Draft gas tariffs code to tweak longer-term capacity options – source

New proposals to encourage shippers to book longer-term capacity have emerged during last-minute negotiations for new rules about how transmission capacity is booked across Europe, ICIS has learnt from a regulatory source.

Agreeing the network code for gas transmission capacity tariffs has been difficult, with opposing views between shippers, transmission system operators and the regulatory bodies surfacing on how tariffs should be calculated.

Some of the views are so divergent, the European Network of Transmission System Operators for gas (ENTSOG) recently admitted that it was not be possible to find solutions for some issues which could satisfy all stakeholders at a conference in London in September.

Long-term capacity

The three parties involved in negotiations – the European Commission, the Agency for the Cooperation of Energy Regulators (ACER) and ENTSOG – have recognised a balance needs to be found between long-term and short-term capacity bookings. Long-term, fixed bookings allow transmission system operators to predict the demand for capacity in the system better and to manage investment in infrastructure accordingly.

But last year, ACER proposed introducing floating tariffs as part of the code. This, ACER said, would allow TSOs to adjust tariffs according to their allowed revenues (a regulated return based on price multiplied by quantity of capacity sold). Because demand for capacity might decrease year on year, system operators would be allowed to increase tariffs.

Floating tariffs encourage shippers to book short-term capacity, as they cannot predict what tariffs will be several years ahead. They would have to commit to pay for capacity based not just on their own bookings, but also on how much capacity other shippers in the system have booked.

Shippers have generally lobbied against floating tariffs. According to a source from a European regulator, elements of fixed tariffs have been added to the proposed code for new and incremental capacity only, and not for existing capacity.

“It is very rare to see a shippers booking capacity more than one year ahead anyway [for existing capacity],” said the regulatory source.

Increasing the cap set on multipliers would also encourage shippers to book forward capacity. Multipliers are used to calculate reserve prices for non-annual standard capacity products. The logic is short-term products should be more expensive than annual products, which should incentivise shippers to book longer-term capacity. The higher the multiplier, the cheaper annual products are relative to short term.

ACER’s guidelines initially suggested a multiplier cap of 1.5. Now this cap can be increased up to 5, the source said.

Another demand from shippers was to make regulators from each member state to publish their tariffs before the annual auction, which occur in March each year. At the transparency workshop last week, ENTSOG said that the reserve price, as well as multipliers and the f-factor will be released one month before the date of the auction.

Reset clause

No concession is likely on a reset clause, which would allow shippers to cancel the long-term capacity they have booked in the wake of coming changing rules on tariffs. ICIS understands that adjusted measures on multipliers and fixed prices are considered to be sufficient for shippers to have a longer-term view on tariffs. A reset clause could also affect negatively other participants of the system.

The draft is expected on Wednesday, sources said. Lucie Roux