Secondary Market

September 14, 2023

Transmission secondary market capacity transfer

Capacity can be transferred directly from one network user to another network user according to sub-paragraph 6.1* of the Common Regulations for the Use of Natural Gas Transmission System (hereinafter – the Transmission regulation)

In case the capacity is transferred in the secondary market  the use of transferred capacity will be affected following way:

1. If capacity is transferred before 9:00 UTC on a day before the beginning of booked capacity product in full term of the capacity product, then the capacity retains  capacity product features within the meaning of sub-paragraph 4.7.1 of the Transmission regulation in case of capacity restriction as described in sub-paragraph 4.7.6.6** of the Transmission regulation.
2. If the duration of capacity transferred is shorter than booked capacity product, or the capacity is transferred after 9:00 UTC on a day before the beginning of the capacity product, then capacity for capacity restriction purposes, as foreseen in sub-paragraph 4.7.6.6. of the Transmission regulation, is treated as daily capacity.

• Therefore, if the duration of transferred part of capacity product is shorter than specified duration of capacity product, the transferred capacity part of capacity product cannot be considered as the same capacity product, which was booked by the network user on the primary market, because after the partial transfer of the capacity product the transferred part of capacity product does not qualify as the same duration capacity product.
• It is not possible to transfer transmission capacity for past periods. Therefore, if the period of capacity product has started, it is not possible to transfer capacity product features as it is not possible to transfer full period of capacity product.
• Capacity products are offered only by TSO on the primary market. According to point 22 of paragraph 1 of Article 22 of Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 the “primary market” means the market of the capacity traded directly by the TSO.  Therefore, if duration of capacity transferred in secondary market corresponds to other capacity product by duration, but was not booked as such, is not considered as a product of duration of the transferred capacity and will be treated as daily capacity for capacity restriction purposes.
• Capacity can be transferred in secondary market only by network user who booked the capacity (first sentence of sub-paragraph 6.1.* of the Transmission regulation). Therefore, it means that capacity that has been received on secondary capacity market cannot be transferred again on secondary capacity market.

Informative example with yearly capacity product:

1) if long-term (yearly) capacity product is transferred in full duration before 9:00 UTC September 30 it will remain as yearly capacity product within the meaning of sub-paragraph 4.7.1.1 of the Transmission regulation.

2) if yearly capacity from yearly capacity product is transferred for partial duration or after 9:00 UTC September 30 (which would mean also partial transfer), the capacity will not be considered as yearly capacity product within the meaning of sub-paragraph 4.7.1.1 of the Transmission regulation.

It must be noted that JSC Conexus Baltic Grid (Conexus) in cooperation with Estonian gas transmission system operator Elering AS has submitted for approval to the Latvian and Estonian national regulatory authorities the proposal for the amendments of the Transmission regulation. Please take into account, that the proposal contains a new provision, which stipulates, that “for the purposes of congestion management, capacity obtained through secondary capacity trading is treated as daily capacity product. When allocated capacity that has been transferred through secondary capacity trading, it is allocated from the transferring network user´s portfolio, starting with shorter duration capacity products and then progressing to longer duration capacity products.”.

The proposal submitted to the national regulatory authorities in August does not specify regulation regarding the already transferred capacity in secondary market before the entry into force of the proposed amendments to the Transmission regulation. However, Conexus is open to discuss and clarify the intended amendments to the Transmission regulation, taking into account the interest of the market.

*6.1. A network user who has booked the firm capacity products may agree with another network user and transfer right to use the firm capacity product or part of it. Secondary capacity trading shall be restricted to transfer of rights to use capacity of an entry/exit point for a specific time period. Obligations arising from the booked capacity product, including, but not limited to, obligation to pay the TSO for the booked capacity product, shall not be transferred and shall maintain with the network user intending to transfer the booked capacity product. A network user by transferring right to use the capacity product or part of it loses its right to surrender the transferred capacity.

** 4.7.6.6. In case of capacity restrictions at Kiemenai entry/exit point, capacity shall be restricted proportionally among network users in the following order: first, interruptible capacity of the shortest period; then interruptible capacity of a longer period; and finally, if demand still exceeds the supply, firm capacity of a shorter period, and if necessary, firm capacity of a longer period.