Overhaul of Croatian natural gas balancing regime stalls

Significant changes to the natural gas balancing regime in Croatia have been pushed back to at least 1 January 2015, according to new network rules published by the market operator HROTE and the energy regulator HERA.

The market aims to adopt an interim, market-based balancing regime that would run until October 2016, when the EU-wide network code on balancing comes into force, but details are yet to be finalised.

At present, a single party – state-owned electricity company and government-nominated household gas supplier HEP – is responsible for balancing the Croatian grid in co-operation with system operator Plinacro. The government has awarded HEP 70% of the country’s storage capacity to help it fulfil its household gas supply and system balancing roles.

This regime will not change until at least 1 January, when all shippers in Croatia are expected to be able to participate in a market-based, balancing regime.

According to the upcoming EU network code on balancing, grid users should be subject to a market-based, marginal sell price if they are long, or a marginal buy price if they are short, plus a small adjustment to incentivise network users to balance their gas input and off-take.

This is not currently the case in Croatia where the cost incurred by HEP in supplying or taking gas from the Croatian grid is not reflected in the penalties imposed on the shippers responsible for network imbalances.

Instead, HEP enforces two types of imbalance charges. The first is a penalty on shippers whose actual gas input/offtake deviates by more than 30% from their nomination. The second penalty is charged to shippers who fail to balance their portfolio across the required time period. For large balance groups this will be a single gas day between 1 October 2014 – 1 January 2015, while for small balance groups, it is three gas days.

The 58 companies licensed to supply gas in Croatia are organised into 16 balance groups, each headed by a company responsible for keeping the companies in its group balanced through forecasting and nomination procedures. Every supplier must be a member of a balance group, although suppliers are allowed to be the sole member of their own group.

The large balance groups in Croatia are defined as having more than 10% of the market share, and currently include the groups headed by HEP, Croatian oil and gas producer INA and the country’s largest natural gas importer PPD.

It is also expected that new rules in 2015 will require all balance groups, irrespective of size, to maintain a balanced portfolio within a single gas day.

Details of the new balancing regime should be finalised in Q4 2014 ahead of its implementation on 1 January 2015. Jake Horslen