The single natural gas market will start operating from 1 January 2020. Let's explain what this means and how it will affect the users of natural gas infrastructure.
The single natural gas market is a single natural gas transmission entry/exit tariff area, which means that payments when crossing the territorial borders of each country are being cancelled.
It is necessary for several reasons, but the most important reasons are:
Currently, three countries - Estonia, Latvia and Finland - have agreed to start operation of the single market from 1 January 2020. Negotiations on the possible accession of Lithuania are being continued.
The single natural gas market, with the participation of three or four countries, will start its work from 1 January 2020. Initially, it will be a single entry/exit tariff area with two or three balancing areas - Finland and a single Estonia-Latvia one. If Lithuania is to join the single natural gas market by then, the market coverage will increase accordingly.
With the creation of the single natural gas market, the natural gas market will be expanded and competition between the natural gas traders will be promoted. An equally important benefit is the promotion of use of the Inčukalns underground gas storage facility, thus strengthening the flexibility and security of supply.
An important cornerstone in the process of establishing a regional natural gas market is the ITC agreement (Inter - TSO Compensation Mechanism Agreement) signed by and between Estonia, Finland and Latvia. It provides for a single tariff area for participating countries, a redistribution of entry capacity reservation revenues and compensation of eligible variable costs.
New unified system use and balancing rules are being developed for the needs of the single gas market, which were submitted to the Public Utilities Commission and the Estonian Competition Council on 29 May 2019 for taking a coordinated decision. In general, the documents will not differ significantly from the ones currently in force, while they will reflect changes related to closer integration of transmission systems at the same time.
Market players will have to enter into new agreements with one of the selected transmission system operators serving the unified balancing area, such as JSC Elering or JSC Conexus Baltic Grid.
A single entry tariff at the external borders of the area will be set forth for the single market area. Operators agree and work to ensure that the single area entry tariffs change as rarely as possible, providing medium to long-term stability and predictability.
Exit tariffs to countries outside the single market area as well as to the distribution system (or to users directly connected to the transmission system) are set forth according to the regulation of each individual Member State.
The level of the single market entry tariffs is determined in close cooperation with the responsible authorities (national regulators), based on open and transparent principles.
The existing transmission system usage and balancing procedure will be discontinued with the creation of the single natural gas market on 1 January 2020. So the market, as it currently stands, will end its operations on 31 December 2019.
Uniform invoicing and payment deadlines will be set forth as well as the specific conditions of the country of residence of the transmission system operator with which the transmission system use and balancing agreements have been entered into.
The operators are developing one online solution for the needs of servicing the single market. If the user's IT system supports data exchange using EDIG@S/AS4, direct data exchange opportunities will be provided without using an internet platform.
Starting operation of the single gas market will not change the procedure for using Inčukalns UGS.
The remuneration received for reservation of the single entry/exit area external interconnection capacity will be distributed among the single area operators and will form a part of the authorised revenue as defined by the national Regulators.
Technical maintenance and security of the transmission systems will, as is currently the case, be the responsibility of the operator who owns the infrastructure concerned. For example, if technical works in the Latvian natural gas transmission infrastructure are required, they will be carried out by JSC Conexus Baltic Grid.
At present, it is difficult to predict whether the single Baltic-Finnish gas market will cover the territory of more than 4 countries, but operators are ready to expand cooperation based on mutually acceptable principles.