Completing the implementation of european provisions relating to the resolution of congestion at interconnection points with other countries of the national gas pipelines system 60/2016/R/gas

February 19, 2016

Italian version

With Consultation Document 60/2016/R/gas the Regulatory Authority for Electricity Gas and Water sets out guidelines for the completion of implementation of the European provisions relating to congestion management at interconnection points with other countries of the national gas pipeline system, as provided by CMP Regulation (Congestion Management Procedures), that defines European rules for the management of the so-called contractual congestion, namely situations where the transport capacity is poor because it is entirely conferred even in case of available physical capacity.
The unused capacity at an interconnection point is made available through the application of one of the following procedures:

1. "oversubscription and buy-back" (hereinafter: OS&BB) or, alternatively, "Firm day ahead use-it-or-lose-it" (hereinafter: FDA UIOLI);
2. surrender of contracted capacity;
3. long-term "use-it-or-lose-it" mechanism (hereinafter: LT UIOLI).

The procedures referred to in points b) and c) have already been implemented by the Authority (resolution 411/2013/R/gas) and, in accordance with Regulation CMP, SNAM, as a transmission system operator (TSO), has sent to the Authority an implementation proposal of the OS&BB mechanism. However, issues emerged during the definition of the details of the OS&BB mechanism induces the Authority to believe that its adoption, in the specific context of the Italian market, may not be the most efficient solution in terms of costs and benefits for the system, even considering that in recent years at interconnection points with other countries of the national network no event of contractual congestion has been registered.

As shown in the document, the Authority considers that the application of the above mechanism in Italy could lead to the risk of burdening the system with costs that cannot be determined ex ante, potentially very high, not necessarily compensated by as many benefits. The OS&BB mechanism appears to involve significant administrative complexity as well as risks related to the uncertainty of the effects for the system. These issues may be avoided by adopting the alternative congestion management method of, FDA UIOLI, foreseen by the CMP Regulation. This alternative option is also the one adopted by the Austrian regulator E-control.
Therefore, the document aims to consult the opportunity to introduce the FDA UIOLI mechanism in the Italian regulation rather than the OS&BB mechanism, starting from 1 October 2016.
The document 60/2016/R/gas also foresees the modification and the completion of some provisions of Resolution 137/02 (regarding free access to the natural gas transportation system) concerning the timing of some processes to ensure the effective implementation of the long-term "use-it-or-lose-it" mechanism and to ensure the consistency of the accounting deadlines of the transport service provided by the SNAM's network code.

The Authority also intends to define the two procedures that must be followed by the TSO, if conditions occur for the application of the long-term "use-it-or-lose-it" mechanism:

1. the first provides that the TSO proceeds automatically to the withdrawal of the capacity only in the event that the user fails to submit proper justifications by the expected deadline;
2. the second provides that, in all other cases, the TSO sends to the Authority its own evaluation of the justifications provided by the user and proceeds, or not, with capacity withdrawal if so  indicated by the Authority through an ad hoc resolution.

Finally, with regards to  bundled capacity products, the Authority submits for consultation that the TSO should adopt the same conditions envisaged for unbundled capacity for the amount of capacity whose withdrawal would be possible on both sides of the interconnection. The TSO will co-ordinate for this purpose with the operator of the interconnected transport system.
Interested stakeholders are invited to submit their comments to the Authority by 31 March 2016.

The note is merely informative and does not have regulatory nature.