Finnish-Baltic gas market integration TSO pricing study - status report April 17, Timo Partanen energy Authority

Transcription

1 Finnish-Baltic gas market integration TSO pricing study - status report April 17, 2018 Timo Partanen energy Authority

2 Study on Transmission tariffs for the Finnish Baltic gas market The purpose of the project is to allow the NRAs to make an informed decision which entry-exit model option will be most suitable for Baltic-Finnish region. The study is procured jointly by all four NRA:s of the region. Finnish NRA leads. Analyzed models: Postage stamp, CWD-method, Matrix. This assessment will be done on following dimensions: impact of the methodologies on market volumes, impact of the methodologies on use and role of Klaipeda s LNG terminal and Incukalns underground gas storage use, impact of the methodologies on competitiveness on gas in different usage situations (peak shaving, seasonal storing, other), welfare benefits of different options. 2

3 TAR NC requirements Art 2: This Regulation shall apply to all entry points and all exit points of gas transmission networks shall apply to entry points from third countries or exit points to third countries, or both, where the national regulatory authority takes a decision to apply Regulation (EU) 2017/459 at those points. (unless covered by derogation) Art 4: Transmission and non-transmission services and tariffs Art 6: The reference price methodology shall be set or approved by the national regulatory authority as set out in Article 27. Within MS: Art 10 (1): the same reference price methodology shall be applied jointly by all transmission system operators within an entry-exit system Within MS: Art 10 (2): when planning entry-exit system mergers, on intermediate steps allowing for different reference price methodologies to be applied separately by each transmission system operator within the entry-exit systems concerned. Between MS: Art 11: The same reference price methodology may be applied jointly or separately or different reference price methodologies may be applied separately where more than one transmission system operator is active in an entry-exit system covering more than one Member State. 3

4 Why to merge market zones (sources Frontier and Baringa)? Frontier (2016): For overall welfare for the region, a single zone is likely to bring benefits that exceed those related to separate zones Frontier: recommend a full market merger with a single balancing zone and complete harmonization of balancing rules. A new market area manager will need to be established. Greater diversity of supply sources, consumer base and utilization of assets Common access to wider spectrum of assets GIPL BalticConnector Klaipeda terminal Incukalns storage Yet, the market will still be rather small 4

5 European gas hubs and FIN-BALT 5

6 Main characteristics of the models Postage Stamp: In extreme one entry and exit fee for everyone. Could be bundled by customer groups No locational signals, could lead to high ITC Capacity Weighted Distance: True pipeline costs calculated for every consumer from every supply point, weighted by capacity. Brings locational signals. Low ITC Matrix: Most complex, optimizes routes from supply point, true pipeline costs calculated for every consumer optimized from every supply point. Allocates true pipeline costs to used pipeline route. Could lead to significant variations between customers in different locations and tariff changes could lead to siugnificatn temporal changes. Lowest ITC. Grouping customers: Could reduce results to resemble PS. 6

7 Baltic-project overall schedule TSO tariffication study completed 6/2018 Tariffication decission by ITC proposal spring -18 Balancing proposal spring -18 VTP, MAM, BalticConnector, Intergovernmental agreement on market merger Common gas market, FI, EE, LV, LT

8 General observations on tariffication When market zones are merged, the pricing principles should be unified. General consensus has been that the entry tariffs should be harmonized. Tariffication is fundamentally a national decision. The choice of reference price methodology is national, too. Some harmonization would be recommendable. TSO revenues consist of entry, exit, ITC and non-transmission services. The sum of the three first is subject to regulation. The choice of ITC principles impacts tariff levels. Non-national revenues can be subject to regulatory coordination between the NRA:s or subject to ACER decisions. 8

9 Thank you for your attention Timo Partanen, Finnish Energy Authority