Transcript capacities to be offered

CAM PROPOSAL FOR
HARMONISATION
17th IG meeting
Madrid
2nd November 2011
Consultation
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ENTSOG NC on CAM

ENTSOG published a first draft of the CAM NC on 21st June and submitted
to public consultation until 3rd August.

On 20th October the analysis of the responses and the possible
improvements where presented by ENTSOG.

The main improvements included the inclusion of the annual product and the
modification of auction algorithms.
Enagás and REN recommend to stick to the initial proposal, although
this might change with the final NC on CAM
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Responses to consultation (I)
During the last SG meeting which took place on July, stakeholders were asked
to provide feedback on the TSOs CAM harmonisation proposal. TSOs have
received two answers.
SHIPPER 1
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Inclusion of yearly products
ENTSOG is studying this proposal
for LT products. Enagás and REN
harmonisation proposal is for ST
(monthly or maybe quarterly)
Support of Volume-Based
Cleared-Price auctions, specially
the maximization of the capacity
allocation (pro-rata)
Enagás and REN will promote this
auction algorithm
Reserve price should be lower or
equal to the regulated tariff
The reserve price should be the
regulated tariff (no discussion at
European level for monthly/quarterly
products)
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Responses to consultation (II)
SHIPPER 2
1
In favour of co-existence of bundled
and unbundled products
Enagás an REN understand that ACER FG on
CAM only allows for bundled products
(debatable?).
Inclusion of yearly products
ENTSOG is studying this proposal for LT
products. Enagás and REN harmonisation
proposal is for ST (monthly or maybe
quarterly)
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3
The period proposed is in line with the draft
ENTSOG NC on CAM.
A different calendar would imply a delay until
2013
The period offered should be the gas
year in Portugal or the natural year
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Coordination of the allocation capacity
between different IPs
Not relevant for this pilot
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Responses to consultation (III)
SHIPPER 2
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The proposed algorithm does not
allow for price discovery and might
distort price signals. Preference for
multiple round algorithms
ENTSOG has included both single round and
multiple round auctions algorithm in the
recently launched public consultation
Enagás and REN preference for single round
at least for an initial period (see next slide)
The final allocation mechanism
implies pro-rata and does not ensure
a minimum available capacity for the
next auctions
Enagás and REN harmonisation proposal
only foresees the allocation of monthly (or
maybe quarterly) products. Capacity not
allocated in this auction will be available
through the booking procedures in place in
each country.
Reserve price should guarantee the
maximisation of capacity allocation
and the recovery of investments.
Otherwise, distortions could appear
for TSOs or in the market
TSOs fully agree with the principle that
recovery of investments should be
guaranteed.
The maximisation of capacity allocation in a
given auction could mean setting reserve
prices at zero o even negative prices.
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Auction algorithms
Single round
Multiple rounds ascending clock
 Straightforward price discovery
mechanism without need for
additional rules
 Could be considered to offer less
transparent price formation (may
be possible for users to find a way
to avoid the auction closing early)
 Considered by some
stakeholders to provide greater
transparency with regard to price
formation
 If early closure mechanisms are
applied, ensures immediate
results in case of uncongested
points
 With each bidding round, bidder
gets better understanding of
likely clearing price
 When auctions at several IPs take
place simultaneously, all the
auctions close at the same time
 Ensures immediate results in
case of uncongested points
 Appropriate for avoiding collusion
if the market is not fully
competitive
 If the market is not fully
competitive, there might be
collusion
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Experience in Spain
 Capacity at underground storages is allocated through auctions.
 The auction algorithm used is multiple round ascending clock.
 During the last two years capacity has been allocated at a clearing price
below the regulated price.
 Several factors might explain this behavior.
 However, the CNE explains in a report that one of the reasons of the
negative price might be the own regulation of the auction.
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Capacities
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Capacities
 In 12 May 2011, REN and Enagás GTS agreed the final interconnection
capacities between Portugal and Spain for the time horizon 2011-2015.
 The following delivery pressure conditions are guaranteed at the border by
both Portuguese and Spanish systems.

Tuy  Valença do Minho: 60 bar

Badajoz  Campo Maior: 76 bar

Campo-Maior  Badajoz: 55 bar
 Former capacities had flow restrictions associated to CCGTs in Portugal and
withdrawal from Carriço UGS facility. New capacities are not restricted by
these factors in Portugal.
 However, from the Spanish system point of view, it is very likely that
capacities at Tuy are subject to certain operational conditions (e.g. entry
flows from Mugardos). Thus, the necessary condition to implement a VIP is
not fulfilled.
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Capacities – TUY
Capacities in GWh/day
ENAGÁS REN
Winter
Summer
Technical capacity
(common value)
30.00
40.00
Contracted capacity SP
13.07
13.07
Capacity to be offered
16.93
26.93
REN ENAGÁS
Winter
Technical capacity
(common value)
Contracted capacity SP
Capacity to be offered
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Summer
25.00
25.00
0.00
0.00
25.00
25.00
Capacities – Badajoz
Capacities in GWh/day
ENAGÁS REN
Winter
Summer
Technical capacity
(common value)
134.00
134.00
Contracted capacity SP
134.00
134.00
0.00
0.00
Capacity to be offered
REN ENAGÁS
Winter
Technical capacity
(common value)
Contracted capacity SP
Capacity to be offered
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Summer
35.00
35.00
5.00
5.00
30.00
30.00
Harmonisation
proposal
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Main principles
PRODUCT

Service duration of a calendar month or a combination of several months up to a
maximum of 12 months.

Bundled firm capacity to be sold. This means that:

The corresponding entry and exit firm available capacity at both sides of an IP will
be offered and allocated through a single procedure.

Different contracts will be subscribed with each TSO.

The same shipper entity will need to be registered in both countries.
UNITS AND GAS DAY

Capacity will be offered and contracted in kWh/day.

The final goal is to standardise the gas day from 5:00 to 5:00 UTC. However, during
an interim period other harmonised gas day, if approved by NRAs, could be
implemented.
BOOKING TOOL

The final goal is to develop a common tool in order to organize the allocation
procedure. However, during an interim period TSOs might make available other
means to ensure coordination.
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Capacities to be offered
PERIOD

The intention is to hold the initial auction in 2012 in order to allocate capacity
from 1st October 2012 to 30th September 2013 (12 months).
CAPACITIES TO BE OFFERED

The capacity figure for this product shall be defined according to the
available capacity above existing ToP contracts and or Long Term capacity
contracts (more than one year) on both sides of the IP.

The final decision will be made once the Operating Manual currently under
revision by REN and Enagás is approved.
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Allocation methodology

Capacity will be allocated through volume-based cleared price auctions.

The reserved price shall incorporate the regulated tariff agreed by the NRAs

Capacity will be available for bidding on multiple months ahead within one
bidding window.

Depending on the various capacity needs shippers will be able to place bids
either for each month auctioned or only for some of them. However, each
month will be allocated independently.
Source: ENTSOG
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Bidding window

The bidding window will last 5 working days. During this period shippers will
be allowed to submit bids and to withdraw or modify bids previously
submitted.

At the end of each day, TSOs will publish the aggregated results of the
bidding information. No provisional interim allocation will be performed at the
end of each bidding day.

Capacity will be allocated only after the final bidding window closes.
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Bid information

Each bid shall specify:
 the identity of the network user applying;
 the concerned Interconnection Point and direction of the flow;
 the month for which the capacity is applied for;
 per price-step, the amount of capacity for the respective month applied
for; and
 per price-step, the minimum amount of capacity for the respective month
which the network user is willing to be allocated.
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Volume-Based Cleared-Price Auction

TSOs shall provide a price range of 30 price steps, starting at the reserved
price P0.

Network users shall only be allowed to submit one bid per price step.

All bidders shall submit a bid at price step P0.

Each bid quantity at P1 and subsequent steps shall be equal to or less than
the bid quantity at the previous price step.

TSOs shall aggregate the demand per price step

The clearing price is defined as price of the lowest successful bid. All
successful bids shall be deemed payable by the network users at the
clearing price.

If the total demand exceeds available capacity at the maximum price step, at
that price step the demand shall be pro-rated proportionally to the individual
bid quantity.
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Volume-Based Cleared-Price Auction

All bids at the highest price (Px) for which total demand is higher than or
equal to the available capacity offered shall be allocated.

For the final allocation the following steps shall be taken into account:
1. If network users have bid at the subsequent price-step (Px+1)

all capacity requested at Px+1 shall be allocated,

capacity requested at Px minus capacity already allocated at Px+1
shall be allocated by pro-rata proportionally to the individual bid
quantity at Px
2. If network users have not bid at the subsequent price-step (Px+1) 
capacity requested at Px shall be allocated by pro-rate proportionally to
the individual bid quantity at Px
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Thank you for your attention!