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Common Natural Gas Market

From 1 January 2020, the single market for natural gas became operational. Explain what it means and how it affects natural gas infrastructure users!

  • What is the single market for natural gas?

The single market for natural gas is a single entry / exit tariff area for the transmission of natural gas, which means that payments are cancelled when crossing the territorial borders of each country.

  • Why is the single market for natural gas needed?

This is necessary for a number of reasons, but the main reasons are:

  • in order to ensure as stable and predictable tariffs as possible;
  • avoid hidden payments between transmission system operators (TSOs);
  • provide traders with free and equal access to the entire gas infrastructure of the Single Market Area;
  • creating a customer-oriented market by ensuring digital and efficient market communication;
  • promote competition among natural gas traders.
  • Which countries have joined the single natural gas market?

On 1 January 2020, three countries – Estonia, Latvia and Finland – agreed to launch the Single Market. Negotiations on the possible accession of Lithuania are ongoing.

  • When did the single market for natural gas start its job?

The single market for natural gas, with the participation of three countries, started on 1 January 2020. It is originally a single entry/exit tariff area with two balancing zones, Finland and the single Estonia-Latvia balancing zone. At the time Lithuania joins the single market for natural gas, market coverage will increase accordingly.

  • What benefits does the single market for natural gas provide to natural gas infrastructure users?

With the completion of the single market for natural gas, the market for natural gas is being expanded and competition between natural gas traders is encouraged. Promoting the use of Inchualna's underground gas storage is equally important, thereby strengthening the flexibility and security of supply.

  • What is the legal basis for the single natural gas market?

The ITC Agreement signed between Estonia, Finland and Latvia (Inter - TSO Compensation Mechanism Agreement) is an important cornerstone in the process of developing the regional natural gas market. It provides for a single tariff area for participating countries, a reallocation of revenue for booking entry capacity and compensation for recognised variable costs.

  • Does a new legal framework come into force with the completion of the single market for natural gas?

For the purposes of the single gas market, new uniform rules for the use and balancing of the natural gas transmission system were developed, harmonised by the Public Utilities Commission and the Estonian Competition Council. In general, the documents reflect changes related to closer integration of transmission systems.

  • Does the natural gas transmission system user have to enter into new contracts with operators of the single natural gas market?

Market participants must enter into new contracts with one of the selected transmission system operators serving the single balancing area, such as AS “Elering” or JSC “Conexus Baltic Grid”.

  • How does the creation of the new market refer to natural gas transmission tariffs – how often will they change?

A single entry tariff at the external borders of the zone shall be established for the single market area. Operators are in agreement and work to ensure that the entry rates of the single zone are changed as rarely as possible, ensuring medium - to long-term stability and predictability.

  • What needs to be known about international natural gas exit tariffs?

Exit rates to countries outside the single market area, as well as to the distribution system (or directly to users connected to the transmission system), shall be determined according to the regulation of each individual Member State.

  • What should be taken into account for regional entry rates?

The level of entry rates for the single market is determined in close cooperation with the responsible authorities (national regulators), on the basis of open and transparent principles.

  • How does the single market for natural gas change previous pay and billing arrangements?

Uniform deadlines for invoicing and payment shall be established, as well as the specific conditions of the country of residence of the transmission system operator with which the transmission system use and balancing agreements have been concluded.

  • What should be taken into account in IT systems to operate in the single market for natural gas?

Operators have created one online solution for single-market service purposes. If the user's IT system maintains data sharing through EDIG @S/AS4, direct data sharing capabilities are provided without using the Internet platform.

  • How does the new arrangements affect those market participants who use only Inčukalns UGS?

The arrangements for the use of Inčukalns UGS following the launch of the single gas market are unchanged.

  • For what purposes does revenue collected at external borders be diverted?

The remuneration received for the reservation of the external interconnection capacity of the single entry/exit zone shall be distributed among the single area operators and shall form part of the permitted revenue determined by the national regulators.

  • Who in the single natural gas market takes responsibility for the technical maintenance and security of the transmission infrastructure, particularly at the external borders?

The technical maintenance and security of transmission systems shall, as in the past, be the responsibility of the operator owning the infrastructure concerned. For example, if technical repairs are needed for Latvia's natural gas transmission infrastructure, these will be performed by JSC “Conexus Baltic Grid”.

  • Will the single market for natural gas be expanded?

At present, it is difficult to predict whether the single Baltic and Finnish gas market will cover the territory of more than 4 countries, but operators are prepared to extend cooperation on the basis of mutually acceptable principles.