French shippers left in gas storage limbo for 2017/18 season

12 September 2016 06:20 Source:ICIS

French market participants have had their strategies for the 2017/18 gas storage season thrown into disarray, after being left high and dry by the non-publication of a legal text which was supposed to usher in gas storage reform.

The French government had planned to implement new reforms to change the way companies accessed local storage capacity by moving to an auction-based system. But the changes now almost certainly face a delay of at least a year, after the energy directorate missed parliament’s 17 August deadline to publish the legal text, known as an ordinance.

The delay has led to uncertainty over how gas capacity for the 2017/18 storage season will be allocated.

“In the short-term, it is not possible for shippers and traders to imagine anything but the present framework,” said Mark Boudier, president of the Independent French Association of Electricity and Gas (AFIEG).

“For shippers and suppliers, the situation is uncomfortable. We are not sure of the regulatory framework for winter 2017/18”, said a source at a French utility.

“So it’s tough to price gas storage offers and difficult for shippers to sort out their strategy,” he said.

It appears likely the current storage system will remain in place for gas winter 2017/18. This involves suppliers negotiating bilaterally with France’s two storage operators - Storengy and TIGF - to set the prices they charge to use their facilities.

It was hoped the ordinance would clarify some of the reform’s outstanding sticking points. These include the auction reserve price, storage operator compensation and the role of DGEC and regulator CRE in the new system.

“The reforms will be delayed for sure but we don’t know for how long. We are waiting for the government to clarify its position, since it has not given any clue of its action plan on this topic”, an AFIEG spokeswoman said.

Under the government’s proposed schedule, auctions to sell capacity for the 2017/18 gas winter were due to be held between 1 December 2016 and 31 March 2017.

“The previous agenda is not going to happen – to create a legal basis for the reforms before December will be very difficult”, the utility source said.

AFIEG and other stakeholders have this week expressed their dismay and regret at the government’s tardiness and called on the energy ministry to urgently provide clarity over the regulatory framework for the 2017/18 gas storage season.

They believe the current storage system is not fit for purpose, especially in the wake of narrow winter-summer spreads, and the reforms are badly needed to safeguard France’s security of supply.

Neither the French regulator nor the DGEC were able to provide an update on a new time-frame for the reforms when contacted by ICIS.

By Alex Thackrah