The European Federation of Energy Traders (EFET)1 welcomes the contribution made by the Council of European Energy Regulators (CEER) in the Conclusions Paper of the CEER Vision for a European Gas Target Model (GTM) from 1st December, 2011. In particular, we consider the attention that the document gives to the integration of new capacity into the ongoing capacity allocation process for existing interconnection points to be a valuable addition to the efforts for completing the internal European energy market.

“Currently, there is no mechanism for Transmission System Operators (TSOs) to provide additional capacity if demand for capacity exceeds existing availability... The lack of clarity as to how TSOs will meet the unsatisfied demand for capacity creates unnecessary uncertainty for shippers, which in turn will also lead to distorted bidding behaviour. It is therefore essential that the long-term allocation process be combined with a process whereby, incremental capacity can also be allocated subject to a suitable lead time,” pointed out the EFET delegation at the 20th Madrid Forum.

As stated in Recommendation 3 of the GTM, “CEER, in consultation with stakeholders, will develop proposals how to identify and integrate new capacity, based on market demand established through coordinated market-based procedures. CEER includes this topic in its work plan 2012.” To contribute to this initiative, EFET has identified key steps for TSOs, market participants and regulators to follow at existing interconnection points. This comprehensive approach is explained further in the EFET Position Paper on Incremental Capacity: Regulated Pipeline Investment in Response to Market Needs.

A crucial element of the EFET recommendations is the establishment of an „investment test‟, managed by National Regulatory Authorities (NRAs) in consultation with TSOs and market participants. The investment test must be agreed and published before long-term capacity is allocated, because the result of the test determines how much additional interconnection capacity will be built.

The approach suggested by EFET requires EU-wide cooperation. However, while several aspects of EU gas legislation will interact with the process, implementation could be carried out by regulators, TSOs and market participants without the need for a new EU legislative instrument.

EFET urges all parties to agree this approach as part of the target model for the EU gas market. Lastly, in this context, it is important to emphasise the need to facilitate market-based economic investment in, and allocation of, incremental capacity during the development of various EU framework guidelines and EU network codes (for example on CAM and on tariffs).

For further information, please contact Maria Popova, Policy and Communication Associate (M.Popova@efet.org; Mobile: +44 (0)79 3556 6114).

1 The European Federation of Energy Traders (EFET) promotes and facilitates European energy trading in open, transparent and liquid wholesale markets, unhindered by national borders or other undue obstacles. EFET currently represents more than 100 energy trading companies, active in over 27 European countries. For more information: www.efet.org.