Bringing Gas to the Market

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Bringing Gas to the Market Bringing Gas to the Market Bringing Gas to the Market Gas Transit and Transmission Tariffs in Energy Charter Treaty Countries: Bringing Gas Regulatory Aspects and Tariff Methodologies Tariffs for the utilisation of gas transmission pipelines are an essential factor Gas Transit and Transmission Tariffs in Energy CharterTreaty Countries: Regulatory AspectsTariff and Methodologies to the Market determining the openness of international gas markets. The availability of interconnections and economically acceptable transportation costs are a condition for natural gas reaching consumer markets. With the dependence of major consuming countries on imported natural gas increasing – with the exception of countries that can rely on significant own reserves of unconventional gas – international trade in natural gas is expected to grow over the next decades. Common principles are necessary to enable such trade and to facilitate transit. Basic principles for transmission tariffs and some other aspects related to the utilisation of energy transport facilities have been elaborated in the Energy Charter. This study analyses methodologies and tariff principles for natural gas transmission Gas Transit and Transmission Tariffs in used in member countries of the Energy Charter Treaty, paying particular attention to developments in Europe, the Black Sea region and Central Asia. Common basic principles exist across this area, but concrete methodologies vary, as well as the Energy Charter Treaty Countries: choice of the market structure and the treatment of transit, in particular between the European Union on the one hand and some Eastern European and Central Asian countries on the other. The study compares the following aspects of regulatory regimes: Regulatory Aspects and - the role of the regulator, third-party access and unbundling; - the treatment of gas transit; Tariff Methodologies - methodologies to calculate capital and operational costs; - unit tariff methodologies. 2012 Energy Charter Secretariat 2012 Energy Charter Secretariat ISBN: Boulevard de la Woluwe, 56 . B-1200 Brussels, Belgium Charter Energy 978-905948-115-2 (English Paperback) Tel.: +32 2 775 98 00 . Fax: +32 2 775 98 01 978-905948-114-5 (English PDF) E-mail: [email protected] . www.encharter.org Energy Charter Secretariat 2012 Bringing Gas to the Market Gas Transit and Transmission Tariffs in Energy Charter Treaty Countries: Regulatory Aspects and Tariff Methodologies Energy Charter Secretariat 2012 Disclaimer Information contained in this work has been obtained from sources believed to be reliable. However, neither the Energy Charter Secretariat nor its authors guarantee the accuracy or completeness of any information published herein, and neither the Energy Charter Secretariat nor its authors shall be responsible for any losses or damages arising from the use of this information or from any errors or omissions therein. This work is published with the understanding that the Energy Charter Secretariat and its authors are supplying the information, but are not attempting to render legal or other professional services. © Energy Charter Secretariat, 2012 Boulevard de la Woluwe, 56 B-1200 Brussels, Belgium ISBN: 978-905948-114-5 (English PDF) ISBN: 978-905948-115-2 (English hard copy) Reproduction of this work, save where otherwise stated, is authorised, provided the source is acknowledged. All rights otherwise reserved. Preface Preface Demand for natural gas is expected to increase significantly in the decades to come. International gas markets will continue to change due to the shale gas revolution, a growing role of LNG and changing energy policies of the consuming countries. International trade in natural gas will grow in any event. Major suppliers will play an even stronger role and will use both pipelines and LNG to sell natural gas on their traditional and new emerging consumers’ markets. At the same time, efforts by the consuming countries to diversify their sources and routes of supply will be stepped up. In parallel, new suppliers will strive to sell natural gas under more favourable conditions on the global market. Such new suppliers are often located in land-locked countries, thus making it necessary to have the appropriate cross-border and transit transportation infrastructure in place. The Energy Charter Treaty of 1994, which is today in force in 46 countries in Eurasia as well the European Union as a whole, has strong provisions aiming at the facilitation of transit and cross-border energy transport infrastructure. The Energy Charter’s policy forum has been used to discuss common principles for transit and cross-border energy transport, including access rules, tariffs, congestion management mechanisms and emergency response mechanisms. Laying down such principles in a binding Protocol remains an attractive option for the members of the Energy Charter Treaty. This study focuses on natural gas transit and transmission tariffs as one critical aspect in view of the development of mutual beneficial cooperation and open markets. It analyses the underlying methodologies and tariff principles used in member countries of the Energy Charter Treaty, paying particular attention to developments in the Europe, the Black Sea region and Central Asia. For this study, the 2006 report “Gas Transit Tariffs in selected Energy Charter Treaty Countries” has been substantially revised, using information provided from governments and available from open sources. The study was written by Florian Encke under the responsibility of the Directorate for Trade and Transit of the Energy Charter Secretariat, headed by Steivan Defilla. This study is published under my responsibility as Secretary General and is without prejudice to the positions of Contracting Parties or their rights or obligations under the Energy Charter Treaty or the WTO Agreements. References to EU and national legislation have been made for illustrative purposes only and may not have any legal relevance. Urban Rusnák Secretary General Brussels, 5 October 2012 3 Table of Contents Table of Contents Preface ....................................................................................................................................................... 3 CHAPTER 1: Executive Summary .................................................................................................. 6 CHAPTER 2: Outline ............................................................................................................................. 8 CHAPTER 3: Trade and Transit Flows and Infrastructure .................................................. 9 3.1 Transit Volumes ................................................................................................................................ 9 3.2 Types of Transit Systems ............................................................................................................... 9 3.3 Ownership .......................................................................................................................................13 3.4 Pipeline Economics ......................................................................................................................14 CHAPTER 4: Regulatory Regime ..................................................................................................16 4.1 The Role of Regulators ................................................................................................................16 4.2 Third-Party Access ........................................................................................................................17 4.3 Unbundling .....................................................................................................................................19 4.4 Treatment of Transit in Regulation .........................................................................................20 4.5 Intergovernmental Agreements ..............................................................................................23 CHAPTER 5: Tariffs, Charges and Other Fees ........................................................................26 5.1 Tariff Principles ...............................................................................................................................27 5.2 Transparency, Publicity, Access Rules ....................................................................................28 CHAPTER 6: Gas Transmission and Transit Tariff Methodologies ..............................30 6.1 Revenue Requirement ................................................................................................................31 6.2 Regulated Asset Value (RAV) .....................................................................................................31 6.3 Operative Costs .............................................................................................................................35 6.4 Return on Capital ..........................................................................................................................35 6.5 Rate-of-Return Regulation and Network Planning ..........................................................37 6.6 Unit Tariff Methodology .............................................................................................................38 6.6.1 Postal Tariffs .........................................................................................................................39 6.6.2 Distance-Based Tariffs ......................................................................................................40
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