Position paper for consultation: exploring the feasibility of implicit allocation in the (North West) European gas market

Background to the position paper
The Council of European Energy Regulators (hereafter: CEER) has – in close cooperation with stakeholders – developed the first European Gas Target Model. In this vision, CEER foresees two measures that should contribute to creating a European internal energy market. Firstly, a series of harmonised liquid and functional regional gas markets within the EU should be created (possibly through zone merging and the implementation of entry/exit zones). In a second step those functioning wholesale gas markets should be connected through the efficient use of interconnector capacity (possibly through an implicit allocation mechanism).
In discussions on the Gas Target Model no clear “yes or no” – at least for NRAs within the Gas Regional Initiative North West (hereafter: NRAs within GRI NW) – came forward on the question whether implicit allocation should be introduced in the gas market. At the same time, GRI NW – of all three gas regions – is probably the most advanced region in terms of gas market development and therefore most suitable for a possible implicit allocation pilot. For this reason, NRAs within GRI NW decided to work on a joint position paper which explores the feasibility of introducing implicit allocation in the gas market. 
Scope of the position paper

In the draft position paper*, NRAs within GRI NW explain whether they see added value (and under what conditions) in introducing implicit allocation in the gas market and – should this be the case – when this coupling mechanism should be introduced.

Given the fact that the design of the mechanism is only relevant if there is added value (and practical experiences seems to be needed to determine the design), the position paper does not answer the question what the implicit allocation mechanism should look like in detail. However, the position paper will present the relevant design issues.

 * - The Brattle report that is published has served as a starting point for the position paper. As such, the Brattle report is published as a background document. In the position paper itself, the background and role of the Brattle report is expained in more detail.

 Public consultation and workshop

The position paper intends – given the fact that implicit allocation requires cooperation between stakeholders and will impact the “rules of the game” in the gas market – to facilitate a regional dialogue. To ensure an open dialogue, the position paper will be up for public consultation until Monday 5 November 2012 as to provide stakeholders the possibility to share their views. NRAs within GRI NW are therefore now seeking stakeholder views on the content of the position paper. We would welcome your views by email to IAconsultationGRINW@acer.europa.eu. Next to the consultation, a workshop on implicit allocation will take place on Friday 19 October 2012 (10:00 hours – 16:00 hours) in The Hague. For more information on the (agenda of the) workshop, please contact NMa (lead regulator of GRI NW) by e-mail: InternationalofficeDREV@nma.nl.
Next steps
Responses received from the consultation will serve as input to NRAs within GRI NW to finalize the position paper. The final position paper will be presented during the Stakeholder Group meeting of GRI NW on Friday 23 November 2012 in Copenhagen, Denmark.