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European gas network codes

Network codes: a European regulatory tool to harmonize the 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 of technical and commercial conditions for the access to the transmission networks of gas and electricity, which are equally applied in the European Union and facilitate exchanges between different market places.

Beyond the rule book, the network codes is a real opportunity to simplify and to facilitate the access to the European gas market and to drive mechanisms that strengthen 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 scale.

(Source : www.cre.fr)

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

(Source : Gas in Focus)

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

The 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 June 2009. ENTSOG is in charge of writing network codes in accordance with framework guidelines previously defined by the ACER (Agency of Co-operation of Energy Regulators). The ACER, established by directive 713/2009, is the European organization of energy regulators.

​The "Clean Energy Package", a set of European electricity regulations adopted between December 2018 and June 2019 and substituting the "3rd Electricity Package", deals with measures that could potentially be applied to gas, as its impact is currently under examination by the ENTSOG. In addition, the procedures for establishing future network codes are also being updated in accordance with the provisions of the Lisbon Treaty: these procedures mainly concern the decision-making and voting processes.

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

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Applicable network codes:

 

Capacity Allocation Mechanisms (CAM) is the directive 2017/459 of the European Commission Regulation. 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. In addition, these interconnection capacities must be sold by auction and on dedicated reservation platforms. Eventually gas isn’t delivered at border points but it is mainly focused on wholesale market places which increases their liquidity.

3 reservation platforms are implemented. GRTgaz is the co-founder of one of them, called PRISMA, that was created with the support of European institution and regulators but also 19 TSO’s of 7 European countries.​ The CAM network code also includes provisions on non-existent capacity allocation mechanisms (incremental capacity process).

 

Balancing 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 (e.g. storage).

Interoperability and data exchanges is mandatory since May 1st, 2015 (directive 2015/703 of the European Commission). It stipulates to undertake harmonization measures linked with interconnection agreements, data exchange procedures and convergence principles regarding odorisation and the quality of gas.

Pricing is the directive 2017/460 of the European Commission Regulation and entered into force on May 31th, 2019. It describes processes for harmonizing tariff structures for gas transport.

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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. They mean to avoid contractual congestion, that is to say, when all the transmission capacity was subscribed without being fully used.