STEP PROJECT

Stakeholder consultation

March 2018

STEP Stakeholders consultation

2

INDEX

1 Background .................................................................................. 3

1.1 Reminder of the previous consultations conducted ....................... 3

1.2 Additional consultation ............................................................. 4

2 Description of the project and proposed capacity ............................... 6

2.1 Technical description ................................................................ 6

2.2 Capacities ............................................................................... 7

2.3 Marketing of capacities ............................................................. 9

2.4 Tariffs ................................................................................... 12

3 Procedure for responding to the consultation ................................... 14

3.1 Questions .............................................................................. 14

3.2 Process ................................................................................. 14

STEP Stakeholders consultation

3

1 Background

On 4th March 2015, the President of France, the Prime Minister of Spain, the Prime

Minister of Portugal, and the President of the European Commission, signed the

“Madrid Declaration”. In this declaration, they “agree on the need to actively assess

in order to complete the Eastern gas axis between Portugal, Spain and France,

allowing bidirectional flows between the Iberian Peninsula and France through a

new interconnection project currently known as the MidCat”.

Following the Declaration, the High-Level Group on Interconnections for South-West

Europe (HLG-SWE) was established by the European Commission to ensure the

timely implementation of the objectives set in the Madrid Declaration.

The HLG-SWE gave the mandate in 2015 to Enagás, GRTgaz and TIGF to set a

Technical Group in order to conduct technical studies analysing MidCat capacities

and sets of infrastructures.

The approach suggested by French and Spanish authorities in the HLG-SWE was an

incremental one, starting with the lowest level of investments and then

incorporating gradually infrastructures at both sides of the interconnection. In

particular, they recalled that the study should include an evaluation on the

possibilities to increase interconnection between France and Spain with the

minimum development of additional infrastructures. STEP (South Transit East

Pyrenees) was identified as the least-cost project allowing for the increment of

capacities at the border. This project has been included in the 2017 PCI (Project of

Common Interest) list.

On 26th January 2018, the HLG-SWE endorsed the maturity of the project, and

there was a unanimous consensus about the next step being the submission of the

investment request for STEP by Enagás and TIGF (hereafter the promoters) to the

relevant NRAs.

1.1 Reminder of the previous consultations conducted

Open seasons were carried out in relation to capacity on the French-Spanish border

in 2009 and 2010, and several stakeholder consultations have been carried out

during the last years, notably:

The European Commission while developing the PCI list, both for the 2nd PCI

list (2015) and the 3rd PCI list (2017) has consulted the organisations

representing relevant stakeholders including producers, distribution system

operators, suppliers, consumers, and organisations for environmental

protection. This is in line with the requirement stated in Annex III point 1(5)

of Regulation 347/2017.

During the 3rd PCI selection process (2017) stakeholders were invited to

participate in the meeting of the North-South gas interconnections in

Western Europe (NSI West Gas) which took place on 8th November 2016.

The European Commission requested stakeholders’ contributions on

remarks/analysis of the energy system problems, and invited them to

provide to the EC additional assessments or studies that stakeholders

consider to be a deemed input to the discussion about the problems of the

NSI West Gas Corridor.

STEP Stakeholders consultation

4

When the draft TYNDP 2017 was published in December 2016, ENTSOG

launched a public consultation from 21st December 2016 to 3rd February

2017. Stakeholders were invited to provide comments, among other issues,

on the projects that they would like to see included in the TYNDP 2017.

Since the initial open seasons, the market has had other opportunities to express

their views on project STEP. Notably, Regulation 2017/459 (CAM NC) introduced a

new procedure for assessing the incremental capacity at EU-IPs. Enagás and TIGF

followed this process for the first time in 2017.

In April 2017 Enagás and TIGF published in their respective websites a call

for non-binding demand indication for incremental capacity at VIP Pirineos,

in line with article 26 of Regulation 2017/459. No non-binding demand

indications were received by the TSOs.

Enagás and TIGF published by the end of July 2017 the first Demand

Assessment Report for VIP Pirineos1. This report concludes that, despite the

fact that the TSOs did not receive any non-binding demand indications

“some auctions cleared with premium over the reserve price; thus not all

demand for capacity has been satisfied at the reserve price. Therefore, in

order to avoid these possible situations in which the demand for capacity at

the VIP could not be satisfied, new infrastructures could then be

investigated.”

The outcome of the Demand Assessment Report indicates that no long term

commitments may be expected from shippers at STEP. This is consistent with the

fact that the STEP project does not provide firm capacities on an annual basis. It is

also consistent with the ongoing and wider trend away from long-term

commitments from shippers at interconnection points.

1.2 Additional consultation

To complement the views already received, Enagás and TIGF, as part of the

ongoing preparation of the project, would like to monitor the views of the

stakeholders one more time. With this objective, the operators are launching the

present consultation of active shippers and other related stakeholders, on the

creation of additional capacities on the French-Spain border. This consultation is not

related to the public participation procedure regarded in Regulation 347/2013,

which will be conducted separately and with a different focus.

The objective of the present consultation is therefore to invite stakeholders

(including users and potential users of the VIP Pirineos as well as industry

associations and hub operators relevant in both countries), to express their interest

in contracting capacity offered on STEP.

This document sets out:

The technical description of project STEP

The additional capacities that will be created by STEP between the French

and Spanish gas systems

The conditions under which the promoters envisage to market the

capacities

1 https://www.entsog.eu/publications/incremental-capacity#INCREMENTAL-CAPACITY---DEMAND-

ASSESSMENT-2017

STEP Stakeholders consultation

5

Information in relation to the tariffs for the relevant capacity

Participation in this market consultation does not constitute a commitment to buy

capacity on either the existing interconnection capacity or additional capacities to

be created by STEP. Equally, this consultation does not constitute a commitment

from any TSO involved as to offer a product, new interconnection capacity, any

service and/or develop any infrastructure.

The promoters will respect the confidentiality of any information received. The

responses shall be considered as confidential information and subject to the binding

rules regarding the confidentiality of commercially sensitive information under the

European regulation as transposed in France and Spain. The promoters reserve the

right to disclose only the aggregated results, and the responses specifically

indicated as non-confidential. The promoters note that responses to the

consultation may be shared with National Regulatory Authorities and Ministries, but

with a clear indication of their confidentiality.

STEP Stakeholders consultation

6

2 Description of the project and proposed capacity

2.1 Technical description

The STEP project comprises the minimum set of infrastructures to create a third

physical interconnection between France and Spain.

On the French side the project consists of a pipeline between Barbaira and

the Spanish border (120 km, 36’’), as well as the adaptation of the Barbaira

compressor station.

On the Spanish side the project consists of a pipeline between Hostalrich and

Figueras (79 km, 36’’), a pipeline between Figueras and the French border

(28 km, 36’’) and a compressor station in Martorell.

The project will be located in Spain and France in the regions of Cataluña and

Occitanie respectively.

Figure 1: STEP infrastructures

The current timeline foresees commercial operation in gas year 2022.

The expected investment cost of the STEP project is 442 M€, with the following

disaggregation between the different assets:

STEP Stakeholders consultation

7

Table 1: Estimated investment costs for the STEP project

TSO Pipeline / compressor

station

Length / Power CAPEX

(M€)

TIGF Barbaira – Border 120 km 290

Enagás Figueras – Border 28 km 27

Enagás Hostalrich – Figueras 79 km 72

Enagás Martorell CS 36 MW 53

The above figures can slightly vary after the public participation process due to

changes in the pipeline route or final decision on the compressor station

technology.

Enagás and TIGF do not expect any major cost deviation, i.e. costs are expected to

remain within a ±10% range of the investment costs reported in Table 1.

2.2 Capacities

STEP will create the following cross-border capacities:

French side:

o Interruptible cross-border capacity up to 230 GWh/d Spain to France and

180 GWh/d France to Spain.

Spanish side:

o Firm cross-border capacity of 120 GWh/d Spain to France and 110

GWh/d France to Spain.

o Interruptible capacity up to 110 GWh/d Spain to France (totalling 230

GWh/d) and 70 GWh/d from France to Spain (totalling 180 GWh/d).

This is illustrated in the figure below.

STEP Stakeholders consultation

8

Figure 2: Illustration of capacities provided by STEP

The basis on which these will be marketed is described further below.

2.2.1. Interruptibility conditions

Enagás, GRTgaz and TIGF undertook a Joint Technical Study to evaluate the

potential capacity of the minimum set of infrastructures to create a third physical

interconnection between France and Spain (STEP).

To identify the capacity that could be made available on a firm basis and which

could be guaranteed under all conditions, the JTS took the approach of considering

the worst-case conditions for flows elsewhere on the networks.

The JTS also examined the physical capability provided by STEP. This resulted in

the following projections of French physical capability:

Table 2: JTS Capabilities

SP FR FR –> SP

Peak Scenario

1) STEP+Fos+Manw ≤ 775 SN1: Pir+Fos+Lusw+Manw ≤ 1212 SN2: Pir+Fos+Lusw+Manw+Atlw ≤ 1725 SN3: Pir+Fos+Lusw+Manw+Atlw+Mont ≤

2065

1) STEP-Fos-Manw ≤ 35 NS1: Fos+Lusw+Manw-Pir ≥ 195

NS2: Fos+Lusw+Manw+Atlw+Mon-Pir ≥ 925 NS3: Mont+Fos-Pir+Atlw+Lusw+SEw+Jura ≥ 1215

Winter Scenario

1) STEP+Fos+Manw ≤ 715 SN1: Pir+Fos+Lusw+Manw ≤ 982 SN2: Pir+Fos+Lusw+Manw+Atlw ≤ 1352 SN3: Pir+Fos+Lusw+Manw+Atlw+Mon ≤ 1643

1) STEP-Fos-Manw ≤ 175 NS1: Fos+Lusw+Manw-Pir ≥ -52 NS2: Fos+Lusw+Manw+Atlw+Mon-Pir ≥ 279 NS3: Mont+Fos+Atlw+Lusw+SEw+Jura-Pir ≥ 313

Summer Scenario

1) STEP+Fos-Mani ≤ 575 SN1: Pir+Fos-Lusi-Mani ≤ 685 SN2: Pir+Fos-Lusi-Mani-Atli ≤ 581 SN3: Pir+Fos-Lusi-Mani-Atli+Mon ≤ 969

1) STEP-Fos+Mani ≤ 335 NS1: Fos-Lusi-Mani-Pir ≥ -342 NS2: Mon+Fos-Lusi-Mani-Atli-Pir ≥ - 536 NS3: Mont+Fos-Atli-Lusi-SEi+Jura-Pir ≥ -629

STEP Stakeholders consultation

9

Note: PIR refers to the combined flows through the existing interconnections and STEP

2.3 Marketing of capacities

2.3.1. Services and products

All existing and incremental capacity shall be commercialised according to the rules

set out in Regulation 2017/459 (CAM NC). STEP capacities will also follow these

rules.

Pursuant to article 19(9) of CAM NC, where two or more interconnection points

connect the same two adjacent entry-exit systems, the adjacent transmission

system operators concerned shall offer the available capacities at the

interconnection points at one virtual interconnection point.

In October 2014 Enagás and TIGF created a Virtual Interconnection Point between

Spain and France, called VIP Pirineos, for the purpose of providing a single capacity

service. Today, the VIP Pirineos comprises the two physical interconnections points

between France and Spain: Larrau IP and Biriatou (FR) / Irun (ES) IP.

Once STEP has been put into operation, in order to continue providing a single

capacity service, STEP IP for commercial and operational purposes will be

integrated at VIP Pirineos. The conditions set in article 19(9) of CAM NC will be met.

The total technical capacity at VIP Pirineos will be equal to or higher than the sum

of the technical capacities at each of the interconnection points contributing to the

VIP.

Table 3: Existing capacities at VIP Pirineos, as of March 2018

GWh/d

Enagás side TIGF side

Firm Interruptible Firm Interruptible

From France to Spain 225 0 165 (W) / 175 (S)

60

From Spain to France 225 0 225 0

Capacities created by STEP on the Spanish side are firm whereas on the French side

they are interruptible as already mentioned in section 2.2.

Table 4: STEP capacities

GWh/d

Enagás side TIGF side

Firm Interruptible Firm Interruptible

From France to Spain 110 70 0 180

From Spain to France 120 110 0 230

STEP Stakeholders consultation

10

Table 5: Capacities at VIP Pirineos after STEP commissioning

GWh/d

Enagás side TIGF side

Firm Interruptible Firm Interruptible

From France to Spain 335 70 165 (W) / 175 (S)

240

From Spain to France 345 110 225 230

Capacity bookings will be available for a range of standard durations corresponding

to the existing durations available at VIP Pirineos. The range of products is

described further below separately for firm and interruptible capacities.

2.3.2. Marketing of firm capacities

Firm available capacities at VIP Pirineos will be offered to the market by means of

standard capacity products allocated via auctions at PRISMA booking platform,

according to the rules set in the CAM NC.

Before an auction starts Enagás and TIGF individually upload on PRISMA the

capacities to be auctioned. Then PRISMA automatically computes the

bundled capacity to be auctioned taking into account the lesser value

(lowest common quantity) of the capacities sent by each TSO.

Each TSO decides if the capacity mismatch (difference between the values

uploaded on PRISMA and the lesser value) could be offered as unbundled

capacity.

Note that capacities will be offered on PRISMA in kWh/h at 25°C. However, the

contracts will be signed in kWh/d at 0°C with Enagás and in MWh/d at 0°C with

TIGF. The following conversion factors should therefore be used to convert the

capacities from kWh/d at 0°C and MWh/d at 0°C in kWh/h at 25°C:

From Enagás’s side : ENT (kWh/j (0 °C)/1,0026 /24) = kWh/h (25 °C)

From TIGF’s side : ENT (MWh/d (0 °C) * 1000 /1,0026 /24) = kWh/h (25

°C)

To convert capacities from kWh/h at 25°C to kWh/d at 0°C and MWh/d at 0°C, the

following shall be used:

From Enagás’s side : ENT (kWh/h (25 °C) * 1,0026 * 24) = kWh/j (0 °C)

From TIGF’s side : ENT (kWh/h (25 °C)/1000 * 1,0026 * 24) = MWh/j (0

°C)

Currently, the following firm capacity products are offered on VIP Pirineos,

according to the ENTSOG calendar2:

Yearly products: the auction in 2018 will start on 2nd July 2018 (first

Monday of July) for delivery years 2018/19 up to 2032/33 (the product runs

from October 1st of the first year and ends October 1st of the following year)

2https://www.entsog.eu/public/uploads/files/publications/CAM%20Network%20Code/2017/2018/CAP07

75_171031_CAM%20NC%20auction%20calendar%202018-2019_rev9.xlsx

STEP Stakeholders consultation

11

Quarterly products: the auction in 2018 will start on the 6th August 2018

(first Monday of August) for delivery 4 quarters ahead (i.e. products for Q4

2018 to Q3 2019 will be available)

Monthly products: the auction starts on the third Monday of M-1 for

delivery between the 1st of month M to the 1st of month M+1

Daily products: the auction starts a day before the delivery date

Within day products: see the ENTSOG calendar for details3.

Firm capacity mismatches (where there is more available firm capacity on one side

of the interconnection point than on the other side for any period considered) may

be offered as unbundled products in accordance with the auction calendar and the

following rules:

a) where there is an existing unbundled transport contract at the other side of

the interconnection point, capacity may be offered on an unbundled basis

not exceeding the amount and duration of the existing transport contract at

the other side;

b) where such extra capacity would not fall under rule (a), it may be offered for

a maximum period of one year; In principle, firm capacity mismatches on

the French side and on the Spanish side will be offered only for one gas

year.

Firm capacity mismatches on the French side and on the Spanish side will be

offered only for one gas year. This is line with current practice.

Depending on how capacities will be defined in the French side, the offer of firm

capacity might be increased. If TIGF is able to confirm the availability of more firm

capacity before an auction starts, then, the offer of firm capacity will be increased.

2.3.3. Marketing of interruptible capacities

Today, up to 60GWh of interruptible capacity is offered by TIGF as daily products

but only if 98% of the total firm capacity has previously been allocated. With STEP,

the interruptible capacity offered will evolve as 180 GWh of additional interruptible

capacity from France to Spain will be created.

In Spain currently, interruptible capacity is also offered by Enagás as daily

products, if 100% of the total firm capacity has previously been allocated.

With STEP, TIGF and Enagás plan to commercialise all interruptible capacity

available by extending the offer to longer term products. In line with article 32 of

CAM NC, Enagás and TIGF may only offer interruptible capacity with a duration

longer than one day if the corresponding monthly, quarterly or yearly standard

capacity product for firm capacity was sold at an auction premium, was sold out, or

was not offered. Shorter term i.e. daily and within day products will also continue to

be offered.

Interruptible capacity will be offered in an unbundled way as the conditions for

interruption are different at each side of the VIP Pirineos. Nevertheless, it will be

offered as standard capacity products and allocated via auctions at PRISMA booking

platform with the exception of within-day interruptible capacity that will be

allocated by means of an over-nomination procedure.

3 Ibid

STEP Stakeholders consultation

12

2.4 Tariffs

Capacity will be commercialized consistently with applicable regulation, in particular

Regulation (EU) 2017/460 of 16 March 2017 establishing a network code on

harmonised transmission tariff structures for gas.

2.4.1. Current tariffs

The current transmission tariff structure has been in place in France since 1st April

2017 pursuant to the Délibération de la Commission de régulation de l’énergie du

15 décembre 2016 portant décision sur le tarif d’utilisation des réseaux de

transport de gaz naturel de GRTgaz et de TIGF.4 It is expected to apply for a

duration of about four years, until an updated tariff structure has been introduced

by deliberation of the CRE.

Table 6: Tariffs for annual bookings at VIP Pirineos in France

€/MWh/d/year

01/04/17- 31/03/18

01/04/18- 31/10/18

01/11/18- 31/03/19

01/04/19- 31/03/20

From 01/04/20

VIP Pirineos exit

France to Spain 494.2 499.16 617.08 623.3 629.5

VIP Pirineos entry France from Spain

102.30 103.32 103.32 104.36 105.40

Source: « Délibération de la CRE du 15 décembre 2016 portant décision sur le tarif d’utilisation des

réseaux de transport de gaz naturel de GRTgaz et de TIGF (ATRT6) » and « Délibération de la CRE du 7

février 2018 portant décision sur l’évolution du tarif d’utilisation des réseaux de transport de gaz naturel

de GRTgaz et TIGF au 1er avril 2018 (updated ARTR6) »

The following multipliers apply:

Table 7: Tariff multipliers for bookings of duration lower than a year at VIP Pirineos

in France

Duration Conditions Coefficient

Quarterly Congestion 1/4 of the annual tariff

No congestion 1/3 of the annual tariff

Monthly Congestion 1/12 of the annual tariff

No congestion 1/8 of the annual tariff

Daily n/a 1/30 of the annual tariff

Intraday n/a Prorata of the daily tariff, based on

outstanding hours in the day Note: The congestion condition is considered met where, during the auction for annual products, the

selling price is strictly higher than the reserve price.

The current transmission tariff structure in Spain has been in place since 1st

January 2014, pursuant to the Orden IET/2446/2013, de 27 de diciembre 2013, por

4 http://www.cre.fr/documents/deliberations/decision/atrt62/consulter-la-deliberation

STEP Stakeholders consultation

13

la que se establecen los peajes y cánones asociados al acceso de terceros a las

instalaciones gasistas y la retribución de las actividades reguladas.5

On the Spanish side, tariffs are yearly updated by the Ministry the values provided

below are the ones applicable for the year 2018.

Table 8: Tariffs for annual bookings at VIP Pirineos in Spain

Cent €/(kWh/d)/mes 1/01/2018- 31/12/2018

VIP Pirineos exit Spain to France 2.00599

VIP Pirineos entry Spain from France 1.0848

Table 9: Tariff multipliers for bookings of duration lower than a year at VIP Pirineos

in Spain

Within-day Daily Monthly Quarterly

January 0.25 0.15 2.30

1.91 February 0.22 0.13 2.00

March 0.21 0.13 1.90

April 0.16 0.09 1.40

1.21 May 0.16 0.09 1.20

June 0.13 0.08 1.00

July 0.14 0.08 1.20

1.08 August 0.11 0.07 1.00

September 0.13 0.08 1.20

October 0.15 0.09 1.30

1.36 November 0.16 0.09 1.40

December 0.18 0.11 1.60

These tariffs may evolve in the future consistently with national regulations.

2.4.2. Interruptible capacity

Reserve prices will be calculated according to article 16 of the Regulation 2017/460

(“Calculation of reserve prices for standard capacity products for interruptible

capacity”).

Currently, on the French side, the reserve price for interruptible entry capacity into

France at Pirineos is set at 75% of the reserve price for firm capacity at the same

point.

On the Spanish side, the reserve price for interruptible capacity at VIP Pirineos will

be calculated according to the probability of interruption of the offered capacity, in

line with TAR NC.

The creation of a single trading area in France will be one of several drivers of the

level of the probability of interruption reflected in the reserve price in the future.

This probability will be calculated every year ahead of the capacity auction.

5 https://www.boe.es/buscar/pdf/2013/BOE-A-2013-13768-consolidado.pdf

STEP Stakeholders consultation

14

3 Procedure for responding to the consultation

3.1 Questions

Based on the information provided in this document, participants are invited to

express their views on and interest in booking incremental capacity at VIP Pirineos.

In relation to the general proposal to increase the capacity of France-Spain

interconnection, we would be interested in comments on the following questions.

Question 1. What is your view on the current situation of the markets potentially

impacted by STEP (particularly France, Spain and Portugal) in terms of integration

(including price convergence) with neighbouring markets, competition, liquidity and

security of supply?

Question 2. Do you believe that further gas interconnection between France and

Spain would enhance integration, competition, liquidity and security of supply?

Question 3. What is your view on the capacities provided by the STEP project?

In relation to the specific capacities provided by STEP, we request expressions of

interest in capacity.

Question 4. Please provide an indication of the products in which they would be

interested, by gas year, including:

• Volume of interest in the product (MWh/d)

• Interest in either firm and/or interruptible capacity (noting the nature of

incremental capacity from STEP, set out above), and the direction of flow

• Duration of interest

• Expected timeline for capacity to be booked.

Finally, we invite respondents to provide any further comments in relation to STEP

and its capacities.

3.2 Process

Enagás and TIGF invite interested parties to send their views on the project, until

April 12th, 2018, noon CET, by e-mail to the following addresses:

PCIcontact@enagas.es, and

Stepcommunication@tigf.fr

We request that all parties provide a brief indication of the nature of their current

and future activities in relation to the European gas market.