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Gas industry struggles to prepare for changing rules amid tariffs storm

By Miriam Siers on 04-Mar-2016

Knowing how to prepare for going outside during winter months feels, at times, impossible to predict in London. The weather behaves erratically from week to week – mild and rainy; brisk and sunny; bitter and cold; snowy and grey.

At times, it has seemed that shippers, transmission system operators (TSOs) and regulators throughout the bloc have faced a similar struggle in knowing how to prepare for complying with an upcoming network code on harmonised gas transmission tariffs. The development of the controversial laws has become an extremely messy battle ground resulting in multiple facelifts to the rules over the years.

The controversy comes from a constant tug-of-war between shippers and TSOs over deciding how to set fair capacity transmission tariffs for transporting gas. On the one hand, TSOs need to be able to recover lost revenue. A TSO’s profit can fluctuate depending on gas price volatility. On the other hand, shippers need to be able to predict what those fees charged will be, in order to know how much it will cost to transport gas.

The bodies involved in the creation of the new regulation have failed to see eye-to-eye with each other, which has resulted in a year of proposals being rejected and sent back to the drawing board. This back-and-forth has meant the European Commission has had more freedom to design their own draft of the rules, which will then be voted on during comitology meetings among member states. The uncertainty over what the final rules will actually look like has been a cause of concern among shippers and TSOs.

After a public meeting in December (https://www.icis.com/resources/news/2015/11/11/9942179/commission-to-reveal-tariff-law-changes-on-15-december/) the commission’s changes started to come to light. However details are still flipping around (https://www.icis.com/resources/news/2015/12/28/9955768/final-details-on-gas-tariff-law-uncertainties-remain/). In December the commission said it planned to bring forward the start-date of the rules by one year to 2017. In a new draft forwarded to member states at the end of February, the commission seems to have changed this compliance date back to 2018.

The new draft, which is not publically available but has been seen by ICIS, has not been approved by all of the EU processes yet and as such, is not the official draft that will go to comitology. But it is the closest the industry has gotten to understanding what the rules will look like when they come into force. Hopefully now, EU gas market participants might be able to know with more surety than ever how to prepare for the changing weather the new regulation will bring. miriam.siers@icis.com