Workshop - Forum Brussels, September 26 th 2011

1. Rules for Capacity Allocationby Explicit AuctionswithinCentral West Europe Region (CWE),Central South Europe Region (CSE)and Switzerland Workshop - Forum Brussels, September 26th 2011

2. Introduction • The origin of the project: the Memorandum of Understanding (MoU) signed May 19th 2010 due to CSE works for harmonising • Step 1: delegation to CASC with current rules for CSE and SNB (2011) • Step 2: harmonisation CWE/CSE/Switzerland (2012) • What is behind the word “harmonization”? • Propose to participants a unique entrance for contracting with the Joint Auction Operator (CASC) and provide them a similar way of functioning on all borders covered by a single Auction Rules (AR) document • For 2012, the target is to compile this set of AR even if similar managements are not yet in place for all mechanisms/regions

3. Existing Auctions Rules • CWE Rules for Capacity Allocation by Explicit Auctions within Central West Europe Region (CWE Auction Rules) version 2.2 • CSE • ACCESS RULES TO FRANCE-ITALY, SWITZERLAND-ITALY, AUSTRIA-ITALY, SLOVENIA-ITALY, GREECE-ITALY INTERCONNECTIONS (Capacity Allocation Auction Rules) 2011 with Joint Auction Office • Swiss – Austria Rules and Regulations for the Auctioning of Cross-Border Electricity Transfer Capacity on the Extra-High-Voltage Interconnectors between the Control Areas of APG and Switzerland by Austrian Power Grid AG (APG) and swissgrid ag (Swissgrid) Version 1.02 • Swiss – Germany • Rules of EnBW Transportnetze AG (TNG), Amprion GmbH (Amprion), VKW-Netz AG (VKW NETZ), and swissgrid ag (swissgrid) Hereinafter jointly designated the “Auction Partners” for the Yearly, Monthly and Daily Auction of the Available Transfer Capacity in the cross-border electricity trading between the control blocks of Germany and Switzerland no version / no duration

4. 12 Borders covered by the new AR NL DE • CWE borders: BE-FR, BE-NL, DE-FR, DE-NL, • Italian borders: FR-IT, CH-IT, AT-IT, SI-IT, GR-IT • Swiss Northern Borders: AT-CH, CH-DE • New Border covered: CH-FR On going project for introducing explicit auctions for the PTRs starting from 2012 as delivery period. This border is included in the new AR. Dedicated forum: 8th November 2011 BE CH AT SI FR IT GR

5. Planning Objective: 1st Yearly Auctions performed beginning of December 2011 with the new set of AR Consultation: 13th of September to 4th of October (3 weeks) Comments may be sent to: feedback.auctionrules@CASC.EU

6. First Yearly Auctionson Dutch Borders Due to the Dutch Grid code, first Yearly Auctions are scheduled between mid September and mid October, so under current CWE Auction Rules. But Participants shall be aware that the allocated Capacities during these Auctions will be governed by the new set of Auction Rules when they come into force for the 2012 PTRs. The draft Auction Rules under consultation are available for participating in these Auctions

7. Alternatives to be considered In case the new set of AR cannot be ready in time for governing the allocation of 2012 PTRs, the following solutions could be applied: • For CWE region and for the DE-CH and AT-CH Borders, the current sets of Auction Rules will apply; • For Italian Borders, a 2012 set of Auction Rules mainly based on 2011 Auction Rules will have to be approved; • For FR-CH border, a new set of Auction Rules will have to be issued (based on the Auction Rules under consultation) and approved.

8. Main topics • Auction Rules structure • Entitlements • Participation in Yearly/Monthly Auctions • Participation in Daily/CWE Shadow Auctions • Financial guarantees • Daily offered capacities lower than non-nominated LT PAs • Fall back procedures • UIOSI and Secondary Market: Transfer and Resale • Scheduling information remaining • Reduction in Held Capacities and Financial Compensation • Reduction in Exchange Programs and Financial Reimbursement • Liability clause / Force Majeure

9. Auction Rules structure • The AR deals with the Allocation of PTRs • Only one Declaration of Acceptance (DoA) dealing with the Allocation; no DoA for Nomination (DoAN) like currently in the Italian borders AR; • The DoA will be signed by the Joint Auction Office and the Participant (all documents will have to be re-signed) • The AR are issued for an unlimited period • In order to give Participants a general overview, in the AR, remaining border specificities will be explained in the main part, no longer in the appendices and clarify the principles was one of our main goal.

10. Entitlement Section III • Article 3.01/ Registration • Specific roles: CWE Shadow Auction Only, Beneficiary of a Transfer • Article 3.02/ Financial Guarantees • Article 3.03/ Entitlement • Participation in Yearly and Monthly Auctions • Participation in Daily and CWE Shadow Auctions

11. Participation in Yearly and Monthly Auctions • Any entity will be entitled forall Yearly and Monthly auctions operated by the Joint Auction Office under the new set of AR if it is active on the Electricity Market in at least one control area (see list in the next slide) UIOSI, Transfer and Resale mechanisms can be used by Participants even if they cannot nominate the PTRs bought

12. Participation in Yearly and Monthly Auctions NL DE An entity shall have at least: • a Participation Agreement for the Import/Export Rules with RTE, and/or • an ARP Contract with ELIA, and/or • a Bilanzkreisvertrag with EnBW TNG, and/or • a Bilanzkreisvertrag with Tennet GmbH, and/or • a Bilanzkreisvertrag with AMPRION, and/or • a Balance Group Contract signed with Slovenian Market Operator or signed a Contract for settlement of imbalances with the Balance Responsible Party in Slovenia, and/or • a Balance Group Contract with Swissgrid. • a PV Contract with TenneT TSO BV, and/or • anEnergy Transactions Contract with HTSO, and/or. • a Contratto di Dispacciamento with TERNA, and/or. • a Datenübermittlungsvertrags-Paar with APG and a BGV-Vertrag with APCS which together result in a valid Genehmigungsbescheid from Energie-Control Austria. BE CH AT SI FR IT GR

13. Participation in Daily and CWE Shadow Auctions • An entity will be entitled for Daily or CWE Shadow Auctions if it respects specific requirements per border and even per direction This mechanism entitles only entities being able to use the PTRs allocated

14. Participation in Daily and CWE Shadow Auctions

15. Financial Guarantees • Financial checking of the Business Account is now harmonized with only one specificity remaining for the Yearly product: • 2/12th on most of the Country Borders except on AT-CH where the Yearly product is paid in one settlement. • Beneficiary of Transfer Role: no financial guarantees (Business Account) needed. • As a reminder • Monthly Auctions: Valuation of obtained Capacities shall be covered in the Business Account. • Daily Auctions: full Bids valuation shall be covered in the Business Account.

16. Daily Offered Capacities lower than non-nominated Yearly and Monthly PA Currently, in the Auction Rules: On all Country Borders, except on CWE Market Coupling Borders, in this case, the non-nominated Yearly and Monthly Programming Authorization are curtailed on a pro-rata basis and the Participants will receive a financial compensation similar as a reduction of Held Capacities (100 or 110% of the original price of the Capacity). Disclaimer: On CWE Market Coupling Borders, this article is still under discussion between the TSOs and the Regulators regarding the necessity to introduce, on one or several Country Borders, a mechanism for hedging the financial risks of TSOs (including potential introduction of caps).

17. Daily Offered Capacities lower than non-nominated Yearly and Monthly PA Solutions under discussion among CWE TSOs and NRAs Option 1: send PA later after coordinated NTC D-1 calculation? Option 2: capping the UIOSI compensation? Option 3: assure NTC D-1 ≥ PA through coordination and re-dispatching? Other options or a combination can be envisaged Feedback from Market Participants is welcome during the Auction Rules consultation period

18. Fallback modes principles CWE-CSE-Switzerland Auction Rules Yearly & Monthly Auctions Postponement or bidding by fax Fallback mode • Equal share • If applicable in terms of timing and only to Participants able to use the daily PTRs Daily Auctions Fallback mode IT-SI Market Coupling Daily Auctions Fallback mode Fallback mode CWE Market coupling CWE Shadow Auctions Fallback mode Fallback mode

19. UIOSI UIOSI mechanism will be applied on all Country Borders. Explicit resale to Daily Auctions will no longer exist on CH-DE and CH-AT Borders.

20. Secondary Market Transfer mechanism of Yearly/Monthly Capacities between Participants is harmonized The Capacity to be transferred shall be first paid by the Transferor or blocked on its Business Account and the Beneficiary shall accept the Transfer. Resale of Yearly Capacities to a Monthly Auction remains as today On CWE Country Borders, the resale is feasible as soon as the Yearly Capacity is allocated (after the end of the contestation period). On all the other Country Borders, the resale is feasible only if the yearly capacity allocated is paid or blocked on the Business Account.

21. Scheduling information remaining in the AR • The AR only deal with Capacity Trader (CT) Role • However, depending on mechanism in place on each border, the Participant can designate a Nomination Agent in some countries for scheduling. • If this designation mechanism is performed by CASC, the Nomination agent will also receive the Programming Authorization by CASC. • This is the only information remaining in the AR related to the scheduling like currently in the CWE AR. • Other information like deadlines for scheduling or the way matching will be performed by TSOs are or will be described in local nomination rules.

22. Scheduling information remaining in the AR Participant A Nomination Agent on exporting side Nomination Agent on importing side Nomination Agent 1 Nomination Agent B Nomination Agent 2 Nomination Agent 1 Nomination Agent A Nomination Agent N Example:

23. Scheduling information remaining in the AR This table is a clarification of mechanisms that are already in place today! For Yearly and Monthly Capacities: For Daily Capacities:

24. Reduction in Held Capacities and financial compensations CWE Borders, FR–CH in both directions and FR>IT: • For reasons linked to the Safety of the Power System or in the event of Force Majeure, the Held Capacities can be Reduced until the sending of Programming Authorizations. • After sending and except in case of Force Majeure, the Programming Authorizations are firm for Nominating with the concerned TSOs. On all the other Borders (CH-IT, AT-IT, AT-CH, CH-DE, SI-IT, GR-IT and IT>FR): • For reasons linked to the Safety of the Power System or in the event of a Force Majeure, the Held Capacities can be reduced, until the deadline for the Nomination with the concerned TSOs (limited to a number of equivalent days on Italian borders for reasons linked to the Safety of the Power System ).

25. Reduction in Held Capacities and financial compensations Changes in the Compensation schemes BE-NL Border > the compensation scheme currently in place on FR-BE Border will apply Market spread with a cap on the spread prices and a cap related to the Auction revenues collected during the concerned month (1/12 of the Yearly Auctions and Monthly Auctions). DE-FR and DE-NL Borders > TSOs committed to harmonise CWE compensation by using the same compensation scheme as on FR-BE Border and BE-NL Border

26. Outlook: CWE Future compensation scheme for reduction of held capacities Compensation schemes will be re-examined at the latest when CWE Flow Based MC is introduced in order to be in line with the Framework Guidelines CACM and eventually with the Network Code Topic to consider: Time factors • Curtailment announced before a reasonable lead-time defined by NRAs • Curtailments of long duration

27. Reduction in Exchange Programs and financial compensations Changes in the Compensation schemes In case of Force Majeure and on all Country Borders: • Exchange Programs can be reduced; • and the capacities corresponding to the concerned Exchange Programs are reimbursed at the original price.

28. Liability Article / Force Majeure Liability clause has been harmonized based on the Italian Borders Auction Rules principles. Force Majeure definition has been modified in order to comply with Framework Guidelines on CACM.

29. Conclusion

30. Harmonized features • A unique contract for participating in all explicit allocations on 12 borders covering 2 regions • Same wording / concepts for all these borders • Nomination aspects excluded from HAR (separation of nomination agent and CT role) • Entitlement • Financial guarantees • Modification of compensation scheme toward Market Spread on BE-NL, DE-NL and DE-FR borders. • UIOSI (now also on CH borders instead of UIOLI) • Many technical differences from Participants point of view are reduced (publication of auction specifications, number of maximal bids, contestation period, settlement, etc.)

31. Thank you for your participation