Gas companies protest draft natural gas emergency cutoff law

An LNG tanker ship arriving in the Lithuanian port of Klaipeda.
An LNG tanker ship arriving in the Lithuanian port of Klaipeda. Source: Eesti Gaas

The Estonian Gas Association (Gaasiliit) and the largest natural gas distributor network operator in Estonia, AS Gaasivõrk, argued that the new draft bill regarding natural gas emergency cut-off prioritization is imprecisely phrased, and puts tasks on network operators that are beyond the scope of their competence.

In the case of a gas shortage, the draft bill proposes classifying users into six priority groups, which will determine the order of gas supply shutoff.

AS Gaasivõrk filed a letter to the Ministry of Economic Affairs stating that the language of the draft is too general and the foundation for assigning clients to consumer groups should be further specified.

According to the gas network operator, the regulation should provide the gas provider with sufficient guidance, and the explanatory memorandum should remove any references to the network operator's obligation to further deliberate or investigate.

"We would like to point out that as this is a critical decision for the consumer that could result in substantial losses or even bankruptcy, the network operator cannot be tasked with making this decision. These distinctions must be sufficiently drawn by the government," Triinu Tamm, chair of the company's management board, said.

Also the Estonian Gas Association criticized the ministry of economic affairs stating that the revisions, which were drafted in a hurried and uninvolved manner, have led to significant confusion and a lack of comprehension among market participants. The association is equally unhappy with the lack of detail in the definition of consumer groups and the network operator's need to weigh and investigate.

Heiko Heitur, the CEO of the association, said: "We believe that no network service provider should be obliged to examine or request information from its clients for state purposes. In order for all network operators to arrive at the same conclusion when grouping a client, the legislation must provide precise rules. The state cannot place the network operator in a situation where gas is denied to a consumer owing to human error or discretion, where the network operator could be held liable for legal action,"

The Competition Authority should define the groups

The gas network operator said while Estonia has 23 gas distribution system operators, whose ability to assign consumer groups would vary greatly, none of them has such competence.

The network operator only has access to the client's contact information, consumption volumes, and, when logging into the data of a specific customer, the customer's technical ability to receive gas.

"There is also no legal justification for a network operator to access the business secrets of its clients or retrieve their data," Tamm explained.

AS Gaasivõrk said that the distribution system operator (DSO) is unable to determine which heat provider uses district heating units that can only run on gas. Because all heat producers are required to coordinate their marginal heat prices with the competition authority, the competition authority must know who meets these requirements.

The company also said that the Electricity Market Act defines emergency power plants only broadly and network operators are unsure which measuring points represent emergency units.

"The draft's explanatory memorandum makes it very clear that the ministry is aware of this; hence, the regulation should clearly identify these stations," Tamm said.

Network operators are unwilling to perform state tasks

Tamm said that the draft's explanatory memorandum states erroneously that the regulation's implementation does not incur any costs. However, Tamm continues, it would be more appropriate to inquire about these costs with network operators and include them in the memorandum.

"Assigning a client to a customer group incurs both one-time and recurring costs for the network operator, including IT expenditures, the cost of querying registers, human costs for both data entry and customer service, and contingency fees to ensure mass disconnection readiness," he said.

The Estonian Gas Association also suggested that the ministry calculate the draft's costs and revenues, because if the network operator is required to do work for the state, it will require resources as well.

The Estonian Gas Association also urged the ministry to assess the draft's expenses and revenues, arguing that if the network operator is tasked to perform governmental duties, additional resources will be required.

Neither the gas association nor the gas network operator believe that the definition of a household consumer is sufficiently defined.

"Has the ministry assessed what will happen in various sectors if the gas is turned off?" Heitur enquired, pointing out that even hospitals and medical institutions are not listed as protected customers within the regulation's annex.

"The drafting of the Natural Gas Act amendments demonstrated that the Ministry of Economic Affairs and Communications has very limited communication with market participants and so a low grasp of the market, as several examples in the explanatory memorandum clearly show. To improve the situation, market participants should be included more actively in deliberation process and different points of view should be canvassed already at the draft stage," he said.

Prioritizing gas supply toward domestic consumers

The amendments were adopted by the Riigikogu on July 19. The Ministry of Economic Affairs and Communications previously stated that the ranking of gas consumers would be completed by the end of October at the latest.

This will see customers split into six categories, and ordered in terms of how readily their gas supply should be interrupted in the event of an emergency.

Domestic consumers receive highest priority and would be cut off last, the proposed regulation states.

The second category of protected consumers consists of businesses that provide energy for domestic heating but who unable to use any other fuel than natural gas in order to do that.

A third group of users are gas-fired emergency standby power plants, which are critical to the operation of the electricity system.

A fourth group consists of gas consumers who provide essential services to society and whose continued existence is dependent on the availability of gas supplies.

Other users will be placed in either the fifth or sixth group depending on how quickly their gas supply can be cut off in the event of a gas shortage.

The fifth cohort of consumers may experience gas supply interruptions that last up to six hours, while the sixth group may experience gas supply interruptions that last even longer than that.

Once amendments to the relevant legislation, the Natural Gas Act, is in force, a consumer must be notified by their supplier as to which of the above categories they belong to. This information must also be placed online and lodged with the relevant consumer groups.

The Ministry of Economic Affairs and Communications estimates there are around 44,000 domestic gas consumers in Estonia, along with around 13,000 business consumers.


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Editor: Kristina Kersa

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