Gas Natural Comments to the Information Memorandum and the Allocation Rules

Gas Natural comments to the Information Memorandum and the Allocation Rules

1. Transparency of the Economic Test GENERAL COMMENTS

• The economic test will determine the success of the open season in France. Therefore, transparency is needed in order to allow shippers to react to the investments rules and to reduce uncertainties.

• To assess the results of the open season, the baseline for capacity should be determined ex‐ante in each interconnection point with a flexible approach if needed (minimum capacity level allocated for the OS to succeed.

• EFET has already addressed this issue in the position paper “The Allocation of Primary Capacity. Economic Market‐based Allocation”.

INVESTMENTS LINKED TO EACH INTERCONNECTION POINT

• Investments to be decided in each interconnection point:

As it can be noticed from the charts, the interconnection point which requires a bigger effort in terms of capacity is the TIGF and GRTGaz interconnection.

If an interconnection point has different investment scenarios (ie: Larrau‐Biriatou, just Larrau, just Biriatou), information regarding the baseline for capacity of each scenario should be published in the Information Memorandum.

RECOVERY PLAN

• The European Commission has proposed to give the interconnection France‐Spain 245 M€ (200 M€ to France for the “Reinforcement of French gas network on the Africa‐Spain‐France axis”, 45 M€ to Spain for the “Gas Interconnection Western Axis Larrau Branch”).

• The Recovery Plan would have a strong positive impact in the viability of the Economic Test.

o According to the last information provided by TSOs (Development of gas interconnection capacity between France and Spain – Market consultation, November 2008) the investment cost of Larrau‐ Biriatou interconnection is 550 M€ (Larrau 472 M€, Biriatou 78 M€)

o The Recovery Plan will cover:

36% of the Larrau‐Biriatou investment costs 42% of Larrau investment costs

o It is important to have transparency regarding how the economic test will take into account the Recovery Plan.

o In addition to that, the impact in access tariffs should be provided as well

2. Access tariffs Tariff visibility should be included in the Information Memorandum. An indicative tariff range for each interconnection point should be provided. Given that the tariffs are dependent on the scale of the investment to be made, shippers should be also informed about the variation in such applicable tariffs against the allocation of different levels of capacity.

3. Investment Costs • Investment costs have a potential impact in the economic test and in the access tariffs. In this regard we would like to ask Regulators to closely monitor them. In particular as they have increased significantly since the S‐GRI started without TSOs providing a justification.

• This information should be checked and provided in the Information Memorandum taking into account the current scenario of prices.

• In Annex I, information regarding investment costs is provided.

4. Potential Second Round • It could be appropriate to include a second allocation round in order to avoid a situation in which part of the capacity offered has not been allocated to the shippers and at the same time certain capacity requests have been rejected (most probably because they included a minimum condition which turned out to be too restrictive).

• The necessity of a Second Round is of great importance in case the amount of capacity allocated during the First Round is not enough to justify the economic feasibility of the project.

5. Transparency on the results of the OS • Information regarding the amount of capacity being obtained by each bidder on the Open Season should be kept confidential as it may reveal the commercial strategy of each shipper.

• Information regarding the capacity subscribed by individual shippers through other allocation mechanisms is not made public, so the results of the Open Seasons should be treated equally.

6. Legal documentation • Shippers should be given the opportunity to comment on and influence the drafting of the capacity booking contract between the TSOs and the interested subscribers.

7. Consultation publique de la CRE sur l’accès aux réseaux de transport de gaz naturel en France et le développement des interconnexions gazières avec l’Espagne • A working group Concertation Gaz was established to analyze the access to the three market zones in France.

• The conclusions of this group have an impact in the open season; however, the discussions have not been included within the Gas Regional Initiative.

• Our main concern is that the result of this working group does not create additional delays to the development of the open season.

• Regarding this consultation,

o We would like to note that the entry into operation of the interconnection between France and Spain could modify the flows in France and might alleviate the congestion in some areas if there is more flow from South to North.

o The alternative proposed that would improve the interfaz of TIGF‐GRTGaz Sud might provide important benefits taking into account that this market is not as developed as PEG Nord and that the interconnection might provide more liquidity to this area.

• Taking into account the current network structure (TIGFÙSouthÙNorth), we consider that the allocation rules as currently proposed for the open season can bring to a very dangerous situation : Indeed, capacities could be oversubscribed at the TIGF=>Sud interface on the long term (10 to 20 years).

• This could potentially lead to :

o an internal locking of the French system on the long term 3

o a fiasco of the Open Season process on the French‐Spanish interconnections if shippers’ requests on SpainÙNorth route were globally reduced because of just one oversubscribed segment.

• For these reasons, we consider that a long term marketing of capacities as proposed in the allocation rules can be organized only in case of the disappearance of TIGFÙSouth capacity constraint (as proposed by French regulatory body in its consultation).

• Should the capacity constraint be maintained on that interconnection, the five products currently proposed for the open season (FR=>SP, SP=>FR, TIGF=>South, South=>TIGF, South=>North) should be replaced by products of bundled capacities SP=>TIGF, SP=>South and SP=>North.

• If as a result of the above mentioned public consultation there is not offer capacity SP=>South we proposed to be considered the allocation rules included in the Annex II.

ANNEX I

Larrau‐Biriatou Interconnection

Délibération de la Commission de régulation de l'énergie du 14 Délibération de la Commission de régulation de l’énergie sur Development of existing interconnections by février 2008 sur l'attribution l’attribution d’un taux de rémunération majoré au projet de 2010/11 and proposal for a new one between d'un taux de rémunération majoré aux projets de renforcement de l’artère de Guyenne France and Spain by 2013/15 développement de l’axe Guyenne – Espagne 08-dic-05 10-jul-07 M€ 14-feb-08

Laprade (Charente) à Castillon-la-Bataille (Gironde) Captieux-Castillon Captieux-Castillon 100 Lussagnet CS (renforcement) Lussagnet CS (renforcement) 50 Sauveterre de Guyenne CS Sauveterre de Guyenne CS 45 Aménagement de l’interconnexion de Roussines (Charente) Unité de comptage du gaz (Castillon-la-Bataille) 240 M€ 315 M€ Guyenne 1 Guyenne 1 195 Guyenne 1 (REAL y aprobado) 65 M€ GRTgaz, 175 M€ TIGF 65 M€ GRTgaz, 250 M€ TIGF

Sauveterre de Guyenne CS (renforcement) Sauveterre de Guyenne CS 24 Lussagnet CS (renforcement) Guyenne 2 20-40 M€ (TIGF) Guyenne 2 24 Guyenne 2 (aprobado) 35M€

Chazelles CS (renforcement) Chazelles CS, interconnection & metering 104 CS 26 MW et d’une station d’interconnexion à Chazelles Lussagnet-Captieux Lussagnet-Captieux 63 60 km 800 mm Lussagnet à Captieux. Lussagnet CS 49 2 CS 8 MW Lussagnet Sauveterre de Guyenne CS 24 2 CS 8 MW Sauveterrede-Guyenne l’adaptation des installations de comptage à Lamothe-Montravel. 308 M€ Guyenne 3 60-80 M€ (TIGF) Guyenne 3 240 Guyenne 3 98 M€ GRTgaz, 210 M€ TIGF

Reversibility of flow in TIGF network 4 compression additionnelle de 8 MW sur la station de Mont Pipeline Lussagnet-Lacq 64 60 km 800 mm Lussagnet et Lacq CS Mont 38 Proyecto Lussagnet-Lacq 106 Proyecto Lussagnet-Lacq 125

Guyenne 3 + Larrau 346 Guyenne 3 + Larrau 433

Arcangues-Coudure II and III pipelines 78

Guyenne 3 + Larrau + Euskadour 424

MIDCAT

Development of existing interconnections by 2010/11 and Development of gas interconnection capacity between proposal for a new one between France and Spain by 2013/15 France and Spain – Market consultation 10-jul-07 M€ nov-08

Pipeline Spanish/French border-Barbaira 144 Midcat 120 km Additional CS at Barbaira 38 Reinforcement of existing compressor station at Barbaira Trebling of Lupiac – Barran (28 km) (“Artère de Gascogne”) 1 CS at Etrez 80 Compressor station at Etrez Additional CS at St Martin 44 Compressor station at Saint-Martin de Crau Pipeline Artère du Rhône 407 Doubling of “Artère du Rhône” Doubling « artère du Midi » (180 km DN 900) Compressor station at Montpellier 713 1250 M€

ANNEX II

Coordinated allocation proposed

• The proposed coordinated allocation types are: “Non Flat Allocation” and “Flat Allocation”. This choice could not be enough to satisfy shippers needs.

o Transport capacity requirements of a shipper at one point can be highly conditioned by the capacity to be allocated to such shipper at the other points so coordination among points is required. However:

“Non Flat Coordination” would not be a good option for those shippers not having a minimum limit in any of the interconnection points and that can accept more than one combination of allocation at each interconnection point but following a specific profile. For example, a shipper whose capacity needs have a descendent profile from point 1 to point 3.

“Flat Coordination” would not be a good option if the shipper needs different capacities at each interconnection point.

• Proposition: A new type of coordinated allocation, “Option B.III.”.

In the capacity request, Shippers would indicate a “differential quantity” between two adjacent interconnections:

• a = Capacity requested at point 2 – Capacity requested at point 1

• b = Capacity requested at point 3 – Capacity requested at point 2

• c = Capacity requested at point 4 – Capacity requested at point 3

• “a”, “b” and “c” could be all negative or all positive

o The amount of capacity allocated at coordinated points would be calculated as indicated in the following example:

Capacity request:

• Point 1 = A

• Point 2 = B

• Point 3 = C

• Coordinated points: 1, 2 y 3.

• Type of coordination: B.III. with: a = B‐A and b = C‐B

Allocation after the 1st Stage as described in the “Allocation Rules”

• Point 1: A’

• Point 2: B’

• Point 3: C’

After the 2nd Stage the allocation would be:

• Point 1: A’’

• Point 2: B’’

• Point 3: C’’

• With B’’‐A’’ =a and C’’‐B’’=b and 0