General Agreement on Tarrifs and Trade - Excel by pso19902

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									                                                                                                      Questionnnaire on investments 2008 GRI northwest




1. General questions on context of sound investment
climate



                              org_name                                                     category
GDF Suez                                                               networkuser
Essent                                                                 networkuser
POWEO                                                                  networkuser
Electricity Supply Board                                               networkuser
GASELYS                                                                networkuser
Merrill Lynch Commodities (Europe) Limited                             networkuser
anonymous networkuser 1                                                networkuser
E.ON UK                                                                networkuser
Centrica Plc                                                           networkuser
GRTgaz                                                                 TSO
N.V. Nederlandse Gasunie                                               TSO
Vattenfall, Generation Nordic                                          networkuser
On behalf of Shell Energy Europe                                       networkuser
DONG Naturgas                                                          networkuser
GasTerra B.V.                                                          networkuser
National Grid                                                          TSO
Gaslink Independant System Operator Limited                            TSO
anonymous networkuser 2                                                networkuser
Eneco Energy Trade                                                     networkuser
DONG Energy Pipelines GmbH                                             TSO
Swedegas AB                                                            TSO

This overview excludes several "paper"s submitted via email as
response to consultation. These papers shall be published separately
in parallel to this online-response overview.




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                                                                                                        Questionnnaire on investments 2008 GRI northwest




1a. Questions to determine your interest in investment

1 What activities of the gas supply chain are you currently
involved in? In which countries do you operate?
GDF Suez                                                      Midstream
                                                              Capacity reservation (storage, transport, LNG terminalling) over whole
                                                              Europe
Essent                                                        distribution of gas, trade and sales
POWEO                                                         POWEO is a retailer in Gas & Power and operates CCGT and power
                                                              assets. POWEO is as well the main shareholder and the project leader
                                                              of Gaz de Normandie, an LNG Regasification Terminal located in
                                                              France. Poweo aims to be an active member of main continental
                                                              Europe Hubs and to book transit capacity.
                                                              Poweo is then a mid- and downstream company, with main activities in
                                                              France
Electricity Supply Board                                      Purchase and Ship gas in the UK at the NBP and ship gas in the ROI,
                                                              we are an end user of the gas for power generation.
GASELYS                                                       Trading
                                                              France, Germany, UK, Netherlands, Belgium, Austria
Merrill Lynch Commodities (Europe) Limited                    Offshore optimisation, downstream gas marketing and trading, storage
                                                              investment
anonymous networkuser 1
E.ON UK                                                       Shipper, Supplier, Storage Operator and user
                                                              England, Wales and Scotland




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Centrica Plc                                             Centrica’s core gas business is the supply of energy to household and
                                                         business consumers. We supply gas to retail gas customers in Great
                                                         Britain (as British Gas), The Netherlands (as Oxxio) and in Belgium
                                                         (via our stake in SPE). Centrica is also active as a gas producer,
                                                         shipper and wholesale trader. We operate gas-fired power plants in
                                                         the UK and Belgium (again, via SPE) and hold a tolling agreement with
                                                         Intergen’s Rijnmond II power plant under development in The
                                                         Netherlands.

                                                         In addition to our activities in our home market of Great Britain,
                                                         Centrica’s existing European gas activities are concentrated in the
                                                         north west of Europe, in Belgium, the Netherlands and in Germany.
                                                         Within the EEA we also own businesses in Spain and Norway.


GRTgaz                                                   TSO
N.V. Nederlandse Gasunie                                 N.V. Nederlandse Gasunie, owner and administrator of and investor in
                                                         gas infrastructure
Vattenfall, Generation Nordic                            Whole saler and end user.
                                                         Operation in Denmark and Germany
On behalf of Shell Energy Europe                         As a pan-European organization, Shell Energy Europe (SEE) covers
                                                         18 markets and sells gas to over 7000 customers, i.e. industrial and
                                                         commercial end-consumers, as well as regional & local distribution
                                                         companies. SEE oversees activities in the following countries covered
                                                         by the ERGEG GRI N/NW group: Belgium, Denmark, France,
                                                         Germany, Ireland, Netherlands, Norway, Sweden, UK

DONG Naturgas                                            DONG Naturgas is member of the DONG Energy group of companies
                                                         engaged in the whole gas supply chain. The group is active in
                                                         Sweden, Denmark, Germany and The Netherlands
GasTerra B.V.                                            Gas trade in Netherlands, UK, Germany, Belgium, France, Italy,
                                                         Switzerland
National Grid                                            National Grid owns and operates the Gas Transmission System in
                                                         Great Britain and also owns four of the eight GB Gas Distribution
                                                         Networks.




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Gaslink Independant System Operator Limited                     Operation, Maintenance and Development of the Gas Transportation
                                                                Network (Transmission and Distribution). Gaslink operates in the
                                                                Republic of Ireland.
anonymous networkuser 2
Eneco Energy Trade                                              Wholesale, storage, retail
DONG Energy Pipelines GmbH                                      DEP is a supraregional TSO and operates a pipeline in Germany.
Swedegas AB                                                     transmission
                                                                sweden

2 Is investment in new transmission capacity important to you
from a:
(n= 21)
Regional perpective                                             47.6%
National perspective                                            33.3%
Your individual business or organisation perspective            33.3%
A combination of these                                          76.2%

Please explain why
GDF Suez                                                        Enables a portfolio approach for midstream players
Essent                                                          lack of capacity is an issue at mainly interconnection points. but we
                                                                also experience major difficulties obtaining capacity in order to connect
                                                                a gas storage facility to the German grid, apparently due to lack of
                                                                available capacity.
POWEO                                                           Poweo is requesting more interconnections between the different
                                                                european gas markets, to create a more liquid and attractive gas
                                                                market.
Electricity Supply Board                                        Installation of new CCGT's for portfolio upgrade.
GASELYS                                                         Target is to develop a paneuropean liquid unified market. One of the
                                                                basic condition to achieve this is to have an optimal and efficient
                                                                transmission capacity framework across regions and at national level
                                                                too.
Merrill Lynch Commodities (Europe) Limited                      Better market access will improve liquidity and therefore trading
                                                                opportunities both on a national and regional basis
anonymous networkuser 1




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E.ON UK                                                  E.ON has a functional business structure which operates accoss
                                                         borders. My interests are mainly about the impact of market rule
                                                         changes on these E.ON businesses that operate in GB. Clearly from a
                                                         gas perspective investment in infrastucture in the NW Region is an
                                                         important consideration for wholesale gas prices and security of
                                                         supply in GB. My perspective is mainly from the perspective of a user
                                                         of infrastructure rather than an investor in infrastructure although the
                                                         investment is fundamental to our sister businesses - E.ON Gas
                                                         transport and E.ON Gas Storage.
Centrica Plc                                             Centrica needs access to transmission capacity to secure gas
                                                         supplies to meet the needs of our customers in Great Britain, the
                                                         Netherlands, Belgium and Germany as well as for our portfolio of gas-
                                                         fired power generation. Access to transmission is also essential for
                                                         our gas production and wholesale trading activities.

                                                         Cross-border transportation of gas within the North West European
                                                         region is an integral part of these activities and we have bid for new
                                                         transmission capacity in around half a dozen separate open season
                                                         (OS) processes over the last few years.

GRTgaz                                                   The most important is to invest according to the needs (market,
                                                         security of supply, environment, etc) and, as TSO, to be fairly paid for
                                                         it




1a. Questions to determine your interest in investment      Pagina 5 van 83
                                                                                                    Questionnnaire on investments 2008 GRI northwest




N.V. Nederlandse Gasunie
                                                         Gasunie is the first independent fully ownership unbundled cross
                                                         border gas infrastructure company in Europe. Gasunie participates
                                                         and invests in:

                                                          LNG (e.g. Gate terminal Rotterdam, the Netherlands)	
                                                         •	

                                                          Storage (e.g. Salt caverns Zuidwending, the Netherlands)	
                                                         •	

                                                          Interconnectors, e.g. Bacton-Balgzand-Line (BBL) and Nordstream	
                                                         •	

                                                          Gas
                                                         •	 transmission systems (e.g. Gas Transport Services (GTS),
                                                         Gasunie Deutschland Transport Services)

                                                          Gas
                                                         •	 Exchanges	

                                                         At the moment the Gasunie infrastructure spans the area from Bacton
                                                         (UK) to Berlin (Germany)



                                                         Investment in new gas infrastructure is important for Gasunie from a
                                                         business perspective and from a national/regional perspective.

                                                         Gasunie’s business model is to offer gas infrastructure in a non-
                                                         discriminatory, transparent, objective, safe and efficient manner, and
                                                         at reasonable costs. Gasunie applies this business model in all its
                                                         activities. In these activities Gasunie is aggregating market demand
                                                         (for example by Open Seasons), on the basis of which efficient and
                                                         economically reasonable investments can be done.

                                                         The development of infrastructure is key for Europe to reach the goals
Vattenfall, Generation Nordic                            of its energy policy: securitythegas supply and thenot increased
                                                         Liquidity is not developed if of Ellund capacity is creation of a




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On behalf of Shell Energy Europe                         · SEE business is based on local (national) sales activities, with strong
                                                         regional (cross border) interdependencies.
                                                         o Gas supply usually/in most cases is not/can not be fully covered by
                                                         indige-nous supplies, thus appropriate cross border interconnection
                                                         capacities are essential.
                                                         o The goal of 'one internal, competitive energy market can' can only be
                                                         achieved if an appropriate level of transmission capacity between
                                                         member states is available.


DONG Naturgas                                            DONG Naturgas need capacity in the grids in the NWE region. Thus
                                                         alignment of the national regulatory frame- works is needed to ensure
                                                         investment incentives, which will subsequently provide sufficient and
                                                         efficient capacity - not least across national borders.
GasTerra B.V.                                            For reaching more markets to trade gas.
National Grid                                            National Grid are required under the terms of its licence to maintain
                                                         network capability up to a 1 in 20 peak winter day (i.e. the worst single
                                                         day conditions that would expect to be experienced only once in a 20
                                                         year period). It is essential from a national perspective this level of
                                                         transmission capability is maintained and that National Grid continue
                                                         to invest in its network to meet rising demand and changing supply
                                                         patterns. From a regional perspective the UK is becoming increasing
                                                         dependant upon gas importation. This comes from Norway, LNG and
                                                         importantly via interconnectors from Netherlands and Belgium. Co-
                                                         ordination of investments between National Grid and those TSOs, or
                                                         other parties, wishing to connect to its network is an essential element
                                                         of maintaining security of supply in Great Britain.

Gaslink Independant System Operator Limited              Investment in new transmission capacity is key to ensuring a robust
                                                         infrastructure to meet market demand and to facilitate competition.

anonymous networkuser 2
Eneco Energy Trade                                       Investments by Eneco sometimes have a supranational character, but
                                                         national issues remain equally important
DONG Energy Pipelines GmbH                               One of our entry/exit points is located at the German/Danish border.




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Swedegas AB                                                      Total dependancy of danish supply which will decrease make opening
                                                                 of new supply routes essential. The market also need a general
                                                                 expansion from the present low level.

3 Have you been involved as an investor (owning, financing or
developing) in any gas, cross border infrastructure project or
infrastructure with an impact in regional gas trade?
(n= 21)
Yes                                                              42.9%
No                                                               57.1%

Are you considering participation in any such a project in the
future?
Essent                                                           yes, that would be possible
POWEO                                                            LNG Regas Terminal
Electricity Supply Board                                         Our focus is installation of gas fired power stations, investment in the
                                                                 gas infrastructure would be limited to getting sufficient connection to
                                                                 the grid via connection agreements and enhanced pressure supply
                                                                 agreements.
GASELYS                                                          No
Merrill Lynch Commodities (Europe) Limited                       No current plans
E.ON UK                                                          Sister companies within the E.ON group are clearly interested in
                                                                 investing in all counties in the NW region.
Centrica Plc                                                     No
Vattenfall, Generation Nordic                                    Not at the moment
On behalf of Shell Energy Europe                                 The answers to this questionnaire are given on behalf of Shell Energy
                                                                 Europe (SEE).
                                                                 In the context of this consultation, we focus on our network-user role.

DONG Naturgas                                                    No
anonymous networkuser 2

4 In which countries have you invested or planned to invest?
(n= 14)
Belgium                                                          14.3%
Denmark                                                          0.0%




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                                                                                      Questionnnaire on investments 2008 GRI northwest




France                                                            28.6%
Germany                                                           50.0%
Great Britain                                                     28.6%
Ireland                                                           14.3%
Netherlands                                                       42.9%
North-Ireland                                                     7.1%
Sweden                                                            7.1%
other                                                             14.3%

5 As a network user (answer if applicable), have you been
involved in user commitment relating to such investment and (if
so) in which countries?
(n= 16; including 1 TSO with a Yes)
Yes                                                               81.3%
No                                                                18.8%

If so, in which countries?
(n= 13)
Belgium                                                           30.8%
Denmark                                                           7.7%
France                                                            30.8%
Germany                                                           53.8%
Great Britain                                                     46.2%
Ireland                                                           7.7%
Netherlands                                                       69.2%
North-Ireland                                                     0.0%
Sweden                                                            7.7%
other                                                             15.4%




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1b. Questions to all stakeholders

6 Can an adequate level of interconnection between Member
States be achieved in view of future flows?
(n= 19)
Yes                                                         89.5%
No                                                          10.5%

Please explain.
Essent                                                      liberalised marktets require more capacity then available in the tailor
                                                            made grids existing from the situation before liberalisation.
POWEO                                                       This objective should only be partially achieved. In some areas, there
                                                            might be sufficient investments if a good coordination between
                                                            inverstors is realized but it seems unsufficient in main areas, in
                                                            particular due to operational reasons.
GASELYS                                                     In our view this is perfectly achievable since there is still a lack of
                                                            visibility of capacity availability in most of the member states
                                                            especially those which have transit services


Merrill Lynch Commodities (Europe) Limited                  Depends on the definition of adequate, but with proper incentives
                                                            there should be sufficient investment to increase the size of some
                                                            market areas. It may not be economic to gold plate the system to
                                                            provide a single market however.
anonymous networkuser 1                                     With suitable congestion management principles and adequate
                                                            incentives for TSOs or third parties to invest.
E.ON UK                                                     Yes. From the UK perspective this more often than not will depend on
                                                            merchant investments so 'light touch' regulation and TPA exemption
                                                            regimes are important so as not to act as an impediment to this.




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Centrica Plc                        An adequate level of interconnection should be able to be achieved if
                                    the conditions are right and TSOs maximise the use of existing
                                    capacity. For example TSOs will need to consult in a regular open and
                                    transparent way with stakeholders on future market needs, have
                                    robust and non-discriminatory ways of offering new capacity (e.g. open
                                    seasons), have improved coordination with other TSOs and regulatory
                                    authorities and a regulatory regime that gives incentives for timely and
                                    efficient development of the network. Regulators will also need to
                                    ensure that TSOs comply with their obligations to develop and
                                    maintain the network as set out in the current Gas Directive
                                    2003/55/EC Article 8 and further obligations resulting from the
                                    implementation of the 3rd Package.

                                    Despite a number of imperfections in the recent OS processes, the
                                    results clearly indicate that network users are prepared to make
                                    substantial firm commitments that underpin major investment
                                    decisions in favour of new capacity development.

GRTgaz                              yes, it is possible with :
                                    - a stable, predictable and fair rate of return for these investments (to
                                    garantee a minimal rate of return)
                                    - binding commitments from the market, the regulators and/or the
                                    policy makers (at national and European level) that cover the needs
                                    for the market, security of supply, etc.
                                    -stable and compatible legislative and regulatory frameworks
                                    -cooperation between regulators and TSOs in order to achieve those
                                    projects




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N.V. Nederlandse Gasunie            Gasunie bases its investments on concrete market demand, the
                                    market appetite of which is tested in open subscription processes.
                                    Eventually investment decisions are taken on the basis of signed
                                    contracts with customers for capacity. The level of interconnection is
                                    adequate if market demand for capacity can be met.

                                    Besides contracts with customers, a stable and predictable regulatory
                                    regime needs to be in place. This will enable investors to earn a fair
                                    return on their project and to be able to forecast long-term stable cash
                                    flows (also to meet financiers’requirements). The project-specific risk-
                                    reward balance also needs to be taken into account.

                                    Finally, good coordination between Member states/Regulators and
                                    TSOs is required.
                                    . The involved regulators and governments should coordinate to make
                                    regulatory frameworks compatible to enable timely investments for the
                                    market.


On behalf of Shell Energy Europe    From our point of view it's absolutely necessary (not an 'if', more a
                                    'when') to achieve an adequate level of interconnection. Otherwise an
                                    EU internal gas market will not be achieved.

                                    Beside this, adequate interconnections are necessary
                                    o to deal with increasing demand in Europe and resulting increase for
                                    gas transits and

                                    o to guarantee an appropriate level of supply security.

DONG Naturgas                       Most cross border IC points are sold out several years into the future.

GasTerra B.V.                       Yes, if there is a sound regional investment climate.




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National Grid                                        Uncertainty over future sources of gas supply to Europe, brought
                                                     about by a general decline in indigenous production, and the need to
                                                     ensure future security of supply against a variety of scenarios will
                                                     undoubtedly require more interconnection between member states
                                                     and more diversity in terms of sources of gas. This can be achieved
                                                     by co-ordinated planning both sides of the border coupled with long
                                                     term commitments from users, regulators or governments.

Gaslink Independant System Operator Limited          This can be achieved providing the appropriate incentives are in place
                                                     to promote investments needed.
Eneco Energy Trade                                   All barriers to sufficient interconnection can be removed.
Swedegas AB                                          If investments are coordinated and tuned to expected market demand.


7 Is further investment in interconnection needed?
(n= 20)
Yes                                                  95.0%
No                                                   5.0%

Please explain.
GDF Suez                                             To improve interconnexion between markets.
Essent                                               see answer to question 6
GASELYS                                              In any case certain points will have to be investigated and it is more
                                                     likely that investment will be needed
Merrill Lynch Commodities (Europe) Limited           In the absence of any effective measures to deal with long term
                                                     contractual congestion there is a need for physical investment to
                                                     increase market efficiency for the benefit of consumers.
anonymous networkuser 1                              Flow changes arising from different production sources, increased
                                                     security of supply requirements, optimisation of system, removal of
                                                     value for hoarding.




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E.ON UK                             Additional investment in transit lines across Europe is required to
                                    ensure peripheral areas such as GB can access flexible, diverse and
                                    reliable sources of gas over the longer term. Further connections to
                                    mainland Europe can be achieved if necessary by merchant
                                    investment. Major impediments such as the need for gas processing
                                    to UK specifications are likley to be required although the GB
                                    regulator's obsession with complex auction arrangements to
                                    demonstrate adequate user committments is a major impediment to
                                    providing the necessary infrastructure.
Centrica Plc                        Congestion needs to be relieved in the Oude-Bunde-Emden area as
                                    well as on the Dutch/Belgium border at Zelzate. Expansion work is
                                    underway from existing open seasons but not for all networks

                                    There appears to be both physical and contractual congestion to be
                                    resolved at the Belgian/French border. We note that the delayed OS
                                    process is now to be resumed, with firm capacity bids to be made
                                    before the end of this year.

                                    A further important example is the current EGT OS process in
                                    Germany. it remains unclear, at the current time, to what extent and
                                    on what timing EGT be able/willing to translate the very considerable
                                    firm user commitment (in total 120 GWh/h) into actual new
                                    transmission capacities.


GRTgaz                              Further investment (for security of supply, development of gas market,
                                    environment issues, etc) have to be determined with network users,
                                    operators of adjacent infrastructures, regulators and governements.




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N.V. Nederlandse Gasunie                      The indigenous production in Europe is declining, while the demand
                                              remains stable, or is slightly increasing. This leads to an additional
                                              demand for gas coming form outside Europe. Gas is coming from
                                              countries closer to the European Union, like Russia and Algeria, from
                                              which piped gas is coming to Europe. In addition, gas also comes from
                                              countries further away, from which gas will be brought o Europe in
                                              liquefied from (LNG).
                                              The additional gas flows create the need for additional gas
                                              infrastructure, such as pipelines, interconnectors, LNG import facilities.
                                              Given that gas will mainly come to Europe at baseload rates,
                                              additional flexibility (in the form of storages) is needed to meet the
                                              market demands.

                                              Indeed, additional gas infrastructure is required to secure gas delivery
                                              to the European market. Gasunie aims at playing an important role to
                                              achieve this and is at the moment working to create new infrastructure
                                              in the NW region.

On behalf of Shell Energy Europe              E.g.: Germany/NL (Bunde, Oude, Waidhaus), France/Spain (Larrau),
                                              Transits Germany to NW markets, Austria/Germany (e.g.
                                              Burghausen), Norway/ Germany (Emden)
DONG Naturgas                                 Coordinated Open Season's are needed - perhaps in combination with
                                              new UIOLI rules.
GasTerra B.V.                                 Yes, for example export transport capacity from the Netherlands to
                                              market areas in Germany. More export capacity from the Netherlands
                                              to the South.
National Grid                                 Further investment in interconnection will almost certainly be required
                                              for the reasons stated above.
Gaslink Independant System Operator Limited   There are significant new sources of gas coming into the Irish network
                                              over the coming years (e.g. indigineous gas fields, LNG terminals,
                                              Storage Facilities), but we still believe that there will always be a need
                                              for further investment in interconnection as economies grow and fuel
                                              mixes change.
anonymous networkuser 2
Eneco Energy Trade                            Diversification of supply sources will create the need for a larger
                                              European gas network




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DONG Energy Pipelines GmbH          Needed to meet the market demand and for security of supply across
                                    the EU.
Swedegas AB                         See answer to 2. above.




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1c. Questions for stakeholders with an experiennced
view toward investment (e.g. TSOs; network users are
very welcome to answer where qualified

1:
GDF Suez                                                              Permitting/nimby
Essent                                                                tariff regulation
POWEO                                                                 Lack of coordination of operators/regulators
GASELYS                                                               lack of standardisation of products, balancing/allocation regime...
Merrill Lynch Commodities (Europe) Limited                            poor national market development which reduces investment
                                                                      incentives
anonymous networkuser 1                                               TSOs can demand onerous commitments to underwrite their
                                                                      investment, which can only be met by incumbents
E.ON UK                                                               Regulatory risk - will investors be able to earn adequate returns
Centrica Plc                                                          1.Regulatory uncertainty over current and future tariff regimes
GRTgaz                                                                an unapropriate rate of return (too low, non predictable, etc)
N.V. Nederlandse Gasunie                                              The patchwork of regulatory regimes is hindering Gasunie to make
                                                                      timely cross border infrastructure investment and to meet market
                                                                      demand for capacity.
On behalf of Shell Energy Europe                                      Question should be primarily answered by TSOs
DONG Naturgas                                                         Unclear, unstable and unattractive regulatory framework for cross
                                                                      border investments
GasTerra B.V.                                                         Legal uncertainty
National Grid                                                         Co-ordinated / compatable regulatory regimes
Gaslink Independant System Operator Limited                           Cost Recovery/Return On Investment
anonymous networkuser 2
Eneco Energy Trade                                                    Attempts to treat supply security as a national issue
DONG Energy Pipelines GmbH                                            Uncertain legal framework
Swedegas AB                                                           Regulator predictability

2:
GDF Suez                                                              Increasing costs
Essent                                                                usage level uncertain in off peak hours




                                                                        Pagina TSOs; 83
1c. Questions for stakeholders with an experiennced view toward investment (e.g. 17 van network users are very welcome to answer where qualified
                                                                                                                 Questionnnaire on investments 2008 GRI northwest




POWEO                                                                 Too important expected rate of return on investment from TSO
                                                                      compared to risk
Gaselys                                                               capacity hoarding by LT contracts, incumbents...
Merrill Lynch Commodities (Europe) Limited                            old fashioned investment criteria by regulators too afraid to support
                                                                      spare system capacity
anonymous networkuser 1                                               Lack of forward transparency on tariffs mean that forward
                                                                      commitments cannot be accurately determined.
E.ON UK                                                               Regimes that require unduly onerous user commitments e.g those in
                                                                      UK
Centrica Plc                                                          2.Lack of compliance with GGP on Open Seasons including a lack of
                                                                      coordination of TSOs with Neighbouring Network Operators (NNOs)

GRTgaz                                                                no binding commitment (mainly to determine the needs)
N.V. Nederlandse Gasunie                                              The lack of cooperation between regulators and governments (e.g. OS
                                                                      2012) is hindering and postponing e.g. coordinating Open Season
                                                                      projects.
DONG Naturgas                                                         Specific incentives for TSO's to invest in cross border facilities
National Grid                                                         Planning / permitting issues
Gaslink Independant System Operator Limited                           Regulatory Uncertainty
anonymous networkuser 2
Eneco Energy Trade                                                    Suboptimal focus on efficient network instead of efficient market
DONG Energy Pipelines GmbH                                            different regulatory regimes in member states
Swedegas AB                                                           Political uncertainty

3:
GDF Suez                                                              LT Commitment of shippers
POWEO                                                                 Links (financial, management) between TSO and commercial activities
                                                                      in the same companies (Unbundling)
GASELYS                                                               lack of transparency, subsidisation
Merrill Lynch Commodities (Europe) Limited                            lack of incentives to allow competition for affiliated supply companies

anonymous networkuser 1                                               Absence of liquid secondary markets means that capacity holders
                                                                      have little confidence in being able to liquidate a position.
E.ON UK                                                               Incompatibility between national enty-exit regime e.g. Between GB and
                                                                      Ireland




                                                                        Pagina TSOs; 83
1c. Questions for stakeholders with an experiennced view toward investment (e.g. 18 van network users are very welcome to answer where qualified
                                                                                                                 Questionnnaire on investments 2008 GRI northwest




Centrica Plc                                                          3.Lack of coordination of national regulators and other authorities
                                                                      e.g. planning authorities
GRTgaz                                                                inconsistency (legislative or regulatory) between both sides of the
                                                                      interconnection
N.V. Nederlandse Gasunie                                              On a national level in the Netherlands the regulatory framework is not
                                                                      suitable for large infrastructural expansion projects. At the moment
                                                                      GTS, the regulator and MEA are working on a sound framework that
                                                                      will have the principles, as described by the TSOs in this document, in
                                                                      place. On a national level in Germany the regulatory framework is also
                                                                      not suitable and even unclear for large infrastructural projects. BNetzA
                                                                      has recently decided that Gasunie Deutschland is not longer allowed
                                                                      to set its transmission tariffs market based but has to follow cost and
                                                                      incentive regulation. The rules for new investments currently foreseen
                                                                      in this regulatory framework (e.g. return on equity, observance of
                                                                      operational costs, interests on debts) are inadequate to provide a
                                                                      sufficient return on investment to TSOs.

DONG Naturgas                                                         Too little cooperation between national regulators on cross border
                                                                      issues
National Grid                                                         Obtaining sufficient User commitments. Proportional to the risk being
                                                                      taken by the developer
Gaslink Independant System Operator Limited                           Regulatory Approvals
Eneco Energy Trade                                                    TSO's led by incentives of an affiliate supply complany
DONG Energy Pipelines GmbH                                            uncertainty of RoI
Swedegas AB                                                           Fuel price developments

9 What should Member States do to achieve this (an adequate
level of interconnection between Member States)? What should
regulators do to achieve this?
GDF Suez                                                              Member States should concentrate on the leverage towards producers
                                                                      and support EU midstream players to diverify sources and create more
                                                                      level playing fields with producers.
Essent                                                                by determining the need for additional capacity, thoroughly investigate
                                                                      the use of capacity at these interconnection points including
                                                                      congestion managements systems. cooperation between regulators!




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POWEO                                                                 Improve coherence between cross-border TSOs. Develop secondary
                                                                      market (mandatory with penalty if hoarding).
                                                                      Develop hubs liquidity.
                                                                      Clarify methodology on rate of return for investement (Asset base to
                                                                      be precised, evolutive level related to financial rates, real assumption
                                                                      on risk supported by operators)
GASELYS                                                               Regulator should incentivise TSOs to create IC combined (or bundled)
                                                                      products. Firmness of capacity offered should be the same on each
                                                                      side. Still fighting for having standadisation of operation, balancing and
                                                                      allocation regime.
                                                                      development of full capacity release policy, no longer capacity
                                                                      hoarding and full data transparency
Merrill Lynch Commodities (Europe) Limited                            Member states should drop nationalist policies and develop
                                                                      appropriate models of risk sharing for cross border investments to
                                                                      better share costs.
                                                                      Regulators should provide pro-investment models that properly
                                                                      allocate risk between shippers, tsos and consumers which doesn't
                                                                      happen now.
anonymous networkuser 1                                               Stronger obligations on TSOs to invest where there is demonstrated
                                                                      demand.
                                                                      Incentives on TSOs to optimise capacity availability (i.e. move away
                                                                      from 100% capacity charges)
                                                                      Opportunities for non-incumbents to by-pass the system where a lack
                                                                      of investment is preventing competition.
                                                                      Publication of investment plans.
                                                                      Coordination of open seasons.
                                                                      Greater transparency around tariff methodologies and tariff-setting.
E.ON UK                                                               Solve the returns issue for regulated interconnections or commit to a
                                                                      genuine TPA exemption regime where the context permists (e.g.
                                                                      between the UK and Mainland Europe).
                                                                      Regulators must work together to ensure that national market rules are
                                                                      compatibile with neigbouring country regime. This has proved to be a
                                                                      problem in recent years with respect to the Irish Interconnector, where
                                                                      Ireland is expected to come into line with GB exit arrangements.




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Centrica Plc                                                          Regulatory powers - Member States firstly need to give national
                                                                      regulators sufficient powers and resources to oversee effectively TSO
                                                                      investment in interconnection and ensure that TSOs comply with their
                                                                      network development obligations. In particular, it is critical to ensure
                                                                      that the “user commitment” required from network users is sufficient to
                                                                      encourage new investment, but not unduly onerous (as this could
                                                                      deter potential shippers) nor structured in such a way as to restrict
                                                                      future competition in gas supply.

                                                                      Tariff regimes – For regulated infrastructure Member States should,
                                                                      through their regulators, ensure that a stable tariff regime is in place
                                                                      which reflects efficiently incurred costs, whilst at the same time
                                                                      providing appropriate incentives for new investment. Rates of return
                                                                      allowed on TSO investment should fairly reflect the level of risks
                                                                      involved, taking into account the risks assumed by network users via
                                                                      their user commitment.

                                                                      Coordination of TSOs and regulatory authorities – Member States via
                                                                      national regulators should ensure that the TSOs firstly comply with the
                                                                      GGP Open Seasons. Member States should ensure that the national
                                                                      regulatory authorities have the power to ensure TSOs cooperate on
                                                                      and coordinate investments having a cross-border impact. It is equally
                                                                      important that the regulatory process is coordinated between Member
                                                                      States. User commitment regimes should be broadly consistent cross-
GRTgaz                                                                Member States and regulators have to create a sound investment
                                                                      climate. It means :
                                                                      - garantee on a minmimum rate of return for these investments,
                                                                      - binding commitments from the market, the regulators and/or the
                                                                      policy makers (at national and European level) that cover the needs
                                                                      for the market, security of supply, etc.
                                                                      -stable and compatible legislative and regulatory frameworks
                                                                      -cooperation between regulators and TSOs in order to achieve those
                                                                      projects




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N.V. Nederlandse Gasunie                                              Member states and regulators should see the importance of cross
                                                                      border gas infrastructure as a key enabler for security of supply and
                                                                      the realisation of a competitive regional/European gas wholesale
                                                                      market.

                                                                      There is insufficient attention for the specific position of independent
                                                                      fully ownership unbundled (cross border) infrastructure companies.
                                                                      Provided that these companies have no interest elsewhere in the gas
                                                                      chain, they have to generate their income solely from their
                                                                      infrastructure activities.

                                                                      Regulation is a means to reach the goals of energy policy. (security of
                                                                      supply and creating a competitive and transparent gas market);
                                                                      regulation is no goal in itself. Therefore, regulators should not focus
                                                                      too much on cost-efficiency as this might have a counterproductive
                                                                      effect in the realisation of the energy policy goals, For an unbundled
                                                                      company in a competitive infrastructure market (storages, LNG
                                                                      terminal and transmission pipelines in competition) it is questionable if
                                                                      detailed regulation is encouraging new gas infrastructure investment.

                                                                      The regulatory framework is key to the development of the internal
                                                                      market and the main regulatory focus is on the midstream sector,
                                                                      notably on transmission networks. In Gasunie’s view, for the existing
                                                                      infrastructure assets, the networks, the regulatory focus should be on
                                                                      maximising the availability of the existing capacity to the market. The
                                                                      regulatory framework should recognise in this respect that for
                                                                      ownership unbundled infrastructure operators there is a natural
                                                                      incentive to make as much capacity available as possible as this is
                                                                      their sole source of income. Also the potential conflict of interest within




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On behalf of Shell Energy Europe                                      From a general perspective:
                                                                      · The legal and regulatory framework should be fit for purpose and not
                                                                      inadvertently distort the market.
                                                                      · Member states and regulators should aim for a level playing field in
                                                                      the European gas market. To that end they should focus on the full
                                                                      and equal implementation of the Gas Directive in every country.
                                                                      · In general, we believe the market would benefit from continued
                                                                      harmonization of regulation at an appropriate level across Europe and
                                                                      we would encourage the EU to investigate what the proper allocation
                                                                      of regulatory powers between EU level and national regulators would
                                                                      be.
                                                                      · We would welcome more and better cooperation of regulation at EU
                                                                      level and we support measures that are aimed at making crossborder
                                                                      projects less complicated. Therefore a Regulatory Agency comparable
                                                                      (but not identical, e.g. competencies should be aligned with
                                                                      responsibilities) to the one proposed in the 3rd package could be a
                                                                      useful institution.
                                                                      · Cooperation of TSOs should be fostered. The planning for new
                                                                      transmission infrastructure requires input from and consultation with all
                                                                      other market participants. Specifically we would expect clear
                                                                      processes for consultation and the resolution of disagreements. To
DONG Naturgas                                                         Focus specifically on cross border issues - and develop an appropriate
                                                                      regulatory framework for applicable infrastructure assets.

GasTerra B.V.                                                         Long term predictability in order to attract long term investments
National Grid                                                         The investment model within Great Britain works reasonably well. It
                                                                      relies upon the market signalling (and valuing) a requirement for new
                                                                      capacity investment. This works reasonably well in ensuring that
                                                                      investments in capacity are backed by a significant commitment from
                                                                      users but it is foreseeable that in the future some investments may
                                                                      require a different approach. For example – strategic interconnection
                                                                      projects might fall into this category.
Gaslink Independant System Operator Limited                           MS's need to ensure that there are appropriate Regulatory
                                                                      Arrangements in place and Regulators need to ensure that there are
                                                                      appropriate Investment Incentives in place to guarantee adequate
                                                                      levels of interconnection.




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                                                                                                                 Questionnnaire on investments 2008 GRI northwest




anonymous networkuser 2
Eneco Energy Trade                                                    -Ministers must explicitly state that gas supply security is not an
                                                                      national but a European issue
                                                                      -Unbundle TSO's
                                                                      -Allow the network to be larger than technically necessary to create
                                                                      competitive pressure on the commodity market
DONG Energy Pipelines GmbH                                            Improve cooperation between member states.
                                                                      Improve cooperation between regulators.
                                                                      Not just focus on national but also on regional perspective.
                                                                      Develop adequate RoI principles to attract investors.
Swedegas AB                                                           Member States: cooperate
                                                                      Regulators: Provide predictability




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                                                                                                                Questionnnaire on investments 2008 GRI northwest




1d. Specific questions for Network Users

10 Is it sufficient to have a regulatory framework that encourages
investment in each individual MS?
(n= 20)
Yes                                                                20.0%
No                                                                 80.0%


11a What are your views on the investment climate in the region:
Is there sufficient clarity on the regulatory framework?
(n= 19)
Yes                                                                   21.1%
No                                                                    78.9%

11b Does the regulatory framework provide the correct
incentives for cross-border investment?
(n= 18)
Yes                                                                   16.7%
No                                                                    83.3%


11c If you answered "no" to 11a and/or 11b, please explain what
is missing in the investment climate (please try to answer this
question by explaining how this impacts your organisation and to
which Member States or parts of the region your answer relates
GDF Suez                                                         Extremely complicated rules, different regulatory frameworks in
                                                                 different countries.
POWEO                                                            Incentives as to be linked to the level of risk taken by ths investors. No
                                                                 premium should be granted without additional risk.
                                                                 Level of IRR should be defined in accordance with Euribor + or
                                                                 equivalent




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GASELYS                                      In general responsibility of the regulators is not clear and investments
                                             projects took far too long to become live when they do. Now what we
                                             see is future investments are mostly based on OS which are very
                                             difficult to coordinate, which favour mostly (very)long term bookings
                                             where market visibility is very uncertain. This means that investment
                                             plans are still not market orientated and, the actual need for additional
                                             capacity at certain IC points (ie Oude, Emden, Blaregnies,
                                             Oberkappel...)is probably not justified. By the mean of coordinated OS,
                                             which are very difficult and long to put in place, based on the
                                             assumption that people have a clear view of their capacity
                                             requirements in the next 25 years, TSOs can delay easily any decision
                                             making process.
Merrill Lynch Commodities (Europe) Limited   No clear investment models so often shippers are required to commit
                                             to capacity without knowing the price or likelihood of delivery. The
                                             current arrangements only suit large producer/suppliers.
                                             The open season approach only encourages periodic investment from
                                             one level of congestion to the next.

anonymous networkuser 1                      Obligations and incentives for TSOs to take risks, rather than invest
                                             only when a project is fully underwritten by long term capacity
                                             commitments.
E.ON UK                                      Certainty about adequate regulated returns where if regulated and
                                             genuine 'light touch' regulation where there is merchant investment in
                                             interconnectors




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Centrica Plc                               Member States are still in the process of properly implementing
                                           regulated tariff regimes that reflect efficiently incurred costs. As a
                                           result there is a lack of clarity on the overall tariff regime as well as the
                                           incentives that may be given for new investment.

                                           This creates uncertainty for us as a network user about the overall
                                           cost of the capacity we are committing to pay for in the future. It also
                                           creates uncertainty for the TSO making the investment and frequently
                                           results in the open season process being delayed. This issue has
                                           delayed TSO investment in the Netherlands and Belgium, and had a
                                           knock on effect in France.

                                           Moreover, the cross-border co-ordination of OS processes has been
                                           less than satisfactory to date – e.g. as regards their timing, procedural
                                           details, consistency of inter-operability conditions (such as gas quality
                                           specifications), user commitment regimes, capacity allocation rules
                                           and regulatory conditions precedent.

                                           It is also important to consider the link between OS processes and
                                           other key aspects of the transmission capacity regime. We consider
                                           that many TSOs are not currently facing the correct regulatory




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N.V. Nederlandse Gasunie                   It is not solely the national regulatory framework but it is the overall
                                           European energy policy and the cooperation between the involved
                                           authorities that should enable and encourage timely and economically
                                           reasonable gas infrastructure investments.

                                           A sound national investment climate is only the beginning, a
                                           prerequisite. Additional regional cooperation between authorities is
                                           required to ensure a sound investment climate on both sides of the
                                           border so timely cross border investments will meet regional market
                                           demand for additional capacity.

                                           As described above, we doubt whether the regulatory regime always
                                           focuses on the right elements. Regulatory regimes should support
                                           developments that lead to the realisation of the goals of the energy
                                           policy and in certain instances we see that, on the contrary, the
                                           regulatory framework is a hindering factor in the development of new
                                           infrastructure.

                                           At the moment in the Netherlands Gas Transport Services, the NRA
                                           and the MEA are working to improve the national investment climate.
                                           An investment policy (Beleidsregel) was recently published by the
                                           MEA. Gasunie is confident that the contents of the Beleidsregel will be
                                           accommodated in all future regulatory frameworks. Gasunie fully
                                           acknowledges the principles written by the TSO and strongly believes
                                           that investment is only possible if these investment principles are in
On behalf of Shell Energy Europe           From our perspective, we have some sympathy for TSO/investing
                                           parties argu-ments complaining about missing clarity of regulatory
                                           framework.
                                           Concerning 'the right incentives'– we doubt that the current systems
                                           offer ap-propriate (commercial) incentives or legal requirements for an
                                           unbundled TSO to invest in cross-border interconnections. There are
                                           almost no legal obligations to align investments with neighboring TSOs
                                           nor attractive commercial incentives to foster lengthy discussions with
                                           regulators and other TSOs.




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                                           The missing clarity - hereunder the limited length of regulatory periods
                                           (ref. the German Incentive Regulation) provide too great uncertainty
                                           for passive investors, who are likely to invest their funds outside the
                                           gas infrastructure business.
GasTerra B.V.                              Regulatory framework is not stable enough and should be improved
                                           such that it is more based on economics (business economics as well
                                           as benefits for society).
                                           Open season only is not enough, an overall (NW-European) grid
                                           scheduling is also needed.

National Grid                              One of the difficulties with answering this question is that there is
                                           currently no concept of a regional investment climate. Instead there is
                                           a patchwork of different investment regimes which in many cases
                                           appear not to be particularly compatible. This fact coupled with TSOs
                                           and indeed NRAs having different priorities and/or objectives leads to
                                           potential difficulties in obtaining the clarity of risk required before
                                           investments can be made.

                                           Where the regulatory frameworks in MS are functioning well and are
                                           comparable / compatible each side of the border with neighbouring
                                           states then this should be sufficient to enable cross border
                                           connections.


anonymous networkuser 2
DONG Energy Pipelines GmbH                 The current German regulatory framework does not create a sound
                                           investment climate:
                                           Equity yield rate before tax too low
                                           Incentive Regulation Ordinance creates uncertainties for TSOs and
                                           investors
                                           Framework for investment budgets unclear.
                                           Depreciation periods too long.
Swedegas AB                                No coordination of regulatory regimes and too regide regulatory
                                           systems not designed to handle new major investments




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12 What do you consider reasons for investments? Please list
and explain.
GDF Suez                                                       Create new routes for gas flow. Remove physical congestions.
                                                               Encourage market area mergers.
Essent                                                         market demand.
                                                               additional flows from for example LNG, storage.
GASELYS                                                        With the past 10 years experience in the region, TSOs know exactly
                                                               where investment should be made to improve transit capacity and
                                                               flows liquidity
Merrill Lynch Commodities (Europe) Limited                     Investments are required to get the gas to market, either to trade or to
                                                               supply consumers. Congested networks provide no incentive to
                                                               compete for gas sales.
anonymous networkuser 1                                        A favourable risk/return ratio.

E.ON UK                                                        With respect to UK to mainland Europe interrconnects this was driven
                                                               by the need initially to access new export markets then as a new
                                                               supply route to the GB. Also use driven by arbitrage opportunitities.
                                                               With the lack of real storage obligations on suppliers in GB investment
                                                               in storage depends on differential in wholesale prices across the year.
                                                               Flatten prices across the year and the investment case becomes very
                                                               difficult. The difference in the storage regimes between the UK and
                                                               the rest of Europe thus clearly influences the investment climate within
                                                               the UK. Less emphasis in terms of storage obligations and more
                                                               emphasis on the market driving use and investment in storage
                                                               facilitities is required. Ultimately if there is proper regulated TPA
                                                               access to the grid and it should be possible for many storage facilities
                                                               to compete amongst themselves and with LNG and customer
                                                               interruption in emerging peak gas flexibility marketss.




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Centrica Plc                               Investment in capacity is needed to remove existing congestion,
                                           accommodate new flows and allow for gas to flow on an economic
                                           basis to where it is needed most.

                                           Other investment may be needed, e.g. to accommodate changing gas
                                           qualities and reduce the number of balancing zones (e.g. within
                                           France, as from 1.1.2009).

GRTgaz                                     Market needs, security of supply, environment issues, etc
N.V. Nederlandse Gasunie                   The most important reason for investment for Gasunie is when there is
                                           enough market demand for capacity that can be translated into a
                                           sound and economically reasonable investment project. .

                                           Subsidiaries of Gasunie also have legal/public tasks to invest in
                                           specific gas infrastructure (e.g. covering peek demand in the
                                           Netherlands).

On behalf of Shell Energy Europe           · Legal requirements: safety, security of supply and adequacy of grid
                                           (incl. maintenance)
                                           · Regulatory requirements as outlined in respective
                                           directives/laws/regulations
                                           · Revenue growth (by geographic expansion, increase of transport
                                           volume) or efficiency increase (cost reduction) aspirations.

DONG Naturgas                              A possibility for the TSO to earn a fair return comparable to business
                                           opportunities for paasive investors in other sectors.
GasTerra B.V.                              Business development
National Grid                              As a TSO the reasons for investments are;
                                           To comply with any licence or other legal obligation to maintain or
                                           enhance capability in the network;
                                           To meet the requirements of our customers, i.e. satisfy the demands
                                           of the market; and,
                                           To provide a suitable rate of return to our share holders.




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Gaslink Independant System Operator Limited                     Security of Supply, Supply and Demand Forecast, Market Growth,
                                                                Operating Environment Changes (e.g. Single Gas Market Ireland),
                                                                Technical Requirements, Competition Rules etc.
anonymous networkuser 2
DONG Energy Pipelines GmbH                                      Security of supply in EU
                                                                To meet the market demand
                                                                Sound investment climate:
                                                                shorter periods of depreciation

Swedegas AB                                                     1. Market demand
                                                                2. Reasonable return (in relation to alternatives)
                                                                3. Predictability about risks

13a Do you observe a link between efficient congestion
management and investment needs?
(n= 19)
Yes                                                             89.5%
No                                                              10.5%

13b What is needed to assess a reasonable capacity demand for
which TSOs must invest?
GDF Suez                                                        Requests to regulator with a study
Essent                                                          open season are a good method provided that regulators have powers
                                                                to intervene if needed.
POWEO                                                           TSOs need shippers commitments supporting the investments. These
                                                                commitments will be a consequence of better coordination between
                                                                stakeholders and efficient market consultation.
                                                                A transparent regulatory framework defining fair RRI for TSO is
                                                                needed as well.
GASELYS                                                         To know in a full transparent manner the actual flow at the IC,
                                                                especially the "hoarding situation" of the LT booked capacity and the
                                                                actual level of interruptibility. It is also to be considered the level of
                                                                uncompatibility of the capacity products offered either side of the IC,
                                                                as well as for the associated services, ie balancing, measuring,
                                                                allocation, firmness...




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Merrill Lynch Commodities (Europe) Limited   TSOs should have a proper economic investment test then use a
                                             variety of information sources to assess demand. This includes
                                             surveys, and primary allocation approaches such as auctions with firm
                                             bids. Open seasons should only be used for very uncertain
                                             investment requirements such as new large infrastructure.
anonymous networkuser 1                      Regional planning
E.ON UK                                      The efficiency of wholesale markets depends on building some
                                             flexibility into systems so there is greater scope for gas to be brought
                                             to market under a wider range of supply scenarios. Efficient wholesale
                                             markets offer more value to customers in terms of lower prices that
                                             more than offset small increases in trnsportation charges caused by
                                             slightly 'over-investing' in infrastructure.

                                             There is value in user commitment provided by long term contracts
                                             however there is a place for central planning for many key investments
                                             backed by guaranteeed retuns for TSOs. Regulators must not be
                                             allowed to abdocate their responsibilities by pretending that user
                                             commitments can replace adequate regulatory oversight of
                                             investments (exclusing those of coursethose made on a merchant
                                             basis where such oversight is not required).

                                             Also some capacity needs tobe help back and made available on a
                                             short term basis to support new entry to the market.




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Centrica Plc                               TSOs must firstly comply with the GGP on Open Seasons. In due
                                           course we also look forward to implementation of the elements of the
                                           3rd Energy Package that should help address this issue.

                                           As a priority, TSOs must also comply fully with all their existing
                                           transparency requirements, so that shippers can start to develop a
                                           better understanding of how the network is being used and where
                                           additional capacity may be needed. We support the EFET wish-list of
                                           additional information that shippers need for effective access to the
                                           system. In the light of the recent report from Ofgem on the NW GRI
                                           Transparency work stream, we welcome the progress that has been
                                           made to date and look forward to a more rigorous application by TSOs
                                           and regulators of the “less than 3 shippers” process laid out in EU
                                           Regulation 1775/2005.

                                           TSOs must develop regular and rolling processes for consulting with
                                           shippers on future demand and investment. Annual Winter Outlook
                                           and 10-year Investment Plans are an important part of this process.
                                           Additional processes are then needed to assess formally the demand
                                           for new investment e.g. open seasons and auctions.

                                           We welcome the processes that have been initiated by GTE to
                                           produce pan-European winter outlooks and investment plans, but (as
GRTgaz                                     Binding commitments from a combination of the market, the regulators
                                           and the government




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N.V. Nederlandse Gasunie                   Gasunie has efficient congestion management systems in place in all
                                           infrastructure access conditions. As a full ownership unbundled
                                           infrastructure company the only possibility to generate income for
                                           Gasunie is to market capacity in the most efficient way. Additional
                                           detailed regulation is not required for Gasunie to encourage efficient
                                           congestion management.

                                           Subsidiaries of Gasunie in practice encourage efficient congestion
                                           management by facilitating primary and secondary markets, offering
                                           interruptible and day ahead capacity at all important cross border
                                           points.

                                           In case, there is still market demand, after applying these CAM and
                                           CMPs, the additional market demand will be aggregated and
                                           translated into a new economically reasonable infrastructure project
                                           which will be realised when the investment climate is sufficient.
                                           Gasunie supports all the principles described by the TSOs in this
                                           questionnaire and agree with the corresponding justification.




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On behalf of Shell Energy Europe           · As mentioned in the side-letter to the questionnaire, the TSOs have
                                           the obligations to expand the transmission system to meet market
                                           demand (Directive 2003/55/EC and Regulation 1775/2005). One of the
                                           most obvious indicators for likely congestions is the level of available
                                           firm capacity. If there is a lack of spare capacity, this should be seen
                                           as a strong indicator for necessary investments. Beside that, the huge
                                           interest in additional capacity is/has been documented in several Open
                                           Season processes (e.g NL GTS expansion, Germany: EGT Open
                                           Season)
                                           · We would recommend regular open season processes, which would
                                           have to be coordinated between TSOs in adjacent grids. The process
                                           and time-interval between the open seasons should be aligned. The
                                           results of these processes could either be used to directly trigger
                                           investments activities of TSOs. Alternatively, the regulators could use
                                           the information to develop a regional list of expansion investments,
                                           which would have to be implemented by TSOs.
                                           · In addition, we would encourage regulators not to exclude 'creative'
                                           ideas for capacity generation. E.g. flow commitments, nomination
                                           netting by TSOs, statistically firm capacities. Of course, regulators
                                           should monitor and take action to inhibit and penalize abusive
                                           behavior.
DONG Naturgas                              Transparency,joint Open Seasons at cross border points - and Open
                                           Seasons in the adjourning national grids.
GasTerra B.V.                              If there is demand for capacity, it should be made available either by
                                           efficient congestion management (where, of course, existing contracts
                                           have to be respected) or by new investments.
                                           Market (shippers) demand and overall grid schedule based on benefits
                                           for society are needed to assess a reasonable capacity demand as a
                                           basis for investments.
National Grid                              Clearly congestion may be taken as a signal that additional capacity is
                                           required. However it is important that effective use it or lose it
                                           mechanisms along with a range of capacity products are operating
                                           before this conclusion can be reached. It is also necessary that any
                                           capacity investment, which will inevitably be a long term investment, is
                                           backed by sufficient commitments from users and/or the NRA.




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Gaslink Independant System Operator Limited                       Security of Supply considerations should ensure that supply is
                                                                  sufficiently higher than demand to ensure that peak demand and
                                                                  abnormal conditions can be handled by the infrastructure. If modeling
                                                                  show this not to be the case, then investment may be required.

anonymous networkuser 2                                           There is mutual exchange of information relating to future capacity
                                                                  demand needed between relevant parties such as TSO's and
                                                                  companies which are involved in large infrastructure projects such as
                                                                  LNG or storage facilities.
DONG Energy Pipelines GmbH                                        Open season.
                                                                  Shippers requests.
Swedegas AB                                                       Market research, i.e. open season procedures.

14 How would you describe the applicable regulatory regime for
the investment in the countries of which you have experience
(e.g. mandated investment, guaranteed rate or return, incentive
regulation, merchant investment)?
GDF Suez                                                          Guaranteed rate of return, mandated investment, merchant investment

Essent                                                            Netherlands, all ok.
                                                                  Germany, too much uncertainty for market parties but TSO as well.
                                                                  Example current open season EGT.
Merrill Lynch Commodities (Europe) Limited                        Dutch regime is confused and uncertain.
                                                                  German regime has poor processes with little regulatory oversight.
                                                                  UK system works but is complex, and planning is used as an excuse
                                                                  for slow delivery.
                                                                  Belgium system never seems to deliver outcomes on time.


anonymous networkuser 1                                           UK - good
                                                                  Germany - unclear
                                                                  NL - unclear
                                                                  France - unclear
                                                                  Belgium - unclear




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E.ON UK                                    NGG - guaranteed rate of retun through a 5 year price control with
                                           incentive regime around the edges. The incentive regime is overly
                                           complex and opaque and it is hard to work out whether the
                                           mechanism esigned for investment in the grid offer good value to
                                           customers.

                                           The TPA exemption regime in GB has worked extremely well to date
                                           but there are signs that there is a new mood for intervention by the
                                           regulator which could undermine investor confidence that adequate
                                           reurns will be earned for new projects. The implications of greater
                                           emphasis on regulated access for LNG, interconnectors and storage
                                           in the 3rd package needs to be considered very carefully in the GB
                                           context.




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Centrica Plc                               National Grid Gas – incentive regulation based on a Regulatory Asset
                                           Base, an allowed rate of return on investment and a 5 year allowed
                                           revenue capping formula of the form “RPI – X%”. Capacity auctions
                                           apply at NTS Entry within this overall regulatory framework and new
                                           investment is “signalled” within the annual auctions for long term
                                           systems entry capacity (LTSEC).

                                           GTS – pending regulatory and legislative approval, incentive
                                           regulation based around an allowed rate of return for new
                                           investment.

                                           Fluxys – pending settlement of legal action, guaranteed rate of return
                                           for new investment.
                                           GRT-Gaz – the system is currently in transition, but appears to be
                                           moving towards incentive regulation of transmission opex combined
                                           with a guaranteed rate of return on new investment (which includes a
                                           3% premium to the return allowed on existing assets).

                                           EON Gastransport – also in transition, but seems likely to be a form of
                                           multi-annual incentive regulation with an allowed rate of return on new
                                           investment.

                                           IUK and BBL (initial forward flow) are exempt from regulated TPA.
                                           Incremental forward flow capacity in BBL is formally regulated but the
                                           basis for that regulation is rather unclear.

                                           We would encourage ERGEG to review the various regimes and learn
                                           from best practice.
GRTgaz                                     In France, the regulation gives a higher rate of return for investments
                                           which develop the gas market. It is an incentive regulation if the rates
                                           of return are predictable and high enough.




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N.V. Nederlandse Gasunie                      For the transmission system in the Netherlands operated by Gas
                                              Transport Services a cost based tariff regulation applies. For the
                                              transmission system in Germany operated by Gasunie Deutschland
                                              Transport Services two principle ways of tariffication are foreseen in
                                              the law. TSOs who are under existing or potential competition can set
                                              their tariffs market based. All other TSOs have to apply cost based
                                              tariffs which will additionally from 2009/2010 onwards follow an
                                              incentive based regulation. BNetzA has recently decided that Gasunie
                                              Deutschland has to apply cost based tariffs.

                                              For the BBL interconnector an article 22 exemption has been granted
                                              for the regulated terms and conditions, and the same applies to Gate
                                              terminal. For storage projects, in general the nTPA regime applies
                                              (provided that no party with a dominant position on the market
                                              develops the project, in which case additional requirements have to be
                                              applied).


On behalf of Shell Energy Europe              For the sake of efficiency, regulators of N/NW countries should answer
                                              this question. Only if market participants would disagree with the
                                              respective selection, further country specific evaluation would be
                                              useful.
                                              Nevertheless, one should ask the questions: Why do we need such a
                                              diverse selection of different regimes?

DONG Naturgas                                 Unclear, unstable and unattrative
GasTerra B.V.                                 Regulatory regime for investments is pending
National Grid                                 The GB regime is one in which National Grid, as TSO, is incentivised
                                              to make efficient investments in order to meet the requirements of
                                              users who have committed to buying capacity via a long term auction
                                              process. In addition there is a mandatory requirement to ensure that
                                              system capability is maintained at 1 in 20 peak day demand levels.

Gaslink Independant System Operator Limited   The Irish Regulatory Regime could be described as incentive
                                              Regulation with 5 year price controls and annual allowances set by the
                                              Regulator.




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DONG Energy Pipelines GmbH                                   Germany:
                                                             i. a.: Equity yield rate to low. No interest on assets under construction
                                                             considered - negative for investment decision. Currently no predictable
                                                             framework for investment budget application.

Swedegas AB                                                  Regime: ex ante and no guidance on acceptable return mekes
                                                             investments impossible.

                                                             Regulator: Low general competence, lack of market understanding
                                                             and bureaucracy makes dialouge very difficult.

15 Which elements of the regulatory regime made/would have
made the investment more attractive?
GDF Suez                                                     Incentive tariffs for long term subscription
Essent                                                       guaranteed rate of return.
Merrill Lynch Commodities (Europe) Limited                   Pre-agreed investment models between TSOs and regulators before
                                                             capacity sales.
                                                             Market based allocation with flexibility to meet shippers needs.

anonymous networkuser 1                                      Guaranteed Article 22 exemption for non-incumbent investment.
E.ON UK                                                      Burden of proof for rejecting applications for TPA exemptions to be
                                                             placed on the relevant regulatory authorities.

                                                             In GB allow investments to be made ahead of user commitments and
                                                             that allowed revenues should not be disallowed in the absence of user
                                                             commitments where there is a clear need for such investment (e.g.
                                                             critical investment re Easington capacity in GB). The fear of having
                                                             revenue disallowed because of so called lack of user commitments
                                                             inevitably makes TSOs conservative in making investment decsions.
                                                             This could make the difference between "just in time" investments and
                                                             "just too late investments" which may turn out to adversely affect to
                                                             security of supply.




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Centrica Plc                                  This question is primarily for TSOs. We support appropriate
                                              incentives for TSOs to invest in new infrastructure e.g. an appropriate
                                              rate of retun, taking into account both the need for investment
                                              efficiency and the level of risk passed to network users via their “user
                                              commitment”.
GRTgaz                                        Higher rate of return
                                              Garantee of stability (or predictability) of regulatory conditions
                                              Binding commitments from shippers and/or regulators, states, etc
N.V. Nederlandse Gasunie                      With respect to the timely development of new infrastructure the policy
                                              and regulatory framework should support new investments. In this
                                              regard, a better balance between politics (setting of goals and targets)
                                              and regulation (technical, independent) would enhance both the
                                              effectiveness of policies and the quality of regulation. Ownership
                                              unbundled infrastructure operators have a natural incentive to invest
                                              on the basis of a business case that views the investment purely on its
                                              own merits. Yet, the level of allowed regulated return on the
                                              investments in many cases prevents taking an investment decision
                                              unless the majority of the risk is carried by the shippers through long-
                                              term commitments. With the costs of transmission typically in the
                                              range of 2 to 4% of the end-user bill, allowing returns more
                                              commensurate with risks could improve the investment climate at only
                                              a very marginal effect on the end-user bill. After all, the cost to end
                                              consumers is mainly determined by the price of the commodity. By
                                              removing infrastructure bottlenecks, and even allowing a slight over-
                                              dimensioning of the infrastructure, the increased opportunity for trade
On behalf of Shell Energy Europe              Question should be primarily answered by TSOs. In general, all
                                              elements, which are moving the benefit/risk coordinate into a more
                                              favorable position.
DONG Naturgas                                 Joint (cross border) timing of the planning process is essential for
                                              taking multi-company decisions. The national frameworks for investors
                                              to obtain technical and environmental permits must be aligned. The
                                              national thresholds for gas quality, pressure and temperature need to
                                              be aligned. (Gas Codes)
GasTerra B.V.                                 Transparent, long lasting integrated regime.
Gaslink Independant System Operator Limited   A Guaranteed Rate of Return over the full life of projects would be
                                              more attractive.




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DONG Energy Pipelines GmbH                                   - stable legal framework
                                                             - adequate RoI
                                                             - current market equity yield rates
Swedegas AB                                                  Predictability and fair return.

16 Which elements of the regulatory regime made/would have
made the investment less attractive?
GDF Suez                                                     -
Essent                                                       in Germany the mid-long term uncertainty on rate of return and tariffs.
                                                             re-evaluation after 5-10 years is creating much uncertainty for TSO's.

Merrill Lynch Commodities (Europe) Limited                   Trying to keep tariffs at the same level for all time regardless of the
                                                             marginal cost of additional investment.
                                                             Lack of flexibility in contract terms.
anonymous networkuser 1                                      For TSOs to answer.
Centrica Plc                                                 This question is primarily for TSOs
GRTgaz                                                       Adverse changes on investment parameters concerning investment
                                                             decisions already taken
N.V. Nederlandse Gasunie                                     More detailed regulation will only hinder additional investments for
                                                             Gasunie instead of encouraging them. Thereby Gasunie believes the
                                                             lack of good coordination between regulators and Member states
                                                             and/or the lack of an investment climate that stimulates new
                                                             investments will make investments in new gas infrastructure less
                                                             attractive.
On behalf of Shell Energy Europe                             Question should be primarily answered by TSOs. In general, all
                                                             elements, which are moving the benefit/risk coordinate into a less
                                                             favorable position.
DONG Naturgas                                                Incentive Regulation as approved in Germany.
GasTerra B.V.                                                Regulatory regime still pending.
Gaslink Independant System Operator Limited                  Regulator uncertainty and the possibility of Regulator Opportunism
                                                             (post completion of a project)




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DONG Energy Pipelines GmbH                                            - instable legal framework
                                                                      - different regulatory approaches in MS
                                                                      - no consideration of regional aspects of investments in new
                                                                      infrastructure.
                                                                      Lack of alignment between national regulators with regard to
                                                                      implementation processes.
Swedegas AB                                                           Lack of predictability and/or too low return in relation to alternative
                                                                      investments with comparable risks.


17 How and who should intervene if e.g. two or more adjacent
TSOs involved in a trans-national pipeline fail to cooperate due to
the circumstances in one or more of the involved countries?
GDF Suez                                                            European commission as guarant of the needed means for market
                                                                    comptetition.
Essent                                                              regulator in first instance, but we acknowledge that it is also often a
                                                                    political issue, so MS could play a role as well.
POWEO                                                               ERGEG/ACER & GTE+/EC as mediators and regulators to force TSOs
                                                                    to share opinions.
GASELYS                                                             of course regulatory bodies of each country involved, assuming that
                                                                    they can work efficiently and not under the pressure of governments or
                                                                    TSOs
Merrill Lynch Commodities (Europe) Limited                          National regulators should sign cooperation agreements noting
                                                                    appropriate courses of action.
anonymous networkuser 1                                             Relevant regulatory authorities, CEER/ERGEG, European
                                                                    Commission
Centrica Plc                                                        In the first instance, National Regulators should have the power to
                                                                    require TSOs to cooperate and to take action to intervene e.g. in the
                                                                    case of interoperability issues. National regulatory authorities must
                                                                    ensure that if the TSO is part of a vertically integrated company that it
                                                                    is not seeking to delay investment to protect the market of any related
                                                                    supply undertaking.

                                                                      In the context of the 3rd Energy Package, creation of ACER should act
                                                                      as a further guarantee of such cooperation.




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N.V. Nederlandse Gasunie                                           It’s not that TSOs are failing to cooperate but it is the lack of a sound
                                                                   investment climate with the right incentives and the incompatibility of
                                                                   neighbouring regulatory frameworks that hamper timely cross border
                                                                   investment. See for example the postponement of Open Season 2012
                                                                   of GTS because of the lack of a sound investment climate in the
                                                                   countries of neighbouring network operators. On the website of BBL
                                                                   Company it becomes clear that the interruptible reverse flow services
                                                                   have been postponed due to the fact that Ofgem has not yet agreed
                                                                   on the tariff

On behalf of Shell Energy Europe                                   See above. We would prefer a level playing field with comparable
                                                                   implementation of 2nd directive. From our perspective, there just
                                                                   should not exist an excuse like 'circumstances in one or more
                                                                   countries'.
                                                                   At least, regulators and governments should focus on removing these
                                                                   circumstances before thinking about new regulatory initiatives.

DONG Naturgas                                                      ACER
GasTerra B.V.                                                      Benefits for society at both sides of the interconnection point should be
                                                                   the basis on which governments should take action.
Gaslink Independant System Operator Limited                        The NRA's and the Governments of the involved countries should
                                                                   discuss the issues and propose some solutions in conjunction with the
                                                                   TSO's involved.
anonymous networkuser 2
DONG Energy Pipelines GmbH                                         ACER
                                                                   Regulators as moderators.
Swedegas AB                                                        An european Authority, according to the proposed 3rd energy market
                                                                   directive.

18 Mismatches in available capacity on both sides of an
interconnection point may be considerable and hamper market
access. Solving this problem is not easy since e.g., investments
(costs) in one network may lead to benefits in another network
(e.g. upstr
GDF Suez                                                           Create crossborder compensation, and support crossborder M&A (eg
                                                                   Gasunie).b




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Essent                                       better and obligatory cooperation between TSO's.
POWEO                                        Cross border capacities should be considered as a whole, as a project
                                             with 50/50 cost/benefits for both TSOs.
GASELYS                                      By harmonisation of the balancing, allocation rules and offering
                                             combined firm/interruptible capacity products, even not for all the
                                             products at the beginning would be ok
Merrill Lynch Commodities (Europe) Limited   Solutions will not be perfect, but an attempt should be made to assess
                                             the overall benefits and maybe find a way to have inter tso
                                             compensation in the short term.

                                             In the long term a move toward regional market/networks should
                                             reduce such conflicts.
anonymous networkuser 1                      Some form of transfer pricing may be considered. Capacity rights
                                             definitions may also be relevant.
E.ON UK                                      We would like to emphaise the importance of locational entry exit
                                             charges to target cost appropriately. Ultimately there might have to
                                             be some pooling of revenues and reallocation monies between TSOs.

Centrica Plc                                 There are a number of elements to this, including:
                                             Cross-border co-ordination of investment incentives
                                             Effective measures to combat contractual congestion, on one side of
                                             the border or another
                                             OS co-ordination
                                             A sufficient (but not unduly onerous) level of user commitment on the
                                             part of cross-border shippers to ensure that retail customers do not
                                             shoulder an undue portion of any investment cost/risk
                                             Mismatches in definitions, including of capacity

GRTgaz                                       Generally speaking, global optimisation is a good thing for the
                                             community. It has to be encouraged by the regulatory regimes and/or
                                             benefits have to be shared by the investors.




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N.V. Nederlandse Gasunie                      Gas Transmission Infrastructure (LNG, storage and transmission)
                                              should be regarded in an integral way because it is the integral gas
                                              infrastructure that provides the overall security of supply. This view is
                                              not compatible with regulation that is focussed primarily on the
                                              transmission costs for the individual national end consumer
                                              (approximately 3 % of the end-consumer price)

                                              By removing infrastructure bottlenecks, and even allowing a slight over-
                                              dimensioning of the infrastructure (i.e. building more infrastructure
                                              than long term committed by users), the increased opportunity for
                                              trade and arbitrage will likely more than compensate for the slight
                                              additional cost for use of the infrastructure, thereby in effect
                                              significantly lowering the cost to end consumers.


On behalf of Shell Energy Europe              From our point of view, most of these problems could be sorted out if a
                                              coordinated approach between adjacent TSOs and respective
                                              regulators would be achieved.
DONG Naturgas                                 Should be solved on a project-to-project basis with ACER as an
                                              intermediate. Closer TSO cooperation
GasTerra B.V.                                 Benefits for society at both sides of the interconnection point should be
                                              the basis on which governments should take action.
National Grid                                 Circumstances such as that described can be alleviated through co-
                                              operation and agreements between TSOs e.g. to provide an enhanced
                                              pressure service. It is however essential that NRAs are involved on
                                              both sides of the border to agree the provision of the service and that
                                              any proposed cost targeting is appropriate.
Gaslink Independant System Operator Limited   This is all related to the Sound Investment Climate being discussed,
                                              and should be considered not only on a national basis, but certainly on
                                              a regional basis. Regional Regulators and Government bodies need
                                              to cooperate and develop seme overarching principles for investments
                                              across all member states. . . consistency is key.

DONG Energy Pipelines GmbH                    Cooperation between all active parties.




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Swedegas AB                                This type of optimization require:
                                           1.TSO cooperation to make assure the most efficient investment to
                                           solve the problem
                                           2. Equal regulatory provisions on both sides of the border
                                           3. A compensation system, wich could be administred by the planned
                                           european Authority




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2. Detailed questions to TSO principles per principle

19 Do you feel that you have adequate access to capacity?
(n= 15)
Yes                                                         13.3%
No                                                          86.7%

If not, please explain?
GDF Suez                                                    Entry-exit with no free and/or firm available capacity to book.
Essent                                                      in general yes, but some interconnection points are difficult to access.
                                                            and as explained before the issue of getting capacity in Germany.

POWEO                                                       Until now, secondary market of capacity is very poor, mainly due to
                                                            capacity hoarding or lack of rule to incent incumbent to sell their
                                                            rights.
                                                            Any current development will be available for the market on the long
                                                            run (2012+). Rules have to be defined to have access to a non-
                                                            discriminatory market.
GASELYS                                                     There is still a lack of clarity on the firmness of the capacity at most of
                                                            the points, ie our experience shows that interruption at the most
                                                            important IC points are very scarce. Also risk is very difficult to assess
                                                            because products are different from one TSO to the other and even
                                                            uncompatible. balancing, allocation... regimes are very different too.
                                                            Booking methods are also too far from each other. All these points
                                                            prevent right access to capacity. There is still too much confidentiality
                                                            on the LT contract hoarded capacity
Merrill Lynch Commodities (Europe) Limited                  In practice we know where capacity is not available so we don't look in
                                                            those areas.
                                                            Where it is available but scarce the price often reduces the incentive
                                                            to complete deals, even if the capacity on offer is not going to be used
                                                            by the primary holder.
anonymous networkuser 1                                     Inadequate access to FIRM capacity; often there is access to
                                                            interruptible.




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Centrica Plc                                                    The majority of existing transmission capacity in NW Continental
                                                                Europe is reserved under long-term contracts. Many routes are highly
                                                                congested (physically and/or contractually) and it is very difficult for
                                                                new and recent market entrants to get access to existing gas
                                                                transmission capacity, either from the TSO or on the very limited
                                                                secondary market.
Vattenfall, Generation Nordic                                   Working with short term contracts only, there are normally not capacity
                                                                available, even with a 12 months palning period.
On behalf of Shell Energy Europe                                The answer very much depends on the interpretation of 'adequate'.
                                                                Of course we have access to the capacity necessary to run the
                                                                existing business. Nevertheless, we do not see it as 'adequate'
                                                                access, as we are seeking to book additional capacity at various IPs in
                                                                Europe – which is often just not available (e.g. entry capacity from NL
                                                                to GER - we have committed firm bookings in open season process
                                                                and are concerned about potential delays of projects.)



DONG Naturgas                                                   There are still bottlenecks throughout the NWE region - some IC
                                                                points are booked more than 3 years ahead.
GasTerra B.V.                                                   No, for example we would like to have more export transport capacity
                                                                to Germany.
anonymous networkuser 2

20 What processes would you like to see in place to encourage
cross-border investment?
GDF Suez                                                        Yearly basis study at networks interconnection (level of booked
                                                                capacity, level of used capacity, level of requests not served)
Essent                                                          continue with third package proposals concerning ENTSOG en
                                                                regulatory cooperation.
POWEO                                                           See above.
GASELYS                                                         harmonisation and offer of bundled/combined capacity products
                                                                Coordinated capacity booking




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Merrill Lynch Commodities (Europe) Limited              Proper investment tests
                                                        Better flexible allocation approaches
                                                        Incentive on TSOs
                                                        Proper risk sharing
                                                        Greater consultation; TSO incentives.
E.ON UK                                                 It may not always be possible to justify investments on the basis on
                                                        user commitments. Some investments of this kind may need to be
                                                        viewed as stratigic investments that go beyond the narrower interests
                                                        of the directly affected TSOs and particular users. As such they may
                                                        need to have retuns guaranteed by relevant regulators. By removing
                                                        key constraints it may be possible to link markets more efficiently and
                                                        encourage more wholesale market liquitiy to emerge at new or existing
                                                        trading hubs.
Centrica Plc                                            Greater transparency of information (e.g. capacities, flows, aggregated
                                                        network demands), regulatory certainty over the framework for new
                                                        investment and regulatory oversight to ensure that TSOs (and indeed
                                                        regulators) are cooperating effectively on cross-border investment.

                                                        There needs to be a thorough, comprehensive review of TSO
                                                        incentives applicable to cross-border gas transportation – not just as
                                                        regards new investment but also in respect of other objectives such as
                                                        transparency and effective use of existing capacities. This issue could
                                                        be addressed by regulators in the GRI NW.


Vattenfall, Generation Nordic                           binding capacity ordering, but the price should be the actual one of the
                                                        year. This would avoid capacity being a commercial factor
On behalf of Shell Energy Europe                        Regular and coordinated open season processes (coordinated
                                                        between adjacent TSOs) with an acceptable timeline/schedule and
                                                        balanced risks between TSOs and shippers/traders.
DONG Naturgas                                           Yearly market demand checks by TSO's equivalent to the first part of
                                                        an Open Season. Harmonization of Network Codes
GasTerra B.V.                                           TSO’s should make overall planning for the grid that is in line with
                                                        other NW-European TSO’s.
Gaslink Independant System Operator Limited             N/A as Gaslink is not a Network User
anonymous networkuser 2




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Eneco Energy Trade                                      Harmonisation of transport access rules, e.g. the various balancing
                                                        regimes




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2a. Principle 1 by TSOs

21a Do you agree with this principle?
(n= 14)
IT problem. Therefore answer omitted. Response is manually
rechecked: respondents reactions still pending.


21b Why/why not?
GDF Suez                                                     Stability is nowadays impossible. Unilateral changes without third
                                                             parties' opinion and TSO's consent.
POWEO                                                        Stability and predictable climate are clearly important issues, both for
                                                             TSOs and shippers.
                                                             The third point is much more arguable, especially about the need to
                                                             attract capital. In a monopoly regime, TSO should have the obligation
                                                             to make investment. The best way to attract capital is to open capital
                                                             and perform unbundling of the TSO. The "fair" return will be provided
                                                             by possible new shareholders. With a dynamic capital, such
                                                             consideration is useless.
E.ON UK                                                      In the main yes but major problems and uncertainties exist in the GB
                                                             trasmission access regime which places unnecessary and in some
                                                             cases unmanageable risks on users.
Centrica Plc                                                 We agree that a sound investment climate must be stable, predictable
                                                             and fair. However, there may be cases where aspects of the regime
                                                             may legitimately need to change during the life of the investment (e.g.
                                                             a significant increase or reduction in the cost of external borrowing by
                                                             TSOs).

                                                             As regards the 3rd point proposed by TSOs, we suggest that the
                                                             following rider should be added:
                                                             “taking into account (inter alia) the level of user commitment provided
                                                             by potential capacity holders before the investment decision was
                                                             made”. 	
                                                             This is to reflect the inter-action between Principle 1 and Principle 2.




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On behalf of Shell Energy Europe                              ORIGINAL QUESTION 21a:
                                                              Do you agree with this principle? Why/why not? What do you consider
                                                              to be a stable, predictable and fair framework?

                                                              FOR THIS QUESTION, OUR ANSWER IS "YES". Explanation:

                                                              From our point of view, TSO description of 'sound investment climate'
                                                              is almost adequate.
                                                              We would suggest changing the statement 'Important investment
                                                              parameters must be stable during the lifetime of new assets.' to
                                                              'Important investment parameters should be guaranteed for the
                                                              specific project, at least during depreciation period of the project.'
                                                              Reasons:
                                                              o Lifetime of assets might be unrealistic long time (e.g. 30 to 40
                                                              years). If emphasis is on financial parameters, 'stability' should be
                                                              guaranteed for period used in economic evaluations (depreciation
                                                              period could be an appropriate figure).
                                                              o Parameters and framework might change for future projects but stay
                                                              unchanged for dedicated project.


21c In your MS, who is responsible for addressing the above
principle and for considering its adequacy?
GDF Suez                                                      -
Essent                                                        regulator
GASELYS                                                       national and (central) regulators with the support of the EU parliament

Merrill Lynch Commodities (Europe) Limited                    The regulator




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E.ON UK                                                         In theory NGG in GB - however it is becoming progressively less clear
                                                                as the TSO is expected to increasingly rely on user commitments from
                                                                shippers to signal investment. It is not always possible for shippers to
                                                                provide the appropriate signals and this has result in late investment at
                                                                Easington despite the clear need for such investment. The risk that a
                                                                TSO will have revenue disallowed if he invests without adequate user
                                                                commitments means that they will invariably be conservative in their
                                                                invstment decsions - this can result in 'just in time' investment being
                                                                'just too late investment'

Centrica Plc                                                    Ofgem (in Great Britain).
Vattenfall, Generation Nordic                                   the regulator and the market
On behalf of Shell Energy Europe                                For the sake of efficiency, MS representatives (and TSOs) of N/NW
                                                                countries should answer this question. Only if market participants
                                                                would disagree with the respective selection, further country specific
                                                                evaluation would be useful.
DONG Naturgas                                                   Danish Energy Regulatory Authority (DERA)
GasTerra B.V.                                                   No legislation yet. Tarification is pending.
Gaslink Independant System Operator Limited                     The NRA in conjunction with the TSO's
anonymous networkuser 2

21d What do you consider to be a stable, predictable and fair
framework?
GDF Suez                                                        No yearly changes. Mid-term explicit targets to reach.
Essent                                                          agree with above mentioned principles.
GASELYS                                                         Framework that are elaborated with all the business parties in full
                                                                transparency
                                                                In most of the current projects we got the feeling that TSOs don't take
                                                                into account business parties views despite large consultation.

Merrill Lynch Commodities (Europe) Limited                      One that is applicable to all parties not just the TSO, so it should
                                                                include transparency on the investment framework.




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E.ON UK                            Allowed revenues for a given investment plan should be agreed in
                                   advance and revenues shall be guaranteed if at the ime the
                                   investment was made a need for invstment could be demonstrated to
                                   the relevant regulator (this criteria should not be dependant on user
                                   commitments alone. TSOs should only be allowed on actual
                                   investments made. Changes to investment plans reflecting changing
                                   circumstances should be permitteed during the period of any plan.
                                   This requires regulators to have sufficient technical as well as
                                   econonomic expertise to enable them to challenge TSO plans and
                                   determine whether investments have been efficienty incurred.

Centrica Plc                       We agree that a sound investment climate must be stable, predictable
                                   and fair. However, there may be cases where aspects of the regime
                                   may legitimately need to change during the life of the investment (e.g.
                                   a significant increase or reduction in the cost of external borrowing by
                                   TSOs).

                                   As regards the 3rd point proposed by TSOs, we suggest that the
                                   following rider should be added:
                                   “taking into account (inter alia) the level of user commitment provided
                                   by potential capacity holders before the investment decision was
                                   made”. 	
                                   This is to reflect the inter-action between Principle 1 and Principle 2.


N.V. Nederlandse Gasunie           We fully agree with the views of the TSOs on this point and their
                                   justification
On behalf of Shell Energy Europe   See 21b
DONG Naturgas                      The Regulatory Framework should not change considerably in the
                                   cause of the lifetime of a major investment. As a point of departure it
                                   should be possible for a passive TSO investor to earn a return
                                   comparable with alternative investments in other business sectors.
                                   However, TSO's must also realize that they are now in open
                                   competition with each other, wherefore they will need continously to be
                                   competitive to be able to attract customers.
GasTerra B.V.                      Transparent long lasting legal framework, long term tarification




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Gaslink Independant System Operator Limited                        A system with appropriate Rates of Returns, no stranding of pre-
                                                                   approved assets/investments. Ireland has these features at the
                                                                   moment, but there are concerns regarding various initiatives affecting
                                                                   the framework negatively. hence we are participating heavily in these
                                                                   regional initiatives.
anonymous networkuser 2                                            Price settings should be transparent and predictable.
                                                                   rTPA Exemptions should be aligned.
                                                                   Operation procedures such as balancing, allocation, UIOLI-rules
                                                                   should equally be formulated.
                                                                   Users who book new capacities should not adversely be affected
                                                                   opposed to those who have booked existing capacities (tariff
                                                                   consistency etc.).
                                                                   It should be predictable how to deal whth cross border capacity rights
                                                                   and obligations in case of mergers and consolidations of market
                                                                   areas.
Eneco Energy Trade                                                 The first two bullets in the first TSO principle sound reasonable. The
                                                                   third is questionable. The principle of a fair risk/reward ratio for each
                                                                   infrastructure project ignores the need for cross-subsidy in a monopoly
                                                                   infrastructure.
NB: Some answers to 21b were omitted due to same problem as with
question 21a. The responses shall be manually checked.

22 Do rules that are stable during the life time of new assets
facilitate the development of increasingly dynamic competitive
markets? Yes or No. Please explain why Yes or No.
GDF Suez                                                           Yes. Helps new shippers to enter a market area.
Essent                                                             yes. TSO operate in a competitive environment as well and are
                                                                   becoming more and more commercial regarding their investment
                                                                   planning. therefore TSO most likely seek the same kind of certainty as
                                                                   market parties that want to invest in assets.
GASELYS                                                            Yes because stability means clear view and expected situation in
                                                                   terms of investment, raodmaps and expectations to have said planned
                                                                   capacity/asset availability
Merrill Lynch Commodities (Europe) Limited                         There is a riks of creating legacy arrangements that protect rights for
                                                                   some parties and not for new entrants.




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anonymous networkuser 1   No - a framework that allows change in a transparent, predictable way
                          with full open consultation provides the best opportunity.
E.ON UK                   Stability of rules are preferable once a viable set of rules are
                          established. There is alway a need for markets change processes
                          that permit changes to deal with changing circumstances.

                          Ideally the regulators should actively resist intervening and promoting
                          further changes once reasonably stable rules have been established.


                          The GB experience suggests that the reality is more likely to be
                          constant change to the regime driven by the regulator. Like all
                          bureacracies regulators do not plan their own demise and can always
                          justify their existance.

                          If the GB experience of ever intrusive regulation is to be reflected in
                          other MSs one can only assume regulatory uncertainties and risks will
                          grow rather than reduce over time.




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Centrica Plc                       Yes, but some flexibility may need to be retained to change rules (as
                                   mentioned above).

                                   In some jurisdictions (such The Netherlands, re GTS), it should be
                                   noted that gas transportation capacity fees are not fixed for the
                                   duration of the relevant contract, but are determined on an annual
                                   basis within the overall incentive framework approved by the national
                                   energy regulator, Energiekamer.

                                   From a network user’s point of view, this type of arrangement is clearly
                                   less stable than a fixed capacity tariff, but may have advantages where
                                   there is scope for material gains in efficiency leading to reduced
                                   charges over time. In any event, this approach to transportation tariffs
                                   requires a higher degree of long term stability, transparency and
                                   predictability in the regulatory framework than one which is based on
                                   contractually fixed or indexed charges.


GRTgaz                             The need is to guarantee a sufficient rate of return taking into account
                                   the economical life of the infrastructure
Vattenfall, Generation Nordic      No, rules might better be adapted to new circomstances - if aggreed
                                   between the investors
On behalf of Shell Energy Europe   Yes, but see comments above. We would propose a project-specific
                                   continuity (stable rules for a dedicated project).
                                   Investment projects are usually evaluated on the basis of set of
                                   assumptions. The more risk these assumptions contain, the higher the
                                   respective mitigation needs are (in terms of expected rate of return,
                                   payout time etc).

DONG Naturgas                      New TSO assets are needed. Stable rules may attract investors - but
                                   at the same time such rules may have a negative impact on the
                                   competition i.e. hamper the possibility of changing imperfections.




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GasTerra B.V.                                                     Rules that are stable improve the investment climate and thus
                                                                  stimulate growth of infrastructure which is one of the necessities to
                                                                  create a more competitive market. The down-site is that infrastructure
                                                                  will be used less efficient.
Gaslink Independant System Operator Limited                       Yes, if these rules are designed to create competitiveness in the
                                                                  markets.
anonymous networkuser 2
Eneco Energy Trade                                                Yes. Too little investment because of unstable rules will hamper those
                                                                  dynamic competitive markets.

23 Do you consider there is room for improvement in the current
environment in terms of predictability, stability and fairness?
Please describe some instances where the regulatory
environment for investment may not be satisfactory in terms of
predictabil
Essent                                                            German example.
GASELYS                                                           Yes certainly there is room for improvements
                                                                  In general what we experience is TSOs are designing their investment
                                                                  plans, new TSCs... without taking account of the business parties
                                                                  inputs and got the feeling that regulatory bodies have not a great deal
                                                                  of influence. In fact we are still dtruggling with the same issues


Merrill Lynch Commodities (Europe) Limited                        Just about every open season in the recent past has been structured
                                                                  as a contract with all of the rights given to the TSO. Shippers are often
                                                                  asked to bid on non-flexible terms and make firm commitments without
                                                                  knowing tariff levels.
anonymous networkuser 1                                           Room for improvement.

                                                                  Improved governance, consultation and transparency on network
                                                                  access, infrastructure investment planning and tariffication are all
                                                                  necessary.




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E.ON UK                   Revenues and plans should always be agreed on an ex ante basis.
                          The scope for ex post adjustments should be limited to asking whether
                          investments were efficiently incurred (and certainly must excluding
                          regulatory perspectives arising from the benefit of hinddight).

                          Lack of coordination arising from specific and phylisophical
                          differences between regulators has arising with respect to the Irish
                          interconnectotr and the need to underwtie investment in the GB
                          system to ensure continuity of supplies to Ireland.

                          Key concerns with regard reforms to the gas exit regime in GB that
                          originated from Ofgem ignored the concerns of downstream Irish
                          stakeholders.

                          A challenge at the UK Competition Commission found that Ofgem did
                          not have to consider the cost and benefit consequences outside GB,
                          even other parts of the UK. The legal basis for this under English Law
                          and European law was dubious.

                          It does raise an important issue of principle however. Surely each
                          regulator in making decisions within its own juristiction should have
                          regard to and take account of the implications on other MSs and
                          stakeholders in those MSs.




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Centrica Plc                       As mentioned previously, the current disputes between the TSOs in
                                   the Netherlands and Belgium and their relevant regulatory authority
                                   and/or government over the tariff regimes for current and future
                                   infrastructure has created considerable uncertainty for both the TSOs
                                   concerned and network users.

                                   To take a second example, the outcome of the ongoing EGT OS
                                   process has been delayed by a number of months and is currently
                                   rather difficult to predict, notwithstanding the binding commitments
                                   made by potential network users. We also note that the basis for
                                   future capacity charges (whether fixed contractually or to be set on an
                                   annual basis within an incentive regulation framework) was unclear at
                                   the binding bid date and remains so at the time of writing.

                                   Regulatory oversight to ensure TSOs compliance with the GGP on
                                   Open Seasons, would also contribute to an environment of
                                   predictability, stability and fairness.


GRTgaz                             There is always room for improvement.

On behalf of Shell Energy Europe   Question should be primarily answered by TSOs (especially if question
                                   shall be answered against background of capacity investments in
                                   interconnection facilities)
DONG Naturgas                      Examples:

                                   German TSO's are just now being asked by BnetzA to calculate tariffs
                                   according to cost-plus instead of benchmarking regime.

                                   German Incentive Regulation seems focused on cutting tariffs in a
                                   rather complicated and unclear way, which creates great uncertainty
                                   by investors for the profitability of individual business cases.




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GasTerra B.V.                                                     Yes, for example the division between new and old investments is not
                                                                  clear, but legislation is still pending in the Netherlands (as is
                                                                  tarification).
Gaslink Independant System Operator Limited                       Any improvement that would lead to the abolishment of Regulatory
                                                                  opportunism would be welcome.
anonymous networkuser 2
Eneco Energy Trade                                                see 21d

24 Do the above 3 bullets address the objectives of a sound
regional investment climate (from various stakeholder
perspectives)?
(n= 10)
Yes                                                               50.0%
No                                                                50.0%

If not, please advise alternative approaches that might address
the objectives?
POWEO                                                             Clear definition of Asset Base /risky assets has to be harmonized at an
                                                                  European level.
                                                                  This will help TSOs for any new investment.
Merrill Lynch Commodities (Europe) Limited                        No mention of the shippers and consumers. The starting point should
                                                                  be an appropriate sharing of risk given the level of regulated returns.

anonymous networkuser 1                                           The bullets represent only a part of what is necessary. A sound
                                                                  investment climate is not guaranteed.
Centrica Plc                                                      Answer given is NO, because we would like to comment.

                                                                  Generally yes, but with two provisos:
                                                                  1.As mentioned above, some flexibility may need to be retained to
                                                                  change rules.
                                                                  2.The principles do not adequately address the mix between
                                                                  regulatory and contractual (user commitment) framework and the need
                                                                  to ensure that allowed returns are reasonable in view of the risks
                                                                  transferred to network users and/or end consumers.

GasTerra B.V.                                                     Clear long lasting legal framework and long term tarification.




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25 How does this principle affect network access tariffs?
GDF Suez                                                    Multiplied changes cost money to adapt one's tools/organization...
Essent                                                      tariff setting is essential for TSO in order to determine their investment
                                                            risk.
POWEO                                                       There is no real need of any long term predictibility in tariffs, as the
                                                            regulator check at all time that the tariffs are defined on a cost-plus
                                                            basis.
                                                            But it is clear that there is a need for new investment with, maybe,
                                                            some increase in tariffs. This is the condition to improve competition.

GASELYS                                                     fair, shorter terms plans, better predictability, rational decision on
                                                            additional capacity building after efficient analysis... should lead to
                                                            better Network access tariffs elaboration.
Merrill Lynch Commodities (Europe) Limited                  There will be an incentive to keep tariffs high, and not to sell short term
                                                            services for economic value. Where the economic value is less than
                                                            the (multiple) of the regulated tariff shippers will not by capacity and
                                                            the system is not being used efficiently.
anonymous networkuser 1                                     Tariff methodologies, and actual tariff predictability are both essential.
                                                            Note that a clear methodology does not guarantee predictability
                                                            without transparency on other issues including planned and actual
                                                            capex and opex.
E.ON UK                                                     The 3 bullets in my view decribe a regime that assures particular
                                                            returns. Network access tariffs must by definition be set to recovered
                                                            those returns. Auction based mechanism for the recovery of revenues
                                                            will always over or under recover and lead to volatile and
                                                            unpredictable tariffs.

                                                            We think there is is a place for locational charges based on LRMC
                                                            principles but we would not advocate the fundamentally flawed auction
                                                            based arrangements for access that apply in GB. Having said that
                                                            there may be a role for auctions to allocate scarce short-term
                                                            interruptible or use-it-or-lose-it entry/exit access rights. Auctions
                                                            should certainly not be used as the primary mechansm to recover
                                                            allowed revenues.




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Centrica Plc                                  In general it should make at least the capacity element of network
                                              access tariffs more predictable. It is difficult for network users to make
                                              long term capacity commitments without the information needed to
                                              take a reasonable view of what they can expect to pay for it.

On behalf of Shell Energy Europe              Minor influence if no structural change is planned.
DONG Naturgas                                 Must be analysed further in detail.
GasTerra B.V.                                 Should be based on long term tarification.
Gaslink Independant System Operator Limited   Under this pricinple, tarrifs would be stable, predictable and fair.




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2b. Principle 2 by TSOs

26a Do you agree with this principle?
(n= 18)
Yes                                          72.2%
No                                           27.8%

26b Why/why not?
GDF Suez                                     Not all stakeholders can allow heavy binding commitments. can be
                                             beared only by important groups.
Essent                                       investments in capacity are only possible if there is sufficient demand
                                             and regulatory certainty.
POWEO                                        Market (shippers) are supporting most of new investements.
GASELYS                                      All parties with expertise of the market development must be involved

Merrill Lynch Commodities (Europe) Limited   This seems to be a trade off for regulating the returns. But it should
                                             also say 'for a given level of risk'
anonymous networkuser 1                      TSOs should be exposed to some level of risk in return for the
                                             potential for upside.
E.ON UK                                      Yes but undue reliance on user commitments from the market may not
                                             be approriate in many instances,




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Centrica Plc                       Under Article 8 of the current Gas Directive 2003/55/EC, TSOs have a
                                   duty to maintain and develop their system. There may be some cases
                                   where infrastructure investments have a benefit for the whole network
                                   and the recovery of these investments should be socialised across
                                   network users as a whole. In such cases, after consultation with
                                   stakeholders, the regulator should approve the addition of the
                                   investment to the TSO’s asset base.	

                                   However, for most major cross-border infrastructure investments
                                   leading to new pipeline capacity it would be reasonable for the TSO to
                                   require sufficient binding commitments from the market to underpin
                                   such and investment.

                                   We note that there are significant differences between TSOs in the
                                   currently applicable “user commitment” regime and the reasons for
                                   such differences are not fully clear. In our view, they must be
                                   sufficient to underpin investment, but neither unduly onerous (in which
                                   case the level of investment could be sub-optimal) not unduly
                                   restrictive of competition.

GRTgaz                             Binding commitments is necessary to garantee the need and limit the
                                   financial risk for the investors.
N.V. Nederlandse Gasunie           See justification of TSOs
Vattenfall, Generation Nordic      These are the partners to agree on commitments
On behalf of Shell Energy Europe   We tend to agree, but would prefer to involve governments even more.
                                   We would suggest removing the word 'possibly' in the sentence
                                   above.
                                   The reasons are mentioned in answers already given (preference for a
                                   level playing field all over Europe) – and discussions in several
                                   ERGEG GRI projects: Regulators and TSOs quite often had to realize
                                   that some of the proposals to improve interoperability/ capacity usage
                                   are not compliant with national legal framework, which often cannot be
                                   changed by regulator. These ideas require action of the governments.




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DONG Naturgas                                                      With the view that TSO's must be profitable as individual stand-alone
                                                                   businesses, they will try to minimize investment risks as any other
                                                                   business. Therefore they will like to recover their costs as quickly as
                                                                   possible and to minimize the risk of sunk costs.
GasTerra B.V.                                                      Yes, but based on a clear long lasting regulatory and legal framework

Gaslink Independant System Operator Limited                        Binding commitments are core to a sound investment climate, as they
                                                                   help to remove the financial risks associated with major investment
                                                                   projects.
anonymous networkuser 2
Eneco Energy Trade                                                 Investments cannot be done without binding commitments. However,
                                                                   binding commitments should not only arise from a TSO initiative (e.g.
                                                                   open season), but also from capacity requests from the market.


27 How can underpinning an investment from the market be
obtained: Long-term / short-term contracts? What is the correct
balance between short-term/long-term commitments, in view of
facilitating competition and security of supply? Please give, if
possibl
                                                                   Mid-term Gas releases to open market areas and needed capacity
                                                                   acquired in accordance to allocation combined with 70-80% of long
                                                                   term commtimement and 20-30% of short term commtiment
Essent                                                             only long term contracts shut off market access for new entrants,
                                                                   therefore a transparent and fair allocation method should be applied
                                                                   that all parties are in the position to get access. short term contracts
                                                                   form part of this.
POWEO                                                              Some long term contracts could be envisaged but the commitment is
                                                                   taken mainly by the regulator, in giving an approval to include
                                                                   investment in the asset base.
                                                                   Long term contracts should actually be a requirement from the
                                                                   regulator, to check the accuracy of this investement. A 70% LT/30%
                                                                   CT or 80/20 seems fair, with in that case 100% include in the asset
                                                                   base, with a tariff calculated on 100% of the capacity and evoluting if
                                                                   short-term booking fails.




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GASELYS                                      Markets and liquidity development need more short/mid term visibility
                                             so short-term commitments are much more favoured. LT
                                             commitments can only benefit to incumbents who have minor interest
                                             in liquidity development
Merrill Lynch Commodities (Europe) Limited   Contract lengths should be variable, so this requires an investment
                                             model that recognises that 100% funding with long term contracts is
                                             not necessary.
                                             UK arrangements has allowed investment to occur based on shipper
                                             demand.
anonymous networkuser 1                      A mix of LT, ST and rolling into the general RAB.
E.ON UK                                      If revenues are underpinned by regulatory commitments, user
                                             commitments from the market are then only required for new
                                             investment.

                                             Users e.g. new power station need only provide a commitment
                                             sufficiently large to ensure the project is specultive. This might
                                             amount to some 2 to 3 million Euros for a 500MWe station hich might
                                             typically be equivalent to 1 years exit capacity charges. This
                                             commitment provides sufficient safeguards to ensure any investment
                                             by the TSO is not stranded. This leval of commitment has proved to
                                             be successful in the UK.

                                             There is a dannger that if too long or too large a finacial commitment is
                                             asked this could act as a mjor barrier to new entrants to the market.

                                             The acid test is to ensure that any financial commitments made are
                                             sufficient to dissuade speculative investments.




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Centrica Plc                       It would be reasonable for TSOs to require the majority of the
                                   investment to be underpinned by long-term contracts. In this case
                                   long-term could be considered any period in excess of 5 years. In
                                   practice, many OS processes require much longer term commitments
                                   and some include capacity allocation (prioritisation) rules which
                                   effectively exclude shorter term transportation contracts.

                                   In Great Britain for network entry capacity users are required to make
                                   commitments equivalent to 50% of the incremental investment cost
                                   over a period of 8 years.

                                   On the Continent, user commitment periods are typically much longer,
                                   though some (such as EGT) reserve a portion of total new capacity for
                                   shorter duration contracts. In our view, it is desirable to do so where
                                   the “normal” user commitment is very long (say, 10-20 years) and a
                                   short term contract reservation can be made without undermining the
                                   overall investment case from a TSO perspective.



On behalf of Shell Energy Europe   From our perspective, long-term contracts are essentially a risk
                                   management tool. They exist to limit the risk for an investor but also to
                                   provide security of supply and thus mitigate the risk of disruption to
                                   energy supplies.
DONG Naturgas                      In the ideal world capacities should be available throughout the region
                                   at all times. However, such a scheme will require "oversized"
                                   pipelines. The questions then is how much is the market prepared to
                                   pay for capacities, which may be idle most of the time. This questions
                                   could be discussed in an ERGEG coordination group. The questions
                                   about long-term/short-term contracts may not be so important if UIOLI
                                   rules are changed enabling an actual release to the market in due time
                                   of ununsed capacities.




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GasTerra B.V.                                                Both, with price discrimination between short term and long term
                                                             contracts.
                                                             Where long term investments are not underpinned by revenues from
                                                             market parties, benefits for society should be considered and if these
                                                             are high enough, governments should invest.
Gaslink Independant System Operator Limited                  Large infrastructure investment projects NEED long term
                                                             commitments to ensure they are practical and viable.
Eneco Energy Trade                                           Depends on specific investment.

28 In your MS, who is responsible for addressing the above
principle and for considering its adequacy? How would you
define binding commitments from the regulators and the
government? By what means do regulators and governments
commit in your MS?
GDF Suez                                                     -
Essent                                                       both regulator and ministry of economic affairs.
GASELYS                                                      Not sure
                                                             Think this is The CRE regulator
Merrill Lynch Commodities (Europe) Limited                   The regulator is responsible. Binding commitments come in the form
                                                             of rates of return, and incentive arrangements. More often the funding
                                                             commitment is a broader agreement dealing with total funding, debt
                                                             levels and credit ratings
E.ON UK                                                      Binding commitments should relate to a specific investment plan
                                                             and/or agreed level of physical capacity provision. Governments
                                                             migh ultimatley have to underwrite certain strategic investments where
                                                             a conventional business case may not justify a particular project,
                                                             e.g.strategic storage,




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Centrica Plc                                                     In Great Britain, Ofgem Is the responsible authority and it recognises
                                                                 the importance of consistency, transparency and a stable regime to
                                                                 support investment.

                                                                 We would not expect the GB regulator or UK government to finance
                                                                 capacity. The cost of new investment is recovered from network
                                                                 users, via a mixture of specific user commitment and more general
                                                                 regulatory arrangements - both Transmission Operator (TO) price
                                                                 control regulation and the System Operator (SO) incentives.


On behalf of Shell Energy Europe                                 For the sake of efficiency, MS representatives of N/NW countries
                                                                 should answer this question. Only if market participants would
                                                                 disagree with the respective selection, further country specific
                                                                 evaluation would be useful.
DONG Naturgas                                                    Danish Energy Regulatory Authority (DERA)
GasTerra B.V.                                                    Responsibility still not clear.
Gaslink Independant System Operator Limited                      The local Regulator is responsible, in conjunction with the government,
                                                                 for ensuring the adequacy of the commitment model in the Republic Of
                                                                 Ireland.

29 Which other mechanisms are appropriate to recover costs for
TSOs?
GDF Suez                                                         Generated cash flow partially dedicated for others investments, or to
                                                                 cover less binding commitments
Essent                                                           no comment
POWEO                                                            compensation mechanism (fine-tuning of the tariff) if real booking are
                                                                 different than foreseen ones.
GASELYS                                                          None
Merrill Lynch Commodities (Europe) Limited                       Capacity costs could be recovered through capacity sales and a
                                                                 balancing charge. Operational costs should be recovered by a
                                                                 separate charge.
anonymous networkuser 1                                          Rolling into the cost base; charges based on factors other than
                                                                 capacity e.g. commodity, site/meter etc.




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E.ON UK                                                     Not sure if question applies to storage operators as well. It is perfectly
                                                            posssible under the right market conditions (as in the GB) for storage
                                                            operators to rely entirely on the market to provide returns or not

Centrica Plc                                                As mentioned above, we strongly advocate proper consideration of
                                                            “SO” type incentives at a regional level, alongside the framework of
                                                            user commitments and the regulation of TO charges.

                                                            For example, TSOs should be given incentives to maximise the use of
                                                            capacity. This could include methods such as “capacity buybacks”. 	

                                                            There needs to be a proper balance of incentives on TSOs to balance
                                                            investment in new capacity, release of existing capacity (whether firm
                                                            or interruptible) and the facilitation of secondary markets. Regulators
                                                            need to be aware that the current incentive framework can lead one or
                                                            more of these aspects to be favoured, to the exclusion (or only limited
                                                            implementation) of the others.


DONG Naturgas                                               Shorter time of depreciation.
Gaslink Independant System Operator Limited                 Long term financial security commitments and commitments to
                                                            underwrite assets.

30 What would you, as a stakeholder, prefer as a means of
underpinning an investment?
GDF Suez                                                    Longer period of investment returns
Essent                                                      long term guarantees by regulator.
POWEO                                                       Regulators approving investment with transfer into asset base.
GASELYS                                                     consultation and vote
Merrill Lynch Commodities (Europe) Limited                  Agreement on the level of risk to be faced by TSO, consumers and
                                                            shippers then an investment model, and where necessary additional
                                                            system charges to ensure funding is provided as agreed is capacity
                                                            sales are insufficient.
anonymous networkuser 1                                     Mix of LT commitment, rolled into cost base and TSO risk.




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E.ON UK                                       Binding commitments by the relevant national regulator(s) should
                                              underpin new investments.
                                              Investments plans should largely be driven by central planning
                                              processes by relevant TSOs.

                                              However, investments must be efficienty incurred and a degree of
                                              user commitment may have a part to play in this but undue or excess
                                              user commitments will act as a barrier to market entry and for
                                              established users can act as a barrier to exit.

                                              In this regard the shift to longer user commitments in the GB has
                                              proved to be detrimental and seems to go against creating an
                                              environment that conducive competitive wholesale markets
Centrica Plc                                  We support binding multi-annual “user commitments” by stakeholders,
                                              provided that (a) the basis for this commitment is
                                              transparent/predictable and (b) an excessively long minimum period is
                                              not applied.
On behalf of Shell Energy Europe              As long as appropriate level of investments by TSOs and access to
                                              capacity is guaranteed whenever needed, we would have no
                                              dedicated preferences.
DONG Naturgas                                 Yearly Open Seasons.
GasTerra B.V.                                 Economics (business as well as benefits for society).
Gaslink Independant System Operator Limited   Long term commitments over either the useful of technical lifetime of
                                              the assets, in conjunction with an appropriate rate of return.




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2c. Principle 3 by TSOs

31a Do you agree with this principle?
(n= 17)
Yes                                                           88.2%
No                                                            11.8%

31b Why/why not?
GDF Suez                                                      -
Essent                                                        see previous answers
GASELYS                                                       Assuming that efficient analysis of the need has been carried out, final
                                                              decision on cross-border investments should involve all concerned
                                                              parties who should foster such projects
Merrill Lynch Commodities (Europe) Limited                    Such investments can not be done unilateraly.
anonymous networkuser 1                                       There is no reason why TSOs could not be separately incentivised to
                                                              construct capacity on either side of the border.
N.V. Nederlandse Gasunie                                      See justification of TSOs
Vattenfall, Generation Nordic                                 The approach by regulators, TSOs and governments should be
                                                              regional meaning across national boaders and not national combined
                                                              with improved cooperation across boarders. natural Gas business is
                                                              international and trade should not be limited by national boarders.

Gaslink Independant System Operator Limited                   This principle is key to the success of interconnector investment
                                                              projects, where cooperation is essential between the various
                                                              regulators/TSO's.
anonymous networkuser 2                                       We absolutely agree on this, because only a harmonised environment
                                                              incentivises TSO's to co-operate and coordinate their respective
                                                              investment programmes, what in turn helps shippers to enter into
                                                              commitments. Recent open seasons such as those between Fluxys
                                                              and GRTgaz are positive examples.

31c In your MS, who is responsible for addressing the above
principle and for considering its adequacy?
GDF Suez                                                      -
Essent                                                        regulator and legislator




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GASELYS                                                             don't know exactly
                                                                    CRE ??
Merrill Lynch Commodities (Europe) Limited                          The Regulator
E.ON UK                                                             Ofgem
Centrica Plc                                                        Ofgem and National Grid Gas. (However, the nature of this principle is
                                                                    that is cannot be achieved by one set of national actors alone.)

Vattenfall, Generation Nordic                                       the regulator and the market
On behalf of Shell Energy Europe                                    For the sake of efficiency, MS representatives (and TSOs) of N/NW
                                                                    countries should answer this question. Only if market participants
                                                                    would disagree with the respective selection, further country specific
                                                                    evaluation would be useful.
DONG Naturgas                                                       Danish Energy Regulatory Authority (DERA)
GasTerra B.V.                                                       not clear
Gaslink Independant System Operator Limited                         Regulator and TSO's

32 Please give examples of when the differences in the allocation
of regulatory roles and responsibilities (e.g. between regulatory
agencies and governments) have hampered cross-border
investments?
GDF Suez                                                          Different operational rules or operational untis between TSOs due to
                                                                  legal enforcement or regulatory rules that empeach harmonization

GASELYS                                                             not known
Merrill Lynch Commodities (Europe) Limited                          Fluxys open season delivery was hampered by a lack of alignment
                                                                    with connected networks. There didn't seem to be any regulatory
                                                                    oversight to help manage the process.
Centrica Plc                                                        In both the Netherlands and Belgium, where tariff disputes have
                                                                    delayed cross-border investment, the shared role that the government
                                                                    and regulator have in approving tariffs has contributed to the delay.

                                                                    It is not entirely clear on which basis incremental BBL forward flow
                                                                    capacity and any reverse flow service (whether physical or virtual) is
                                                                    being regulated, as between Ofgem and the Energiekamer.




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GRTgaz                                                              Rules between the countries are often different and sometimes non
                                                                    compatible. For example, There are differences on capacity allocation
                                                                    rules (first come - first served / prorating), on the parts of the capacity
                                                                    dedicated to short term booking, etc.
Vattenfall, Generation Nordic                                       Capacity problems at Ellund is still unsolved
GasTerra B.V.                                                       Occasionally import capacity for the Netherlands is build, our demand
                                                                    for export capacity to Germany has not been taken into consideration
                                                                    yet.
Gaslink Independant System Operator Limited                         Not applicable as this has not been an issue for us in the past. There
                                                                    has been very successful cross-border investments made in the past,
                                                                    even when faced with differing roles and responsibilities of the
                                                                    Regulators.

33 Does the difference between how TSOs are regulated in
different MS create a barrier to investment? Please give specific
examples in your responses.
(n= 14)
Yes                                                                 78.6%
No                                                                  21.4%


34 On which aspects could coordination be improved, e.g.
allocation rules, transmission services, regulatory parameters?
GDF Suez                                                            Standard gas day - Operational unit (MWh 25°C/Sm3/Nm3...) -
                                                                    Allocated as nominated
Essent                                                              tariff setting
POWEO                                                               Allocation rules is a key principle in developping capacity, at least until
                                                                    a liquid secondary market appears.
GASELYS                                                             harmonisation on all aspects of the cross-border processing, ie
                                                                    balancing, scheduling, allocation, bookings
Merrill Lynch Commodities (Europe) Limited                          Incentives to invest
                                                                    Allocation approaches in terms of methods and timing

E.ON UK                                                             harmonisation of services and obligations wherever possible. Whre
                                                                    differences exist these should be objectively justified.




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Centrica Plc                                                    The timetables for key commercial dates and regulatory approvals in
                                                                each Member State need to be aligned. This should take into any
                                                                contentious national regulatory issues that could affect one of the
                                                                TSOs investment decisions.

                                                                The rules for allocation of capacity, especially in the case of
                                                                oversubscription, should be published and approved by the regulatory
                                                                authority in advanced. Allocation rules need to be sufficiently
                                                                coordinated between co-ordinated between TSOs to allow for
                                                                contracting shippers to match their final capacity bookings at the
                                                                relevant interconnection points.

Vattenfall, Generation Nordic                                   The governments and the regulators should focus on the regional
                                                                markets across national boarders with the adequate regulation on EU
                                                                level.
On behalf of Shell Energy Europe                                We fully support comment/note by RCC ('relevance to this principle
                                                                prior to implementation of the 3rd package').
                                                                Which also means: Priority should be given to full and equal
                                                                implementation of the 2nd Gas Directive in every country.
DONG Naturgas                                                   Allocation should be based on transparency and joint Open Season
                                                                (simultaneouly) - not FCFS. Short-term capacities to be sold at
                                                                auctions. Shippers to buy same capacity entry/exit at cross border
                                                                points.
GasTerra B.V.                                                   Overall framework is missing.
Gaslink Independant System Operator Limited                     Similar regulatory arrangements within regions could be a great
                                                                benefit, and this is certainly one ultimate goal of the NW-GRI/ERGEG
                                                                initiatives. In addition, similar transportation arrangements between
                                                                neighbouring systems could help.
anonymous networkuser 2


35 Do you have any specific suggestions or examples as to how
coordination could be improved between regulatory authorities
and TSOs in different sides of cross-border investment point?
GDF Suez                                                        Coordination of Open Season (planning - technical possibilies on both
                                                                sides of the border to be equal)




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Essent                                        Guidelines for open season should become binding and more detailed
                                              so that there can be less discussion on details.
POWEO                                         Instead of making Open Season on a full network basis, capacity
                                              should be developped by interconnection point, with a clear project
                                              leader requesting commitments for shippers on such interconnection.
                                              This is the only efficient way to develop any cross-border entry-exit
                                              capacity.
GASELYS                                       regulatory authorities and TSOs should work with business parties on
                                              a harmonisation package leading to TSOs contracting the same rules
                                              anywhere and offering combined products
Merrill Lynch Commodities (Europe) Limited    For large projects there may need to be a coordination group.
                                              For regular system enhancement, well structured rules and processes
                                              should be sufficient.
E.ON UK                                       Much needed at the Irish Interconnectors. Regulators should be
                                              required to consider the implications of downstream
                                              regulators/stakeholders in their decisions
Centrica Plc                                  The regulatory authorities and TSOs are best placed to comment on
                                              this. However, information on how coordination will be carried out and
                                              the key dates should be made known to shippers on a timely basis.

Vattenfall, Generation Nordic                 Some times regulators have more national than international interests.

On behalf of Shell Energy Europe              The recently announced plan of GTS and Gasunie D to carry out an
                                              integrated open season process is a very good example how situation
                                              could be improved.
DONG Naturgas                                 Regulatory Authorities and TSO's should be requested to report
                                              specifically on their active involvement in improving cross border trade
                                              in their respective Annual Reports.
GasTerra B.V.                                 Create an overall framework.
Gaslink Independant System Operator Limited   Through initiatives like NW-GRI, GTE+, CAG (the all-Island Gas
                                              Market in Ireland) etc.
anonymous networkuser 2




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2d. Principle 4 by TSOs

36a Do you agree with this principle?
(n= 17)
Yes                                          94.1%
No                                           5.9%

36b Why/why not?
GDF Suez                                     If not, leads to a dead-end process to take any decision
Essent                                       important for quick decision making and realisation of new
                                             investments.
POWEO                                        Before any open Season process, a first round table has to be made
                                             between TSOs, regulators and European autorithies to insure of the
                                             success of such process.
                                             There should be a tacite on basic principles before any request to the
                                             market and consultation on this principles with this market before such
                                             process.
                                             Timing, regulatory framework are key elements.
GASELYS                                      this is a pre requisite
Merrill Lynch Commodities (Europe) Limited   A clear understanding of the investment environment is the key
                                             element for creating certainty and transparency. There is little
                                             evidence of this in most markets.
E.ON UK                                      Yes but proper checks and balances in any regime requires active
                                             involvement of users in policy formulation, design of services etc.
                                             Care must be taken to ensure that the regulators do not dictate policy
                                             as workable practical solution are best orignated from TSO and their
                                             users. Decision on most practical and operational matters must
                                             remain with the TSOs. TSOs are not simply there to implement the
                                             policy choices of regulators.
Centrica Plc                                 Clarity of roles and responsiblities is important.
GRTgaz                                       The systems are often The systems are often different between the
                                             countries. This principle is useful for facilitating the exchanges and
                                             improving coordination.
N.V. Nederlandse Gasunie                     See justification of TSOs
Vattenfall, Generation Nordic                There is a need for a regional European approach
GasTerra B.V.                                Yes, but this is needed for the whole market, not only for TSOs.




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Gaslink Independant System Operator Limited                        Clarity on roles and responsibilities is important for TSO's and all
                                                                   market participants to ensure that the correct processes are adhered
                                                                   to by all participants, that it is clear who is responsibile for what
                                                                   elements of the decision process, that final decision makers are
                                                                   known in advance, that decisions/commitments made within each
                                                                   organisation are binding and lasting etc etc.
anonymous networkuser 2

37 In your MS, who is responsible for addressing the above
principle and for considering its adequacy?
GDF Suez                                                           -
Essent                                                             regulator and legislator.
GASELYS                                                            ?
Merrill Lynch Commodities (Europe) Limited                         The Regulator
E.ON UK                                                            Ofgem
Centrica Plc                                                       The responsibilities of stakeholders and regulatory authorities are
                                                                   clearly set out in national legislation and the network code
Vattenfall, Generation Nordic                                      The regulator and the market
DONG Naturgas                                                      Danish Energy Regulatory Authority (DERA)
GasTerra B.V.                                                      Unclear division between policy and implementation.
Gaslink Independant System Operator Limited                        The regulator, in conjunction with the TSO's and government.

38 Are you clear on the division/definition of roles within your
country(ies) of operation and how the roles and responsibilities
are divided? Please provide separate answers per country of
operation, where relevant.
GDF Suez                                                           All mentionned countries present difficulty in roles definition.
Essent                                                             yes.
GASELYS                                                            No this is not clear
Merrill Lynch Commodities (Europe) Limited                         In the UK this is reasonably clear.




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E.ON UK                                                            The roles of TSOs and the market have progressively become blurred
                                                                   in GB. Complex and opaque incentive schemes have commercially
                                                                   incentivised how NGG releases capacity into the market place. It is
                                                                   our view that TSO are the playing field on which the market participant
                                                                   play. Their role in the market should ideally be kept as residual as
                                                                   possible. Under most circumstances TSOs should be viewed as
                                                                   regulated monopolies - if they are allowed to play too nmuch in
                                                                   capacity or energy markets wholesale markets those markets can get
                                                                   distorted.
Centrica Plc                                                       In the other NW region countries where we are active (Belgium, The
                                                                   Netherlands and Germany) the division of roles is often less clear.
                                                                   However, we believe that if national regulators had more power to
                                                                   make decisions on and oversee the cross-border investment process
                                                                   and national tariff methodology, this would help streamline the process
                                                                   and facilitate coordination.
On behalf of Shell Energy Europe                                   Yes for N/NW.
DONG Naturgas                                                      Yes
GasTerra B.V.                                                      No. In Netherlands regulatory framework is still pending (for example
                                                                   unclear division between regulated versus non-regulated business).

Gaslink Independant System Operator Limited                        Yes.


If you have any other remarks or suggestions regarding
investment, we would appreciate it very much if you let us know:
Essent                                                           we are happy to further elaborate on our answers any time.
anonymous networkuser 1                                          I would ask that this response is only published on an anonymous and
                                                                 unattributable basis, or is not published at all.
E.ON UK                                                          Give TSOs adequate guarantees re returns/allowed revenues and
                                                                 they will be more than happy to faciltate non discriminatory TPA
                                                                 access and wholesale market competition. Ulimately assurance on
                                                                 the allowed returns is the only negotiation that matters for monopoly
                                                                 TSO businesses.
GRTgaz                                                           We hope that this process will improve the regional investment
                                                                 climate. GRTgaz is willing to contribute to this improvement.
Gaslink Independant System Operator Limited                      No remarks.




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anonymous networkuser 2




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