REGULATORY FRAMEWORK. Regulatory framework 1-1. Network Code

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1 REGULATORY FRAMEWORK 1) THE REGULATION OF THE GAS MARKET IN EUROPE ) THE LAW DECREE N 164/ ) THE AUTHORITY S RESOLUTIONTIONS RELEVANT TO THE NETWORK CODE ) RESOLUTION N 120/ ) RESOLUTION N 137/ ) THE REGULATORY FRAMEWORK

2 1) THE REGULATION OF THE GAS MARKET IN EUROPE The regulation of the gas market within the EU started with the Directive n 98/30/CE by the European Parliament and Committee issued June 22, 1998 ( Gas Directive ), covering the internal gas market (transportation, distribution, supply and storage). This rule started a process of liberalisation of the sector with the aim of creating a single European gas market, incorporating equality of treatment and nondiscriminatory access for all users of the system. This Gas Directive has been implemented in Italy via Law 17 May 1999, n 144 ( Legge Delega ) and the Law Decree 23 May 2000, n 164 ( Letta Decree ). The Letta Decree contain rules for the internal gas market, in line with the Legge Delega. 2) THE LAW DECREE N 164/00 The Law Decree introduced rules defining the timing and methods for the liberalisation of the Italian gas market in line with the Gas Directive, identifying and defining the roles of the different segments of the natural gas chain such as import, production, export, transportation and dispatching, storage, distribution and sale. In respect of transportation activities, the Law Decree foresees (among other things): regulation of transportation and dispatching activities, in order to offer such services on equitable terms and at regulated tariffs; corporate separation of transportation/dispatching activities and all other activities of the gas sector. The exception to this is storage, which will, however, be separated from transportation/dispatching in accounting and management terms; the customer eligibility principle, with the associated consumption thresholds and the extension, from 1 January 2003, of this principle to all Final Customers; definition, by a Resolutiontion ( Resolution ) from the Authority of electricity and gas, of the criteria which assure that all network users have access on equitable terms, maximum impartiality of transportation/dispatching activities in normal conditions and the obligations of parties which carry out gas transportation/ dispatching activities ; development by gas transporters of a Network Code within three months from the publication of the Resolution by the Authority. The draft Network Code should then be sent to the Authority, who will check its consistency with the Resolution - after a further three month period, should no modifications be required by the Authority, the Network Code is assumed approved. 3) THE AUTHORITY S RESOLUTIONTIONS RELEVANT TO THE NETWORK CODE 3.1) Resolution n 120/01 In line with Article 23 of the Law Decree, the Authority has defined in Resolution n 120/01 the criteria to determine gas transportation tariffs. This document also 1-2

3 included urgent provisions concerning transportation capacity allocation at the RN Entry and Exit points and the Redelivery Points, together with the balancing charges to be applied until the provisions described in Art.24.5 of the Law Decree are issued. 3.2) Resolution n 137/02 To give effect to Article 24.5 of the Law Decree, the Authority published Resolution n 137/02, which defines the framework for the definition by transporters of transportation access conditions, within the criteria set by the Authority, thereby allowing the verification of the draft Network Code against the Authority s criteria. The Network Code is the set of rules, which must be transparent and nondiscriminatory, governing access to the transportation system. It applies to all the gas transported and includes reference to all parties (Shippers) with whom the transportation company signs the Transportation Contract ( Contratto di Trasporto ). Further, the Network Code specifies the rules for transportation capacity booking and the related capacity transactions, and defines the framework that allows gas transportation services to be provided in a safe, transparent and financially neutral (as far as the transporter is concerned) manner this framework includes processes such as transportation programmes/nominations, balancing, measurement, invoicing and emergencies. 4) THE REGULATORY FRAMEWORK The regulatory framework relevant to the Network Code comprises the following laws: - Law 14 November 1995, n 481 Rules to support the market and to regulate the public utility services. Establishment of the Authority to regulate public utility services; - Decree n 98/30/CE of the European Parliament and Committee, 22 June 1998, containing common rules for the gas market; - Law 17 May 1999, n 144 Rules regarding investments, power assigned to the Government to restructure incentives for employment and the rules regarding INAIL, as well as provisions to restructure the labour institutes (Article 41); - Law Decree 23 May 2000, n 164 to apply the European Decree n 98/30/CE containing common rules for the gas market, in line with Article 41 of the law 17 May 1999, n 144; - Ministry Decree 22 December 2000 Identification of the National Pipeline Network in line with Article 9 of the Law Decree 23 May 2000, n 164; - Ministry Decree 27 March 2001 Criteria to authorise gas importations from non-eu countries, in line with Article 3 of the Law Decree 23 May 2000, n 164; - Ministry Decree 26 September 2001 Rules to determine and to withdraw gas from strategic storage, provisions covering gas system emergencies, transitional rules to assure the start of the withdrawal phase 2001/2002 from national gas storage; - Resolution n 120/01 Criteria determining gas transportation, dispatching and LNG terminal utilisation tariffs; - Resolution n 184/01 Provisions covering the ability of eligible customers to withdraw from gas supply contracts; 1-3

4 - Resolution n 193/01 Provisions relating to gas transportation, dispatching and LNG terminal utilisation tariffs, in line with the Authority s decree 30 May 2001, n 120/01; - Resolution n 26/02 Criteria determining storage tariffs; - Decree 24 June 2002 Authorisation for the sale of gas; - Resolution n 127/02 Correction of mistakes in the Authority s decree 30 May 2001, n 120/01; - Resolution n 137/02 Rules assuring equitable access to transportation services and rules for writing the Network Code; - Resolution n 146/02 Application of the Authority s Decree 30 May 2001, n 120/01, concerning gas transportation and dispatching tariffs; - Resolution n 207/02 Provisions concerning natural gas sellers to final customers, as provided for by Article 2 comma 12 letter h) of Law 14 November 1995, n Directive n 03/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC; - Resolution n 75/03 Approval of the network code prepared by the company Snam Rete Gas, in accordance with article 24, paragraph 5, of Law Decree no. 164, 23 May 2000; - Resolution n 91/03 Start of proceedings to draw up the provision as of article 13 of the Resolution of the Authority of electricity and gas no. 137/02 of 17 July 2002, concerning the regulated capacity and gas market and amendment of Resolution no. 137/02 of 17 July 2002; - Resolution n 127/03 Approval of the regulation concerning arbitration procedures with the Authority of electricity and gas; - Resolution n 144/03 Approval of the network code prepared by the company Edison T&S Spa, in accordance with article 24, paragraph 5, of Law Decree no. 164 of 23 May 2000; - Resolution n 145/03 Urgent provisions for the management of interconnection points between the gas transport networks managed by the companies Snam Rete Gas Spa and Edison T&S Spa; - Resolution n 22/04 Provisions concerning the regulated capacity and gas market as of article 13 of Resolution no. 137/02 of 17 July 2002 of the Authority of electricity and gas; - Ministerial decree of 25th June 2004 Approval of the emergency procedure for managing the failure to cover the natural gas requirement in the event of adverse weather conditions; - Resolution n 113/04 Approval of the tariff proposals for the transportation and dispatch of natural gas, in implementation of Resolution n 120/01 issued by the Authority for Electricity and Gas on 30th May 2001; - Resolution n 138/04 Adoption of guarantees for free access to the natural gas distribution service and rules for elaborating distribution codes; - Resolution n 144/04 Integration and modification of Resolution n 120/01 issued by the Authority for Electricity and Gas on 30th May 2001 for cases of start-up; - Resolution n 180/04 Provisions concerning the regulated market of capacities and gas and approval of modifications of the network code of Snam Rete Gas S.p.A. in accordance with Resolution n 22/04 issued by the Authority for Electricity and Gas on 26th February 2004; - Resolution n 5/05 Integration and modification of Resolution n 120/01 issued by the Authority for Electricity and Gas on 30th May 2001 for cases of start-up; 1-4

5 - Resolution n 6/05 Provisions about the natural gas transportation service in cases of withdrawals concentrated in off-peak periods; - Resolution n 23/05 Elimination of clauses of the network codes of Snam Rete Gas S.p.A. and Società Gasdotti Italia S.p.A., in respect of sentences n. 2643/04 of 22nd June 2004 and n.116/05 of 18th January 2005 passed by the Regional Administrative Court of Lombardy; - Resolution n 24/05 Start of procedure for elaborating measures on the highest calorific power of natural gas in accordance with article 2, clause 12, letters g) and h), of law no. 481 of 14 November