January 2010


European Energy Regulators’ News

Issue: January 2010

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- Gas Capacity Allocation and Congestion Management

- see new calendar of workshops
- Madrid Forum presentations

- National Reports and ERGEG's review of them

Public Consultations

- see calendar from Jan - June

Press Release/FactSheet:
  Smart Grids

Region in the Spotlight
-  South South-East and the Austrian Gas Hub

The European Energy Regulators kick-started the new year with the publication of the 27 national country reports and the accompanying Status Review of Liberalisation and Implementation of the Energy Regulatory Framework.  Its main finding (very similar to last year) is that there has been too little progress in terms of energy markets delivering benefits for consumers. This is why consumers feature as a top priority in the regulators’ 2010 work programme,

With the 17th European Gas Regulatory (Madrid) Forum taking place mid January, gas features strongly this month.  The feature article of this edition is on gas capacity allocation gas and congestion management procedures.  At the Madrid Forum, ERGEG called on the Commission to adopt legally binding rules on congestion management.  Other ERGEG presentations at Madrid included the intermediate results of its study on the 10 year gas network development plan; and ERGEG’s view and next steps on balancing. 

The region in the spotlight this month is the South-South East region given that Austria’s spot gas exchange was established in December as a trading platform for spot market gas products.

Finally the European Regulators are pleased to announce a number of workshops (4 in the month of February).  See the calendar of future consultations and the new calendar of workshops.

Gas Capacity Allocation and Congestion Management - first signs of implementing the 3rd Package

The 3rd Package of energy legislation, adopted in July 2009, provides for EU-wide Network Codes. These will be drafted by the European TSO bodies on the basis of Framework Guidelines set out by the new Agency for the Cooperation of Energy Regulators (ACER).These Network Codes are critical for an integrated EU energy market. But, ACER cannot formally act until 3 March 2011. 

European Commission asked ERGEG to act as if it were the Agency
Work does not stand still. ERGEG is developing Framework Guidelines for Capacity Allocation Mechanisms (CAM) to “pilot” test implementation of the 3rd Package. The European Commission (letter dated 22 September) invited ERGEG to assume the role assigned to the Agency under the new Gas Regulation (EC) 715/2009 and to submit a non-binding Framework Guideline on gas capacity allocation within 6 months (by March 2010). This mirrors the procedure in the new Gas Regulation.

The target model for Gas Capacity Allocation and how to reach it
The aim is to improve the access to cross border interconnection points so as to overcome current difficulties such as different allocation rules on the two sides of borders, different types of capacity products and the domination of the First Come First Served (FCFS) principle (which ERGEG considers inappropriate if congestion exists).

ERGEG’s long term vision for the EU gas market is for trades to be concentrated at virtual hubs, thus benefitting market liquidity. The route to this target model is the cohabitation of interconnected entry-exit systems with a virtual hub.  The general principles are that:
• All market  areas are organized as entry-exit zones with virtual hubs
• FCFS is forbidden if congestion exists (except perhaps for intraday)
• Limited number of harmonised capacity products available all over Europe (to make access to capacity easier)
• Regular and timely coordinated allocations throughout the EU at all interconnection points
• Auctions should be the preferred capacty allocation method; with pro-rata allowed (as an interim step) if conditions are not met for efficient & fair auction procedures

This will allow the move towards uniform capacity allocation procedures at interconnection points throughout Europe in 2 steps: (1) Harmonisation of procedures at every IP: towards bundled products between market areas; and (2) Harmonisation at the EU level: same products & capacity allocation mechanism everywhere

Gas Capacity Allocation Mechanism – pilot Framework Guidelines
The Framework Guidelines on gas capacity allocation (a) address the scope and level of TSO cooperation in capacity allocation (b) set out the framework for harmonising capacity products and (c) set out the tools to be applied for capacity booking procedures, the details of the allocation mechanisms to be applied (e.g. auction, OSW, FCFS), and the facilitator (e.g. booking platforms) to be used. ERGEG presented its first drafts of these Framework Guidelines at the European Gas Regulatory Forum (so called Madrid Forum) this month. The public consultation on these pilot ends on 26th February and there will be a workshop in Brussels on 2 February. This pilot Framework Guidelines will not be legally binding - it is the basis for the Network Operators to draft Network Codes. It is the Codes which may become legally binding (via comitology). In parallel ERGEG is continuing to develop its work on Congestion Management of gas pipelines.

Congestion Management Procedures (CMP)
The major cross-border gas interconnection points in Europe are fully booked but physical capacity use is often below 50%. Contractual congestion at market borders hinders shippers to respond actively to price signals in the short term and to sell their gas cross-border.  Furthermore, lower prices at spot markets are not passed on to all consumers.

Seeing the urgent need to improve congestion management of Europe’s gas pipelines, ERGEG has developed (in consultation with stakeholders) principles for Congestion Management Procedures (CMP).  These focus on the Use It or Loose It (UIOLI) principle and the bundling of capacities to be implemented at all Interconnection Points.

In setting out its proposal at the Madrid Forum this month, ERGEG recommended to the European Commission to adopt binding guidelines on congestion management via comitology.

Comitology process requires quantitative impact assessment of policy options.  To this end, ERGEG has engaged a consultant to assess the (a) social welfare impact of implementing more harmonised and prescribed congestion management procedure based on ERGEG principles throughout the EU. 

CEER/ERGEG Publications

• National Reports
• ERGEG 2009 Status Review of Liberalisation and Implementation of the Energy Regulatory Framework, Ref. C09-URB-24-03, 10 December 2009

•  Smart Grids and smart energy regulation help implement climate change objectives, January 2010 (FS-10-01)
Events (see Events section of website for the new calendar of workshops) :
• ERGEG presentations at 17th Madrid Forum, Madrid, 14- 15 January
• 3rd ERGEG workshop on 10-year gas network development plan, Brussels, 26 January 2010
• Draft Pilot Framework Guideline on on Capacity Allocation (CAM) and Congestion Management (CMP),
  Brussels, 2 February 2010
• Integration of Wind Generation, Brussels, 11 February 2010
• Electricity 10-year network development plan, Brussels, 11 February 2010
• Customer Complaint Handling, Brussels, 25 February 2010
• Smart Grids, Brussels, 17 March 2010

Calendar of current and future public consultations

Area Issue Consultation
publication date
Gas Pilot Framework Guideline on Gas Capacity Allocation December 2009 - February 2010
  Guidelines of Good Practice on CAM & CMP to storage facilities April - 
May 2010
  Input to the Framework Guideline on gas balancing rules TBD
  Framework guideline on gas transmission tariffs TBD
Electricity Regulatory aspects of the integration of wind generation in European electricity markets December 2009 -
February 2010
  10-year electricity network development plan (Joint Grid Planning, Infrastructure and Generation Adequacy) December 2009 -
February 2010
  Position paper on smart grids December - 
March 2010
  Call for evidence on incentives schemes to promote cross-border trade in electricity January -
March 2010
  Call for evidence on generation adequacy February -
March 2010
  Framework guideline on electricity grid connection TBD
  Framework guideline on electricity capacity allocation and congestion management TBD
  Framework guideline on operational security TBD
  ERGEG advice on comitology guideline on electricity transparency TBD
Customer Draft GGP on Indicators for retail market monitoring March - April 2010
  Draft GGP on regulatory aspects on smart metering gas and electricity June - July 2010
Cross Sectoral CEER response on interdependencies with other markets TBD

The standard period for ERGEG public consultation is 8 weeks. See the public consultations section of the website.   


See all dates of Regional Initiatives meetings (RCC, IG, SG) on the ERGEG online Calendar.  

Regional Initiatives Update


Region in the Spotlight - SSE and the Austrian Gas Hub

On 11 December 2009, Austria’s spot gas exchange “CEGH – Gas Exchange by the Vienna Stock Exchange”  commenced as a trading platform for spot market gas products. This marks a further step towards positioning the Central European Gas Hub (CEGH) as an important international hub and trading gateway into the Central-East European area, whilst strengthening competition and the further liberalisation of the market.

The Central European Gas Hub AG together with the Vienna Stock Exchange and the European Commodity Clearing offer 2 different day-ahead base-load products.

Day-ahead lots will be offered at a minimum size of 30MWh/h for the Integrated Trading Area Baumgarten (ITAB) and for the Trading point Oberkappel. Currently 13 traders (from Austria, Italy, Slovakia, Germany, Czech Republic and Switzerland) are active and the traded volume in the first month of operation reached 94,320 MWh, of which 58,920 MWh were physically settled. The average prices varied between 12,3 and 15,1 Eur/MWh in the first half of January 2010, where most of the trades took place. A futures exchange will be launched in early 2010 after the integration of the EUREX trading system. Then, monthly, quarterly, seasonal, and yearly futures will be offered.  

The newly launched Spot-Market will open up the opportunity for traders to add short-term products from the exchange to their purchase portfolios. At the current level of free gas offered on the Spot-Market, coming particularly from Take-or-Pay obligations, especially from Russian gas supplies, the offer of cheap volumes might increase in the coming years. This new boost of liquidity should also pave the way for many suppliers to move away from 100% import contracts in order to gain flexibility in volumes and to profit from low Spot-Market prices. As soon as traders can start their activity on the futures exchange, portfolios can also be built on long term products from the gas exchange. Traders will have more opportunites for arbitrage and for hedging their positions, which will reduce the risk premiums and can also lower the purchase costs, also to the benefit of the final customers.

International Activities


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