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May 29, 2013
Comments by Brattle Principal Dan Harris Featured in Article on European Gas Market Network Codes

Brattle principal Dan Harris was recently quoted in a May 29, 2013 article discussing the development and implementation of new network codes to regulate the European Union (EU) energy market.

The article, “Gas market participants rail against mandatory bundling,” examines how network codes, which are developed by the Agency for the Cooperation of Energy Regulators (Acer), represent the set of rules for the gas market and provide general principles and objectives in the form of framework guidance. Several network codes, however, have been met with some resistance by market participants who worry about the impact some of the more restrictive requirements might have.

According to the article, the focus of resistance by market participants is the Capacity Allocation Mechanism (CAM) network code, which will become the first of the new codes to be implemented in November 2015. The purpose of the CAM network code is to simplify the way capacity is bought and sold across Europe’s pipeline network, particularly between the most liquid trading hubs. The CAM network code will require shippers to buy entry and exit capacity at different hubs simultaneously. Those who support the code argue this will help Europe’s gas industry become more competitive; however, some energy firms are concerned that the code will have the adverse effect and deter traders from participating in the market.

Market participants acknowledge several advantages of the CAM network code, including its design, which will bring in standard firm capacity products across the EU. Mr. Harris points out that the aim of the CAM network code is to ease the process of buying capacity for new market players and ensuring that pipelines get fully used.

“The key is making sure that trade can happen when there’s a demand for it and that there’s a physical pipeline capacity available, because under those circumstances you want the gas to flow – and flow at the maximum physical rate possible, because that’s when you get the benefits from trade,” Mr. Harris says.