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What is the single gas market?

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.

  • What is the single natural gas market? 

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.

 

  • Why is a single natural gas market necessary? 

It is necessary for several reasons, but the most important reasons are:

  • to provide the most stable and predictable tariffs possible;
  • to avoid hidden payments between the transmission system operators (TSOs);
  • to provide traders with free and equal access to all gas infrastructure within the single market area;
  • to develop customer-orientated market operation by providing for digital and effective market communication;
  • to promote competition among natural gas traders.

 

  • Which countries have joined the single natural gas market?

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.

 

  • When does the single natural gas market begin its operation? 

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.

 

  • What benefits will the single natural gas market bring to the users of natural gas infrastructure? 

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.

 

  • What is the legal basis for a single natural gas market? 

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 LatviaIt provides for a single tariff area for participating countries, a redistribution of entry capacity reservation revenues and compensation of eligible variable costs.

 

  • Will a new legal framework enter into force with the creation of the single natural gas market?

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.

 

  • Does the natural gas transmission system user have to enter into new agreements with the natural gas market players? 

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.

 

  • How will the creation of the new market be reflected in natural gas transmission tariffs - will they change and how often? 

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.

 

  • What should I know about international natural gas exit tariffs? 

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.

 

  • What should be taken into account regarding the entry tariffs of the region? 

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.

 

  • Is the transmission of natural gas under the principles of the single natural gas market mandatory, or do users of the system have the opportunity to continue working as before? 

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.

 

  • How will the single natural gas market change the procedure of payments and invoices existing so far? 

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.

 

  • Should changes be made in the IT system to operate on the single natural gas market? 

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.

 

  • How will the new order affect those market players who only use Inčukalns UGS? 

Starting operation of the single gas market will not change the procedure for using Inčukalns UGS.

 

  • For what purposes will the revenues collected at the external borders be diverted? 

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.

 

  • Who will take responsibility for technical maintenance and security of the transmission infrastructure in the single natural gas market, especially at the external borders? 

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.

 

  • Will the single natural gas market be expanded? 

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.

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