CHAPTER I

GENERAL PROVISIONS

Subject matter
Article 1
This Regulation establishes a network code setting up capacity allocation mechanisms in gas transmission systems for existing and incremental capacity. This Regulation set outs how transmission system operators cooperate with adjacent TSOs in order to facilitate capacity sales, having regard to general commercial as well as technical rules related to capacity allocation mechanisms.

Scope
Article 2
1
This Regulation shall apply to interconnection points where transmission system operators carry out functions or activities that are regulated by a national regulatory authority. It may also apply to entry points from and exit points to other countries, subject to the decision of the relevant national regulatory authority. This Regulation shall not apply to exit points to end consumers and distribution networks, entry points from ‘liquefied natural gas’ (LNG) terminals and production facilities, and entry points from or exit points to storage facilities.
2
The standardised capacity allocation mechanisms provided for in this Regulation shall include an auction procedure for relevant interconnection points ... and the standard capacity products to be offered and allocated. Where incremental capacity is offered, alternative allocation mechanisms may also be used, subject to the conditions set out in Article 30(2).
3
This Regulation shall apply to all technical and interruptible capacity at interconnection points as well as to additional capacity in the meaning of point 2.2.1 of Annex I of Regulation (EC) No 715/2009 and to incremental capacity. This Regulation does not apply to interconnection points where, immediately before IP completion day, either the UK or relevant member State held a derogation on the basis of Article 49 of Directive 2009/73/EC, as it had effect in EU law.
4
Where an alternative capacity allocation mechanism according to Article 30 is applied, Article 8(1) to (7), Articles 11 to 18, Article 19(2) and Article 37 shall not be applicable to the offer levels, unless decided otherwise by the relevant national regulatory authorities.
5
Where implicit capacity allocation methods are applied, national regulatory authorities may decide not to apply Articles 8 to 37.
6
In order to prevent foreclosure of downstream supply markets, national regulatory authorities may, after consulting network users, decide to take proportionate measures to limit up-front bidding for capacity by any single network user at interconnection points ....

Definitions
Article 3
For the purposes of this Regulation, the definitions in Article 2 of Regulation (EC) No 715/2009, Article 3 of Commission Regulation (EU) 2017/460 ... shall apply. In addition, the following definitions shall apply:
1. ‘incremental capacity’ means a possible future increase via market-based procedures in technical capacity or possible new capacity created where none currently exists that may be offered based on investment in physical infrastructure or long-term capacity optimisation and subsequently allocated subject to the positive outcome of an economic test, in the following cases:
  1. at existing interconnection points;
  2. by establishing a new interconnection point or points;
  3. as physical reverse flow capacity at an interconnection point or points, which has not been offered before;
2. ‘interconnection point’ means a physical or virtual point connecting adjacent entry-exit systems or connecting an entry-exit system with an interconnector, in so far as these points are subject to booking procedures by network users;
3. ‘alternative allocation mechanism’ means an allocation mechanism for offer level or incremental capacity designed on a case-by-case basis by the transmission system operators, and approved by the national regulatory authorities, to accommodate conditional demand requests;
4. ‘standard capacity product’ means a certain amount of transport capacity over a given period of time, at a specified interconnection point;
5. ‘offer level’ means the sum of the available capacity and the respective level of incremental capacity offered for each of the yearly standard capacity products at an interconnection point;
6. ‘implicit allocation method’ means a capacity allocation method where, possibly by means of an auction, both transmission capacity and a corresponding quantity of gas are allocated at the same time;
7. ‘bidding round’ means the period of time during which network users can submit, amend and withdraw bids;
8. ‘large price step’ means a fixed or variable amount that is defined per interconnection point and standard capacity product;
9. ‘incremental capacity project’ means a project to increase the amount of technical capacity at an existing interconnection point or to establish a new interconnection point based on capacity allocation in the preceding incremental capacity process;
10. ‘economic test’ means a test applied to assess the economic viability of incremental capacity projects;
11. ‘incremental capacity process’ means a process to assess the market demand for incremental capacity that includes a non-binding phase, in which network users express and quantify their demand for incremental capacity, and a binding phase, in which binding commitments for contracting capacity are requested from network users by one or more transmission system operators;
12. ‘bundled capacity’ means a standard capacity product offered on a firm basis which consists of corresponding entry and exit capacity at both sides of every interconnection point;
13. ‘interconnection agreement’ means an agreement entered into by a transmission system operator with an adjacent TSO, whose systems are connected at a particular interconnection point, which specifies terms and conditions, operating procedures and provisions, in respect of delivery and/or withdrawal of gas at the interconnection point with the purpose of facilitating efficient interoperability of the interconnected transmission networks, as set out in Chapter II of Regulation (EU) 2015/703;
14. ‘competing capacities’ means capacities for which the available capacity at one point of the network cannot be allocated without fully or partly reducing the available capacity at another point of the network;
15. ‘auction calendar’ means a table displaying information relating to specific auctions which is published jointly by, or on behalf of, all transmission system operators by January of every calendar year for auctions taking place during the period of March until February of the following calendar year and consisting of all relevant timings for auctions, including starting dates and standard capacity products to which they apply;
16. ‘gas day’ means the period from 5.00 a.m. to 5.00 a.m. the following day;
17. ‘within-day capacity’ means capacity offered and allocated after the closure of the day-ahead capacity auctions with respect to that day;
18. ‘ascending clock auction’ means an auction in which a network user places requested quantities against defined price steps, which are announced sequentially;
19. ‘uniform-price auction’ means an auction in which the network user in a single bidding round bids price as well as quantity and all network users, who are successful in gaining capacity, pay the price of the lowest successful bid;
20. ‘reserve price’ means the eligible floor price in the auction;
21. ‘small price step’ means a fixed or variable amount that is defined per interconnection point and standard capacity product which is smaller than the large price step;
22. ‘first-time undersell’ means an occurrence where the aggregate demand across all network users is less than the capacity offered at the end of the second bidding round or a subsequent bidding round;
23. ‘virtual interconnection point’ means two or more interconnection points which connect the same two adjacent entry-exit systems, integrated together for the purposes of providing a single capacity service;
24. ‘f-factor’ means the share of the present value of the estimated increase in the allowed or target revenue of the transmission system operator associated with the incremental capacity included in the respective offer level as set out in Article 22(1)(b) to be covered by the present value of binding commitments of network users for contracting capacity calculated as set out in Article 22(1)(a);
25. ‘over-nomination’ means the entitlement of network users who fulfil minimum requirements for submitting nominations to request interruptible capacity at any time within-day by submitting a nomination which increases the total of their nominations to a level higher than their contracted capacity;
26. ‘non-UK regulatory authority’ means a regulatory authority for a country or territory other than the UK;
27. ‘adjacent TSO’ means a transmission system operator or a non-UK TSO which operates a transmission system which is directly connected to a transmission system operated by the relevant transmission system operator.
Commission Regulation (EU) 2017/460 of 16 March 2017 establishing a network code on harmonised transmission tariff structures for gas (see page 29 of this Official Journal).
Words in Art. 1 substituted (31.12.2020) by The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/531), reg. 1(2), Sch. 4 para. 1; 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 2(1) inserted (31.12.2020) by The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/531), reg. 1(2), Sch. 4 para. 2(2)(a); 2020 c. 1, Sch. 5 para. 1(1)
Word in Art. 2(1) substituted (31.12.2020) by The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/531), reg. 1(2), Sch. 4 para. 2(2)(b); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 2(2) substituted (31.12.2020) by The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/531), reg. 1(2), Sch. 4 para. 2(3)(a); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 2(2) omitted (31.12.2020) by virtue of The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/531), reg. 1(2), Sch. 4 para. 2(3)(b); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 2(3) substituted (31.12.2020) by The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/531), reg. 1(2), Sch. 4 para. 2(4) (as amended by S.I. 2020/1016, regs. 1(2), 4(4)(a)); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 2(6) omitted (31.12.2020) by virtue of The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/531), reg. 1(2), Sch. 4 para. 2(5); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 3 omitted (31.12.2020) by virtue of The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/531), reg. 1(2), Sch. 4 para. 3(2); 2020 c. 1, Sch. 5 para. 1(1)
Art. 3(26)(27) inserted (31.12.2020) by The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/531), reg. 1(2), Sch. 4 para. 3(6); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 3(13) substituted (31.12.2020) by The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/531), reg. 1(2), Sch. 4 para. 3(3); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 3(15) substituted (31.12.2020) by The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/531), reg. 1(2), Sch. 4 para. 3(4); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 3(16) substituted (31.12.2020) by The Gas (Security of Supply and Network Codes) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/531), reg. 1(2), Sch. 4 para. 3(5); 2020 c. 1, Sch. 5 para. 1(1)