European gas network codes

Network codes : towards an European harmonization of access rules to transmission networks

 The network codes are one of the key points of the European harmonization and the development of an integrated energy market. They are a set of common rules on technical and commercial conditions for the access to the transmission networks of gas and electricity, which will be applied in the same way through the whole European Union and will facilitate exchanges between the different market places.

Beyond the rule book, the network codes represent a real opportunity to simplify and to facilitate access to the European gas market and to drive mechanisms that will enhance the market integration.

The first network code developed by gas TSO’s in Europe illustrates the beneficial impacts of this harmonization. Indeed, this network code on “Capacity Allocation Mechanisms” provides the capability of allocating interconnection capacity thanks to a bid mechanism sized to European mesh.

 

Nouvelle image

source : www.cre.fr

 

Strong interactions between the European Commission, regulators and TSO’s

 

triangle des acteurs eng

Source : Gas in Focus

 

The European commission is responsible for defining European Union (EU) priorities in the development of network codes.

ENTSOG (European Network of Transmission System Operators for Gas), the European association representing  TSO’s and gathering 45 members in 26 countries, was created by directive 715/2009  in 2009. ENTSOG is in charge of writing network codes in accordance with framework guidelines previously defined by ACER (Agency of Co-operation of Energy Regulators). ACER which was established by rule 713/2009, is the European organization of energy regulators.

A network code becomes mandatory for member states after a process called comitology. At any time, the European commission has the opportunity to use a process called “direct comitology”. It allows the European commission to replace ACER and ENTSOG and to directly undertake the writing of regulatory procedures (e.g. CMP).

A Gas Committee,  consisting of representatives of member states and chaired by the European commission, adopts network codes. Then, after they have been translated into the official languages and approved by the European parliament, they are published as a directive in the Official Journal of EU.

Then, TSO’s have to support these changes and to make the necessary investments.

Each market player also contributes to writing those network codes. Many meetings are organized by ENTSOG during the writing process of codes : this measure allows all stakeholders to participate to the writing.

 

Progress in the network codes writing

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 Source : GRTgaz

First network code focuses on Capacity Allocation Mechanisms (CAM) and was adopted by the member states on April 25th, 2013 and was implemented and mandatory on November 1st, 2015 (directive 984/2013 of the European Commission). The CAM network code requires that capacities at interconnection points between transmission networks are marketed by gathering the output capacity of the first network with the input capacity on the second network (bundled capacities), and by bid-selling these interconnection capacities.

19 TSO’s of 7 european countries – with european institutions and regulators support – decided to anticipate the implementation of the CAM code by offering capacity through the PRISMA platform. Eventually gas isn’t delivered at border points but it is mainly focused on wholesale market places which increases their liquidity.

 The second network code regarding balancing rules is mandatory since October 1st, 2015 (directive 312/2014 of the European commission). The purpose of this code is to harmonize balancing rules on transmission networks (input gas quantities to match the delivered quantities) promoting market mechanisms and the intervention of transmission network users. These ones should be encouraged to contribute to any rebalancing by intervening on the market places. Residual imbalances are the responsibility of the TSO’s which have to use market places before physical tools (eg storage).

The third network code focuses on networks interoperability and on data exchanges. It is mandatory since May 1st, 2015 (directive 2015/703 of the European commission). It stipulates to undertake harmonisation measures linked with interconnection agreements, data exchange procedures and convergence principles regarding odorisation and the quality of gas.

 ENTSOG and TSO’s have created a new network code about the pricing of access to gas transmission networks. It should be adopted by Member states as a rule in 2017 and should become mandatory in 2019.

Moreover, an Amendment of CAM regulation have been created and is under the scope of comitology process. Measures regarding the allocation of non-existing capacity (incremental capacity process) should complete the previous version.

As explained before, European Commission can choose to use direct comitology. That’s the case for the « Congestion Management Procedures »  (CMP) published in the Official Journal of the European Union on August 28th, 2012 and came into effect on September 17th, 2012. It aims to avoid contractual congestion, that is to say, when all the transmission capacity was subscribed without being fully used.

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