101 UK Brexit Notes

Connemara Programme October 16 2018 pg. 183 Trading gas with the EU if there's no Brexit deal Purpose This notice provides gas market stakeholders with an explanation of how the trading of gas with European states will operate in the unlikely event that the UK leaves the EU in March 2019 with no agreement in place. Before 29 March 2019 The UK has gas interconnectors (direct pipelines) with Ireland, the Netherlands, and Belgium. After March 2019 if there’s ‘no deal’ In a ‘no deal’ scenario, EU energy law will no longer apply to the UK, and the UK will no longer play a role in the EU organisations that support the implementation of these laws, such as the Agency for the Cooperation of Energy Regulators (ACER). However, UK domestic law relating to energy, the licences and industry codes that are used to implement these laws, will remain in place. Some changes and clarifications to the licences and industry codes may be required to ensure they remain operable. Implications In a ‘no deal’ scenario, the mechanisms of cross-border trade are not expected to fundamentally change. National Grid (Great Britain’s Transmission System Operator), Premier Transmission Limited (Northern Ireland’s Transmission System Operator) and the UK’s interconnector operators currently use the PRISMA gas capacity trading platform to allocate capacity at interconnection points. PRISMA is a privately-owned gas capacity trading platform that provides services for a range of EU and non-EU countries. National Grid and Premier Transmission Limited are both PRISMA shareholders and currently hold commercial contracts for PRISMA’s services; their intention is to continue using the PRISMA platform. There will be some implications for the way gas is traded with the 27 EU Member States. These are described below. There will be changes to access rule approval and trading arrangements. Interconnector operators’ access rules are approved by regulatory authorities both in the UK and in interconnected Member States (i.e. Ireland, the Netherlands, and Belgium). The trading of gas across EU borders under these rules is governed in part by the EU Network Code on Capacity Allocation Mechanisms, which establishes the rules for capacity allocation on interconnector pipes, and how adjacent transmission system operators should cooperate in order to facilitate capacity sales. The approval of regulatory authorities in interconnected Member States is needed in order to continue using Capacity Allocation Mechanisms Code processes. In the UK, there are no planned changes to either trading arrangements or the approval processes or requirements for access rules. However, interconnector operators should engage with the relevant EU national regulators (in Ireland, the Netherlands, or Belgium) in good time ahead of the UK’s exit from the EU to confirm whether those countries intend to continue using the Capacity Allocation Mechanisms Code as the basis for their trading with the UK and understand any requirements for the reassessment of their access rules. Ofgem and the Utility Regulator of Northern Ireland will support the interconnectors in this process. There will be changes to Transmission System Operator certification. The operators of UK interconnectors should engage with the Irish, Dutch or Belgian national regulators to understand whether their existing Irish, Dutch or Belgian Transmission System Operator certification – i.e. their EU law approval – will need to be reassessed and, if so, the process for this reassessment. Ofgem will seek to support interconnectors in this process. Great Britain will retain existing Transmission System Operator certifications domestically and will minimise additional administrative requirements. The government will make any changes or clarifications necessary to the Transmission System Operator certification process to make sure it continues to operate effectively. There will be changes to other gas network codes. Many of the EU’s gas network rules are implemented in the UK in the form of the Great Britain Unified Network Code and the Northern Ireland Network Gas Transmission Code and other industry documents. These are used by Ofgem (in Great Britain) and the Utility Regulator (in Northern Ireland) in their roles as gas market regulators. These rules will remain in place in a ‘no deal’ scenario. The government will work with regulators and industry to make any necessary amendments to industry codes. The EU’s Regulation on Energy Market Integrity and Transparency prohibits insider trading and energy market manipulation and makes provision for monitoring of the market by regulators. Market participants will need to register with an EU regulatory authority to avoid a disruption to cross-border trade and trade within EU wholesale markets. The majority of the existing Regulation on Energy Market Integrity and Transparency regime will be maintained domestically with minimal changes. Actions for businesses and other stakeholders (gas market participants) Interconnectors, code administrators and UK market participants will need to carry out contingency planning for a ‘no deal’ scenario. Although it will be a matter for individual businesses to work out what steps they might need to take, the government anticipates these are likely to include: Interconnector owners/operators: will need to engage with the relevant EU national regulators to confirm whether gas can continue to be traded on the basis of the rules in the Capacity Allocation Mechanisms Code, and to understand any requirements for re-approval of their access rules. Interconnector owners/operators: will need to engage with the relevant EU national regulators to understand their processes for the potential reassessment of their Transmission System Operator certifications. Ofgem, and where appropriate, the Utility Regulator, will seek to support the interconnectors in this process. Domestically, the