When organizing an auction for the storage of natural gas in Incukalns, JSC Conexus Baltic Grid must take into account several conditions specified by the Regulator

Natural Gas

Today, the Public Utilities Commission of Latvia (Regulator) harmonised the regulations for JSC Conexus Baltic Grid to organise an auction for the storage of natural gas in the Incukalns underground gas storage in 2018-2019. The Regulator’s Board has harmonised the regulations of the auction by specifying several conditions, which means that JSC Conexus Baltic Grid must take them into account when organizing the auction.

To ensure that the total cost of the auction is as low as possible and the inclusion of the lowest possible costs in the transmission service tariff, the participants of the auction may submit tenders without the compulsory first-time booking of storage capacity and limitations of capacity product. In the initially submitted draft regulations, JSC Conexus Baltic Grid had provided for two versions for the fulfilment of the provision obligations, one of which contained conditions that would make the participation of traders in the auction more costly and, accordingly, would create a risk for a cost increase in the transmission tariff.

Only the existing system users with a concluded transmission system service agreement, a balancing contract, and a natural gas storage service contract can participate in the auction to avoid risks of delaying the auction and the announcement of auction results. This will ensure that the results of the auction are known to all participants as soon as possible and they will be able to take the necessary steps to purchase the natural gas and inject the gas into the storage.

To ensure more price certainty if the natural gas injected into a storage facility is needed for supply in the event of an energy crisis, the compensation for the volume of natural gas used in times of crisis will be tied to the prices of the Gaspool Forward financial instrument.

Meanwhile, in order to provide market participants with the opportunity to prepare and submit tenders in a timely manner, the deadline for the submission of tenders may not be less than five workdays from the publication of the auction regulations on the Conexus Baltic Grid website.

As a transmission system operator, JSC Conexus Baltic Grid is obliged, in accordance with the Cabinet of Ministers regulations[1], to provide 3 1600 00 MWh in the Incukalns underground gas storage facility by March 1 for use in the event of an energy crisis. Auction is one of the mechanisms to ensure the fulfilment of these obligations. The Regulator is obliged in this case to harmonise the regulations on the procedure for the conduct of the auction. JSC Conexus Baltic Grid published the regulations on the conduct of the auction on 3 August 2018.