Council of the Public Utilities Commission approves new natural gas storage tariffs

Today, 26 April, the Public Utilities Commission (PUC) approved the new Inčukalns Underground Gas Storage (IUGS) storage tariffs that were submitted for evaluation by Joint Stock Company (JSC) "Conexus Baltic Grid" as early as in November 2017.

Zane Kotāne, Chairperson of the Board of JSC "Conexus Baltic Grid": "A significant stage of work has been completed: new storage tariffs of the Inčukalns Underground Gas Storage have been approved, which is an important step not only for us, the natural gas storage operator, but is also an efficient market tool that enables any economic operator plan ahead its business processes. Therefore, following the approval of the tariffs, we can commence the suction season on 5 June, as previously announced on the Conexus website".

In the approved draft tariff, two differentiated products shall be offered to the market players as follows: a market product and a product of grouped capacity. The market product price is scheduled to be revised once a week, depending on the changes in the forecasted natural gas prices in winter and summer seasons at the Gaspool trading zone. The market product will be available from 11 June 2018 until 31 August 2018, allowing natural gas to be pumped in the reserved storage volume up to the end of the suction cycle. The market product is offered as an interrupted product. Compared to the current tariff, the predicted price of the market product is by 39% lower. The lowest price for the market product this season is limited by EUR 0.92 / MWh / cycles. The product of grouped capacity will be crucial for those market players who use the storage primarily to provide the maximum consumption and for the needs of supply safety. Compared to the variable-price market product, this product will be a priority during the suction season and during the application of virtual flows. The price of the product of grouped capacity at the beginning of the season is set at 

EUR 2.94756 / MWh / cycle, with the possibility to decrease, if demand for the storage exceeds the predicted.

The cost of the total storage system included in the 2018 draft tariff is EUR 22.3 mln., which is 35% lower than previously approved storage tariffs. This is mainly due to the changes in the tariff calculation methodology with respect to the cost of the technological process provision, by specifying that the costs of natural gas consumed by the compressors are covered by the users of the storage in addition to the defined tariffs.

"It is vital that the tariff revision cycle is set for 3 years, which will allow the storage operator to inform market players more timely of the predicted tariffs for each season without having to undergo a full tariff review procedure. The Regulator decision stipulates to inform market players about the predicted tariffs for each season by 1 February. Also, the decision of the Regulator enables the market players to take an active part in the development of market required services, as well as to motivate the operator to make an offer for the long-term storage products that following harmonization with PUC will be available to all market players", stated Zane Kotāne.

Alongside with the draft tariff adjustments, which today have been approved by the Council of the PUC , JSC "Conexus Baltic Grid" also submitted updated storage conditions of use, which guarantee introduction of the new storage capacity products, as well as other amendments to take account of the business operation experience following the natural gas market opening on 3 April 2017, and thereof related changes in the use of the Latvian and Baltic gas supply infrastructure during the storage cycle of 2017/2018.

The storage tariffs shall come into force within a month after their respective publication in the official publisher of the Republic of Latvia "Latvijas Vēstnesis".

Briefly about JSC Conexus Baltic Grid

JSC Conexus Baltic Grid is the unified natural gas transmission and storage operator in Latvia. The company has been set up in December 2016, when, approaching the Latvian gas market liberalisation on 3 April 2017, in compliance to the European Union Gas Directive and the Cabinet of Ministers established regulated market principles, JSC "Latvijas Gāze" was reorganised. The natural gas infrastructure was transferred to JSC "Conexus Baltic Grid": a unified natural gas transmission system and the Inčukalns Underground Gas Storage.