ACER publishes today its report on Italy’s proposed gas transmission tariffs. ACER assessed the proposed methodology to calculate the gas transmission tariffs, including:

• The distance cost driver that is used to calculate tariffs in the Italian network;
• The discounts proposed for the exit point to Malta; and
• The proposed application of tariffs for the region of Sardinia.

What are ACER’s main findings?

Whilst acknowledging that the public consultation of the Italian National Regulatory Authority, ARERA, is very well documented and very informative, ACER recommends that ARERA improves:

• The proposed commodity-based tariffs; and
• The proposed approach to setting tariffs in the region of Sardinia.

Access the report on the Italian gas tariffs.

Access all ACER reports on national tariff consultation documents.

ACER assesses the proposed methodology to calculate tariffs, including:

• The details on the input parameters to the methodology;
• The regulatory account and the accumulated congestion revenue; and
• The methodology applicable to the L-gas network to transport gas from the Netherlands to France.

What are ACER’s main findings?

The Agency observes that improvements on the proposed transmission tariffs can be achieved based on the provisions of the EU Network Code on Gas Transmission Tariffs and provides some recommendations to the Belgian national regulatory authority CREG.

ACER recommends to CREG to:

• Shorten the duration of the tariff period. This should facilitate the forecast of the contracted capacity, and should help minimise potential under- and over-recoveries as well as the reconciliation of the regulatory accounts.
• Compare (and publish) the forecasted contracted capacity vis-à-vis the realised contracted capacity. This improvement should allow improving the accuracy of the capacity forecast, improve the cost-reflectivity of tariffs and minimises the need to reconcile revenue.
• Ensure the reconciliation of the Transmission System Operator’s (TSO), regulatory accounts, which has accumulated significant over-recoveries, including significant congestion revenue.
• Provide information on the allowed revenue methodology of the TSO, in particular, on the regulatory asset base revaluation of the TSO.
• Provide additional transparency on the cost and the capacity forecast that is used for the calculation of tariffs.

Access the report on the Belgian gas tariffs.

Access all ACER reports on national tariff consultation documents.

On 22 December 2022, the Council Regulation (EU) 2022/2578 established a gas market correction mechanism (MCM) to protect EU citizens and the economy against excessively high energy prices. It enters into force on 1 February 2023 for a period of one year and tasks ACER with the calculation and publication of the MCM reference price.

Based on the daily collected data, ACER will publish the MCM reference price no later than 23:59 CET every weekday. Find the daily MCM reference price here.

Prices on 1 February 2023 are well under the MCM activation levels.

What is the MCM reference price and how is it calculated?

The MCM reference price is the average price of several Liquefied Natural Gas (LNG) marker prices as assessed by different entities and the front-month National Balancing Point (NBP) derivative settlement price.

In order to calculate the daily MCM reference price, ACER needs the following information:

• The LNG Northwest Europe Marker price assessment;
• The LNG Mediterranean Marker price assessment;
• The LNG Northeast Asia Marker price assessment;
• The front-month NBP derivative settlement price; and
• The price of the ACER’s daily LNG price assessment report.

The values of the three LNG marker price assessments are derived from data administered by Platts Benchmark B.V. and Argus Benchmark Administration B.V. As the MCM reference price is expressed in EUR/MWh, ACER uses European Central Bank’s Euro foreign exchange rates for the currency conversion where needed.   

When is the MCM activated?

According to the Regulation, the MCM can only be activated as of 15 February 2023.

The MCM is activated if the front-month TTF derivative settlement price:

• exceeds 180 EUR/MWh for three consecutive working days, and
• is at least €35 above the MCM reference price for the same period of time.

In the event the MCM is activated a notice stating that a market correction event has occurred is published on the ACER website no later than 23:59 CET on the day of event.

Upon the activation, orders on TTF derivatives (front-month to front-year) €35 above the MCM reference price cannot be accepted. Should the MCM reference price be lower than 145 EUR/MWh, the MCM bidding limit is set at 180 EUR/MWh. 

The MCM bidding limit applies until:

• ACER publishes a deactivation notice 20 working days from the market correction event if the MCM reference price is below 145 EUR/MWh for three consecutive working days; or
• The European Commission suspends the MCM in case of significant deterioration of the gas supply situation in the EU.

Learn more about the MCM.

Today, ACER publishes its preliminary report on the effects of the Market Correction Mechanism (MCM) on energy markets and security of supply.

Background to the Market Correction Mechanism

The recently adopted MCM Regulation establishes a MCM to protect citizens and the economy against excessively high gas prices.

The MCM sets a bidding limit on certain financial derivatives traded at EU exchanges with the aim of limiting EU gas prices. This bidding limit is triggered when specific conditions are met.

The Regulation tasks ACER and the European Securities and Markets Authority (ESMA) with publishing a report (by 1 March 2023) to assess the market effects resulting from the introduction of the MCM, and a preliminary report by 23 January 2023.

ESMA also published their preliminary report today.

MCM has not had an impact on EU gas markets to date

So far, ACER has not identified significant impacts (positive or negative) that could be unequivocally and directly attributed to the adoption of the MCM Regulation itself. Its entry into force coincided with a time when prices were significantly lower compared, notably, to the second half of 2022. ACER cannot conclude that these market dynamics in the first weeks of 2023 are a direct or indirect effect of the approval of the MCM Regulation.

However, this does not preclude any impact on financial and energy markets in the future. Hence, both Agencies are proposing indicators to continue monitoring market developments and help detect potential future impacts of the MCM.

ACER welcomes feedback on the MCM indicators

In its preliminary report, ACER proposes to use eleven market indicators in its final effects report due on 1 March 2023. These indicators cover across three areas: prices, flows and trades.

ACER welcomes stakeholder feedback on these indicators, and in particular on the following questions:

• Are there any potential effects that could be triggered by the MCM, and early warning signs that should be monitored, that have not been identified in this ACER report?
• Are there any indicators that you consider relevant for assessing the effects of the MCM that have not been discussed in this ACER report?
• Are there any other points which you consider relevant to improve the ACER report on the effects assessment of the MCM that is due on 1 March?

Interested parties should send their feedback on the indicators by Monday, 6 February 2023, to MCM_effects@acer.europa.eu.

See the ACER preliminary report and the ESMA preliminary report.

Read more about the MCM.

On 30 December 2022, a new Council Regulation (EU) 2022/2576 entered into force requiring ACER to produce and publish an objective daily LNG price assessment.

As of today, 13 January 2023, ACER makes its LNG price assessment report available on a daily basis.

Today ACER published the first LNG price assessment. By 16.00 CET today, ACER has collected 9 transactions, of which 2 were eligible. According to the methodology, the LNG market data reported for the price assessment during the relevant rolling time window is not sufficient. So today it is not possible to calculate a single daily LNG price indication.

On the basis of the LNG market data reports received from registered LNG market participants, ACER’s daily price assessment reports will be published no later than 18:00 CET (weekdays only) on the TERMINAL platform.

Is this the final version of the ACER price methodology?

ACER’s LNG price assessment methodology was published today as a beta version based on European LNG Daily - Methodology for LNG price assessments Beta 1.0. Hence, initially ACER’s LNG price assessment consists of a weighted average price of daily LNG spot transacted quantities and is based on transactions concluded and reported for the purchase or sale of LNG with delivery in the European Union. By 31 March, ACER’s price assessment methodology will be refined with the support of the newly established LNG price assessment/benchmark expert group

Is ACER’s LNG Price Assessment report the same as the new LNG Benchmark?

No. In addition to the daily LNG price assessment, and no later than 31 March 2023, ACER will also publish a daily LNG benchmark. Currently in EU, the standard benchmarks are related to the Dutch Title Transfer Facility (TTF), which is used for both pipeline gas and LNG. The Council Regulation requires ACER to develop an alternative transaction-based LNG benchmark based on verifiable price assessments for LNG cargo deliveries to EU, to ensure the new LNG benchmark is reflective of real-world prices for the fuel. According to the Regulation, the new LNG benchmark, based on mandatory data reporting, shall contribute to greater market transparency and effectively, lower wholesale prices for gas without distorting competition in the EU energy markets. Stakeholders may use the LNG benchmark voluntarily.

LNG market data collection and registration of LNG market participants

LNG market participants must submit their LNG market data to ACER via TERMINAL by first registering in the Centralised European Register of Energy Market Participants (CEREMP) and identifying themselves as an ‘LNG market participant’, and second creating a user account at TERMINAL.

Detailed information on the registration process of LNG market participants in CEREMP and TERMINAL is available here.

LNG market participants shall submit daily to ACER the LNG market data as close to real-time as technologically possible.

Whilst the reporting obligation for both LNG transactions and bids and offers applies since 30 December 2022, when facing issues with the technical feasibility of reporting (given the short implementation timeline), LNG market participants should currently prioritise the reporting of transactions over the reporting of bids and offers and should report bids and offers as soon as technologically feasible.

When submitting LNG market data, market participants shall follow the dedicated reporting guidance published on the ACER website (link here). ACER considers the reporting guidance as an evolving document and will release further updates and FAQ documents as required, in consultation with the industry.

Read more about LNG Price Assessment.

The EU Agency for the Cooperation of Energy Regulators (ACER) publishes an Opinion assessing the consistency of the most recently published national gas and hydrogen network development plans (NDPs) with the EU-wide Ten-Year Network Development Plan (EU TYNDP).

The comprehensive review is carried out biannually and is based on the information provided by national regulatory authorities (NRAs).

ACER analyses the regulatory aspects and key features of the gas NDPs, as well as the inputs, the methodology used and the resulting outputs, focusing on changes observed during the last two years.

The review also analyses whether the gas NDPs cover energy transition aspects, such as the hydrogen and biomethane developments, the blending of hydrogen and biomethane in gas transmission networks, the existence of hydrogen blending targets, hydrogen strategies and plans for dedicated hydrogen networks.

Project-consistency of national and European gas network plans

ACER is concerned by a continuous falling level of project consistency between gas NDPs and the draft EU TYNDP 2022, compared to previous editions of the EU TYNDP. This is largely explained by the inclusion of hydrogen and biomethane projects in the draft EU TYNDP 2022 which, however, are often not part of the most recent gas NDPs.

ACER Recommendations

ACERs recommendations aim to improve the consistency of national and European plans and to align network plans with decarbonisation efforts.

NDPs should:

• Focus on investments allowing low-carbon and renewable gases to be injected into the networks;
• Consider possible future needs to decommission gas infrastructure;
• Be better coordinated with neighbouring Member States for cross-border issues;
• Include project cost data;
• Include soon-to-be-operational infrastructure aimed to phase out Russian gas;
• Build on compatible scenarios aligned with targets of decarbonisation and phase out dependency on Russian gas.

The EU TYNDP should:

• Reconcile the large number of investment projects with the projected downward gas demand;
• Make gas decarbonisation a main driver of network development;
• Include project costs and monetised benefits data (as it is already the case in the electricity TYNDP);
• Be primarily based on NDPs;
• Include suitable areas for location of power-to-gas assets, in coordination with electricity TYNDP assessments;
• Synchronise expectations of uptick of supply and demand of renewable hydrogen and biomethane with a prudent assessment of need of transportation services.

Key findings on aligning national and EU network plans with decarbonisation targets:

• NRAs would support an EU-wide approach to hydrogen blending limits;
• Hydrogen blending is likely to be a temporary or transitional solution towards decarbonisation;
• Essential network adaptations are required to allow for hydrogen injection in the transmission network;
• The number of Member States with hydrogen strategies doubled in the last two years. However, limited progress is observed regarding the readiness of gas transmission networks and national legislations for accommodating hydrogen.

Access the ACER Opinion and its Annexes I and II and Annex III, which provide comprehensive information on the most recent gas and hydrogen plans. Slides summarise selective findings of this ACER assessment of the gas TYNDP.

The EU Agency for the Cooperation of Energy Regulators (ACER) publishes today its Opinion on the Winter Supply Outlook for 2022/2023 of the European Network of Transmission System Operators for Gas (ENTSOG).

What are the supply outlooks about?

The short-term supply outlooks issued by the European Network of Transmission System Operators for Gas (ENTSOG) and Electricity (ENTSO-E) provide relevant information to EU decision-makers in the current times of unusual developments in the energy sector. ACER monitors and assesses ENTSOs’ summer and winter supply outlooks, and issues recommendations to further improve their methodologies.

Winter supply outlook 2022/2023: what are the main findings?

ACER highlights the following findings and conclusions from the ENTSOG’s Outlook:

• The EU storage level on 1 October 2022 (89%) is one of the highest in recent years and meets the objectives set out in the EU gas storage regulation;

• The European gas infrastructure offers sufficient flexibility to dispatch gas supply to meet demand, assuming that there is cooperation among Member States and that sufficient gas reaches the EU. However, under specific scenarios of high demand and prolonged disruption of Russian gas supply, some possible demand curtailments are possible;

• In case of a “cold winter”, all European countries would be exposed to a risk of 10% demand curtailment for the entire winter season and from 10% to 27% in case of a “peak day”;

• Cooperation between Member States, additional gas supply, LNG infrastructure and a demand reduction of ca. 15% would efficiently mitigate the risk of demand curtailment;

• Early and significant withdrawal of gas from storages will result in low storage levels at the end of the winter season, having a negative impact on the flexibility of the gas system.

What is ACER’s assessment?

ACER appreciates that the Outlook assumptions and methodology were revised to consider already reduced gas flows from Russia and that it includes a scenario of full disruption of Russian gas.

Storage filling levels: ACER welcomes that the 80% EU storage filling objective was already achieved by the end of August, and that storage filling levels have to increased close to 95% by 1 November 2022. Strengthened national and EU gas storage regulations and other regulatory interventions have played a role in the successful replenishment of storages.

Use of gas storage during the winter: ACER highlights the critical importance of having adequate storage levels towards the end of the winter in case of high demand or supply disruption situations. ACER expects storage users to withdraw gas from storage prudently, and national competent authorities to monitor the withdrawal pattern in view of the filling targets for 2023, set out by European Commission.

Gas demand savings: The implementation of gas savings is fundamental for improving preparedness for this and next winter. ENTSOG should have used a “baseline scenario” of gas demand for the winter outlook consistent with the EU targets for reduction of gas demand set out under the EU Regulation on coordinated gas demand-reduction.

New infrastructure projects and maximisation of gas import and cross-border capacities: ACER welcomes that physical gas flows from France to Germany are possible since October 2022; that major gas infrastructure projects increasing the LNG import regasification capacities by more than 30 bcm and the gas connectivity across the EU have recently been commissioned or are expected to become online soon. The rapid finalisation of these projects should become a priority.

Recommendations to improve the Outlook methodology: ENTSOG should consider improving the Winter Supply Outlook assumptions and methodology, in particular by using a complementary scenario based on expected gas supply and booked capacities and estimating the effects of high gas prices on gas demand in the Outlook.     

ACER highlights the importance of close cooperation between ENTSOG and ENTSO-E to ensure, where relevant, consistent assumptions and results in their respective seasonal assessments.

Read more about the ACER’s Opinion. 

The Agency for the Cooperation of Energy Regulators (ACER) publishes today a Study on the Future Regulatory Decisions on Natural Gas: Repurposing, Decommissioning and Reinvestments. ACER commissioned DNV as a consultant to carry out the study.

Europe’s ambitious energy transition and decarbonisation goals by 2050 point to a changing role for natural gas. Demand for natural gas is expected to decline over time as the decarbonisation goals lead to a substitution of natural gas with other energy vectors. Therefore national regulatory authorities (NRAs) will need to take regulatory decisions on a wide range of issues such as:

• The repurposing of natural gas assets for their use as part of hydrogen networks;
• The potential decommissioning of natural gas assets that become stranded; and
• The reinvestment of assets that reach the end of their regulatory lives and become fully depreciated.

What is in the Study?

The DNV Study provides an overview of current practices in Member States in addition to identifying challenges and offering possible solutions to future challenges that NRAs and the natural gas transmission system operators (TSOs) face with respect to the changing role of natural gas.

The analysis touches upon issues that are part of the European Commission’s Hydrogen and Decarbonised Gas Market Package of legislative proposals, such as the setting of the transfer value for repurposing assets, the forecasting of future transmission tariffs and the benchmarking of TSO costs. The report includes data collected from NRAs on the TSOs’ regulatory asset base, which helps increase understanding of how current TSOs’ costs are foreseen to evolve over time.

The DNV Study also identifies future challenges and suggests future possible legislative steps to be taken at the EU level on natural gas transmission and on hydrogen networks.

The information and the views set out in this study are those of the author (DNV) only and may not, in any circumstances, be regarded as stating ACER’s official position, opinion, or recommendation. ACER does not guarantee the accuracy of the data and the statements contained therein.

Access the Study on the Future Regulatory Decisions on Natural Gas: Repurposing, Decommissioning and Reinvestments