ERGEG Guidelines of Good Practice for Gas Balancing (GGP-GB): 2008 ERGEG Monitoring Report

XV Madrid Forum, 6 and 7 November 2008

ERGEG Guidelines of Good Practice for Gas Balancing (GGP-GB): 2008 ERGEG Monitoring Report

Mr. Walter Boltz ERGEG’s Gas Focus Group (GFG)

2 XV Madrid Forum, 6 and 7 November 2008

Structure of the presentation

Brief overview ERGEG 2008 Monitoring Exercise: GGP-GB

Presentation of top level findings TSOs Users

ERGEG Conclusions Outlook Relevance of compliance monitoring


Brief review: ERGEG GGP-GB monitoring

12/2006 ERGEG presentation ofGuidelines of Good Practice for Gas Balancing(GGP-GB): Voluntary guidelines

01/2008 Beginning of ERGEG’s monitoring workFocus on 2 dimensions- TSO perspective: transmission systems

- User perspective: Ask market participants directlyAIM: Validation of responses via cross-check

07/2008 First deadline for the submission of informationtwo extensions granted

10/2008 Inclusion: NRA perspective: Additional questionnaire

11/2008 at MF15: Presentation of initial findingsafter MF15: Presentation of an ERGEG report

12/2008 Finalisation of 2008 ERGEG monitoring workPublication of the ERGEG 2008 monitoring reportFinalisation of 2008 ERGEG monitoring work


Brief review: Structure of the monitoring process

Inclusion of the following groups/market participants

TSOs

Users

Responses received cover the following countries

21 TSOs submitted responses 29 users submitted responses


GGP-GB monitoring: Top level findings

GGP-GB not specific enough

More than 80% of TSOs state that following the introduction of the ERGEG GGP-GB, they have not made any changes to their current balancing regime.

More than 55% of users state that the publication of the ERGEG GGP-GB has not had any impact whatsoever.

Timely information about balancing positions needed

In almost 60% of the cases, it takes TSOs more than 12h to inform users of their system reg. their balancing position.

More than 40% of users responding in the survey do not consider the time interval of updating of information to be sufficient. In almost 70% of the cases, users report that it takes the TSO longer than 12h to inform them reg. their balancing position.



User-friendliness of information provided on balancing

Almost 50% of users do not consider the information system of the TSO to be user-friendly. More than 40% of the users state that they have not been consulted on the level of information to be published by the TSO.

Almost 60% of the TSOs do not make demand forecasts for their transmission system available to their users.

55% of users find that they do not have access to the information that they need to manage their imbalance positions efficiently.

Almost 70% of users state that existing balancing rules do not reflect their needs.



Harmonisation of balancing regimes

Almost 60% of users have actually encountered difficulties related to balancing when shipping gas through different pipeline systems.

Almost 70% of TSOs claim that they have cooperated with other TSOs to seek greater harmonisation of their balancing rules and balancing mechanisms, however the majority of users says this has not had any effects.

More than 70% of users in the survey think that greater harmonisation of balancing regimes is needed.


GGP-GB monitoring: ERGEG conclusions

Lack of compliance with GGP-GB/GGP-GB not specific enough Better specification and more stringent implementation needed

Differences in balancing regimes need to be reducedNeed for greater harmonisation, in particular: balancing periodA reduction of the balancing zones needs to be achieved

Depending on the balancing regime in place users need to have access to appropriate options to manage their positions: e.g. trading, pooling

The procurement of balancing energy should be done in amarket based manner to ensure that balancing energy is procured in the most cost efficient manner

ERGEG’s primary conclusion:Need to make the existing GGP-GB more specific

and to transform them later on into binding balancing guidelines


Further conclusions

ERGEG’s 2008 monitoring exercise of the GGP-GB has helped to substantiate the view that differences in balancing regimes are indeed impediments to the creation of the IEM

Greater harmonisation of balancing regimes and balancing rules is urgently required

Harmonisation of balancing periods: Move towards daily balancing

Reduction of balancing zones: Creation of greater balancing areas

Use of market based systems for the procurement of residual balancing energy

Non-discriminatory and transparent balancing regimes for gas are key to functioning gas markets

Current rules are NOT assuring non-discriminatory and transparent gas balancing

ERGEG is committed to ensure that the balancing regimes are modified to overcome current shortcomings


Outlook: Relevance of compliance monitoring

Regular monitoring of relevant EU regulation is absolutely required to ensure the functioning of the markets in both electricity and gas and to promote competition

Where there is non-compliance, findings from monitoring need to be used to ensure and enhance compliance at a national level

This implies: Proper use of enforcement procedures Where existing: national regulators will use their enforcement powers to

assure compliance Where insufficient: national regulators need to be given adequate

powers to ensure compliance with relevant EU regulation

Close cooperation with European Commission’s on the study on methodologies for gas transmission network tariffs and gas balancing fees in Europe (Tender No. TREN/C2/240-241-2008)


Future ERGEG compliance monitoring

Elements for the future approach of compliance monitoring Identification of monitoring priorities by subject areas by EC, ERGEG and

the Madrid and Florence Fora ERGEG Work Programme lists scope and timetable for monitoring Monitoring at clearly defined cut-off dates backed up by proper IT

infrastructure, i.e. online Questionnaires addressed at NRAs, which are responsible for compliance

at national level Infrastructure users to be involved for the assessment of user-friendliness

and practicability of the systems implemented by infrastructure operators When monitoring legally binding regulation, enforcement action by NRAs to

be surveyed For each subject area monitored by ERGEG, the enforcement powers

available to NRAs shall be surveyed


# Issue Deliverable Cut-off dateGA

approval

Monitoring GGP-GBRequest by the 14th Madrid Forum

ERGEG Compliance Monitoring Report on the Implementation of the Guidelines of Good Practice on Gas Balancing

JUL 08 DEC 08

23GMM-1

Monitoring the Gas RegulationRequest by the 14th Madrid Forum

ERGEG Compliance Monitoring Report on Art. 5 and 8 of Reg. 1775/2005

JUL 09 OCT 09

24GIF-1

Monitoring GGP-OSRequest by the 14th Madrid Forum

ERGEG Compliance Monitoring Report on the Implementation of the Guidelines of Good Practice for Open Seasons

JUL 09 OCT 09

Monitoring GGPLNGRequest by the 15th Madrid Forum

ERGEG Compliance Monitoring Report on the Implementation of the Guidelines of Good Practice for LNG System Operators

NOV 09 FEB 10

Timetable for monitoring gas-related regulation


Further information is available at

www.energy-regulators.eu

Thank You !


Extra slides


Contextualisation of findings

Findings from ERGEG’s 2008 monitoring work have to be seen in the wider context of:

European Commission’s inquiry into competition in gas and electricity markets in 2005, pursuant to Article 17 of Regulation 1/2003 EC (‘ Sector Inquiry’).

ERGEG’s work at the regional level: Gas Regional Initiative (GRI) and its Regional Energy Markets (REM)

Work carried out by independent consultants, e.g. PwC: regional market development and impediments for traders in the South South East (SSE) European region (‘Trader Survey Gas 2008’)

European Commission’s project on methodologies for gas transmission network tariffs and gas balancing fees in Europe (cf. Tender No. TREN/C2/240-241-2008)


GGP-GB monitoring: Participation: TSOs

21 TSOs (draft report)countries highlighted in greenseveral late submissions of information: Will be considered in the final report

Good participation rate and geographic coverage

TSOs (and users) were given enough time to submit their information:Two extensions granted timewise

ERGEG is please with the overall response rateAll material will be made available via the ERGEG web pageThis includes any additionall material that TSOs/users have submitted


GGP-GB monitoring: Participation: Users

29 submitted respones (draft report)Countries highlighted in green Users were able to submit multiple responses for different TSO systems

80% shippers, 15% traders

TSO systems covered:Countries highlighted in green Major European natural gas transmission systems covered by users’ responses



More than 80% of TSOs admit that following the introduction of the ERGEG GGP-GB, they have not made any changes to their current balancing regime.

This is actually reflected by what users say:

More than 55% of users state that the publication of the ERGEG GGP-GB has not had any impact whatsoever.



In almost 60% of the cases, it takes TSOs more than 12h to inform users of their system reg. their balancing position.


More than 40% of users responding in the survey do not consider the time interval of updating of information to be sufficient. In almost 70% of the cases, users report that it takes the TSO longer than 12h to inform them reg. their balancing position.



95% of TSOs think that the cost of balancing are predictable for new suppliers when entering the market.

Users do not necessarily agree with that:

Almost 45% of the users state that the existing penalty charges create indeed a barrier to market entry.



Almost 60% of the TSOs do not make demand forecasts for their transmission system available to their users.

Almost 50% of users do not consider the information system of the TSO to be user friendly. More than 40% of the users state that they have not been consulted on the level of information to be published by the TSO.

Users heavily criticise information availability:



More than 70% of the TSOs admit that they do not publish online information regarding the overall costs incurred for balancing

55% of users find that they do not have access to the information that they need to manage their imbalance positions efficiently.

Balancing cost is key information for effective balancing:



Almost 65% of TSOs admit that they do not provide a system for neither pooling nor trading of imbalance positions.


Almost 40% of users in the survey state that they have never pooled their positions, 20% state that they have never traded their positions.



Almost 70% of TSOs claim that they have cooperated with other TSOs to seek greater harmonisation of their balancing rules and balancing mechanisms, however the majority of users says this has not had any effects.

More than 70% of users in the survey think that greater harmonisation of balancing regimes is needed.

Users heavily criticise the lack of harmonisation:


GGP-GB monitoring: Top level findings: TSOs

In more than 60% of the cases, TSOs procure residual balancing gas on a contractual basis.

Only in less than 20% of the cases, the balancing regime is based on market mechanisms, e.g. merit order. 90% of TSOs use line pack for balancing purposes.


GGP-GB monitoring: Top level findings: TSOs

More than 30% of TSOs apply different tolerance levels to different user types.

In more than 30% of the cases, there are different balancing regimes in place for transit and transport.


Almost 70% of users state that existing balancing rules do not reflect their needs.

GGP-GB monitoring: Top level findings: Users

Almost 40% of users regard the allocation procedure of imbalance charges as being intransparent.



Almost 60% of responses to the survey state that users have not been consulted on the time period for settlement of provisional allocations.

Almost 60% of users said that the application of the so-called “3-rule” prevents them from accessing relevant information.



The harmonisation of balancing periods is the greatest priority (65% of responses): Almost 60% of users have actually encountered difficulties related to balancing when shipping gas through different pipeline systems.

More than 50% of users in the survey say that they do not consider the balancing period to be appropriate. Almost all users prefer daily balancing to hourly balancing.

ERGEG Guidelines of Good Practice for Gas Balancing (GGP-GB): 2008 ERGEG Monitoring Report

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