TAR NC (2017/460) 01.12.2023 – 30.09.2025

Article of TAR NC

Description

Information, link

Information to be published before the annual yearly capacity auction *

29. (a)

Information for standard capacity products for firm capacity (reserve prices, multipliers, seasonal factors, etc.)

Information is available in the decision No. 119 of the Public Utilities Commission (PUC) Council regarding the natural gas transmission service tariffs of the joint-stock company 'Conexus Baltic Grid', dated October 26, 2023.

(1) Standard capacity product tariffs: Transmission tariffs

(2) Article 13 of Regulation 2017/460 stipulates the range of multipliers applicable to standard capacity products. The multipliers used in the tariff calculation are calculated according to the level set out in the first paragraph of Article 13 of Regulation 2017/460. In order to avoid undue competition between entry points of the common natural gas market, thus improving natural gas trade in the common natural gas market and optimising natural gas flows between Finland, Estonia and Latvia, the same multipliers shall be applied to entry points of the common natural gas market. Taking this into account, as well as in accordance with Article 28(3) of Regulation 2017/460, the following multipliers are applied during setting of tariffs for short-term capacity products:

(3) According to Article 15 of Regulation 2017/460, the seasonal factor applies in such cases when standard capacity products are not offered with a constant capacity for a year. In accordance with Article 28(3) of Regulation 2017/460, a seasonal factor of 1.0 is to be applied in the calculation of tariffs, taking into account the different level of natural gas market development within the common natural gas market. The seasonal factor is 1.0, meaning that it does not lead to seasonal tariff differentiation.

In accordance with the rules stipulated in Article 9(1) of Regulation 2017/460 and point 42 of the methodology for calculating tariffs for the natural gas transmission system (only in Latvian) service, a 100% discount is applied to the tariffs for capacity products at the entry point from the storage facility and the exit point to the storage facility. Application of the aforementioned discount facilitates more efficient utilisation of the natural gas transmission system and ensures larger volumes of natural gas supply from the storage facility during the winter period.

29. (b)

Information for standard capacity products for interruptible capacity (reserve prices and an assessment of the probability of interruption)

(1) Interruptible capacity product tariffs: Transmission tariffs

(2) Discount of 5% is applied for interruptible capacity products according to Methodology for calculation of tariffs for natural gas transmission system service

* Annual yearly capacity auctions according to Commission Regulation (EU) 2017/459 of 16 March 2017 establishing a network code on capacity allocation mechanisms in gas transmission systems and repealing Regulation (EU) No 984/2013 (NC CAM) are not implemented due to the application of the implicit capacity allocation procedure according the Article 2 (5) of NC CAM.

Information to be published before the tariff period. Current tariff period: 01.12.2023.–30.09.2025. (22 months) (hereinafter – Tariff period)

30. (1) (a)

Information on parameters used in the applied reference price methodology that are related to the technical characteristics of the transmission system, such as:

(i) technical capacity at entry and exit points and associated assumptions;

(ii) forecasted contracted capacity at entry and exit points and associated assumptions;

(iii) the quantity and the direction of the gas flow for entry and exit points and associated assumptions, such as demand and supply scenarios for the gas flow under peak conditions;

(iv) the structural representation of the transmission network with an appropriate level of detail;

(v) additional technical information about the transmission network, such as the length and the diameter of pipelines and the power of compressor stations

(1) Technical capacity at entry and exit points

      Principles of calculation of technical capacity

(2) Forecasted contracted capacity for Tariff period at entry and exit points GWh/day/year:

(3) The forecasted quantity and direction of gas flow for entry and exit points during the Tariff period, GWh

According to the methodology for calculating tariffs for the natural gas transmission system service, the estimated daily average capacity of the entry point or exit point shall be equal to the daily average used capacity of the previous three calendar years. Taking into account new situation in the regional natural gas market due to changes in geopolitical situation, the use of entry and exit point capacities has significantly changed compared to the previous three calendar years. As a result, the total entry capacity and total exit capacity of the transmission system during the Tariff period are determined based on the natural gas transmission system usage principles in 2022 and 2023.

(4) Transmission network structure scheme and technical information

30. (1) (b) (i)

The allowed or target revenue, or both, of the transmission system operator

(1) Regulatory period is from 01.12.2023. till 30.09.2026 (34 months), that is divided into two tariff application periods:

• 01.12.2023.-30.09.2025. (22 months)

• 01.10.2025.-30.09.2026. (12 months)

Allowed revenues for Tariff period 01.12.2023-30.09.2025:

30. (1) (b) (ii)

The information related to changes in the revenue referred to in point from one year to the next year.

(1) Tariff period duration is 22 months, the previous tariff period 01.01.2020-30.09.2022 lasted 33 months. Below is a comparison of allowed revenue on average gas year, in thousands of EUR:

The allowed revenues for the Tariff period compared to the period 01.10.2022-30.11.2023 are on average 5 793.9 thousand EUR higher per gas year.

30. (1) (b) (iii)

Information about the following parameters:

(1) types of assets included in the regulated asset base and their aggregated value; (2) cost of capital and its calculation methodology;

(3) capital expenditures, including:

(a) methodologies to determine the initial value of the assets;

(b) methodologies to reevaluate the assets;

(c) explanations of the evolution of the value of the assets;

(d) depreciation periods and amounts per asset type. (4) operational expenditures;

(5) incentive mechanisms and efficiency targets;

(6) inflation indices.

(1) Types of assets included into regulated asset base according to Methodology for calculation of tariffs for natural gas transmission system service (methodology only in Latvian)

I. Intangible assets;

II. Fixed assets (land, buildings; technological equipment; other fixed assets);

III. Payments accounted in assets for participation in the international transmission infrastructure establishment projects;

IV. Liabilities, arising from decisions regarding distribution of investment costs, which were adopted in accordance with the Regulation (EU) No 347/2013 of the European Parliament and of the Council of 17 April 2013 on guidelines for trans-European energy infrastructure and repealing Decision No 1364/2006/EC and amending Regulations (EC) No 713/2009, (EC) No 714/2009 and (EC) No 715/2009.

In the calculation of regulatory asset base (hereinafter - RAB) the following items are excluded: financial investments, trade accounts payable, securities and capital shares, monetary funds, inventories, assets not yet accepted into use (construction in progress), as well as part of the value of fixed assets which was co-financed by the state, local government, European Union or other international organization and institution's financial aid or support. RAB does not include changes in the value of assets created by other parties or changes in their value resulting from revaluation.

RAB value for the Tariff period is 221 853.2 thusand EUR.

(2) According to Methodology for calculation of tariffs for natural gas transmission system service (methodology only in Latvian) the cost of capital composes depreciation and return on capital. The return on capital is calculated by multiplying the RAB value by the weighted average cost of capital rate (WACC rate), taking into account the duration of the Tariff period.

The real WACC rate in the Tariff period is 2.72%, according to the Public Utilities Commission (PUC) decision No. 177 “On the rate of return on capital for the calculation of a tariff project for the natural gas transmission system, natural gas distribution system and natural gas storage services” (only in Latvian).

(3) Capital expenditure:

a) methodology to determine the initial value of the assets – assets are carried at their historical cost;

b) methodology to re-evaluate the assets – The last revaluation of fixed assets was carried out in 2020. The revaluation was performed by independent certified assessors to determine the value: initial value, accumulated depreciation and residual value for each group of fixed assets. Method used in the revaluation was based on the average construction and acquisition costs in Latvia. According to Methodology for calculation of tariffs for natural gas transmission system service, starting from December 31, 2021, the cost of capital (or RAB value) does not include changes in the value of assets resulting from revaluation.

c) explanation of the evolution of the value of the assets – depreciation is applied on a straight-line basis over the useful life of asset; d) depreciation periods (according to Appendix 3 of the Methodology for calculation of tariffs for natural gas transmission system service) and depreciation amounts per asset type in Tariff period:

(4) Operational expenditures in Tariff period – 28 732.3 thosuand EUR.

(5) Incentive mechanisms and efficiency targets – the costs of capacity booking services during the Tariff period need to be reduced for operational efficiency: 621.7 thousand EUR

(6) Inflation indices:

30. (1) (b) (iv, v)

(iv) Information about the transmission services revenue; (v) the following ratios for the revenue referred to in point (iv): (1) capacity-commodity split; (2) entry-exit split; (3) intra-system/cross-system split.

(iv) Tariff period revenue:

(1) Capacity-based revenue 100% (a+b+c);

(2) Entry revenue 11% (a) / Exit revenue 89% (b+c);

(3) Intra-system revenue 93% (a+c)/ Cross-system revenue 7% (b).

30. (1) (b) (vi)

Information related to the previous tariff period regarding to reconciliation of the regulatory account: (1) the actually obtained revenue, the under- or overrecovery of the allowed revenue and the part thereof attributed to the regulatory account and, if applicable, sub-accounts within such regulatory account;

(2) the reconciliation period and the incentive mechanisms implemented.

1. The difference between the actual revenues/expenses and allowed revenues/expenses from the previous tariff period at 16 725.8 thousand EUR (01.01.2020-30.09.2022) and transition period (01.10.2022- 30.11.2023) is included in the regulatory period (01.12.2023-30.09.2026). Of this, 10 827.4 thousand EUR is included in the Tariff period. The adjustment from the previous tariff period cycle increases the allowed revenues for the regulatory period.

(2) In the previous tariff period, incentive mechanisms for reconciliation were not used.

30. (1) (b) (vii)

Information on the intended use of the auction premium

Not applicable

30. (1) (c)

Information on transmission and non-transmission tariffs

Not applicable

30. (2) (a)

Information on transmission tariff changes/trends

1. Yearly standard capacity product tariffs, short-term standard capacity product tariffs, interruptible capacity product tariffs and interruptible virtual counter flow capacity product tariffs for the natural gas transmission system do not be changed in the regulatory period (01.12.2023-30.09.2026): Transmission tariffs
2.  Changes of charge for the use of the exit point for supplying gas users in Latvia:

Tariffs in force: Transmission tariffs

30. (2) (b)

Information about used tariff model

(1) Tariff calculator for transmission network users to calculate the transmission tariffs applicable for the existing tariff period and to estimate their possible value beyond the existing tariff period: Simplified calculation of natural gas transmission service tariffs