EUROPEANCOMMISSION

Heinrich Hick, DG TREN C 2

3rd IEM Package and relevance of GRI

GRI NW stakeholder Conference, London, 14 November 2008

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Content of the presentation

.Update on legislative process

.Relevant issues in negotiations» Unbundling» Agency» Comitology» ENTSOG.Relevance of Gas Regional Initiatives

.Conclusions / Timing

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Legislative process

.Council» Energy council conclusions of 6 June 2008

• Confirmed by European Council of 20 June 2008» Energy Council of 10 October 2008

.Parliament» Plenary vote to conclude first reading

• Electricity Directive Electricity Regulation and Agency Regulation on 18 June 2008

• Gas Directive and Gas Regulation on 9 July 2008

. Commission proposal Sept. 2007

. Launching of second reading

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Parliament

. [Electricity: ownership unbundling is the only way]

. Gas: ownership unbundling and a type of independent transmission operator

» Difference to ITO in the Council: Trustee • To guarantee the value of the TSO for the VIU• Appoints members of Supervisory Board that are not appointed

by VIU• Veto on decisions that affect value of the networks assets

» ISO is deleted

. Third option: Independent transmission operator

. TSO remains part of integrated undertaking but detailed rules ensure independence of TSO

UnbundlingCouncil

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Agency

. Relation between ENTSO and Agency is changed» Framework guidelines that define work for TSOs

Council

. More powers for the Agency» Framework guidelines that define ENTSO work» Agency shall consult in drafting process» Agency can adopt codes» 10-year network investment plan of ENTSO is approved and

made binding by the Agency» Impose penalties on TSOs

. Not in line with Meroni judgement on delegation of discretionary powers of the Commission

Parliament

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Framework Guidelines & Network Codes

European Network Codes:

Key tool for creation of efficient single market to be developed for all key aspects relevant for cross-border network issues

Process for adoption of European Network Codes & Framework Guidelines still open in negotiations !

Process still to be agreed: European Commission + Agency + ENTSOG (+ consultation of stakeholders) Relationship / interaction between regulators and TSOs is key

Proposal backed by Council ? Commission: set priorities for code development and prepare codes for

adoption through comitologyAgency: set objectives for codes in framework guidelines & advise CommissionENTSOG: draft codes

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Guidelines and comitology

. Guidelines remain:» Certification» Cross-border regulatory cooperation» Record keeping» Article 22 exemptions

. Guidelines deleted:» Public Service Obligations» DSO unbundling» Powers and duties of NRAs» Independence of TSOs» Retail markets

Council

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Guidelines and comitology

.Parliament

» Delete all comitology in Directives

» Possibility to make guidelines through comitology remains for:

• Network codes• Change of existing guidelines (first adoption

through codecision)

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Commission proposal on Network Codes

European Commission proposal listed 11 areas including:

- grid connection and access- capacity allocation and congestion management- harmonized transportation tariff structure- rules for trading- balancing rules- transparency

In the interim period useful work is being done on all these issues through the development, consultation and monitoring of Guidelines for Good Practice (GGP)

Priority concerns persist: - lack of access to existing infrastructure- lack of transparency- practical problems with interoperability and coordination with TSOs

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ENTSOGLimits of voluntary cooperation of TSOs

3rd package proposes to task TSOs with strengthening their cooperation through establishment of ENTSOG

make sufficient transmission capacity available allow for coordinated long-term planning of system development incl. identification of investment gaps in particular on cross border capacity monitoring of capacities

ENTSOG to draft network codes (pm adhering to framework guidelines)

3rd Package proposes obligation of ENTSOG to prepare a 10 year network development plan every 2 years (different procedure than for codes): integrated network modelling, scenario development, assessment of resilience and deliverability of system

Gas TSOs have started up an intermediate body GTE+

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Common GRI Priorities

.Regions have identified the following priorities:

• Monitor the level of transparency

• Improve transparency

•Increase interconnection capacity (better use of capacity or new capacity)

• incentives for investment

1) Transparency

2) Capacity

3) Investment

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Way Forward GRI – Requirements

. Current concept and structure of the GRI not contradictory to the 3rd package

» addresses the 3rd package's concept of regional cooperation

» GRI remain a model for practical implementation of regional cooperation

. Requirements for way forward» remain in line with/neutral on the 3rd package proposals » focus on practical best practice solutions » transparency and involvement of all stakeholders» not allow for market segregation – ensure consistency with

• other regions • ERGEG work programme• GTE/GTE+ work programme • TEN initiative of the Commission (regional coordinators)• Pentalateral Forum/Gasplatform

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Regional approach

. Regional approach strengthened in the third package. Bottom-up/Top down?» Both needed. How will regional co-operation between TSOs be organised» ENTSOG. How will regulatory co-operation be organised» Agency

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XV Madrid Forum: Relevance of Regional Initiatives

Regulation (EC) No 1775/2005 – Monitoring Art 6 and Art 7 9. The Forum welcomes the presentation by Ofgem on behalf of ERGEG, on the

Northwest regional initiative, concerning improving transmission transparency. The Forum asks for an update of this project at the next Forum and recognises the usefulness of replicating this initiative as appropriate in other regions. ….

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Gas Regional Initiatives

34. The Forum asks for Member States' involvement at governmental level in the regional initiatives to eliminate existing impediments and address legal constraints, as in the positive examples, such as the case of South Regional Initiative, presented by ERGEG.

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37. The Commission announced that it will launch a study on the effectiveness of regional initiatives. This study will look at the organisation and progress in the different regions to identify best practices that can be replicated to other regions.

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40. Forum takes note of the letter of EFET, Eurogas, Eurelectric and Geode, backed by IFIEC, supporting the regional cooperation in the 3rd package.

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Conclusions

.We have the agreement of the Member States on the third package» Unbundling approach workable» New structures: Agency and ENTSOG

Work ahead of us:

. Legislator to adopt the package.Putting in place new structures.Starting the work on European rules, network planning etc..GRI to continue to contribute to process