EU’s upcoming gas reform to address storage, joint procurement

"We will make storage part of the security of supply risks assessments, both at national and regional level,” the EU's energy commissioner Kadri Simson told a meeting of EU energy ministers in Brussels on Thursday (2 December). [Copyright: European Union]

A planned revision of EU gas market legislation, expected on 14 December, will seek to improve access to gas storage facilities and include provisions enabling the joint purchasing of gas stocks, the European Commission said.

Over the last few months, soaring gas prices have hit the poorest EU households and raised costs for businesses, threatening to slow down Europe’s economic recovery.

“The upcoming proposals will tackle, amongst other things, the key issue of storage,” said Kadri Simson, the EU’s energy commissioner.

“We will make storage part of the security of supply risks assessments, both at the national and regional level,” she told a meeting of EU energy ministers who are gathering in Brussels on Thursday (2 December).

Gas prices reached €160/Mwh in the autumn before trading around €95/MWh in November, driving up electricity prices, which have risen to 17% this year, Simson said.

Crisis “created by geopolitics”

But while volatility on gas markets is driven by rising demand from a recovering global economy, “we are also observing uncertainties created by geopolitics, particularly in our neighbourhood,” she added citing Russia and Belarus.

“Russian imports in October and November are 25% lower compared to the same period last year. Gazprom owned storage is significantly lower than last year,” she noted, adding that “Gazprom did not transit daily volumes, which it had committed to”.

Meanwhile, Belarus strongman Alexander Lukashenko has threatened to block supplies of Russian transiting via the Yamal pipeline if Europe imposes sanctions over the migrant crisis on his country’s border with Poland.

Warsaw has accused Russia of deliberately engineering a gas supply squeeze and has called on the European Commission to launch an antitrust investigation into Russian gas export monopoly, headed by Gazprom.

“The issue of Gazprom and practices violating anti-monopoly rules has not been explained,” said Poland’s energy minister Anna Moskwa. “We care about an honest analysis and taking into account our previous conclusions related to Gazprom’s activity,” she told colleagues in Brussels.

Simson replied, saying the EU executive is currently investigating the allegations.

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Storage and joint procurement

One of the ideas put forward by Spain, France, and other countries is for the EU to buy gas jointly to take advantage of the power of its single market of 450 million consumers.

This would be based on a voluntary joint procurement or centralised gas purchasing mechanism of ‘option contracts’ by competitive auctions, according to a joint paper submitted by France, Greece, Italy, Romania and Spain ahead of today’s talks.

A strategic EU gas reserve could then be created, “ensuring additional volumes of gas at affordable prices,” the joint paper said.

Simson seemed to back that idea, telling EU ministers that the Commission’s upcoming gas package “will tackle among other things the key issue of storage”.

“Access to storage will be improved by increasing transparency of storage operations and requiring undistorted trade of unused – secondary – capacities on market platforms,” she said.

“Furthermore, the proposal will include an enabling framework for the joint procurement of strategic gas stocks by regulated entities, in line with energy market regulation and the EU competition rules,” she added.

However, the EU’s energy commissioner dismissed calls by Spain and France to reform the EU’s electricity market rules, saying the current market design is working as intended.

A preliminary assessment by ACER – the EU Agency for the Cooperation of Energy Regulators – highlighted that reliance on gas for power generation “is the main factor explaining price differentials across countries.”

According to Simson, the ACER report “clearly shows the benefits of our electricity market design and points to the risk that opting for alternative electricity pricing mechanisms would create”.

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[Edited by Alice Taylor]

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