ACER calls for greater transparency on upstream pipeline costs in Danish gas tariffs

Today, ACER releases its report on the Danish gas transmission tariffs directed at Energinet, Denmark’s transmission system operator (TSO).

The report assesses the compliance of the proposed reference price methodology (RPM) with the requirements of the EU Network Code on Harmonised Transmission Tariff Structures (NC TAR).

What is the proposed tariff methodology?

The Danish TSO proposes to:

• Apply a uniform postage stamp reference price methodology with an ex-post entry-exit split, combined with discounts for gas storage facilities.
• Continue recovering transmission revenues through capacity-based tariffs only, meaning users pay based on the network capacity they book, not the volume of gas they transport.
• Maintain the existing joint market zone, which integrates the upstream section of the Baltic Pipe (the pipeline connecting Norwegian gas to Poland via Denmark) into the Danish entry-exit zone. Costs of this infrastructure continue to be covered by network users through a separate non-transmission tariff.
• Keep two non-transmission services in place: upstream Baltic Pipe infrastructure and emergency gas supply.
• Continue offering ex-ante discounts for interruptible capacity in steps (5% intervals). This allows users to book extra capacity at reduced prices that can be used when the network is not fully utilised, though it may be interrupted if users with guaranteed capacity rights need network access. 

What are the key findings? 

After analysing the consultation document, ACER concludes that: 

• The proposed methodology meets EU rules on transparency, non-discrimination and volume risk.
• Compliance with the requirements on cost-reflectivity, avoidance of cross-subsidisation and the prevention of cross-border trade distortions cannot be fully assessed due to lack of detail on the upstream infrastructure.
• There is insufficient information to assess whether the proposed pricing for the upstream non-transmission services complies with network code principles. 
• The proposed emergency supply tariff falls outside the scope of the network code framework (which covers transmission and non-transmission services provided to network users), as it pays for a security-of-supply service provided directly to end users.

What does ACER recommend? 

ACER recommends that the Danish national regulator (DUR), when adopting its final decision on the proposed methodology:

• Ensure the upstream Baltic Pipe is overseen with similar transparency and scrutiny to the main transmission network, as its costs are also covered by transmission network users. 
• Handle emergency supply tariffs separately from standard network fees, as they serve end users (not network users) and thus fall outside NC TAR rules.
• Adjust discounts for interruptible capacity using the network code formula to better reflect the actual risk of interruption.

See all ACER reports on national tariff consultation documents.