Poland defends gas storage policy following EC legal challenge

LONDON (ICIS)–The Polish government has defended its national gas storage regulation to ICIS on Friday following its referral to the European court system by the European Commission (EC)

The EC announced on Thursday 16 November it was referring Poland to the Court of Justice of the European Union (CJEU) “for imposing restrictive requirements on companies engaged in the cross-border trade of natural gas under its national gas storage legislation.”

The Polish climate and environment ministry told ICIS on Friday the referral and allegations by the EC “seem incomprehensible and erroneous” and that there are hopes “they will be clarified during the proceedings.”

POLISH STOCKS ACT

Poland’s national gas storage regulation, known as the Stocks Act, necessitates importers and traders of gas stored outside of Poland to ensure delivery of total mandatory stocks of gas to the national transmission or distribution network as well as booking firm capacity into Poland in case the gas is needed.

The law does not allow the booked capacity to be traded at the secondary market even if the capacity is not used and excludes the implementation of the “use it or lose it” principle.

However, the requirements are not applicable for gas suppliers using domestic storage facilities.

The law, which passed in 2016 and entered into force 2017, requires any importer of gas to Poland to maintain in storage 40 days’ worth, or 11%, of the volume they deliver in an average gas year.

Either that storage was to be held domestically in Poland, where shippers have told ICIS they consider capacity costs prohibitively expensive, or held abroad.

If the latter option was used, the associated cross-border capacity to ship that gas back to Poland at times of stress had to be exclusively reserved for this purpose.

This meant additional border capacity had to be acquired for the sole purposes of fulfilling the storage obligation with none of it used for commercial reasons.

EC ALLEGES NONCOMPLIANCE

The EC considers the requirements from the Polish Stocks Act as non-compliant to the EU’s security of gas supply regulation because it “imposes additional burden on market participants storing gas outside Poland, risks distortion of competition, hampers the functioning of the internal market, and risks jeopardising security of gas supply, since the national law increases the risk for congestions at interconnection points”.

In June 2017, the European Federation of Energy Traders (EFET) submitted a letter to the Commission urging it to block a proposal that would ban shippers from using cross-border capacity booked to comply with cumbersome storage rules.

The decision to refer Poland to the CJEU comes as the next step of an infringement procedure the Commission initiated in 2018 based on its own investigation and several complaints from market operators, prompting the Commission to issue a reasoned opinion in 2019.

Poland then published a draft amendment act to its Stocks Act to change the existing gas storage obligation in April 2022.

However, the amended act has not been submitted for adoption by the Polish Parliament to date and authorities have not communicated a timetable update for its adoption, the EC said.

CLIMATE MINISTRY RESPONSE

In a statement to ICIS on Friday, the Polish climate and energy ministry said Poland has “repeatedly” told the Commission in ongoing dialogue that the mechanism of having mandatory stocks in the country was due to being significantly dependent on Russian gas imports and the mechanism was based on the “key assumption that the possibility of supplying natural gas be always guaranteed in the event of the need to release compulsory stocks”.

The requirement to reserve capacity for mandatory stocks abroad “does not impede or restrict the flow of gas” nor does it affect capacity availability on interconnections, the ministry said, adding that Poland’s ongoing policy of supply diversification, targeting a complete end to Russian gas imports, will enable alterations to the country’s gas storage system.

The ministry also said it was undertaking legislative work ”based on lessons learned from the current crisis” to create a new system for security of gas supplies aiming to ensure supplies at current levels while reducing the administrative burden on market participants.