Shippers slam interruptible gas capacity booking changes

07 September 2016 04:28 Source:ICIS
Work on a gas pipeline

Shippers are concerned that a new addition to rules governing how transmission system operators can allocate capacity at border points will severely limit their ability to move gas around the EU.

The European Commission inserted the addition to an official amendment to the capacity allocation mechanisms (CAM) network code, which is currently making its way through the EU comitology lawmaking process.

Under the change, transmission system operators will not be able to offer interruptible capacity at entry/exit points unless all firm capacity has been sold out first.

“Even if a small amount of bundled firm capacity is available, you can’t buy interruptible capacity,” said a transport and regulatory expert at a shipping company.

As part of the whole CAM network code, which came into force last year, firm entry and exit capacity must be sold as a bundled product, and no longer can be sold separately.

The interruptible capacity addition will be especially limiting for shippers due to the nature of the EU market. At many interconnection points across western Europe, there is a structural mismatch in the amount of entry and exit capacity available. Both technically, but also due to the nature of some long-term contracts agreed before third-energy package regulations came into being.

“There are a number of shippers with capacity only on one side of the border, which has led to historic mismatches on either side of a border. It is a problem to match up this capacity, and interruptible has been one way of doing that,” said another regulatory expert at a large shipping company.

Capacity mismatches are expected to cause problems particularly on the Dutch/German, Dutch/Belgian and German/French entry and exit points, shippers said. Border points with little or no firm capacity would not be affected.

“It means you can’t use the transport capacity you’ve booked. The commission would say you can just book a new bundle, but that is too costly. The only option left is that you don’t flow gas,” said a third regulatory head.

Another reason shippers use interruptible capacity currently is to avoid extra costs under CAM’s bundling requirements. Some shippers will already have capacity booked at one side of a border point but not the other. Since CAM came into force they have to pay a second time for that capacity if they wanted to buy the corresponding set at the other side of the border.

The first regulatory expert said the commission’s aim was to promote the bundling of capacity, but the restriction on offering interruptible capacity could hinder gas transport and create pockets of unused capacity.

“What they should be doing is harmonising technical capacities. If technical capacity is harmonised the needed unbundled capacity (to match already booked capacity) automatically would become available, or fall free during auctions,” he said.

The shippers welcomed the commission’s change to rolling quarterly auction timings under the CAM amendment. The change will mean four annual quarterly capacity auctions will be held each year, giving participants more freedom to take part in an auction right before the quarter itself.

The updated text of CAM is expected to be circulated in September, with the second formal comitology meeting scheduled for 15 and 16 September. The comitology process is hoped to be completed by the Madrid Forum on 6 and 7 October.

The amendment to CAM will apply from 1 April 2017.

By Miriam Siers