Conexus submitted the draft of new natural gas storage tariffs for the next 5 years

Unified natural gas transmission and storage system operator AS “Conexus Baltic Grid” (Conexus) on October 28 has submitted the draft of new natural gas storage tariffs to the Public Utilities Commission (Regulator) for the next regulatory period of 5 years, which determines that users shall make storage capacity booking and purchase of basic products at auctions.

Year 2020/2021 cycle of Inčukalns Underground Gas Storage (Inčukalns PGK) is the last currently approved in the period of allowed revenues. Within framework of already existing allowed revenues Conexus continued to develop a range of storage capacity products this year, bringing innovation to both in use of capacity products and the way they are booked.

Jānis Eisaks, Chairman of the Board of Conexus: The functioning of the Common market for natural gas, launched in January this year, has contributed significantly to the use of Inčukalns PGK by attracting new users from Finland and Estonia. A positive trend in storage fill-in allows efficient storage performance in line with existing technical capacity, as well as a gradual approach to previous storage technical level. At the same time Conexus should also provide storage flexibility, which is why it is essential to develop a stable and predictable tariff plan for storage users.

In the next regulatory period, offer for users will be bundled capacity product, two-year bundled capacity product, interruptible capacity product, virtual counterflow product and a new product of Inčukalns PGK storage will be introduced - stock transfer product. An important milestone in the range of products offered by storage will be the introduction of an auction for the purchase of basic products -  bundled capacity, two-year bundled capacity products and interruptible capacity products will be offered in the form of auctions, enabling the user to choose in which of auctions to participate. For system users this means replacing the previous sophisticated capacity allocation mechanism in case of high demand with a simple procedure based on a potential storage user's view of the situation on the market and its chosen operating strategy. It should be noted that the auction method introduced by the Regulator — an auction with the setting of a single premium — provides the potential user with the option to book capacity with the lowest possible premium above the tariff approved by the Regulator.

In order to ensure a stable and predictable tariff for users, the tariff draft has been developed for a regulatory period of 60 months, using the allowed revenue ceiling method. The period of application of the tariffs calculated in the tariff draft is scheduled from 1 of May 2021 to 30 of April 2026.

Submitted tariff draft for natural gas storage services have been prepared in accordance with the ‘’Methodology for calculating tariffs for the storage system service of the natural gas’’ approved by the Regulator in Council Decision No 1/15 of 8 of October 2020 and by decision of the Board of Regulators No 109 of 20 August 2020 on the “Rate of return on capital for the calculation of the tariff draft on natural gas transmission system, natural gas distribution system and natural gas storage services’’. The proposed tariff project foresees a tariff for the bundled capacity product for the storage cycle EUR 1.4023/MWh, a tariff EUR 2.8100/MWh for the two storage cycles of the two-year bundled capacity product, an interruptible capacity product tariff EUR 1.1161/MWh for the storage cycle. Those tariff values will be a base value for all storage capacity booking auctions.

The new tariffs are expected to enter into force along with the new 2021/2022 storage cycle after their approval by the Regulator.