Vienna 12.07.2006

1. Preparation of the Coordinated Physical Transmission Right (PTR) Allocation Scheme for the CEE – Region Vienna 12.07.2006

2. - Commitment of 8 TSOs from CEE-Region • Common willingness of 8 TSOs to improve allocation system: • Bring better in line commercial and physical load flows (PTR allocation) • Coordinated Capacity Forecast • Firmness and netting as far as possible from the view of secure grid operation • Foundation of an independent auction office • One stop shop, direct bids between all countries involved

3. Time schedule • 5th April – High Level Meeting: HLM decision of 8 TSOs to establish two Working Group for further development. • 2nd May: 1st coordination Meeting of WG chairmen • 19th May: 1st WG – Meeting Flow Based Allocation • 24th May: 1st WG – Meeting Coordinated Auctioning • 14th June: 2nd coordination Meeting of WG chairmen • 20nd June: 2nd WG – Meeting Flow Based Allocation • 26th June: 2nd WG – Meeting Coordinated Auctioning • 7nd June: 3rd coordination Meeting of WG chairmen • 11th July – High Level Meeting: Presentation of common Working Group report to HLG and HLG decision.

4. Current Status • Working Group „Flow Based Allocation“ – chaired by PSE • Development of concept of flow based mechanism – PTDF and Border Capacities • Investigate necessary preconditions and environment • Common network model and common data • Working Group „Coordinated Auction“ – chaired by APG • Prepare new approach of commonly owned, independent and transparent auction office • Auction rules for flow based allocation • Principles for distribution of revenues • WGs work together, chairs coordinate frequently their work • Joint presentation

5. Principles of Design of CEE Auction Office • Joint • the same amount of shares of the AO for each TSO • the same rights of access to and control of the AO for each TSO • Independent • AO with full legal rights • No subsidiary of a TSO • Transparent • Towards national authorities and market participant (clear and easily accessible market information)  auction rules and results • Toward the AO shareholders (clear and easily accessible information for monitoring)  business process

6. Auction Entities Auction Participants TSOs Purchase Data BCs PTDF-coordination Sale Data System Data PTDF, ABCs, Base Cases, Auction Results (historical, actual) “online” Risk Management PTR Auctions Secondary Market Scheduling Support PTR Holder General procedures for PTR auctions AO: Customer related AO: IT-related  Proposedstructure is also open for further developments (e.g. OMC)

7. Concept of Common Grid Model for capacitycalculation by an Auction Office • Capacity Forecast based on • Secure grid operation as first priority • Flow based method • Daily forecast for border capacities provided by common centralised body • Final decision remains with the responsible TSO • Not considering preventive measures to increase capacities (in order to save reserves for necessary re-dispatch during real time trading) • Sensitive data should be updated periodically (e. g. wind and hydro generation)

8. Decisions from HLG • Principle support of the HLG for further investigation on PTR-auctions and on a centralised calculation of a grid model, capacities and PDTF matrix • Principle support to provide data – as far as they are available • General agreement on the content of a common Position Paper • Decision on a preliminary optimistic time table (implementation scenario)

9. PTR Allocation - Challenges on technical parameters calculation • New centralised approach of common calculation activities necessary (while responsibility for SoS remains with the individual TSOs) • Higher complexity of the calculation process (more parties involved – not only regional, huge amount of data,…) • If adopted to the specific region strongly affected by external regions creates „ chicken and egg story” • More complex information of the offered capacities for market participants (ABC plus PTDF) • In contradiction with present UCTE rules on scheduling  has to be modified

10. Position Paper: preliminary Time Table (optimistic)

11. Support and decisions from Regulators To proceed with the process according to the shown time table support and decisions from Regulators are necessary! • Support concerning market harmonisation • Approval of costs for establishing and running a common AO before establishing the entity. • Support according to possible obstacles due to the EC Merger Regulation 139/2004. • Acceptance of principles on revenue distribution • Approval of Regulators on the concept of techn. Parameter calculation

12. Outlook • Serious time constraints • Capacity forecast (common grid model, IT etc.) • Data to asses external effects from adjacent regions • Decisions in Supervisory Boards of TSOs necessary • Legal procedure according EC Merger Regulation 139/2004 • Future Guidelines not entered into force until now • Changes in scheduling nomination procedure necessary (UCTE OH) • Approval of regional regulators for financing the CEE-AO • Preparation to prolong current solution (AO: CEPS) with changed auction rules – but to change to new system as soon as possible

13. Challenging exercise, but all participating TSOs are giving their highest commitment to it and are stating their willingness to make a further step forward to a transparent market integration in the CEE region.