Network Access and Pricing

The measures in the first group are principally aimed at improving the scope for an optimal use of the transmission network. As illustrated by Figure 22, the individual measures in this group can be further divided into those related to the services and products available to

us-ers, on the one side, and the pricing of certain services, on the other. Whilst the latter are di-rectly associated with the design of transmission tariffs, the former additionally concern im-portant elements of capacity management which are beyond the direct scope of this study.

We therefore emphasise that the following discussion is limited to only those aspects directly related to the structure and determination of transmission tariffs, whilst we do not generally consider any further aspects, such as allocation procedures or measures to be taken in case of congestion.

Figure 22: Interaction and impact of measures related to network access and pricing

Overall, we specifically recommend considering the following principles and potential changes within this group:

• Products and Services

o Cross-border capacities should preferably, where possible, be made available to network users as hub-to-hub products, combining exit capacity from one market area with a corresponding amount of entry capacity into the other market area for all interconnections between two neighbouring market areas.

o Network users should be generally given the opportunity to obtain non-physical backhaul capacities at all borders, at least on an interruptible basis.

Where no demand currently exists, this product should at least be available on request. Where it is not made available, the TSO should provide the mar-ket with a reasonable explanation.

o To the extent possible, unused capacities should be made available to net-work users as firm capacity at least on a day-ahead basis. The firmness of capacity should be ensured through appropriate measures, which may poten-tially include (partial) restrictions for network users that have not used their capacities reserved in advance and/or through the use of instruments that enable the TSOs to reduce nominated and/or actual flows in case of physical congestion.

o Within each system, network users should be given the opportunity to ex-change gas at a (virtual) trading point. Specific charges for this service (if any) should be set with a view to not discouraging the use of this service.

o TSOs and regulators should investigate the feasibility and potential benefits of introducing virtual hub-to-hub capacities.

• Pricing

o Prices for interruptible and non-physical backhaul capacities should take due account of the risk of interruptions and the resulting impact on the value of these capacities. Tariffs should furthermore provide for an adequate differen-tiation between firm and non-firm capacities, in order to reflect the underlying differences in costs to be committed by the TSOs, whilst recovering at least the incremental costs of making interruptible and/or non-physical backhaul capacity available to users.

o The default price to be paid for short-term capacity, including either any fixed tariff elements or a potential reserve price in case of an auction, should reflect the costs of making these capacities available on a short-term basis as well as the variable costs of transportation. At borders with contractual congestion, prices for short-term capacity should take account of the fact that network us-ers have no guarantee of the required levels of short-term capacities available on the day ahead.⁸²

82 Where a certain share of short-term capacity is reserved for allocation on the day-ahead, for instance in order to foster market integration and the liquidity of the short-term market, it may be more appropriate to socialise the corresponding costs over all users rather than trying to differentiate between ‘guaranteed’ and ‘additional’ vol-umes of capacity available on the day ahead. Ich würde die Fußnote in den Text reinnehmen.

o Where the necessary preconditions are met, the price of cross-border capaci-ties should preferably be determined through market-based mechanisms, i.e.

auctions, in order to reflect the true market value of capacity.

As illustrated by Figure 22 these measures are primarily intended to facilitate access to cross-border capacity, which in turn is an important means of contributing to an optimal use of available capacities. Moreover, it also helps to increase liquidity on individual national markets and supports the establishment and use of market-based mechanisms for the pro-curement of residual balancing gas by means of the TSO-Actor model (see section 5.4 be-low). Liquidity in the national markets, which also supports the development of organised gas markets (e.g. gas exchanges), (and vice versa), would be further promoted by facilitating the exchange of gas at a single notional point in each system.

As explained in section 4.1.4 above, the offering of virtual hub-to-hub capacities would fur-thermore facilitate an equal treatment of both domestic and cross-border flows within a sin-gle integrated tariff system, which again would be beneficial to both the liquidity of national markets and the efficient utilisation of cross-border capacities. Finally, the market-based pricing of cross-border capacity would also serve to create locational signals in the regional gas market by reflecting the value of different transport paths.

These changes appear to be of particular importance for the further development of the European gas markets. Although we acknowledge that the first group of measures is not di-rectly related to the design of transmission tariff and balancing models, we have already commented on the importance of these aspects before and note that the user survey has also identified capacity allocation and management as an area requiring primary attention.

Overall, we therefore believe that these measures should receive clear priority and be ad-dressed in the immediate future.

Implementation of these measures clearly requires changes to the detailed specification of corresponding products and the principles for pricing and allocation, which are largely de-fined at a national level. Depending on the legal and regulatory framework in each country, this will at least depend on corresponding modifications to the applicable regulatory and con-tractual arrangements but may, in certain cases, also require prior changes of primary and/or secondary legislation. In addition, the introduction of hub-to-hub products would obviously require further agreements between neighbouring TSOs (and regulators), although experi-ence has shown that corresponding changes may be relatively easy to realise on a bilateral basis.

Finally, we believe that the main principles underlying the proposed changes are applicable throughout Europe, without any major variations between individual countries or regions. As a result, we furthermore believe that they are potentially suitable for treatment at European rather than regional or national level.