1. Introduction
1.1 Background and Objectives
This study into methodologies for gas transmission tariffs and gas balancing fees was initi-ated by the European Commission in order to assess the existing European transmission tariff and balancing models, identify differences between them and analyse if such differ-ences have a negative impact on barrier free cross border trade.
Article 13 (2) of Regulation (EC) 715/20094 requires that tariffs for access to and use of gas transmission networks do not restrict market liquidity or distort trade across borders of differ-ent transmission systems. Where differences in tariff structures or balancing mechanisms would hamper trade across transmission systems, art. 3 (2) of Regulation (EC) 715/2009 re-quires transmission system operators to actively pursue convergence of tariff structures and charging principles including in relation to balancing. This obligation is to be fulfilled in close cooperation with the national regulatory authorities, responsible for fixing or approving, prior to their entry into force, the tariffs and conditions for the use of gas transmission networks and balancing services according to article 41 (2) of Directive 2009/73/EC5.
Notwithstanding these requirements6, it is clear that the national gas transmission tariff and balancing systems still vary due, for example, to differences in their historic gas market de-velopment, different underlying policies and regulation traditions. Transmission tariffs and balancing fees are of paramount importance for a non-discriminatory access for network us-ers, as they have major financial impact on gas supply projects.
Even though the expected payments from imbalance charges will always remain to a certain extent uncertain for a network user, it is essential for market entry that both transmission tar-iffs and balancing fees are predictable for network users. Furthermore, network tartar-iffs should provide appropriate signals where new infrastructure is required. Balancing fees shall be
4 Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005.
5 Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC.
6 These requirements are already included in the 'old' Regulation (EC) No 1775/2005 and Directive 2003/55/EC.
ideally based upon the costs incurred by the TSO. Overall, both network tariffs and balanc-ing fees shall be fair and non-discriminatory.
Not all regulatory tariff systems equally provide appropriate investment signals. Where such incentives are missing and tariffs only focus on tariff reduction and assess TSO efficiency against the cost level without, for example, taking system flexibility via additional capacities into account, the regulatory tariff system is likely to create a barrier for new investments.
The European Commission therefore has ordered this study to evaluate if, and how, the ex-isting differences effectively lead to barriers in trade across transmission systems and/or hamper investments in new transport capacities. Based on this analysis, this study shall fur-thermore analyse possible areas for improvement and evaluate the minimum level of neces-sary harmonisation.
This study has been supported by a Steering Group from ERGEG, which has provided valu-able comments to our work. In addition, we would like to express our gratitude to ERGEG and GIE and their respective members, the Florence School of Regulation, participants of the user survey, the organisers of the Virtual Test within the Gas Regional Initiative North-West and various other individuals and organisations, which have supported our work under this project.
1.2 Scope and Structure of this Study
As outlined above, this study assesses the transmission tariff and balancing models in the European Union, with the ultimate objective of developing a set of recommendations aimed at ensuring fair access to all customers in Europe on predictable terms, whilst simultane-ously providing sufficient incentives to network operators for investing into new (cross-border) transmission capacities.
Transmission tariffs and balancing models represent key elements of non-discriminatory network access, which is a precondition for the establishment of a functioning gas market. In addition, the successful development of the Internal Gas Market also requires improvements in a number of other areas, such as capacity allocation, congestion management or, more generally, in increased transparency. Many of these aspects are closely related with the is-sues addressed in this study. However, although reference is sometimes made to other ar-eas, we emphasise that they are outside the scope of this study.
Table 4: Aspects to be considered under Task 1
Transmission tariffs Balancing Area
Relevant for Network operators (TSOs)
Regulation of transmission tariffs
Procurement of balancing gas Network users
(Network users)
Transmission tariff structure
Settlement of imbalances
The areas analysed by this study can be grouped into a set of four different categories as il-lustrated by Table 4. For instance, whilst it is primarily the structure of transmission tariffs that is relevant for network users, the principles for the regulation of transmission tariffs are more important for network operators as they will have a direct impact on incentives to invest into new transmission capacity. Conversely, the mechanisms for residual balancing are of primary importance for the TSOs, whereas network users are more affected by the arrange-ments for imbalance settlement. The analysis in this report has therefore been generally structured along this division into four different areas, which facilitates both the presentation of information on the existing transmission tariff and balancing models and the subsequent analysis of potential barriers and areas for improvement.
Based on this background, the analysis in this report is structured as follows:
• The following Chapter 2 provides a structured comparison of the applicable transmission tariff and balancing models in all EU Member States. This analysis focuses on a number of important elements and provides the basis for the subsequent discussion of selected areas in the following chapters. The information collected is furthermore supplemented by the fact sheets in the Annex to this report, which provide a more comprehensive sum-mary of the applicable arrangements in each Member State.
• Chapter 2.5 discusses potential barriers for cross-border trade and investments into new cross-border transmission infrastructure in each of the four areas identified. Besides an extensive qualitative discussion, this part of the study includes a quantitative analysis of the impact of different imbalance settlement regimes on network users and presents the findings of a user survey, which has been used to identify areas of concern for network users, TSOs and regulators.
• Based on these findings, Chapter 4 then develops and proposes a set of recommenda-tions that may resolve, or at least help to mitigate, some of the issues identified before, insofar as these would need to be addressed in European legislation. Besides the treat-ment of the corresponding issues by the existing national authorities, particular emphasis is made on the establishment of regional markets, such as the development and
strengthening of trading hubs, the potential introduction of regional balancing mecha-nisms or the resulting requirements on transmission system operation in an increasingly integrated market.
• Finally, Chapter 5 puts the different findings and proposals into context with each other by highlighting the interaction between different recommendations and identifying a suit-able phasing of the individual changes and actions.