Assets may be abandoned under EU gas tariff laws – shippers

Shippers have welcomed some changes to the network code on harmonised gas transmission tariffs, but remain concerned that the rules could make it unattractive to transport gas in the future.

The latest draft of the EU’s most controversial network code for gas was circulated among member states and industry stakeholders at the end of February. The draft text, seen by ICIS, will be similar to the one that goes through to comitology meetings later this year.

In the commission’s latest draft, the code introduces a wealth of information that needs to be published before the annual capacity auction starts, including reserve prices, multipliers, reference price models, the target revenue of the transmission system operator (TSO), how this revenue is calculated, forecast contracted capacity at entry and exit points as well as other technical data points. Previously TSOs have not been required to release this data.

“Generally the tariffs network code is a step forward. They have reintroduced issues on transparency and hopefully we will get better information from TSOs and national regulatory authorities on how their transmission tariffs are set,” said Doug Wood, chair of the gas committee at the European Federation of Energy Traders (EFET).

But the use of the phrase ‘simplified model’ has one regulatory head at a large shipper concerned.

“If the ‘simplified model’ is interpreted in a way that it doesn’t reflect the way tariffs are calculated it will not help. Frankly it is shocking public entities were not publicising those details any way,” the shipper said.

Stranded asset concerns

Shipping experts were disappointed the commission’s new text, which completely overhauled the previous versions which had been put together by other energy rulemaking bodies, did not address concerns that the rules may stop the market using existing transport assets.

“There are a lot of things not in the draft that still need a forum for discussion. One is how stranded assets are dealt with when investments made for security of supply reasons have not been underwritten by the market. Another is the pricing of short-term capacity when the cost of transporting gas between hubs becomes more expensive than the price differential,” Wood said.

One of the reasons the industry is concerned about stranded assets appearing is due to new multiplier requirements. A multiplier is the amount a floating tariff may increase annually. In particular, multipliers for daily and within-day capacity products can be between 1 and 3. Monthly and quarterly capacity products can increase by between 1 and 1.5 times annually.

“The minimum multiplier for short-term products is not helpful. We do not know where the market will go. If we get price convergence between the hubs, which is what the EU so desperately wants, it will really hinder any incentive to use existing infrastructure,” said another regulatory head at a medium-sized European shipper.

EFET’s Wood warned EU comitology groups to be careful of the impact that some parts of the code, including the multiplier rules, would have on the market.

“There is a possibility we could still go ahead with a subset of the existing code and still do good with a lot of it. The question is whether other parts of the code will help in their current form or could constrain solutions to tomorrow’s problems,” Wood said. miriam.siers@icis.com