Sign In

Results of the regional study on calculating natural gas transmission service tariffs presented

The National Energy Regulatory Council, as a consolidated institution, following the process when the State Energy Inspectorate under the Ministry of Energy has been reorganised by way of merger and joined to the National Commission for Energy Control and Prices, started its activities from 1st of July 2019 and took over the economic and technical regulation and market supervision and control functions of energy market in the Republic of Lithuania. The consolidation of two institutions was approved by the Parliament of the Republic of Lithuania on 14th of February 2019.

The national regulatory authorities (hereinafter – NRAs) of Finland, Estonia, Latvia and Lithuania agreed to determine the best methodology for calculating natural gas transmission service tariffs that would be applied across the common Baltic - Finnish entry-exit system. To this end, the NRAs appointed Baringa Partners LLP to undertake a study of the range of options available under the Commission Regulation (EU) 2017/460 of 16 March 2017 establishing a network code on harmonized transmission tariff structures for gas and to offer the NRAs a solution supported by clear evidence based economic analysis. Therefore, Baringa Partners LLP carried out the study where three alternative tariff methodologies - Postage Stamp, Capacity-Weighted Distance, and Matrix, were analyzed, and based on tariff methodology selected by the NRAs proposed a tariff methodology for the common Baltic - Finnish entry-exit system.

It should be noted that the regulatory authorities, taking into account the results of the cost-benefit analysis of the three alternatives and the results of the survey of the market participants on the pricing elements, have chosen the "postage stamp" methodology that presented the most economical benefits for all Baltic-Finnish region countries.

General outputs from „Baringa Partners LLP" study:

The Reference Price Methodology for the Baltic-Finnish Region is based on a Postage Stamp methodology and has the following features:

  • Postage Stamp methodologies applied separately in each country;
  • Interconnection points within the region are eliminated, including the Inčukalns UGS interconnection points;
  • Flat entry tariffs are set across the region on the basis of justification to be provided through benchmarking (except the case when the LNG discount is applied); 
  • Expected inter-TSO transfers are minimised by setting appropriate and flat exit tariffs separately in each country;
  • Exit tariffs are set to recover each TSOs remaining transmission revenue after recovery of entry revenues on their networks. 

More information can be found here.