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Ukrtransgaz and Natural Gas Market Participants Request the NEURC to bring the GTS Code in Line with the EU Directives

June 25, 2018, Kyiv – Industry-specific discussion "Introduction of Daily Balancing in the Natural Gas Market in Ukraine" was held by the Ukrainian Centre for Economic and Political Studies named after Olexander Razumkov last week. It was attended by representatives of the Ministry of Energy, NJSC Naftogaz of Ukraine, Ukrtransgaz, Ukrgazvydobuvannya, RGC group of companies, NGO Union of Gas Market Liberalization Participants, and industry experts.

 

The main issue of the discussion was the adoption in December 2017 of a new version of the GTS Code, which is a key prerequisite for implementing the model of daily balancing in the gas market. The participants of the discussion were unanimous in assessing the Code as imperfect and requiring its urgent revision. Indeed, in its present form, it not only fails to achieve the main goal of reform, but also jeopardizes the functioning of the natural gas market in Ukraine.

 

Tetyana Fedorova, a Member of the Board of Ukrtransgaz, believes: "The new edition of the Code neither meet the European industry-specific regulations nor the practices of European gas operators. It contains a number of imperfections and significant constraints that make it impossible to provide responsible, fair and equitable access to the main valuable asset of the market - natural gas as a service resource of the Ukrainian GTS. Therefore, the NEURC assertion that the new version of the GTS Code complies with all the requirements of the Energy Community Secretariat, is not correct and is false."

 

The main shortcomings of the Code, which require immediate elimination, are as follows:

•       the substitution of notions of "balancing service" and "unauthorized extraction" (theft) of the GTS Operator's resource. Inclusion of unauthorized withdrawal in balancing services leads to large-scale financial manipulations in the market and real theft of the resource;

•       using only a retrospective approach (without taking into account the projected consumption volumes) to the definition of a financial provision by the GTS Operator;

•       the lack of conditions for the operation of the gas exchange, which would enjoy the confidence of natural gas market participants and would have the required level of business reputation;

•       the prohibition of a free capacities market at the internal points of exit from the GTS, which is to provide operators of the gas distribution networks with the exclusive right to acquire such capacities. This leads to the automatic removal of other participants in the natural gas market and distortion of competition on it;

•       the lack of transparent and balanced tariff methodology of the Regulator.

 

Ukrtransgaz as the Operator of the GTS of Ukraine, in accordance with the requirements of Part 1 of Art. 33 of the Law of Ukraine "On the Natural Gas Market" has the responsibility to propose to the Regulator the wording of the Code, compiled in accordance with the EU directives. Ukrtransgaz has repeatedly contacted the NEURC with its own vision of the GTS Code wording, which would solve the main problems, in particular:

•       to separate the services of natural gas transmission from unauthorized extraction (that is, illegal) of natural gas of the GTS Operator, since such unlawful actions are subject to regulation of the Criminal Code of Ukraine;

•       to ensure proper control over the volumes of unauthorized extraction and to create effective incentives to prevent such a phenomenon;

•       to determine the level of financial provision, taking into account the precisely projected volumes of consumption, which is a normal European practice;

•       to implement the necessary measures for the development of the gas exchange in the Ukrainian natural gas market;

•       to eliminate legislative restrictions and ensure equal access of interested natural gas market participants to the market of capacities, including points of exit from the GTS.

 

As a result, the discussion participants requested the NEURC to consider the existing comments made to the Regulator by all market participants in the last years, to analyse them and to make necessary changes to the GTS Code. In particular, respecting the fundamental principles: recognition of the service gas resource of the GTS Operator as a valuable tangible asset, as well as determining the responsibility of each participant in the natural gas market, and only after giving them the opportunity to use the resource of the GTS Operator.


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