West European Gas Transmission Tariff Comparisons at 1 February 2011

Transcription

1 Gas Transport Services West European Gas Transmission Tariff Comparisons at 1 February 2011 Report to Gas Transport Services March 2012 Arthur D. Little Limited One Bedford Avenue London WC1B 3AU United Kingdom Telephone +44 (0) Fax +44 (0) Reference P

2 Table of Contents 1 Introduction 5 The scope of this report 5 Contents of this document 6 2 Summary and conclusions 7 3 The nature of ADL s gas transmission tariff comparisons 9 4 Tariff comparisons The Gas Transport Services tariff Comparisons with other matrix tariffs 13 5 Comparisons across transmission operators 29 6 Trends in tariffs over time 35 7 Transmission tariffs compared to end user prices 38 GTS\P \018.rpt 2

3 List of Figures Figure 1: Summary of gas transportation tariff comparisons with Gas Transport Services 8 Figure 2: Figure 3: Gas Transport Services transportation tariff 2011, 100 million m 3, 8000 hours, HTL offtake 12 Gas Transport Services transportation tariff 2011, 100 million m 3, 8000 hours, RTL offtake 13 Figure 4: Gas Transport Services tariff comparison with National Grid, 100 million m 3, 8000 hours, HTL offtake 14 Figure 5: Gas Transport Services tariff comparison with National Grid, 100 million m 3, 8000 hours, RTL offtake 15 Figure 6: Figure 7: Gas Transport Services tariff comparison with GRTgaz, 100 million m 3, 8000 hours, HTL offtake 16 Gas Transport Services tariff comparison with GRTgaz, 100 million m 3, 8000 hours, RTL offtake 17 Figure 8: Gas Transport Services tariff comparison with Snam Rete Gas, 100 million m 3, 8000 hours, HTL offtake 18 Figure 9: Gas Transport Services tariff comparison with Snam Rete Gas, 100 million m 3, 8000 hours, RTL offtake 18 Figure 10: Gas Transport Services tariff comparison with Open Grid Europe, 100 million m 3, 8000 hours, HTL offtake 19 Figure 11: Gas Transport Services tariff comparison with Open Grid Europe, 100 million m 3, 8000 hours, RTL offtake 20 Figure 12: Gas Transport Services tariff comparison with GUD, 100 million m 3, 8000 hours, HTL offtake 21 Figure 13: Gas Transport Services tariff comparison with GUD, 100 million m 3, 8000 hours, RTL offtake 21 Figure 14: Gas Transport Services tariff comparison with Thyssengas, 100 million m 3, 8000 hours, HTL offtake 22 Figure 15: Gas Transport Services tariff comparison with Thyssengas, 100 million m 3, 8000 hours, RTL offtake 23 Figure 16: Gas Transport Services tariff comparison with Ontras, 100 million m 3, 8000 hours, HTL offtake 24 Figure 17: Gas Transport Services tariff comparison with Ontras, 100 million m 3, 8000 hours, RTL offtake 24 Figure 18: Gas Transport Services tariff comparison with Wingas Transport, 100 million m 3, 8000 hours, HTL offtake 25 Figure 19: Gas Transport Services tariff comparison with Wingas Transport, 100 million m 3, 8000 hours, RTL offtake 26 Figure 20: Gas Transport Services tariff comparison with postalised tariffs, 100 million m 3, 8000 hours, HTL offtake 27 Figure 21: Gas Transport Services tariff comparison with postalised tariffs, 100 million m 3, 8000 hours, RTL offtake 28 GTS\P \018.rpt 3

4 Figure 22: Comparison of the Dutch transportation tariff with the total range of West European tariffs 29 Figure 23: Comparison of the UK, France, Italy and Germany in the total tariff range 30 Figure 24: Comparison of postalised tariffs in the total tariff range 32 Figure 25: Tariff results from Figure 26 analysed horizontally average tariffs per country 33 Figure 26: Comparison of countries and cases 34 Figure 27: Index of average result for 45 cases, , using GTS 2004 tariff as the basis 36 Figure 28: Index of average result for 45 cases, , using GTS average 2008 as basis 37 Figure 29: Transmission tariff as % of industrial end user prices (including VAT) for various distances and annual volumes 39 Figure 30: Transmission tariff as % of industrial end user prices (excluding VAT) for various distances and annual volumes 40 GTS\P \018.rpt 4

5 1 Introduction Since 1999, the Dutch gas transmission company, Gas Transport Services (GTS), or its predecessor, has commissioned an independent consultant to prepare reports comparing gas transportation tariffs across Western Europe on an annual basis. In 2008 we began using a new methodology, which incorporated an adjustment for the effect of free balancing tolerance on transmission tariffs. In this report we continue with that approach, using company data from 1 February Between 2010 and 2011 several companies published revised carriage arrangements, or adjusted their tariffs (e.g. to reflect inflation, or for other reasons) and so it is appropriate to analyse and report on the change in arrangements. The scope of this report In this report we compare the GTS tariff with the transportation tariffs in eleven other countries: Austria, Belgium, Denmark, France, Germany, Ireland, Italy, Luxembourg, Spain, Sweden, and the United Kingdom. This means that all West European countries with Third Party Access to gas transmission systems (except Finland, Portugal and Greece) are covered. It should be noted, however, that we do not include every possible TSO for reasons of complexity and consistency over time. For example, we do not include the network of TIGF in southern France and therefore when we refer to France in this study, it should be understood that we refer to the network of GRTgaz only. All tariff comparisons are made for domestic delivery only; separate transit tariffs are not included in this study. In our calculations, we evaluate 45 specific cases: 100 million m 3 p.a. at 8000, 5000 and 2500 hours load factor. 10 million m 3 p.a. at 5000 and 2500 hours load factor. 1 million m 3 p.a. at 2500 hours load factor. For each of the cases above, we analyse several distance combinations, from 50 to 350 km on the highpressure network (HTL), and 0 to 30 km on the regional network (RTL). These have been chosen as they are typical of the Netherlands and the GTS system, which is the key reference point for this study 1. The typical Dutch cases may or may not be representative of network usage within the systems of other TSOs. The aim of this study is, as it has always been, however, to carry out a comparison between tariff levels under the current tariff system of GTS and the tariff levels which would result from the introduction into the Netherlands of the tariff systems adopted by other TSOs. This is the same methodology as used in previous reports on tariffs commissioned by GTS. In other words, the distances, volumes and load factors of the cases studied are intended to be representative for shippers on the Dutch transmission system. Whereas in, for example, France, Germany, Italy or the UK it is possible to ship gas over much longer distances than the maximum 350 km considered here, such longer distances are not possible within the Netherlands. Extrapolation of tariffs for longer distances on the Dutch transmission system for comparison with these TSOs is beyond the scope of this report and moreover would not be sensible. 1 We note that since the introduction of entry exit tariff systems, incorporating the distances travelled on the RTL network became complex. In some countries, such as Italy, France and the UK, the medium pressure exit points are part of a separate regional network with a separate tariff element; in Italy this tariff is distance related and therefore we calculate and add the specific RTL tariff at 5 and 30 km to the HTL tariff. In other countries, such as Germany and the Netherlands, a separate medium pressure network is not a feature of the tariff system anymore; exit points in the entry-exit matrix of points are simply designated as being at different pressure levels. Our methodology for RTL cases on matrix tariff systems with no separate RTL network or tariff system is to take the total distance from the HTL network to the RTL exit point regardless of the stated RTL distance, in order to reduce complexity. We include the concept of a distance travelled on the RTL network for completeness in the comparison. GTS\P \018.rpt 5

6 Contents of this document In this main part of the report, we concentrate on showing charts which illustrate the comparisons of tariffs, at various distances, volumes and load factors. This gives an overall picture of the tariffs offered by each company, rather than concentrating on particular cases. The detailed calculations for each of the 45 cases are shown in the Appendix F to this report, and the conclusions from the cases are shown in a colour-coded chart in the Summary and Conclusions chapter. The majority of this report focuses on comparisons between the Gas Transport Services tariffs and those of other companies, but there is also a chapter (Chapter 5) in which we make comparisons across companies, not only confined to comparisons with GTS. We report the tariffs in /m 3 /hour/year. The calorific value of the gas has been normalised to MJ/m 3 and appropriate calorific value conversions have been made, using data shown in the Appendix, to reach an apples for apples comparison. GTS\P \018.rpt 6

7 2 Summary and conclusions We have undertaken a careful analysis of the transmission tariffs charged at 1 February 2011 in each of the main West European gas markets and have found that Gas Transport Services transportation tariffs are among the lowest in Western Europe. Through the analysis of 45 cases, we have found that the transport tariffs of Gas Transport Services are: Always lower than those in Ireland, Spain and Sweden. Usually lower and never higher than those in France, Germany (for Wingas Transport and Thyssengas), Italy, Luxembourg and the UK. Mostly similar to and sometimes lower than those in Germany (for Ontras). Mostly lower but in a few cases higher than those in Austria. Mostly similar to but sometimes higher than those in Germany (for OGE and GUD), Belgium and Denmark. In the traffic light chart below, Figure 1, a green light indicates that Gas Transport Services tariff is lower than that of the other TSO, a red light indicates that it is higher, and a yellow light indicates that the tariffs are similar to each other. As Gas Transport Services offers a range of tariffs at each distance (in common with several other companies) we have compared the range of tariffs offered by GTS with the range or single tariff offered by the other TSO. Where these ranges overlap, we conclude that the tariffs are similar and therefore the yellow traffic light is used. In summary, the GTS tariff is mostly lower than the tariffs of the other TSOs, sometimes equal to them and seldom higher than them. This can be expressed in percentage terms (excluding the cases where no comparison is possible 2 ): 58% of traffic lights are green, meaning that the GTS tariff is lower than that of the other TSO. 37% of traffic lights are yellow, meaning that the GTS tariff is similar to that of the other TSO. 5% of traffic lights are red, meaning that the GTS tariff is higher than that of the other TSO. Our complete methodology for analysing TSOs which have a range of tariffs at a specific distance is described in Appendix C. 2 The percentages above are based on 615 data points and therefore do not include the points where no result has been calculated because the distance for a particular case is too long to be applied for an individual TSO. These cases are represented by blank cells in Figure 1. Including all 675 data points, the percentage results are: 52% green, 34% yellow, 5% red and 9% blank (total does not add to 100% due to rounding). GTS\P \018.rpt 7

8 Figure 1: Summary of gas transportation tariff comparisons with Gas Transport Services Note: 1. As several companies have a range of tariffs, we compare the range of tariffs with the range of GTS tariffs. If these ranges overlap, we conclude GTS has a similar tariff, and the traffic light chart is yellow. For a full explanation of our methodology for comparing tariffs, see the Appendix. 2. It is not possible to travel 350 km on the Fluxys (Belgian) or Swedegas (Swedish) networks, so no comparison is made with the GTS tariff at this distance. It is also not possible to travel 200 km on the Creos (Luxembourg) network, so no comparison is made with the GTS tariff above 50 km. GTS\P \018.rpt 8

9 3 The nature of ADL s gas transmission tariff comparisons The philosophy underpinning the reports which Arthur D Little Ltd (and other companies) has prepared since 1999, initially for Gasunie and later for Gas Transport Services, is to conduct as scientific as possible a comparison of the tariffs which would be charged to shippers serving representative customers in the Netherlands, if the transmission tariff of another country were to be introduced into the Netherlands. So the reason that there is no case for a customer of 1 billion m 3 per year, shipping over a distance of 1000km, is because such a customer cannot exist in the Netherlands, though it might exist in another country. If new cases relevant to the Netherlands emerge, we would be happy to consider them. By scientific, we mean satisfying the following five criteria: 1. The question to be answered must be good, relevant and logical. Bad questions tend to produce bad, irrelevant answers. A good question is a necessary but not sufficient condition for a good, relevant answer. A good question can be answered using appropriate research methods, and the answer must be unambiguous. 2. The data used in the analysis must be published and verifiable by anyone (whether using books, scientific publications, data from the internet, or available from TSOs to anyone via a phone call or an e- mail or written letter exchange). 3. The conceptual approach required to solve the question should be readily available (or can be new, in which case the explanation of it should be detailed) and should be acceptable to acknowledged experts. 4. When statistical techniques are needed they should be applied on a sound basis and with adequate knowledge of handling statistical issues. 5. All assumptions and calculations must be transparent and reproducible, so that the results are capable of being validated and replicated by any third parties. In the past, we have received comments from some of the TSOs which are featured in our comparisons, which have pointed out some misunderstandings of their approach, or errors, which we have been happy to correct. On a number of occasions we have received the comment that our result for a particular TSO is unrepresentative, that their average tariff is actually much lower than we show in our analysis. It is true that the average tariff we show is not necessarily representative for each TSO as our approach, as explained above and in each of our reports, is to base our comparison on the GTS system and customers in the Netherlands. Effectively, we import the tariff system of each TSO in our comparison to the Netherlands in order to carry out the comparison on a like for like basis. It is not within the scope of this report to show the average tariff for each TSO based on its own typical customers, distances, throughput, etc. Another comment has been that our results do not show rational shipper behaviour as, for example, we connect entry and exit points to show tariff results for flows which would not physically occur. Our approach is the same for all TSOs: to look at all the possible journeys on the network. We do not make judgements on which flows do or do not occur, as we do not have evidence to support these. We do not exclude results which could be considered outliers (e.g. very high or very low tariff results in comparison to GTS) as one might in a statistical survey, we do not make judgements on which TSOs are more or less comparable to GTS in terms of network age, terrain factors, etc. nor do we indicate any reasons for some TSOs tariffs being higher/lower than others. We simply present the results of our calculations using the actual published tariffs and the stated methodology. TSOs and regulators have commented on and corrected our approach to the tariff calculations based on the details published in the Appendix. This has occurred on several occasions, also pre-publication, as we carry out checks with the relevant parties that our tariff calculations are correct, in particular when a change of system or structure takes place. We were, and always are, happy to respond to comments and criticisms of our methodology, or data, when we become aware of such comments and criticisms. GTS\P \018.rpt 9

10 For this year s report, we continue to use the same methodology as in the last report (dated April 2011), which adjusts for the different levels of free balancing tolerance offered by the different TSOs. Some, such as National Grid in the UK, offer no free balancing tolerance over a day, while other TSOs, including Gas Transport Services, offer a balancing tolerance on an hourly and daily basis. In order to improve the apples for apples nature of our comparisons, and to focus as purely as possible on transmission charges, we have valued the free balancing tolerance in each country by estimating the opportunity cost to the shipper of the free tolerance, and then deducting this amount from the tariff. What then remains is the true charge for transmission service. This adjustment to our methodology is in response to criticisms that we have not taken balancing charges into account and that if we did, the hierarchy of tariffs would be quite different, with Gas Transport Services not shown to have the lowest, or to be among the lowest, charges. We have therefore tried to take this into account in a fair way. We do not think it would be appropriate to make hypotheses about the behaviour of shippers, and specifically, how frequently and to what extent they are out-of-balance, in order to calculate imbalance charges, because we do not have such information and we would expect that there is a wide variation in performance of shippers depending on such factors as their sources of gas supply, the type of customers they serve, and other factors. Also, a significant component of the cost of being out of balance is the cost of balancing gas, which may reflect a market price of gas or be set by administrative decision. In either case, it has nothing to do with transmission tariffs: for example, GTS does not determine the TTF price, but the TTF price is relevant for the price of balancing gas in the Netherlands. Likewise, penalties for being out of balance, scheduling charges and other similar costs faced by shippers which are out of balance are nothing to do with transmission tariffs and thus should not be part of our comparison of transmission charges. Furthermore, such penalties and balancing costs appear to vary widely from TSO to TSO, and it seems likely that a wide range of methods is used to set such charges. Some TSOs appear to have fixed balancing charges, while others vary with gas market conditions: it seems unlikely that fixed charges are truly cost-reflective, and they may thus be either too high or too low. Certainly, one could not conclude that the TSO with the lowest balancing charges has set them at the right level, and that the TSO with the highest balancing charges has set them at the wrong level. It is in the nature of comparisons such as those in this report that there are always areas in which it is difficult to go beyond a certain point in trying to value certain aspects and to make the necessary adjustments. For example, there are differences between common carriage and contract carriage: in the former, pro-rata curtailment can occur when transmission constraints emerge, while in the latter, the TSO has a binding obligation to make the sold capacity available to the shipper and would be in breach if it tried to curtail the shipper. Other, less tangible, differences between TSOs could include the ease of doing business with them, their responsiveness to requests for service, their degree of adherence to contract conditions, etc. All of these things complicate the comparison and mean there are limits to the strictness of the apples for apples comparisons. Nevertheless we will continue to consider possible ways to improve our comparisons of transmission charges. GTS\P \018.rpt 10

11 4 Tariff comparisons In this chapter, we firstly describe the Gas Transport Services tariff in place on 1 February We then compare the current GTS tariff with tariffs charged by TSOs in other countries. For convenience, we have grouped the countries into two categories: Those which use a matrix approach to the tariff which includes the entry-exit and zonal tariff systems used in the Netherlands, the UK, Italy and France, together with the tariff systems of the German supraregionals: GUD, Open Grid Europe, Wingas Transport, Thyssengas and Ontras. Those which use a postalised tariff, such as Austria, Denmark, Ireland, Belgium, Luxembourg, Sweden and Spain. We no longer use a category relating to pipeline diameter and distance, as this method of tariff calculation has been replaced in Germany by entry-exit systems. Throughout the comparisons, a number of basic assumptions have been used: Only tariffs for firm transportation services are compared. The contract period is always for one year. For some countries using a matrix approach to tariffs, only the main entry-points are considered (the smaller entry points are included in the appendices, for completeness; this is not applicable for France, GUD, Open Grid Europe, Wingas Transport, Thyssengas or Ontras). No separate quality conversion charges are included (i.e. only entry and exit points with compatible gas quality are included, unless there is no additional charge for quality conversion services; note that from mid-2009 and thus applicable for the 2011 analysis, quality conversion became part of the standard system service in the Netherlands and therefore it is possible to enter and exit the GTS system at different gas qualities without incurring any extra charge the socialised quality conversion element was set at /m 3 /h/y in 2011 and is included in our calculations as part of the fees payable by all shippers); no flexibility charges, balancing costs or penalties are included; value added tax is also excluded. Modulation charges are excluded i.e. gas is delivered to the network and redelivered from the network at the same load factor, and therefore points which access storage facilities are excluded. The comparison is made on the basis of the standard capacity charge, adjusted for the value of the free balancing tolerance made available to network users by some TSOs. All calculations and country-specific assumptions are included in Appendix F. A full set of graphical comparisons is presented in a Graphical Appendix. Where more detailed information is not available, either published or provided by the TSO, all distances are measured along pipelines as accurately as possible from published maps. 4.1 The Gas Transport Services tariff Since 1 January 2003, Gas Transport Services has used an Entry-Exit System approach to transportation tariffs. The Entry-Exit System comprises separate charges for the H-Gas and G-Gas pipelines. There are around 50 entry points and over 600 exit points (excluding exits to storage facilities and process gas). Both high and medium pressure pipelines are included in this tariff approach: there is no distinction between HTL (the high pressure network) and RTL (regional network) pipelines. There is also a connection charge which we include in our comparisons. Up to 2006, this fee was capacitydependent, but in 2006 it became a fixed sum per gas receiving station. This method continues in GTS\P \018.rpt 11

12 By considering each combination of entry and exit points to the Gas Transport Services network, and applying these tariffs, we can produce a full matrix of charges which shippers would pay for a given volume and load factor. From mid-2009, charges for the quality conversion services were socialised, meaning that all shippers pay for quality conversion within their entry and exit tariff payments. Previously, when shippers paid an additional charge for quality conversion, we only included in our calculations entry-exit combinations with matching gas quality, but as there is no longer an additional charge, we can now include all combinations of points and our calculations reflect this. The charts showing the GTS entry-exit point combinations therefore contain more points than in previous years. Gas Transport Services provides free balancing tolerance as part of its transportation service for shippers. The level of tolerance decreases when the temperature falls below 0 Celsius, in a linear fashion to -17 Celsius (effective daily period temperature in De Bilt (NL) for a gas day). In this report, we assume the temperature is above 0 Celsius and standard tolerance levels are applied. We have also calculated the result in a form similar to Figure 1 for the -17 Celsius scenario and this is shown in Appendix E. In the chart below, we have only considered the major entry points to the Dutch system (OSZ OGE, Balgzand HC, Balgzand Nogat, Maasvlakte, Uithuizen, Groningen, Zelzate, Emden NPT, Emden EPT and Bocholtz). In the Appendix, this chart is produced for all the entry points to the Dutch network. Figure 2 shows the transportation tariffs for a shipper moving 100 million m 3 to a customer at 8000 hours load factor, only using the HTL network. The tariff is made up of the entry charge, the exit charge, and the connection fee, and adjusted for the value of free tolerance relevant to this case. Figure 2: Gas Transport Services transportation tariff 2011, 100 million m 3, 8000 hours, HTL offtake GTS\P \018.rpt 12

13 There is no separate tariff for the medium pressure network in the Netherlands. Gas Transport Services has advised us of the exit points on the network which are medium pressure points. To deliver gas to these exit points would require a shipper to inject gas at an HTL entry point and withdraw gas at an RTL exit point. Figure 3 below shows these tariffs. No separate RTL distance is shown in this chart, as the RTL tariff is included in the specific exit charge, hence the x-axis on the chart refers to the distance travelled on the high pressure network. Figure 3: Gas Transport Services transportation tariff 2011, 100 million m 3, 8000 hours, RTL offtake The full range of tariff results in the Netherlands for all the main entry points, is 16 to 55 /m 3 /h/y for HTL tariffs (with distances up to 490 km), and 15 to 56 /m 3 /h/y for RTL tariffs (with distances up to 490 km). The minimum RTL tariff result is less than the minimum HTL result as the lowest RTL exit fee in 2011 is below the lowest HTL exit fee; HTL and RTL are not additive. 4.2 Comparisons with other matrix tariffs In this part of the chapter, we compare the Gas Transport Services tariff with other matrix tariffs. The comparison shown in this chapter is only for the 100 million m hour case, the full set of comparisons can be found in the Graphical Appendix. The countries with matrix tariffs are: The UK, with the same structure as 2010: an entry-exit tariff where entry capacity is auctioned. France, retaining its matrix structure from 2010: an entry-exit tariff by zone, with two zones. Italy, retaining its matrix structure from 2010: an entry-exit tariff, with updated tariff elements. Germany, where GUD, Thyssengas, Ontras, Open Grid Europe (E.ON Gastransport) and Wingas Transport have retained their 2010 entry-exit systems with updates to tariff elements. GTS\P \018.rpt 13

14 4.2.1 Comparisons with the UK National Grid has an entry-exit tariff for its high-pressure network, and a postalised tariff for its medium pressure pipelines. National Grid is now the owner of only 4 of the 8 regional medium pressure networks, and we have therefore excluded the other networks from our calculations for consistency in comparing the same TSO over time. Also, gas passing in and out of the UK market has to pass through National Grid s high pressure network before reaching the medium pressure level. Using only National Grid tariffs enables us to look at a single TSO for the UK analysis. Therefore, all references to the UK in this study refer to results for National Grid only. There is no defined free balancing tolerance in the UK comparable to that provided by other TSOs. Figure 4 compares the Gas Transport Services tariff with National Grid for a customer of 100 million m 3 at 8000 hours load factor on the HTL network. The longest pipeline distance possible in the UK is over 1000 km, compared with only 500 km in the Netherlands. For distances up to 500 km, the UK s tariffs range from 28 to 80 /m 3 /h/y. In the Netherlands, the range is similar but slightly lower, at 16 to 55 /m 3 /h/y for the same distance. Figure 4: Gas Transport Services tariff comparison with National Grid, 100 million m 3, 8000 hours, HTL offtake Figure 5 compares the Gas Transport Services tariff with that of National Grid for a customer of 100 million m 3 at 8000 hours load factor, but taking delivery from the medium pressure network. The x-axis in this chart is the distance on the high-pressure network, and the distance travelled on the RTL network does not affect the tariff, as this tariff element is postalised in the UK, and included in the entry-exit approach in the Netherlands. For this example, the GTS tariff is always lower than the National Grid tariff. GTS\P \018.rpt 14

15 Figure 5: Gas Transport Services tariff comparison with National Grid, 100 million m 3, 8000 hours, RTL offtake Comparisons with France The GRTgaz transportation system is entry-exit tariff by zone. There are 8 entry points to the network, and 42 exit points, grouped into 2 zones. The transportation tariffs on the medium pressure network are postalised. GRTgaz provides free balancing tolerance to shippers, therefore we incorporate this in our calculations. Figure 6 compares the GRTgaz entry and exit combinations with the GTS tariff. GRTgaz has entry and exit combinations for distances up to around 1600 km. The range of tariffs is generally larger than GTS, with tariffs between 17 and 97 /m 3 /h/y up to 500 km. The GTS range lies between 16 and 55 /m 3 /h/y. In the cloud diagram, the GRTgaz data points can be seen to be grouped in two bands, one between 20 and 40 /m 3 /h/y and one above 60 /m 3 /h/y. This is an effect of the zonal entry-exit system, as an additional charge is made to cross between the two zones, North and South. The lower band of data points in the chart represents journeys made within a single zone, while the higher band shows journeys which enter the network in one zone and exit in the other zone (for more information see Appendix A). GTS\P \018.rpt 15

16 Figure 6: Gas Transport Services tariff comparison with GRTgaz, 100 million m 3, 8000 hours, HTL offtake Figure 7 compares the GRTgaz tariff with that of GTS for a customer of 100 million m 3 at 8000 hours load factor, taking delivery from the medium pressure network. This chart remains the same regardless of the distance travelled on the medium pressure network as the RTL tariffs are postalised. The GTS tariff is towards the lower end of the range of the GRTgaz tariff. GTS\P \018.rpt 16

17 Figure 7: Gas Transport Services tariff comparison with GRTgaz, 100 million m 3, 8000 hours, RTL offtake Comparisons with Italy The Snam Rete Gas (SRG) tariff for 2011 retains the same structure as in 2010, with transportation tariffs on an entry-exit system, although the tariff elements have been updated including the inclusion of a metering fee which had previously been set at zero. The regional network tariff remains postalised for distances greater than 15 km. Free balancing tolerance is provided and therefore is incorporated in our calculations. Figure 8 illustrates the Italian tariffs for volumes of 100 million m 3 at 8000 hours for the major entry points only. Distances of over 1600 km are possible on the Italian network. The GTS tariff results are towards the lower end of the SRG tariff range, which is 18 /m 3 /h/y to 77 /m 3 /h/y for distances of up to 500 km, comparable to the Netherlands. The diagram shows that the SRG tariff results appear to cluster in two bands, one below 40 /m 3 /h/y and the other above 60 /m 3 /h/y. This is due to comparatively high tariffs at a few entry and exit points: for entry points at Mazara del Vallo and Gela, both located in Sicily, the tariffs are three to four times higher than for the other major entry points. For the exit point at Bizzarone, on the border with Switzerland, the tariff is at least three times greater than for the other exits. Entry and exit point combinations including these points therefore produce much higher tariff results than those for the other points, which leads to the appearance of two tariff bands in the chart (for more information see Appendix A). GTS\P \018.rpt 17

18 Figure 8: Gas Transport Services tariff comparison with Snam Rete Gas, 100 million m 3, 8000 hours, HTL offtake Figure 9 compares the SRG tariff with that of GTS for a customer of 100 million m 3 at 8000 hours load factor, shipping gas on the national network, but taking delivery from the regional network. The SRG tariffs, incorporating the distance related regional network fee, are consistently higher than the GTS tariffs. Figure 9: Gas Transport Services tariff comparison with Snam Rete Gas, 100 million m 3, 8000 hours, RTL offtake GTS\P \018.rpt 18

19 4.2.4 Comparisons with Open Grid Europe (Germany) Open Grid Europe, previously called E.ON Gastransport, has retained its tariff structure from 2010, with updates to the tariff elements. There are a total of around 50 entry points and more than 450 exit points to the system, grouped into two market areas (H-Gas and L-Gas). While no daily free tolerance is provided in Germany, hourly tolerance is provided for large customers and we incorporate this in our calculations. Figure 10 illustrates the tariffs resulting from the various entry and exit combinations for Open Grid Europe, for volumes of 100 million m 3 at 8000 hours, with delivery from the high pressure network. Distances of up to 1300 km are possible on the Open Grid Europe network. For tariffs up to 500 km, the range is from 25 to 55 /m 3 /h/y. The range for GTS is 16 to 55 /m 3 /h/y. Figure 10: Gas Transport Services tariff comparison with Open Grid Europe, 100 million m 3, 8000 hours, HTL offtake Figure 11 compares the Open Grid Europe tariff with GTS for a customer of 100 million m 3 at 8000 hours load factor, shipping gas on the national network, but taking delivery from the regional network. The two tariffs are similar; the GTS tariff range at 15 to 56 /m 3 /h/y is wider than that of Open Grid Europe, which for distances up to 500 km is 25 to 48 /m 3 /h/y. GTS\P \018.rpt 19

20 Figure 11: Gas Transport Services tariff comparison with Open Grid Europe, 100 million m 3, 8000 hours, RTL offtake Comparisons with GUD (Germany) GUD has retained its entry-exit model, with no changes to the tariff levels in There are two gas quality categories within the GUD network, one high and one low calorific value, and we always consider entry-exit combinations at the same quality level in our calculations. Figure 12 illustrates the tariffs resulting from the various entry and exit combinations for GUD, for volumes of 100 million m 3 at 8000 hours, with delivery from the high pressure network. Distances of up to 700 km are possible on the GUD network. For tariffs up to 500 km, the range is from 34 to 35 /m 3 /h/y. The equivalent range for GTS is 16 to 55 /m 3 /h/y. GTS\P \018.rpt 20

21 Figure 12: Gas Transport Services tariff comparison with GUD, 100 million m 3, 8000 hours, HTL offtake Figure 13 compares the GUD tariff with GTS for a customer of 100 million m 3 at 8000 hours load factor, shipping gas on the high pressure network, but taking delivery from the regional network. The range of the GTS tariff is wider than that of GUD, but the two tariffs are at a similar level. Figure 13: Gas Transport Services tariff comparison with GUD, 100 million m 3, 8000 hours, RTL offtake GTS\P \018.rpt 21

22 4.2.6 Comparison with Thyssengas (Germany) Thyssengas (formerly RWE Transportnetz Gas) has two market areas based on gas quality levels and we therefore apply the same principle as for other systems, in that only entry and exit combinations in the same quality band are used for our calculations. Figure 14 illustrates the tariffs resulting from the various entry and exit combinations for Thyssengas, for volumes of 100 million m 3 at 8000 hours, with delivery from the high pressure network. Distances of up to 400 km are possible on the Thyssengas network. The range is from 35 to 48 /m 3 /h/y, compared to the equivalent range for GTS of 16 to 55 /m 3 /h/y. Figure 14: Gas Transport Services tariff comparison with Thyssengas, 100 million m 3, 8000 hours, HTL offtake Figure 15 compares the Thyssengas tariff with GTS for a customer of 100 million m 3 at 8000 hours load factor, shipping gas on the high pressure network, but taking delivery from the regional network. The Thyssengas and GTS tariffs overlap, with the Thyssengas tariff at the high end of the GTS tariff range. GTS\P \018.rpt 22

23 Figure 15: Gas Transport Services tariff comparison with Thyssengas, 100 million m 3, 8000 hours, RTL offtake Comparisons with Ontras (Germany) Ontras maintains its entry-exit system from The exit points may also be exit point zones, within which a number of actual locations are accessible at the same exit fee and pressure. In constructing our point to point model, we have had to select individual locations within the exit point zones using the interactive map tool available on the internet to choose representative points for each zone in order to measure distances. Figure 16 illustrates the tariffs resulting from the various entry and exit combinations for Ontras, for volumes of 100 million m 3 at 8000 hours, with delivery from the high pressure network. Distances of up to 600 km are possible on the Ontras network. For tariffs up to 500 km, the range is from 30 to 39 /m 3 /h/y. The equivalent range for GTS is 16 to 55 /m 3 /h/y. GTS\P \018.rpt 23

24 Figure 16: Gas Transport Services tariff comparison with Ontras, 100 million m 3, 8000 hours, HTL offtake Figure 17 compares the Ontras tariff with GTS for a customer of 100 million m 3 at 8000 hours load factor, shipping gas on the high pressure network, but taking delivery from the regional network. The tariffs are at a similar level and the GTS tariff range is wider than that of Ontras. Figure 17: Gas Transport Services tariff comparison with Ontras, 100 million m 3, 8000 hours, RTL offtake GTS\P \018.rpt 24

25 4.2.8 Comparisons with Wingas Transport (Germany) Wingas Transport retains its entry-exit system in 2011, with updated tariff elements. Excluding the part of the network on the SEL pipeline, which is not connected to the rest of the Wingas Transport system, there are 9 entry points and 76 exit points. These are located in a single market area. Figure 18 illustrates the tariffs resulting from the various entry and exit combinations for Wingas Transport, for volumes of 100 million m 3 at 8000 hours, with delivery from the high pressure network. Distances of up to 1000 km are possible on the Wingas Transport network. For tariffs up to 500 km, the range is around 41 /m 3 /h/y. The equivalent range for GTS is 16 to 55 /m 3 /h/y. Figure 18: Gas Transport Services tariff comparison with Wingas Transport, 100 million m 3, 8000 hours, HTL offtake Wingas Transport does not specify a separate medium pressure tariff, simply a range of offtake pressure levels at exit points, and all entry and exit tariffs are uniform. Therefore we apply this tariff for the medium pressure comparison also. Figure 19 compares the Wingas Transport tariff with GTS for a customer of 100 million m 3 at 8000 hours load factor, shipping gas on the high pressure network, but taking delivery from the regional network. The ranges of the Wingas Transport and GTS tariffs overlap, but the GTS tariffs are mostly lower than those of Wingas Transport. GTS\P \018.rpt 25

26 Figure 19: Gas Transport Services tariff comparison with Wingas Transport, 100 million m 3, 8000 hours, RTL offtake Comparisons with postalised tariffs This part of the chapter compares the GTS tariff with those companies which offer postalised transportation tariffs. These companies are: OMV in Austria, offering a bundled end-user tariff, from which we have attempted to isolate the specific high and medium pressure transportation elements; no free tolerance is provided in Austria. Fluxys in Belgium, which retains its postalised tariff from 2010, with updates to the structure and tariff elements; free tolerance is provided in Belgium. Energinet.dk in Denmark, which retains its postalised tariff from 2010, with updates to tariff elements; free tolerance is provided in Denmark. BGE in Ireland, which retains its postalised tariff from 2010, with changes to specific tariff elements; no free tolerance is provided in Ireland. Enagas in Spain, which retains its postalised structure from 2010, with updated tariff elements; free tolerance is provided in Spain. Creos in Luxembourg, which retains its postalised tariff from 2010, with updated tariff elements; free tolerance is provided in Luxembourg. Swedegas in Sweden, which retains its postalised tariff from 2010; we incorporate no free tolerance for Sweden due to the complexities of the Swedish market model. GTS\P \018.rpt 26

27 Figure 20 compares the GTS tariff with the postalised tariffs. For BGE, Swedegas and Enagas, the GTS tariff is always significantly lower. The Creos and Energinet.dk tariffs are at the top of the GTS tariff range. The Fluxys tariffs are at the lower end of the range of the GTS tariffs. OMV features a distance-related element, with two postalised tariffs for HTL distances above and below 150 km, shown as two lines on the chart; up to 150 km the OMV tariff is in the lower range of the GTS tariff, while above 150 km the OMV tariff is higher. Figure 20: Gas Transport Services tariff comparison with postalised tariffs, 100 million m 3, 8000 hours, HTL offtake Figure 21 compares the postalised tariffs with the GTS tariffs for customers of 100 million m 3, 8000 hours load factor, using the high-pressure network, but taking delivery from the medium pressure network. The tariffs in Ireland, Denmark and Luxembourg remain the same, as they do not distinguish between pipeline pressures. The medium pressure Spanish, Belgian, Austrian and Swedish regional networks have separate postalised tariffs. For Austria, the medium pressure postalised tariff includes an HTL element which is the same for all distances and therefore in Figure 21 there is no split in the Austrian tariff below and above 150 km. All countries apart from Denmark, Belgium and Luxembourg have higher tariffs than the GTS tariff at equivalent distances. The Energinet.dk and Creos tariffs are at the upper end of the range of the GTS tariff. The Fluxys tariff is towards the lower end of the GTS tariff range. GTS\P \018.rpt 27

28 Figure 21: Gas Transport Services tariff comparison with postalised tariffs, 100 million m 3, 8000 hours, RTL offtake GTS\P \018.rpt 28

29 5 Comparisons across transmission operators In this chapter, we compare results across countries, comparing all volumes, load factors and distances in the 45 cases we analyse in this report. For countries with matrix tariffs (the Netherlands, UK, France, Italy and Open Grid Europe, GUD, Thyssengas, Ontras and Wingas Transport in Germany) we show a high and a low tariff to reflect the range in tariffs available. Our methodology for doing this is described in Appendix C. The tariffs are given in /m 3 /h/y (at MJ/m 3 ). It should be noted that with some countries, we do not include every transmission operator in this study. For example, when we refer to the UK, it is only the National Grid tariffs which are included. Also, not all distance cases are possible in all countries, for example it is not possible to travel 350 km on the Belgian network; these cases are excluded from the results. The results for the 45 cases can be analysed to show the full range of West European tariffs, and the relative positioning of each country in that range. Figure 22 shows this analysis for the Netherlands. The range of Dutch tariffs is consistently towards the lower end of the range of West European transportation tariffs. The blue part of the chart illustrates the full range of tariff results for each case; the top edge of the blue area denotes the highest tariff result for each case, the bottom edge the lowest, with no weighting or other calculations applied. It can be the case that one TSO mostly has the highest tariff results and therefore sets the top line of the blue area, while most of the other TSOs tariff ranges are lower. In 2011, the Spanish and Irish tariff results set the top of the tariff range (see Figure 24). Figure 22: Comparison of the Dutch transportation tariff with the total range of West European tariffs GTS\P \018.rpt 29

30 Figure 23 sets out this analysis for the remaining matrix tariff countries: the UK, Italy, and France, together with GUD, Open Grid Europe, Wingas Transport, Thyssengas and Ontras from Germany. The charts show that the range of National Grid tariffs in the UK is mostly towards the lower end of the range of West European transportation tariffs, but in the middle of the range in some cases. The tariffs of GRTgaz in France are often in the middle of the full range of tariffs, sometimes towards the bottom and also the top; the tariff range can be large for some cases. SRG of Italy is generally in the middle of the total range of tariffs, although the Italian tariffs are occasionally the lowest in the total range depending on the case. The Open Grid Europe tariff is consistently towards the lower end of the full range of tariffs; it is the lowest tariff for individual cases. The GUD tariff is towards the lower range of tariffs, while the Wingas Transport tariff is similar. The Thyssengas and Ontras tariffs are similar, towards the lower end of the range of tariffs but not the lowest tariff for any of the cases. Figure 23: Comparison of the UK, France, Italy and Germany in the total tariff range GTS\P \018.rpt 30

31 Figure 24 shows the relative position of the postalised tariffs in the full range of West European tariffs. The first chart shows the relative positioning of the Irish and Spanish tariffs within the West European range of tariffs. Tariffs in both countries are at the upper end of the range, both appearing as the highest in the range depending on the case. The second chart shows the relative positioning of the Danish and Austrian tariffs. The Danish tariffs are in the lower range of the full tariff range, while the Austrian tariffs have a wide range, from the bottom for some cases to near the top for others; they are generally in the middle of the range. The third chart shows the relative positioning of the tariffs in Sweden, Luxembourg and Belgium. There are fewer cases in this chart, as the tariffs are theoretical at 350 km ( theoretical meaning that some distances are not possible in smaller countries). The Belgian and Luxembourg tariffs are towards the lower end of the full range of tariffs, with the Belgian tariff sometimes the lowest in the full range of tariffs. The Swedish tariffs are towards the higher end of the full range of tariffs. GTS\P \018.rpt 31

32 Figure 24: Comparison of postalised tariffs in the total tariff range The results in Figure 26 can also be analysed horizontally, taking the average tariff for each country. Using this approach, the cheapest country is Belgium with an arithmetic average tariff of 25 /m 3 /h/y. The arithmetic average tariff for the Netherlands is 32 /m 3 /h/y. The ranking of all tariffs is set out in Figure 25 below. We recognise that this approach is simplistic, in that it is a simple unweighted arithmetic average of the 45 case results. A more scientific method would be to use a weighted arithmetic average based on instances of each case in the Netherlands; establishing what these weighting factors should be, however, has not been possible yet. We continue to include this presentation of results in this report as an overview, whilst acknowledging it has flaws. We are seeking to refine our approach to producing an at a glance summary of results for future reports. GTS\P \018.rpt 32

33 Figure 25: Tariff results from Figure 26 analysed horizontally average tariffs per country Notes: The footnotes to Figure 26 explain that some countries do not have relevant tariffs at certain distances and/or volumes. Only the relevant cases for each country are used to produce the average tariffs in this chart. The postage stamp symbol (in Figure 25) denotes postalised tariff systems. GTS\P \018.rpt 33

34 Figure 26: Comparison of countries and cases Notes: It is not possible to travel 350 km on the Belgian or Swedish networks, so the tariffs for this distance are theoretical and have been excluded from the table above. Also, it is not possible to travel 200 or 350 km on the Luxembourg network, so again, these tariffs are theoretical. These tables are available as a separate Excel spreadsheet to accompany this report. GTS\P \018.rpt 34

35 6 Trends in tariffs over time Prior to our 2009 report, we provided charts showing the development of tariff results for each TSO over the previous years. Since we have adopted a new methodology, showing tariff results after adjusting for the value of free balancing tolerance, which is received as part of the transportation fee, this is not directly possible. Instead we present the below indices, demonstrating the relationship between the Gas Transport Services tariff and the tariff results for the other TSOs included in the study over time. These are based on the average result for the 45 cases (as shown in Figure 25). In Figure 27 we show an indexation approach for each year from 2004 to 2011, where the Gas Transport Services average result for 2004 is the index basis (highlighted green in the table). We start from 2004 rather than earlier years for consistency, as this is the first year we looked at 45 cases and also when the current group of TSOs were first studied. From 2008, we include an index for our previous calculation method and our current calculation method, in which we have adjusted the tariff results for the value of free balancing tolerance. Note that in 2008, we carried out the analysis using the new methodology for only six TSOs as a pilot study, hence we do not show results for all companies (see report published 1st half June 2010). GTS\P \018.rpt 35

36 Figure 27: Index of average result for 45 cases, , using GTS 2004 tariff as the basis Starting index New method 2009 New method 2010 New method 2011 New method GTS Fluxys Energinet.dk GUD Creos Ontras National Grid Wingas Thyssengas OGE GRTgaz SRG OMV Swedegas Enagas BGE Note: above does not incorporate adjustment for value of free balancing tolerance Note: incorporating adjustment for value of free balancing tolerance GTS\P \018.rpt 36

37 In Figure 28 we show a similar index, but for the current calculation method only, taking into account the value of free balancing tolerance. The basis for this index is the GTS average result in 2008 (again highlighted in green), the first year for which we used the current methodology. Figure 28: Index of average result for 45 cases, , using GTS average 2008 as basis Starting index GTS Fluxys Energinet.dk GUD Creos Ontras National Grid Wingas Thyssengas OGE GRTgaz SRG OMV Swedegas Enagas BGE Note that tariff results have been adjusted for the value of free balancing tolerance if applicable GTS\P \018.rpt 37

38 7 Transmission tariffs compared to end user prices Over recent years, gas transmission tariffs have been the focus of a great deal of attention from regulatory authorities which, naturally, have sought to ensure that TSOs maintain an appropriate balance between standards of service and costs, and which have generally sought to exert downward pressure on tariffs, in the apparent belief that competitive forces alone will not put sufficient pressure on TSOs to reduce costs. During the past decade, wholesale gas prices have varied hugely, regardless of whether they are set within the context of traditional oil-indexed contracts or whether they are set based on liquid wholesale markets such as the TTF, NBP, Zeebrugge, Gaspool, etc. These wholesale gas prices form a much larger component of end-user gas prices than the gas transmission tariffs, and it is worthwhile quickly to review how significant a component of the end-user prices is the transmission tariff. Using ADL s calculations of gas transmission tariffs for the 1, 10 and 100 million m 3 per annum end-users, and comparing them with end-user gas prices as officially published by Eurostat, we have derived the values in Figure 29, showing the percentage of the end-user price represented by the transmission tariff, as at 1 February There is a wide range, from around 1% to about 20%. The Dutch transmission tariff is always in the range 1% to 4%. As well as percentages based on end-user prices including all taxes, it is also possible to calculate results using end-user prices which include taxes but exclude VAT, also published by Eurostat. As large gas consumers may be able to reclaim the VAT, we show these results in Figure 30. In this case the range is from around 1% to about 23%, with the Dutch transmission tariff always in the range 1% to 4%. GTS\P \018.rpt 38

39 Figure 29: Transmission tariff as % of industrial end user prices (including VAT) for various distances and annual volumes GTS\P \018.rpt 39

40 Figure 30: Transmission tariff as % of industrial end user prices (excluding VAT) for various distances and annual volumes GTS\P \018.rpt 40