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Latvijas gāze’s subsidiary Gaso proposes reducing gas transmission price

Ilze Pētersone-Godmane/flickr.com.
Latvijas gāze’s subsidiary Gase has turned to Public Utilities Commission with a proposal for a new natural gas transmission system service’s tariff project, providing for a reducing gas transmission price by 18-46% for more than 95% gas consumers.

At the same time, it is planned to introduce a fixed fee for permitted transmission output regardless of gas consumption.

«Our proposed transmission system’s tariff project is a carefully considered step that should be made to adapt to the new gas market situation and ensure compliance with security standards. Gas infrastructure’s security affects all consumers. This is why it is necessary to restore and maintain the gas transmission network to reduce to a minimum the possibility of risks,» says Gaso board chairperson Ilze Pētersone-Godmane.

She explains that, considering the reduction of gas consumption since the beginning of the ‘90s, international and local gas pipelines originally built for much larger gas volumes, are not used their full potential. For most clients, the capacity of their gas connection does not fit their actual consumption. This needs to be reviewed. The current gas transmission network can potentially ensure continued and unhindered function of electricity-producing companies in nearly every location around the country. On top of that, this does not require any major expansion.

In recent years there have been changes with the structure of consumption of energy resources – gas consumption proportion had reduced to 25.4%. Consumption of fuel wood had come close to 30%. Compared to 2008, when the current transmission system’s tariffs were approved, it is expected for gas consumption to decline by approximately 33% in 2018.

More than 90% of costs in the transmission system are fixed and do not depend on the client’s gas consumption. Unlike with its costs, Gaso’s revenue does tend to change, because the tariffs approved a decade or so ago provide a fee for transmission services in accordance with the supplied gas volume. The new market situation, when transmission system operator’s business model has changed, the unbalance between costs and revenue creates risks for quality, stable and safe maintenance of the network, said Pētersone-Godmane.

«To guarantee safety of gas supplies, the more than 5,200 km long gas transmission network has to be gradually restored by performing regular investments. Established tariffs are not only outdated but also serve to create an unequal situation among gas consumers, because more than 20,500 clients have ‘zero’ and very low consumption connections. Infrastructure should be restored even for those ‘empty’ connections. The costs of maintenance are currently covered by other consumers,» explains Pētersone-Godmane.

To motivate end consumers to use their connection output more effectively and offer opportunities to perform the necessary investments into the gas transmission network, Gaso has reviewed the number of service groups and now plans to introduce a two-step tariff for gas transmission services that includes a fixed component for the permitted output regardless of consumption and a flexible component to fit the supplied volume of gas.

«Until now gas consumers have been differentiated based on annual consumption, without taking into account the consumers’ connection. From now on, differentiation of consumers will be performed based on their consumption and connection efficiency. The objective of the transmission system’s operator is providing consumers safe and unhindered supply of natural gas regardless of type of connection, seasonality and other factors. The new tariff structure will help accomplish this objective,» says Pētersone-Godmane.

Based on the new tariff project for consumers who use gas for ovens, hot water preparation, and heating, will be provided with a fixed fee – EUR 1.77 a month for consumption of up to 6 m3/h, EUR 6.63 a month for consumption of 6 – 10 m3/h, and EUR 10.6 a month for consumption of 10 to 16 m3/h.

The fixed fee of the largest household consumers with permitted output of more than 16 m3/h and industrial clients is calculated based on every permitted output unit.

For example, the fixed fee of the largest household consumers will be EUR 7.95 annually for every 1 m3/h. This means that consumers with consumption of 20 m3/h will be charged a fixed fee of EUR 159 a year.

Gaso management predicts that there will be users who will decide to review the permitted output for their connections. Gaso plans to prepare and inform consumers of the rules for the gas transmission system before the new tariffs come into force.


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