ACER recommends aligning the Estonian gas transmission tariffs with the Network Code’s requirements

Today, ACER releases its report on the Estonian gas transmission tariffs, directed at the Konkurentsiamet, the National Regulatory Authority (NRA) of Estonia.

The report assesses whether the proposed reference price methodology (RPM) complies with the requirements of the Network Code on Harmonised Transmission Tariff structures (NC TAR). The proposed postage stamp RPM is complemented by an inter-transmission system operator compensation (ITC) mechanism, providing part of the revenue collected between Estonia, Finland, and Latvia as part of a market merger process called ‘FINESTLAT’.

What are the key findings?

After analysing the NRA’s consultation document, ACER concludes that:

• The capacity cost driver presented is not sufficiently defined, making it unclear whether it represents an efficient indicator for network utilisation.
• There is limited assessment of the ITC’s impact on the proposed methodology, causing uncertainty in the revenue collected from the proposed RPM.
• The consistent under-recovery of revenue, combined with the implementation of a price cap regime, raises questions about the efficient estimation of target revenue under Article 17 of the Gas and Hydrogen Regulation.
• Due to insufficient information, ACER cannot determine whether the methodology used to calculate tariffs meets the requirements of cost-reflectivity, cross-border subsidisation, cross-border trade, and volume risk.
• No evidence of discrimination in applying the RPM has been identified.

What does ACER recommend?

ACER recommends that the NRA, when adopting its decision:

• Enhances the clarity of published information, ensuring all elements required by Article 26(1) of the NC TAR are included.
• Provides a more elaborate assessment of the RPM, taking into consideration the ITC’s effects on the RPM, in line with Article 7 of the NC TAR.
• Publishes a simplified tariff model, including details on the interaction between the ITC and the proposed RPM.
• Offers a detailed description of the methodology used to compute the target revenue, in line with Article 17 of the Gas and Hydrogen Regulation.

Additionally, ACER invites the Estonian NRA to evaluate the effects of potentially moving to a non-price cap regime and implementing revenue reconciliation principles.

Finally, ACER reiterates its recommendation for NRAs involved in the market integration process to jointly consult on the ITC, aiming for adopting a joint NRA decision.

Access all ACER reports on national tariff consultation documents.