“Conexus” submits a new natural gas transmission tariff proposal for evaluation with minimal impact on bills
The unified natural gas transmission and storage system operator AS “Conexus Baltic Grid” (hereinafter – “Conexus”) has prepared and submitted to the Public Utilities Commission (hereinafter – the Regulator) a draft tariff for natural gas transmission system services for the next five-year regulatory period, based on the tariff calculation methodology approved by the Regulator.
The transmission service fee accounts for only a small share of the total natural gas bill – around 1–6%, therefore the impact of tariff changes on end-user bills will be minimal. The project предусматриes changes to the fee for the use of the exit point for supplying Latvian users (hereinafter – the fee). For example, for households that use natural gas only for cooking, the monthly gas bill will increase by approximately 1 cent. Meanwhile, for households with gas heating consuming around 250 m³ of natural gas in winter months, the bill increase could be about EUR 0.75, while for legal entities the increase is projected at approximately 0.4%.
The submission of the tariff project is related to the end of the current regulatory period on 30 September 2026 and the obligation set in the Regulator’s approved tariff calculation methodology to prepare and submit a tariff proposal for the next period.
In recent years, Conexus has ensured the operation of the natural gas transmission system with lower core operating costs than those included in the approved transmission tariff. However, the achieved savings have not been sufficient to fully offset the rapid increase in inflation and wage growth in the country. Therefore, the costs required to ensure the safe and continuous operation, maintenance, and technical readiness of the transmission system in the coming years have been reviewed.
The increase in core operating costs is mainly driven by the need to maintain infrastructure in proper technical condition, ensure the availability of materials and spare parts for rapid response in case of pipeline damage, as well as projected inflation. At the same time, a significant impact has resulted from the revision of the rate of return on capital, which is necessary to support and finance investments.
“A safe and reliable natural gas transmission system is our top priority. To ensure this, we continuously maintain infrastructure in technical readiness and build up stocks of necessary repair materials and spare parts so that we can respond quickly and efficiently in case of failures. This is particularly important in the current geopolitical situation, where the security and resilience of energy infrastructure are of critical importance. Fulfilling these obligations requires an economically justified fee aligned with market conditions. Once again, we have worked to ensure that the impact of these changes on end-user bills is as small as possible,” says Conexus Chief Financial Officer Mārtiņš Gode.
It is planned that the fee changes will be introduced gradually. The first phase is scheduled for 1 October 2026, when the resource-based fee could increase by approximately 7%. From 1 October 2027, a transition to a capacity-based tariff model is planned, as defined in the transmission system service tariff calculation methodology.
“The total transmission system costs for the next five years have increased on average by 24%. The majority, or nearly 80% of this increase, is due to the rise in the rate of return on capital, calculated in accordance with the methodology for accounting and calculating the cost of capital. From 1 October 2026, the applied rate will increase from 2.72% to 5.82%. The rate currently applied in transmission tariffs was set in 2022, when EURIBOR rates were negative. Additionally, in the next regulatory period, a 1.45% efficiency factor is also planned to be applied within tariffs,” notes M. Gode.
The prepared tariff proposal will still be reviewed and approved by the Regulator, and may be subject to changes during the evaluation process.