At the 2nd ACER Gas Target Model (GTM) workshop held on 19th March in Ljubljana, over 60 representatives of the European gas sector – including gas suppliers, Transmission System Operators (TSOs), energy intensive industries and regulators – discussed how to adjust the target model to changed market requirements. The agenda focused on the functioning of wholesale gas markets, the contribution of the gas sector to sustainability and the state of play of retail competition in gas. "The fast changing global and European framework requires an enhancement of our vision of the future European gas market. This is key in order to ensure the competitiveness of European industries and that European end-consumers pay fair gas prices" explained Mr Walter Boltz, Vice Chair of the ACER Board of Regulators. Participants at the workshop discussed the functioning of forward gas markets based on a genuinely new data set using comprehensive data of OTC transactions and pre-transactional data (order book) for the most relevant European gas hubs. The analyses performed show that the prices at European hubs are determined based on distinct supply and demand characteristics in the respective markets. This could favour a market design whereby each such gas market area should have a liquid spot and forward market. The data also makes it possible to quantify the gains resulting from narrower bid-ask spreads, which needs to be taken into account when performing a cost-benefit analysis on possible mergers of market areas. Furthermore, participants discussed the following topics:
- The uneven level of implementation of gas legislation and regulation across the EU, the corresponding uneven level of gas market development, and the question whether this calls for more targeted interventions;
- The liquidity of forward markets, and the number of liquid forward markets needed in the EU;
- The need for cross-border market zone mergers;
- The Congestion Management Procedures and whether these are sufficient to address all contractual congestion problems;
- The difficulties faced by gas-fired power generators and the extent to which aligning gas and electricity regulations at EU level could help to alleviate this situation;
- The state of play of retail competition in gas, and the question whether regulatory intervention at EU level would help to improve this situation.