German energy trading association Efet Deutschland has urged a clear separation of transmission systems from regional distribution networks when setting gas transport tariffs, to avoid cross-subsidisation which could lift capacity costs at Germany's borders.
Potential cross-subsidisation as a result of an insufficient differentiation between systems could reduce the attractiveness of Germany's gas market and distort competition, Efet said in response to German regulator Bnetza's consultation on its Regent 2021 tariff proposal.
The Regent 2021 regulation is to govern German transport tariffs after the merger of the NCG and Gaspool market areas into the Trading Hub Europe in October 2021.
Efet Deutschland in general welcomes the postage-stamp methodology chosen by Bnetza, which is in line with Germany's existing approach, and results in a single tariff for entry and exit points regardless of distance.
But the proposal does not sufficiently distinguish between transmission pipelines and regional distribution networks, Efet Deutschland said.
As a result, costs related to the regional distribution of gas are allocated to long-distance transmission pipelines, the association said.
This leads to market distortions by lifting the costs at German border points relative to those in neighbouring countries, discouraging cross-border trade, Efet Deutschland said. And high capacity costs at border points result in higher costs for gas within Germany, the association said. In addition, they lead to distorted competition between different supply sources and routes, Efet Deutschland said.
The association's concerns are in line with issues raised by European energy regulator Acer in response to Bnetza's proposal for 2020 tariffs. The application of the same reference price methodology to regional networks and long-distance transmission systems "can lead to a cross-subsidisation effect", Acer had said. And "this can potentially impact the cost reflectivity of the reference price methodology and ultimately result in a distortion of cross-border trade", it said.
A clear separation of costs would allow for "cost reflective tariffs for all capacity users", Efet Deutschland said. Among others, the pipeline diameter and degree of compression could be suitable criteria for differentiating between systems, the association said.
Efet Deutschland opposes a stronger discounting of dynamically allocable capacity (DZK) products to offset distortions that arise from the incorporation of distribution network costs. This had been discussed as an option by market participants at a recent workshop on the tariff plans. Only cross-border transport would benefit in this case, the association said, while it would be detrimental to storage sites, gas-fired power plants and the virtual trading point as a result of higher tariffs.
Most regulations are to stay unchanged with Regent 2021 from existing rules. Multipliers will remain unchanged, while a 75pc discount is to stay in place for entry and exit tariffs at storage connection points.
Bnetza expects a uniform reference price of €0.421/MWh for firm, freely allocable capacity in the integrated German market area in the fourth quarter of 2021. This would be below the €0.46/MWh fee in NCG for this calendar year but above the €0.38/MWh charge in Gaspool.
