which is the annual average for 2010. Balancing tolerance No free tolerance is provided.

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Appendix B: Tariff philosophies In this section, we show a table of the transportation tariff philosophies offered by the companies in our report. HTL means the high pressure network, and RTL is the medium pressure, or regional, network. We note that the distinction between the matrix and postalised approaches has become less clear in recent years, as, for example, some matrix systems now carry flat tariffs and are therefore similar to postalised systems.

Country/Company Matrix tariff (entry-exit/ zonal etc)

Postalised tariff

Austria – OMV HTL/RTL

Belgium – Fluxys HTL/RTL

Denmark – Energinet.dk HTL

France – GRTgaz HTL RTL

Germany – GUD (BEB) HTL/RTL

Germany – Open Grid Europe (EGT) HTL/RTL

Germany – Thyssengas HTL/RTL

Germany – Ontras HTL/RTL

Germany – Wingas Transport HTL

Ireland – BGE HTL

Italy – SRG HTL RTL

Luxembourg – Creos HTL

Netherlands – GTS HTL/RTL

Spain – Enagas HTL/RTL

Sweden – Swedegas HTL/RTL

UK – National Grid (+ regional companies) HTL RTL (depending on region)

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Appendix C: Matrix tariff methodologies In our conclusions in the main report, we use a traffic light system to indicate whether the companies are higher than GTS (green), similar to GTS (yellow), or lower than GTS (red). In this section, we explain our methodology for comparing tariffs. This is also the methodology used for the main report. For many companies, the comparison is straightforward, i.e. for postalised tariffs. The matrix tariffs (entry-exit, zonal, nodal, etc.) are more complicated. For those companies which have matrix tariffs, there may be several different tariffs at a specific distance, or conversely, there may be no tariffs at a specific distance. We therefore use a specific methodology to obtain a high and a low case for our comparisons. We use this high and low case to reflect the range in these matrix tariffs. To ensure that tariffs exist at a given distance, we take a range around each of the 3 distances (on the HTL network our examples are 50, 200 and 350 km) to include all points 10 km above or below the distance we are analysing. For example, at 50 km we analyse the cluster of points between 40 and 60 km, as illustrated in Figure 12 below. We take the average of all the points in the 40 to 60 km range. Those points which lie above the average are used to calculate the high tariff, defined as the average of all the points above the mean. Those points which lie below the average value in the range are used to calculate a low tariff, defined as the average of all the points below the mean. Where a point has duplicates, that is points with the same tariff and the same distance, the duplicates are removed and only a single point included in the average calculations. This prevents weighting of points. Figure 12: Illustrative scattergram of GTS and Snam Rete Gas, 100 million m3, 8000 hours

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This approach is more robust than simply taking the maximum and minimum tariff for a given distance or distance range, as it avoids the potential for “extreme” tariffs, which may be very high or very low and which lie outside the main cluster of tariffs at that distance. In the main report, we show charts of the tariff scattergrams, which are the more “exact” calculations, but for all case comparisons, including Chapters 2 and 5 of the main report, and Appendix F, the matrix tariffs are adjusted, based on the methodology described here.

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Appendix D: Methodology for calculating 1 million m3 cases In this section, we set out our methodology and assumptions for the 1 million m3 cases in our calculations. This year’s study again includes calculations at 1 million m3 in the Netherlands, and other countries where these customers are eligible. However, since less than 1% of the 1 million m3 customers in the Netherlands are directly connected to the Gas Transport Services network, we have adopted a specific methodology in an attempt to allocate the connection charge fairly between the 1 million m3 customers, and we have used the same methodology for the other companies in our study. The connection charge represents the cost in Gas Transport Services’ system for connecting the customer between the collective medium pressure RTL system and the gas receiving station. The connection charge is therefore calculated for each individual gas receiving station (although a few are clustered in “pseudo gas receiving stations”). Economies of scale mean that large (high capacity) gas receiving stations pay less per unit of capacity, and this is captured in the connection charge. A shipper pays Gas Transport Services for an equivalent share of its customer of the total capacity of the gas receiving station. For example, if a customer has 1% of the capacity, then the shipper will pay 1% of the total connection charge. The average size of a gas receiving station for the distribution companies is around 20,000 m3/hour. Since almost all of the 1 million m3 customers are indirectly connected to the GTS network, we have recalculated the connection charge for these customers to include the economies of scale. The tariff cost component for a gas receiving station is €21,202. Therefore, for the 1 million m3 customers, the connection charge we use is 21,202/20,000 = 1.06 €/m3/h/y. Less than 1% of the 1 million m3 customers in the Netherlands would pay the postage stamp fee of 20.56 €/m3/h/y (when exit capacity remains the same as 2010) because they are directly connected to the GTS network. Since the large volume customers are usually directly connected, here the connection charge is calculated without any discount based on economy of scale. In summary then, the connection charge we use for our calculations at 1 million m3 is 5.2% (1.06/20.56 = 5.2%) of the total published connection charge. If no detailed tariffs are present for the connection element of a tariff, we have applied this methodology to the other companies in our study where necessary, taking only 5.2% of connection related tariffs for the 1 million m3 cases. We recognise that the 5.2% may not be representative of the numbers of customers connected directly or indirectly to the networks of other countries, but we wish to apply the same discount uniformly in our calculations. For the remaining companies, we have made the following adjustments for our calculation of the 1 million m3 cases: For OMV, Energinet.dk, BGE, GUD, Snam Rete Gas, Open Grid Europe and Ontras we have not

reduced any element of the tariff. For Enagas in Spain, specific tariffs exist for customers of 1 million m3 and so these are the tariffs used

in our calculations. For Belgium, Fluxys have advised us that only 2.6% of medium pressure customers at 1 million m3

currently pay the pressure reduction fee, so we have used this percentage to calculate this charge for our analysis for these customers.

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For Wingas Transport and Thyssengas, we have taken 5.2% of the fixed billing and metering service fees.

For GRTgaz, we have taken 5.2% of the delivery fees (for both the fixed and variable delivery components).

For the UK, we have reduced the LDZ term in accordance with our UK calculation methodology, described in 1.12.

For Creos, we have taken 5.2% of the fixed delivery fee. For Sweden, we have taken 5.2% of the administration fee and fixed pressure reduction fee.

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Appendix E: Methodology for ‘free balancing tolerance’ In 2009, the value gained by shippers from the balancing1 tolerance they receive for free as part of the transportation fee paid was considered in our analysis for the first time. We continue with this approach in 2011, using the method described below. We begin with the assertion that the ‘free tolerance’ is essentially free flexibility and therefore has value to the shipper. In some markets shippers can sell their surplus free tolerance to other shippers and realise value from it. Most shippers, however, simply use the tolerance allocated to them as part of transportation. The analysis does not review any supplements or surcharges for imbalances outside the free tolerance bands nor subscriptions to additional tolerance, as such imbalances are not free of charge or part of the standard balancing service, and therefore do not constitute part of the standard transportation service. Only the available tolerance for which no fee must be paid is considered. This has been evaluated from the best economic perspective, looking at what is available and not whether the shipper actually can or would use it. As already mentioned, the shipper can in some cases trade unused tolerance. The free tolerance exists, regardless of whether or not it is used, and regardless of who uses it. For clarification, the aim of this analysis is not the comparison of the balancing regimes themselves, but the resulting transportation tariffs after the impact of the provision of free tolerance has been taken into account. Other charges which may be levied by TSOs have not been evaluated, such as the costs associated with exceeding the free tolerance level. Such costs are not relevant to this analysis, which is aimed at making a fair comparison of transportation tariffs in terms of what the shipper actually gets in return for paying the tariff. A shipper’s free balancing tolerances can be substituted for some form of flexibility, the cost of which can be used to provide a value for the free tolerance. The method is to take physical substitutes, which the shipper could use as an alternative form of flexibility, to value the free tolerance. Röhrenspeicher and salt cavity storage are regarded as suitable alternative forms of short-term flexibility and, for each customer case, the costs to use these facilities to gain the equivalent flexibility provided by the free tolerance have been evaluated. By subtracting this figure from the standard transportation fee, a “cleansed” transportation charge can be produced for each customer case and a comparison of the TSOs’ fees without the value of the free tolerance can be conducted, thus improving the comparison of the “pure” transportation tariffs. The balancing tolerance regimes for each TSO have been applied to the required capacities, and injection rates, withdrawal rates and working gas volume figures for each case have been calculated. In order to do this, the tolerance regimes have been modelled, considering, depending on the balancing regime, the cumulative tolerance limit, both positive and negative, to be the level at which the implied storage facility is full (working gas volume). The hourly tolerance limit produces the m3/h injection and withdrawal capacity. For regimes where a daily tolerance also exists, the models showed that the daily limit did not come into play in the theoretical cycling of the storage facility, as the hourly and cumulative limits ensured the shipper was within the daily tolerance at the end of the gas day. In Germany, where there is zero daily free tolerance but hourly tolerance exists, we assume the position is in balance at the end of every 24 hours. Our method for transposing the free tolerance allowance into a theoretical alternative storage facility is depicted in the simple diagram below. This shows a regime where a shipper requires 1 million m3/h/y of capacity. He receives 10% hourly free tolerance and cumulative tolerance of 100% of his booked capacity.

1 Balancing is the process of ensuring the network has equal inputs and outputs. An imbalance occurs when inputs exceed outputs, or vice versa. The TSO usually has responsibility for the entire network, while individual shippers have responsibility for their own positions.

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Figure 13: Example of method for establishing characteristics of the alternative storage facility

Source: ADL

The type of flexibility which would be a relevant substitute for the free tolerance will be different depending on the requirement stemming from the particular balancing regime. For example, in a regime where the free tolerance is filled in a few hours (very short cycle time), a Röhrenspeicher facility may be appropriate as the substitute, whereas for a regime where the maximum free tolerance is not reached for a number of days, it may be substituted for a salt cavity storage facility. We are aware that the actual physical characteristics and capacity status of storage facilities mean that they may not be operated in the manner demanded of our theoretical facility in reality (e.g. equal and completely stable injection and withdrawal rates, very high numbers of cycles per year); this approach simply assumes the facility is able to operate as complete substitute for the free tolerance. We have used the capacity requirement of the 45 transportation cases in our study to define the alternative storage requirement, meaning that we can subtract the value for each case from the full transportation tariff result for each case.

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

6 9 12 15 18 21 0 3 6 9 12 15 18 21 0 3

Hour

m3

The working gas volume is the full range of the cumulative tolerance, in this case 2 million m3

Hourly tolerance forms the capacity for the injection and withdrawal rate per hour, in this case 0.1 million m3/h. A full cycle (maximum negative position to maximum positive and back to maximum negative) takes 40 hours in this regime

Zero on the y axis is equal to a position of no imbalance

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Table 20: Alternative sources of flexibility to the free tolerance regimes of TSOs

TSO Röhrenspeicher Salt cavity

GTS

Fluxys

Creos

GRTgaz

Snam Rete Gas

Open Grid Europe

GUD

Thyssengas

Ontras

Wingas Transport

Energinet.dk

Enagas

Note: TSOs not listed do not provide free tolerance

The value of the theoretical alternative storage has been established by using commercial tariffs for the salt cavity (we use the Storengy tariff for its Saline facility; this has been selected in part as the tariff consists of separate elements for injection, withdrawal and working gas volume rather than as a bundled storage service allowing us to make the necessary calculations). For the Röhrenspeicher we have been able to find published costs for the construction of these facilities in Switzerland between 2003 and 2008, and have combined these with assumptions for return on investment (8% over 20 years) and operating costs (2% of capex per annum) to produce a ‘tariff’ a shipper might pay to use such a facility. In the results shown in the main report, we use a ‘base’ valuation for the alternative storage, which is either the calculated Röhrenspeicher tariff or the actual salt cavity tariff. Gas Transport Services suggested that to check the robustness of this analysis we should also consider high and low cases at 50% above and below the base case. These curves are depicted in Figure 14.

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Figure 14: Alternative storage tariffs

As mentioned, in the main report we show all results using the base storage valuation. In Figure 15 we show the equivalent of Figure 1 in the main report using the high and low storage valuations. These results can be summarised by looking at the percentages of red, yellow and green traffic lights in each case, shown in Table 21. Table 21: Summary of results using low, base and high case storage valuations

Traffic light Low Base High

Red 5% 5% 5%

Yellow 38% 37% 39%

Green 57% 58% 56%

Note: Red = GTS tariffs are higher, Yellow = GTS tariffs are similar, Green = GTS tariffs are lower; rounding means totals may not = 100%

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Figure 15: Summary of gas transportation tariff comparisons with Gas Transport Services – low and high storage valuations

Low case storage valuation

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High case storage valuation

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Gas Transport Services’ free balancing tolerance decreases when temperatures fall below 0° Celsius. In the main report we show we show results based on only the free tolerance levels for 0° Celsius and above. We have carried out similar analysis at a temperature of -17° Celsius, adjusting the level of free tolerance provision by GTS as appropriate. In Figure 16 below we show the equivalent of Figure 1 in the main report incorporating the cold weather case for GTS. We show these results for the low, base and high case storage valuations and summarise them in Table 22. Table 22: Summary of results using low, base and high case storage valuations – cold weather

Traffic light Low Base High

Red 6% 7% 10%

Yellow 40% 42% 44%

Green 54% 51% 46%

Note: Red = GTS tariffs are higher, Yellow = GTS tariffs are similar, Green = GTS tariffs are lower; rounding means totals may not = 100%

Overall, therefore, one can conclude that in this more advanced approach compared with that used by ADL in prior years, the GTS transportation tariff is still among the lowest in the sample of TSOs which have been surveyed. This is a very robust conclusion, as it remains true in a wide range of cost conditions and under normal and cold weather conditions. Thus the main conclusions of the annual reports can be confirmed by this more advanced analysis.

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Figure 16: Summary of gas transportation tariff comparisons with Gas Transport Services – low, base and high storage valuations, cold weather

Low case storage valuation, cold weather

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Base case storage valuation, cold weather

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High case storage valuation, cold weather

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For completeness, we also show in Figure 17 the ‘traffic light’ result prior to any adjustment for free balancing tolerance. This is equivalent to results shown in our previous reports and therefore allows the reader to make a comparison with the result including the free tolerance valuation. The summary of results of red, yellow and green traffic lights in Table 23 shows very similar outputs for the cleansed and uncleansed tariffs. Table 23: Summary of results using base case storage valuation (cleansed tariffs) and uncleansed tariffs

Traffic light Cleansed Uncleansed

Red 5% 5%

Yellow 37% 38%

Green 58% 58%

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Figure 17: Summary of gas transportation tariff comparisons with Gas Transport Services – no adjustment for free tolerance (uncleansed tariffs)

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Appendix F: Calculation of results

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