Finnish and Baltic gas transmission system operators continue regional market integration

Natural gas market participants have expressed the need to extend the current Estonia-Finland-Latvia entry tariff area to include Lithuania in order to remove the current tariff barrier at the Lithuania-Latvia interconnector Kiemėnai. Further to the regional market integration initiated in 2019, the transmission system operators of Latvia, Lithuania, Estonia and Finland, Conexus Baltic Grid AS, AB Amber Grid, Elering AS and Gasgrid Finland Oy, are working on a solution to include Lithuania in the zone without internal tariff barriers, thus creating better conditions for market participants to operate across the region while providing more added value to end consumers of natural gas. The proposed tariff area model foresees harmonised, uniform tariff setting for external borders, allowing for discounts at entry points from alternative gas sources.

The single tariff area would create better access to alternative gas sources and a competitive natural gas market in the region. In addition, the TSO solution should provide net benefits for all countries participating in the single zone.  

Uldis Bariss, Chairman of the Management Board of Conexus: "Our challenge is to ensure that the market can function in the most efficient way. We can do this by removing the tariff barriers that currently exist across the Latvian-Lithuanian border. For market participants, this is a message of potentially stable and predictable tariffs, as well as equal access to the entire gas infrastructure of the Single Market area."

A group of experts from transmission system operators in Finland, Estonia, Latvia and Lithuania is currently preparing a joint application for a harmonised view on gas transmission system entry tariffs and inter-operator compensation mechanisms between transmission system operators in Latvia, Finland, Estonia and Lithuania, to be submitted to the national regulatory authorities of all four countries by the end of this year. The supervising authorities will be asked for their views on the further implementation of the solution proposed by the operators. According to the TSOs' assessment, the next step in regional gas market integration could be implemented as from 1 January 2023. Before that, the proposed inter-operator compensation mechanism and tariff solution should be subject to public consultation in each of the four countries, based on national decisions and relevant legislation.

The current phase of regional gas market integration, known as the Finland-Estonia-Latvia Single Market for natural gas, or Feed-in Tariff Area, has been in place since 1 January 2020. In addition to the common feed-in tariffs, the establishment of the Finland-Estonia-Latvia Single Market involved the merging of the Estonia-Latvia balancing zones to form the Estonia-Latvia balancing zone and the provision of a common service to active market participants in the Estonia-Latvia balancing zone.