Milan – 16th November 2010

Cross Border

capacity allocation in 2011:

CASC Project

All TSOs active in the ERGEG Electricity Regional Initiatives of CSE and CWE and Switzerland are committed to actively contribute to the further development and integration of the single European electricity market and to an increasing harmonisation of the cross-border capacity allocation management on borders

TSOs should facilitate the cross-border congestion management processes towards market actors, e. g. by creating a single point of contact, using same IT-tools and aiming for harmonized rules.

This should result in common coordinated congestion management methods and common procedure for the allocation of transmission capacity.

In order to further enhance regional and interregional coordination TSOs have signed a Memorandum of Understanding aiming at the creation of an interregional Joint Auction Office and in a later stage the harmonisation of long term Auction Rules

Context

Memorandum of Understanding (MoU) signed on the 19/05/2010 aimed to Stronger integration of EU power markets Interregional cooperation and harmonization through common coordinated

methods All involved TSOs outsourcing auctions to CASC to become new

shareholders in CASC Single Point of Contact for Users in the allocation of interconnection

Capacity in the CWE and CSE region

Main commitments 2011 - CASC will perform all currently explicit auctions on interconnections

between Italy and France, Austria, Slovenia, Greece and Switzerland and

on interconnections of Switzerland with Austria and Germany 2012 – harmonised Auction Rules for explicit auctions operated by CASC for

CWE and CSE region as well as Switzerland

The MoU formalising TSOs common will

Actions in progress after the signature of MoU

Modification of all TSOs and CASC IT system for managing transfer of

activities Procedures and Data Exchanges between CASC and all involved TSOs

defined

New governance structure for CASC Since 10th November 2010, APG, ELES, HTSO, Swissgrid and Terna

become new shareholders in CASC CASC denomination changes from CASC CWE to CASC. EU SA

Capacity Allocation Process, rules and actions for 2011 Mandate to CASC, to operate as Auction Operator on behalf of all TSOs for

all Italian Borders (1 April 2011) and Swiss Borders to Germany and Austria

(1st March 2011) Auction Rules 2011 for all borders, amended, in order to take into account

the outsourcing of allocation process to CASC Public Consultation of Italian Border s Auction Rules 2011

Goals and benefits of CASC project

“Single point of Contact” for market users in the allocation of

interconnection capacity in both CWE and CSE region including

Switzerland

Stronger coordination of TSOs in the implementation of common

allocation capacity rules

An important step towards increased harmonisation of Auction Rules in

Europe

Italian Border Auction Rules for 2011 and associated consultations

Due to the expected starting date the 1st April 2011 and to the

usual issuing of Auction Rules (AR) per year, two sets of Rules

developed:

A first one set of AR for Q1 with same features as for 2010

except for Market Coupling between Italy and Slovenia

A second set of AR starting from the 1st April 2011 with CASC

Auction Operator

Auction Rules for 2011 and associated consultations

Consultation on Italian Border Auction Rules for 2011 with CASC as Auction Operator is in course since Friday 5th November 2010 and will finish Friday 19th November 2010 included.

Questions or comments from Participants in English are expected to be taken into account or to be answered before NRAs sending for final approval.

All these questions and comments have to be sent to a unique email address:

auctionrules2011.consultation@terna.it

As TSOs intend to delegate to CASC the management of all rights (also already allocated yearly PTRs) from the launch date, consultation on the second set of Italian Border AR and approval by NRAs should be performed before the yearly auctions for 2011 to let Participants be aware of all features before bidding.Consequently, the expected time schedule is:

• End of public consultation of Italian Border AR on 19 November 2010• TSOs finalise Italian Border AR taking into account comments of Market

Participants and send them to NRAs for approval• Approval of Italian Border AR by NRAs expected before the yearly auctions

for 2011 performed by TSOs• On 1 March 2011 CASC starts operation as Joint Auction Office for Swiss

Northern Borders• On 1 April 2011 CASC starts operation as Joint Auction Office for Italian

Borders• Aiming at further interregional harmonisation of rules for explicit auctions

TSO will work on common Auction Rules of explicit yearly and monthly auctions performed by CASC in 2012

Next steps

Allocation of PTRs for the year 2011

Jan

Registration of Users

CASC acts as Auction Operator

Dec Feb

TSOs act as Auction Operator as today

Mar Apr

First Yearly Auction

TSOs Integration Test

First CASC Auction

Users Test

Allocation of PTRs for the year 2011

JanDec Feb Mar Apr

Users Test

TSO

s ac

t as

Aucti

on

Ope

rato

r

CASC

act

s as

Auc

tion

Ope

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TSOs act as Auction Operator as today

First Yearly Auction

CASC acts as Auction Operator

TSOs Integration Test

First CASC Auction

Registration of Users

Focus on the Auction Rules organization

Auction Rules with CASC will include in the border specific appendices some requirements concerning the relationship TSO/Nomination Agent for the scheduling process.

Taking this situation into account, the Auction Rules set forth:• requirements imposed on the Participant and on CASC related to the

Allocation activities > declaration of Acceptance for the Allocation (DoAA)• requirements imposed on the Participants and on TSO* related to the

Nomination activities > Declaration of Acceptance for the Nomination (DoAN)

Consequently, two types of liability are included on the AR:• contractual liability of CASC for the performance of the allocation tasks, and • contractual liability of some TSO* for the performance of the nomination

tasks.

* Excepted with RTE as requirements and liability for the Nomination are set in the Import/export Rules to be signed with RTE for the scheduling activities in France

Transfer to CASC of yearly PTRs management

• PTRs for Italian Borders with delivery dates within the first three months of 2011 will be allocated as today by:

APG, ELES, HTSO, Swissgrid and Terna acting as Auction Operators on behalf of both TSOs (for the direction in export from each respective border)

Terna as Auction Operator for the direction in import and export on the France- Italy border on behalf of both TSOs.

•Accordingly participants shall comply with the border specific risk management provisions.• For PTR allocation with delivery date starting from 1st April 2011,

Participants shall comply with CASC new risk management policy:• Regarding the specific case of yearly PTRs, Participants owning

these PTRs shall provide CASC with 2/12 of the total yearly amount before the monthly auctions for April 2011 (approximately before 18th March 2011).

Overlapping of risk management provisions

As a consequence of the transfer to CASC during 2011, at least for yearly PTRs owners and for participants intending to obtain capacity in the monthly auctions for April, overlapping of risk management constraints will exist with on one hand current Auction Office and on the other hand, CASC.

Example:– Participant A obtained in the direction France to Italy 100 MW for all 2011 at

11 €/MWh (per month, the amount to be paid is 803 k€)– For the first three months, Bank Guaranty (BG) with TERNA should be set

at 803 k€ (+ monthly and daily debts) as minimum value and this BG should be kept by TERNA at least until May 2011 to cover daily PTR settlement

– To be entitled with CASC, the Participant shall credit CASC bank account with 1,6 M€ not later than middle of March 2011

Forum with all Participants

The present SG meeting mainly deals with main issues related to the CASC project during the consultation phase on the Italian Border Auction Rules 2011.

An additional specific forum involving all interested market players will be organized beginning of 2011 in order to deal with all technical issues and facilitating the transition towards CASC.

This forum will be occasion to discuss deeper:• Process to be entitled with CASC• IT requirements with CASC• Financial provision with CASC• …

… and to collect expectations from Market players.

In order to participate in the auctions, User has:

• to meet grid access requirements of one of two TSOs involved (yearly and monthly auctions) or exporter TSOs (daily auctions)

• to send to the Auction Operator the Statement of Acceptance

• to provide to the Auction Operator a Bank Guarantee (or a Cash Deposit) in order to cover all the outstanding debts

Part

icip

ati

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req

uir

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In order to participate in the auctions, User has:

• to meet grid access requirements of one of two TSOs involved (yearly and monthly auctions) or exporter TSOs (daily auctions)

• to be registered with CASC by:

• sending the Declaration of Acceptance for Allocation and Nomination to CASC

• signing the Participant’s Financial Agreement with CASC

• to open a dedicated Business Account at the bank selected by CASC (BGL BNP Paribas Luxemburg)

Italian Borders as is Italian Borders with

CASC

Focus on Allocation process 1/4

Users provide a Bank Guarantee (or a Cash Deposit )

Amount of Bank Guarantee (or a Cash deposit) depends by Auction Operator

When running auction no check of bidding Vs amount of BG (except for daily auctions in direction SLO-IT)

Invoicing time, deadlines for payment and reimburse compensation depend on the product and by Auction Operator

Users open a Business Account property of CASC

When running auctions, CASC auction tool (EXAU) checks the amount of money in the Business Account:

• at bidding, for daily auctions

• at clearing price, for long term auctions

- Monthly/Daily auctions the amount is blocked after the- auction

- Yearly auctions, 2/12 of the amount is blocked after the auction

Invoicing automatically debited in Business Account at M+1

Harmonization on invoicing time, deadlines for payments and reimburse compensation

Reimburse compensations (curtailment, Resale/UIOSI) is made in a different Bank Account property of Users

Fin

an

cia

l I

ssu

es

Italian Borders as is Italian Borders with

CASC

Focus on Allocation process 2/4

Pro

du

cts

Yearly Base

Yearly Base without Maintenance period (*)

Monthly Base (0:00-24:00 Mo-Su)

Monthly peak (8:00-20:00 Mo-Fr)

Monthly off-peak (0:00-8:00 & 20:00-24:00 Mo-Fr - 0:00-24.00 Sa & Su)

Daily Hourly

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Yearly Base

Yearly Base without Maintenance period (*)

Monthly Base (00:00-24:00 Mo-Su)

Monthly peak (8:00-20:00 Mo-Fr)

Monthly off-peak (0:00-8:00 & 20:00-24:00 Mo-Fr - 0:00-24.00 Sa & Su)

Daily Hourly

Fir

mn

ess

• 100% payback (except RTE – 110% for the direction FR=>IT)

• PTRs are guaranteed:

• Yearly and Monthly after 7:00 of D-1 (with exception of France in the direction FR=> IT, D-2 working days)

• Daily after the publication of Auction Results

Both of them will not change with CASC

Italian Borders as is Italian Borders with

CASC

Focus on Allocation process 3/4

UIOSI for long term PTRs non nominated

No reimbursement of Daily PTRs not nominated

In case of cancellation of the Daily auction, PTR holders are refunded for each non-nominated MW at the clearing price of the native Auction

In case the ATC of daily auction is lower than the Total not nominated capacity , the share of capacity successfully resold is refunded at daily auction price, the rest is refunded at the original price.

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Tran

sfe

r Transfer deadline is at 12:00 D-2 (with exception of France in the direction FR=> IT, D-2 working days)

Transfers have to be confirmed by the Beneficiary

UIO

SI

& D

aily

C

om

pen

sati

on

It will not change with CASC

Transfer deadline is at 12:00 D-2 (with D-2 working days)

Transfers have to be confirmed by the Beneficiary

Italian Borders as is Italian Borders with

CASC

Focus on Allocation process 4/4

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BACK UP

Analysis of impacts if we success to transfer yearly to CASC from 1st April 2011

The overlapping between Bank Guarantee provided to TSOs and the Bank Account given to CASC has not an huge impact on Users.

The full payment of Yearly PTRs for Jan, Feb and Mar in January (payment in advance)

CASC should invoice Yearly PTRS for April in May 2011 (payment ex-post)

Users can riduce the Bank Guarantee with TSOs before deposit money on CASC Bank Account

1st April 2011 Go Live CASC

expire of Bank Guarantee Live CASC