Working towards a single natural gas market: Conexus submits a new draft for natural gas transmission fees

In preparation for the opening of the single natural gas market on 1 January 2020, the single natural gas transmission and storage system operator AS Conexus Baltic Grid (Conexus) submitted a new draft for natural gas transmission system service fees to the Public Utilities Commission today.

Latvia, Estonia and Finland have agreed to establish a single input/output fee zone for natural gas transmission, eliminating any fees for crossing borders between these countries.

The memorandum of understanding signed in October 2018 by the national natural gas transmission operators of all these countries envisaged the development of a draft for creating a mutual compensation mechanism between the operators based on the principle of harmonising the input fees within the single fee zone, and setting up a procedure for redistributing the input capacity booking between the operators.

The transmission system operators of each of the countries have submitted, in close cooperation with the public service regulators of their respective countries, applications including principles for determining the single input fee, preliminary single input fee values and a draft inter-transmission system operator compensation mechanism (ITC) model based on the principles of transparency, which can make it possible to reduce the excessive and inefficient administrative burden.

The submitted natural gas transmission system service fee was developed in accordance with the requirements of the natural gas transmission service fee calculation method approved by the regulating body on 3 July 2019 and European Commission Regulation 2017/460 of 16 March 2017. According to it, the regional input fee is to be 142.77 EUR/MWh/d/y. Furthermore, the annual standard capacity product fee for output points with connections to other transmission systems outside the single fee area is to be 142.77 EUR/MWh/d/g.

The regulatory period for the draft fee will be 33 months, taking into account the regional agreement on the transition to the standard October—September gas year, and the transition period set to take place from 1 January 2020 to 30 October 2020.

The draft fees provide that during the fee applicability period from 01.01.2020 to 30.09.2020, the fee for using the network output point for supplying Latvian consumers will be 0.0024941 EUR/kWh, which is 1.5% lower than the current fee.

The new natural gas transmission service fees applicable as of 2020 are well-considered, balanced and match the new situation on the natural gas market after the launch of the single Baltic market. The calculations were carried out such that the fees paid by the natural gas transmission system users can cover the economically justified service costs and enable the profitability of the transmission service. As the amount of revenue the operator is allowed to have remains unchanged, the impact of the switch to a single fee area for end consumers is expected to be neutral.