Amendments to GTS Code, proposed by GTSOU do not solve the problems of imbalances in the gas market, – market participants

On July 29, National Energy and Utilities Regulatory Commission (NEURC) published a draft Resolution On Amendments to the Code of Gas Transmission System and the Code of Gas Distribution Systems.

If these changes are adopted, the balancing costs of customers for transmission services will increase from 10 to 20%, and the level of profitability of the GTS Operator (GTSOU) will increase from 20 to 40%.

Also, according to the project, the size of the allowable deviation of traders’ imbalances will be reduced from 10 to 3%, which is almost impossible to achieve in the current conditions, especially for small and medium suppliers.

The Association Gas Traders of Ukraine addressed to NEURC with comments and suggestions on this draft of amendments, which also takes into account the experience and expertise of balancing mechanisms of European partners.

According to Andriy Myzovets, President of the Association, the whole issue of balancing on the gas market is that the basic price of gas (BCG) of the GTS Operator should be determined daily with the help of exchange instruments and not under long-term contracts as it is today. In this case, the BCG will always display the current market price and the operator’s gas use for balancing will no longer be an issue.

Otherwise, when this draft resolution is adopted, in the conditions of sharp price fluctuations on the market, imbalances will certainly arise, despite the “draconian” reduction of deviation rates proposed by the GTS Operator to 3% (10% at the moment) and the growth of penalties to 20% (10% at the moment). And for consumers the result of these innovations will be only the increase of gas price!

Association Gas Traders of Ukraine also draws attention to the fact that the current version of the GTS Code guarantees 10% profit in the provision of balancing services. At the same time, Operator declares that it should not have profit in balancing services, that they should simply balance supply and demand. However, in the new draft NEURC regulation the level of profitability of the GTS Operator should double.

We would like to state once again that such changes have not been discussed with the gas market participants.

We publicly post this official letter to NEURC with comments and suggestions on this draft of amendments dated July 29, 2020.

You can see it by following the link:

For the references:

According to the results of January-June, the total debt to the Operator of GTS of Ukraine for negative imbalances amounts to 1 billion 031 million UAH. As of July 24 – 99%, or 1 billion 028 million UAH, the debt was formed by 33 regional gas companies (oblgaz), and other 4 customers for gas transmission services – only 2.6 million UAH.

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