CHAPTER IIREFERENCE PRICE METHODOLOGIES

Article 6Reference price methodology application1.

The reference price methodology shall be set or approved by the national regulatory authority as set out in Article 27. The reference price methodology to be applied shall be subject to the findings of the periodic consultations carried out in accordance with Article 26 by the transmission system operator(s) or the national regulatory authority, as decided by the national regulatory authority.

The application of the reference price methodology shall provide a reference price.

The same reference price methodology shall be applied to all entry and exit points in a given entry-exit system subject to the exceptions set out in Articles 10 and 11.

Adjustments to the application of the reference price methodology to all entry and exit points may only be made in accordance with Article 9 or as a result of one or more of the following:

(a)

benchmarking by the national regulatory authority, whereby reference prices at a given entry or exit point are adjusted so that the resulting values meet the competitive level of reference prices;

(b)

equalisation by the transmission system operator(s) or the national regulatory authority, as decided by the national regulatory authority, whereby the same reference price is applied to some or all points within a homogeneous group of points;

(c)

rescaling by the transmission system operator(s) or the national regulatory authority, as decided by the national regulatory authority, whereby the reference prices at all entry or all exit points, or both, are adjusted either by multiplying their values by a constant or by adding to or subtracting from their values a constant.

Article 7Choice of a reference price methodology

The reference price methodology shall comply with Article 13 of Regulation (EC) No 715/2009 and with the following requirements. It shall aim at:

(a)

enabling network users to reproduce the calculation of reference prices and their accurate forecast;

(b)

taking into account the actual costs incurred for the provision of transmission services considering the level of complexity of the transmission network;

(c)

ensuring non-discrimination and prevent undue cross-subsidisation including by taking into account the cost allocation assessments set out in Article 5;

(d)

ensuring that significant volume risk related particularly to transports across an entry-exit system is not assigned to final customers within that entry-exit system;

(e)

ensuring that the resulting reference prices do not distort cross-border trade.

Article 8Capacity weighted distance reference price methodology1.

The parameters for the capacity weighted distance reference price methodology shall be as follows:

(a)

the part of the transmission services revenue to be recovered from capacity-based transmission tariffs;

(b)

the forecasted contracted capacity at each entry point or a cluster of entry points and at each exit point or a cluster of exit points;

(c)

where entry points and exit points can be combined in a relevant flow scenario, the shortest distance of the pipeline routes between an entry point or a cluster of entry points and an exit point or a cluster of exit points;

(d)

the combinations of entry points and exit points, where some entry points and some exit points can be combined in a relevant flow scenario;

(e)

the entry-exit split referred to in Article 30(1)(b)(v)(2) shall be 50/50.

Where entry points and exit points cannot be combined in a flow scenario, this combination of entry and exit points shall not be taken into account.

The reference prices shall be derived in the following sequential steps:

(a)

the weighted average distance for each entry point or each cluster of entry points and for each exit point or each cluster of exit points shall be calculated, taking into account, where relevant, the combinations referred to in paragraph 1(d), in accordance with the following respective formulas:

(i)

for an entry point or cluster of entry points, as the sum of the products of capacity at each exit point or cluster of exit points and the distance from this entry point or cluster of entry points to each exit point or cluster of exit points, divided by the sum of capacities at each exit point or cluster of exit points:

{AD}_{En} = \frac{\sum_{all Ex} {CAP}_{Ex} \times D_{En,Ex}}{\sum_{all Ex} {CAP}_{Ex}}

Where:

AD_En is the weighted average distance for an entry point or a cluster of entry points;

CAP_Ex is the forecasted contracted capacity at an exit point or a cluster of exit points;

D_En,Ex is the distance between a given entry point or a cluster of entry points and a given exit point or a cluster of exit points referred to in paragraph 1(c).

(ii)

for an exit point or cluster of exit points, as the sum of the products of capacity at each entry point or cluster of entry points and the distance to this exit point or cluster of exit points from each entry point or cluster of entry points, divided by the sum of capacities at each entry point or cluster of entry points:

{AD}_{Ex} = \frac{\sum_{all En} {CAP}_{En} \times D_{En,Ex}}{\sum_{all En} {CAP}_{En}}

Where:

AD_Ex is the weighted average distance for an exit point or a cluster of exit points;

CAP_En is the forecasted contracted capacity at an entry point or a cluster of entry points;

D_En,Ex is the distance between a given entry point or a cluster of entry points and a given exit point or a cluster of exit points referred to in paragraph 1(c).

(b)

the weight of cost for each entry point or each cluster of entry points and for each exit point or each cluster of exit points shall be calculated in accordance with the following respective formulas:

W_{c,En} = \frac{{CAP}_{En} \times {AD}_{En}}{\sum_{all En} {CAP}_{En} \times {AD}_{En}}

W_{c,Ex} = \frac{{CAP}_{Ex} \times {AD}_{Ex}}{\sum_{all Ex} {CAP}_{Ex} \times {AD}_{Ex}}

Where:

W_c,En is the weight of cost for a given entry point or a cluster of entry points;

W_c,Ex is the weight of cost for a given exit point or a cluster of exit points;

AD_En is the weighted average distance for an entry point or a cluster of entry points;

AD_Ex is the weighted average distance for an exit point or a cluster of exit points;

CAP_En is the forecasted contracted capacity at an entry point or a cluster of entry points;

CAP_Ex is the forecasted contracted capacity at an exit point or a cluster of exit points.

(c)

the part of the transmission services revenue to be recovered from capacity-based transmission tariffs at all entry points and the part of the transmission services revenue to be recovered from capacity-based transmission tariffs at all exit points shall be identified by applying the entry-exit split;

(d)

the part of the transmission services revenue to be recovered from capacity-based transmission tariffs at each entry point or each cluster of entry points and for each exit point or each cluster of exit points shall be calculated in accordance with the following respective formulas:

R_En = W_c,En × R_ΣEn

R_Ex = W_c,Ex × R_ΣEx

Where:

W_c,En is the weight of cost for a given entry point or a cluster of entry points;

W_c,Ex is the weight of cost for a given exit point or a cluster of exit points;

R_En is the part of the transmission services revenue to be recovered from capacity-based transmission tariffs at an entry point or a cluster of entry points;

R_Ex is the part of the transmission services revenue to be recovered from capacity-based transmission tariffs at an exit point or a cluster of exit points;

R_ΣEn is the part of the transmission services revenue to be recovered from capacity-based transmission tariffs at all entry points;

R_ΣEx is the part of the transmission services revenue to be recovered from capacity-based transmission tariffs at all exit points.

(e)

the resulting values referred to in point (d) shall be divided by the forecasted contracted capacity at each entry point or each cluster of entry points and at each exit point or each cluster of exit points in accordance with the following respective formulas:

T_{En} = \frac{R_{En}}{{CAP}_{En}}

T_{Ex} = \frac{R_{Ex}}{{CAP}_{Ex}}

Where:

T_En is the reference price at an entry point or each entry point within a cluster of entry points;

T_Ex is the reference price at an exit point or each exit point within a cluster of exit points;

CAP_En is the forecasted contracted capacity at an entry point or a cluster of entry points;

CAP_Ex is the forecasted contracted capacity at an exit point or a cluster of exit points.

Article 9Adjustments of tariffs at entry points from and exit points to storage facilities and at entry points from LNG facilities and infrastructure ending isolation1.

A discount of at least 50 % shall be applied to capacity-based transmission tariffs at entry points from and exit points to storage facilities, unless and to the extent a storage facility which is connected to more than one transmission or distribution network is used to compete with an interconnection point.

At entry points from LNG facilities, and at entry points from and exit points to infrastructure developed with the purpose of ending the isolation of Great Britain or Northern Ireland, or other countries or territories in respect of their gas transmission systems, a discount may be applied to the respective capacity-based transmission tariffs for the purposes of increasing security of supply.

Article 10Rules for entry-exit systems within the United Kingdom where more than one transmission system operator is active1.

In accordance with Article 6(3), the same reference price methodology shall be applied jointly by all transmission system operators within an entry-exit system within the United Kingdom.

As an exception to paragraph 1 and subject to paragraph 3, the national regulatory authority may decide:

(a)

that the same reference price methodology is applied separately by each transmission system operator within an entry-exit system;

(b)

as an exception to Article 6(3), when planning entry-exit system mergers, on intermediate steps allowing for different reference price methodologies to be applied separately by each transmission system operator within the entry-exit systems concerned. Such a decision shall set out the time period for the application of the intermediate steps. The national regulatory authority or the transmission system operators, as decided by the national regulatory authority, shall carry out an impact assessment and a cost benefit analysis prior to implementing such intermediate steps.

As a result of applying different reference price methodologies separately, the transmission services revenue of the transmission system operators involved shall be adjusted accordingly.

In order to allow for the proper application of the same reference price methodology jointly, an effective inter-transmission system operator compensation mechanism shall be established.

The decision referred to in paragraph 2(a) or, respectively, paragraph 2(b) may be taken where the following conditions are complied with:

(a)

an effective inter-transmission system operator compensation mechanism is established with the aim to:

(i)

prevent detrimental effects on the transmission services revenue of the transmission system operators involved;

(ii)

avoid cross-subsidisation between intra-system and cross-system network use;

(b)

such separate application ensures that the costs correspond to those of an efficient transmission system operator.

The maximum time period set out in the decision referred to in paragraph 2(a) or, respectively, paragraph 2(b) shall be no later than five years as from the date referred to in Article 38(2). Sufficiently in advance of the date set out in that decision, the national regulatory authority may decide to postpone this date.

At the same time as the final consultation in accordance with Article 26, the national regulatory authority shall conduct a consultation on the principles of an effective inter-transmission system operator compensation mechanism referred to in paragraph 3 and its consequences on the tariff levels. The inter-transmission system operator compensation mechanism shall be applied by the national regulatory authority and published together with the consultation responses received.

The reserve price referred to in Article 22(1) shall be calculated as set out therein. Where paragraph 2 is applied, the following two calculations shall be carried out:

(a)

the calculation set out in Article 22(1) shall be carried out by each transmission system operator involved;

(b)

the weighted average of the resulting values referred to in point (a) shall be calculated in accordance with the formula set out in Article 22(1)(b), mutatis mutandis.

The final consultation referred to in Article 26 shall be conducted by all transmission system operators jointly or by the national regulatory authority. Where paragraph 2 is applied, such consultation shall be conducted by each transmission system operator separately or by the national regulatory authority, as decided by the national regulatory authority.

The information referred to in Articles 29 and 30 shall be published on an aggregated level for all transmission system operators involved. Where paragraph 2 is applied, the following two actions shall be carried out:

(a)

such information shall be published individually for each transmission system operator involved;

(b)

the information on the entry-exit split referred to in Article 30(1)(b)(v)(2) for the entry-exit system shall be published by the national regulatory authority.

Article 11Rules for entry-exit systems covering the United Kingdom and a member State where more than one transmission system operator is active

The same reference price methodology may be applied jointly or separately or different reference price methodologies may be applied separately where more than one transmission system operator is active in an entry-exit system covering the United Kingdom and a member State.