Benoît Esnault Commission de Régulation de l’Energie (CRE) - ERGEG 19th Madrid Forum, 21-22...

Benoît EsnaultCommission de Régulation de l’Energie (CRE) - ERGEG19th Madrid Forum, 21-22 March 2011

Preparatory work for

Framework Guideline Tariffs

219th Madrid Forum, 21-22 March 2011

Agenda

• Background• Identification of problems• Identification of objectives• Scope• Process


Background

• Legal requirements on transmission tariffs• De-coupled entry-exit systems;• No distinction between domestic transport and “transit”;• Qualitative requirements (Commission Staff Working Document).

• KEMA study 2009• Evaluation of existing differences in the methodologies for gas

transmission network tariffs in Europe; and• If these lead to barriers to cross-border trade.

• 17th Madrid Forum invited ERGEG to start preparatory work on framework guideline on tariffs

• ACER to launch official FG development process


Main legal requirements

• Article 41 Gas Directive (2009/73/EC) • The NRA shall ensure that TSOs are granted appropriate

incentive, over both the short and long-term, to increase efficiencies, foster market integration and security of supply and support the related research activities.

• Article 13 Gas Regulation (EC) 715/2009: Transmission tariffs or methodologies

• Shall facilitate efficient gas trade and competition, while at the same time avoiding cross-subsidies between network users and providing incentives for investment;

• Reflect the actual costs incurred;• Tariffs may also be determined through market-based

arrangements, such as auctions, provided that such arrangements and the revenues arising from them are approved by the NRA.


Identification of problems

• Tariffs can act as barriers to efficient gas trade and competition• Premium on short term capacity products allocated with a short lead

time may frustrate arbitrage flows and price alignment;

• But: need to assess the relation between prices for short term and long-term capacity products and the risks associated to optimisation strategies by shippers;

• Pricing of interruptible and non-physical backhaul capacity.

• Need to find a proper balance between facilitating short term gas trading and providing long-term signals for covering costs and promoting efficient investments

• Cross subsidies between cross-border and domestic network usage• Cross subsidies within a market; and

• Cross subsidies between two adjacent markets.

Cost-reflectivity as a main principle


Identification of problems: Further issues

• Issues resulting from FG on CAM and Balancing:• Cost recovery and revenue sharing among TSOs:

under- and over-recovery of allowed revenues, risk of sunk costs, articulation between capacity and commodity, definition of the appropriate reserve price;

• Split of auction revenues between TSOs for bundled capacity products.

• Infrastructure development: to ensure a proper remuneration and investment incentivisation• Relation with the work on the Energy Infrastructure

Package.


Analysis of national charging systems

• Ongoing complementary analysis to the KEMA study (10 Member States until now);

• Picture of current situation – changes are foreseen with the implementation of the 3rd Package;

• Entry and Exit capacity separately bookable in some cases – for others distinction between tariffs on cross-border and domestic network

No common rule for the breakdown of costs

• Between entry and exit on the IPs;

• Between domestic exits and exits on the border.

• Different role for distance in tariffs calculation;

• Short term vs. long-term prices: Higher prices for daily and monthly products, with seasonality factor in some cases;

• Discount for interruptible products based on the probability of interruption;

• Few TSOs offer non-physical backhaul products.


Identification of objectives

• Objective 1: Harmonised transmission tariff structures shall facilitate efficient gas trade and competition;

• Objective 2: Harmonised transmission tariff structures shall avoid undue discrimination between cross-border and domestic network usage;

• Objective 3: Harmonised transmission tariff structures shall provide incentives for new and efficient investments

• Objective 4: Harmonised transmission tariff structures shall guarantee recovery of allowed revenues associated to cross-border interconnection points.

The work on the Gas Target Model to be taken into account in the Tariff FG development process.


Proposed scope

• Cross-border interconnection points• IPs between two or more Member States as well as IPs

between adjacent entry-exit-systems within the same Member State;

• IPs to LNG and storage facilities may be included, if relevant for market integration and the contribution to non-discrimination, effective competition and the efficient functioning of the market.

• Contribute to recovering the allowed revenues (associated to interconnection points);

• However, detailed rules for the determination of costs (or allowed revenues) are not within the scope.


Process

• Process so far• Preparatory work by ERGEG;• 5 bilateral meetings with ENTSOG;• Initial scoping discussion with the Commission.

• Next steps (according to 3-year plan)• Q1/2011: Finalisation of scoping discussion;• April-October 2011: Official FG development process

by ACER.


Thank you for your attention!

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Benoît Esnault Commission de Régulation de l’Energie (CRE) - ERGEG 19th Madrid Forum, 21-22...

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