German regulator Bnetza should assess whether regional gas distribution networks exist in Germany and the effect that this may have on cost-reflectivity of grid tariffs for the country's joint market area, the EU's Association for the Co-operation of Energy Regulators (Acer) has said.
"Addressing the existence of regional networks, together with its impact on tariffs, is a way of improving the cost reflectivity" of the way in which fees are set, Acer said in response to Bnetza's proposal for a post-merger tariff regime.
Germany's two existing market areas NCG and Gaspool are scheduled to merge by 1 October 2021, with the new market area manager to be called Trading Hub Europe.
Bnetza's draft tariff proposal envisages retaining a postage-stamp methodology in the joint market area after this was introduced in NCG and Gaspool at the beginning of this year. The methodology would result in uniform entry and exit fees for transport capacity at all German network points, except at storage connection points, where a 75pc discount would be applied.
But market participants had raised concerns about certain aspects of Bnetza's proposal during a consultation, including with regard to taking account of the way in which different parts of the grid are used. German energy trading association Efet Deutschland said the lack of a clear separation of transmission systems from regional distribution networks could lead to cross-subsidisation and may unduly lift capacity costs at Germany's borders.
The EU gas directive distinguishes between transmission and distribution assets. "Distribution refers to ‘the transport of natural gas through local or regional pipeline networks with a view to its delivery to customers'", Acer said. And the EU network code on harmonised transmission tariffs (NC TAR) supports "the clear separation of transmission assets from regional networks in view of the allocation of each of these asset types to the beneficiaries", the regulatory body said. This is to ensure cost-reflectivity and avoid cross-subsidisation.
Bnetza had justified the application of a postage-stamp methodology that does not provide a clear separation between transmission assets and regional networks largely based on the complexity of the German system, especially after the merger. Distinguishing between pipelines that fulfill cross-system transmission services and those that serve "intra-system" distribution purposes is impossible, Bnetza had said. And the postage stamp methodology is simpler, more predictable and less prone to errors than an alternative capacity-weighted distance methodology, the German regulator had said.
But Bnetza did not include "an assessment of how the costs of the network are correlated with its use", Acer said. Such an assessment would be necessary to establish whether underlying costs differ between cross-system and intra-system use and hence whether the methodology meets NC TAR's cost-reflectivity requirements, it said. Acer said that Bnetza provided additional information on this on 7 July 2020, but this could not be taken into account for its evaluation since it were submitted too close to the deadline.
A study commissioned by system operators GRT Gaz and Gascade and Russian state-controlled Gazprom's export arm had indicated that "pipelines mainly designed for the purpose of crossing the German network" carry lower unit costs than "smaller pipelines designed to supply end-users connected to the network", Acer said. And any underlying differences in the unit costs for these pipelines would not be reflected in a uniform tariff at all points, it said.
Bnetza is to take a decision on the future tariff regime by 18 October.
