Czech Republic lobbies for new natural gas transport tariff option

The Czech Republic has proposed a specific transmission tariff option for transit countries to be included in the current EU network code draft on natural gas transmission tariff, ICIS has learnt.

But the Agency for the Cooperation and Energy Regulators (ACER) still has to be persuaded.

The European Network Transmission System Operator for Gas (ENTSOG) is currently drafting the EU network code for transmission tariff harmonisation, based both on the framework guidelines published by ACER on the 30 November 2013 and on some ongoing workshops with stakeholders.

The EU-wide code aims to harmonise gas tariffs between EU countries in the context of the implementation of the third energy package and the aim to create a single liberalised EU gas market.

In the framework guidelines, ACER had already selected four tariff calculation methodologies: Postage Stamp, Capacity-Weighted Distance approach (2 variants), Virtual point based approach (2 variants), and Matrix approach.

In addition to those four methodologies, ENTSOG recently included a 5th methodology proposed by the Czech Republic, the so-called “asset allocation methodology” in the draft network code,. This, however, still has to be approved by but ACER.

“This 5th methodology is not in line with the ACER Framework Guidelines,” a spokeswoman from ACER told ICIS on Tuesday.

She added that following the publication of the final network code on tariff due by 31 December this year, ACER will issue a formal opinion, to assess whether the network code is compliant to the framework guideline or not. In the latter case, ACER will ask for the revision of the code, otherwise, it will recommend its adoption by the European commission. The network code is expected to be implemented from 1 October 2017.

Czech proposal

Czech Republic has a situation of dominant transit gas flows (80%) compared with flows for domestic use (20%).

The already exiting calculation methodology proposed by the Czech energy regulator consist of distinguishing costs associated with the two assets, because transit gas represents a higher risk premium cost that end consumers are not willing to pay.

“The risk [of considering a single tariff] is that we reallocate [transit] capacity booking costs to a group of network users who do not benefit from these costs,” Borek Kubatzky, senior manager regulatory affairs at the country’s transmission system operator (TSO) Net4Gas said on the phone last Thursday.

The current Czech methodology differs considerably from the 4th methodology proposed by ACER, which would force the country to make major changes in order to comply, in case the asset allocation calculation is rejected.

At a media briefing hold in July, ENTSOG said they included the 5th methodology in the network code draft as they heard good supporting arguments for it.

The spokesman from Net4Gas said most of the stakeholders were supportive, however the country still has to convince the EU regulator ACER.

“We are in discussion with the commission, we have the feeling that they understood the problem that we are facing,” he said.

Slovakia and other Eastern European countries on the route from Russia to Western Europe are encountering the same issue and might be willing to use this calculation methodology, according to the source.

Critics

ACER wants to limit the number of methodologies allowed by the EU rules.

Previously, some stakeholders, who attended the workshop on 25 June in Brussels but who did not want their names to be mentioned, also told ICIS they were not in favour of an additional methodology as it would further complicate the already complex system ( see ESGM 18 June 2014 ).

The regulator has doubts concerning the added value of this methodology: “The debate concerns differentiated contributions to revenue reconciliation based on assets. This could be applied to any of the 4 methodologies,” a spokeswoman from ACER told ICIS on Tuesday.

The Net4Gas spokesman said that in case the asset allocation option is not accepted, the regulator would introduce a cost split approach before applying the Postage Stamp methodology, the one which is closer to the Czech’s one: “The other three methodologies would just be too complicated [to implement],” he said.

Another criticism raised by ACER is related to possible cross-subsidies. The risk is that this methodology would allow the regulator to charge higher prices to shippers transiting gas in order to subsidize lower prices for final consumers.

“A cost allocation methodology is detrimental to the principles of transparency, simplicity and avoidance of cross-subsidies,” ACER said during the last workshop organised by ENTSOG.

ACER required to add this element in the public consultation launched in May: “Although mentioned as a main concern by stakeholders, there is no specific question on transparency in ENTSOG Public Consultation.”

Stakeholder have until 30 July to give their feedback on the matter, The results are expected to be revealed in September. Lucie Roux