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​​Baltics map.pngFulfilling the RGMCG Action Plan an active phase of market integration begun on July 1, 2017 with implementation of the implicit capacity allocation of the capacity of Latvian-Lithuanian and Estonian-Latvian interconnection points. It provided market participants with the organized market place where gas is easily traded cross-border, in the same time minimising the administrative burden of potentially having the TPA and balancing agreements with all TSOs involved in physical transportation of gas as in the case of OTC trade.

During 2018, a lot of efforts were put for the development of the tariff model and ITC mechanism for the common Baltic-Finnish market, resulting in stepwise integration approach agreed by RGMCG.

Following the stepwise integration approach on November 14, 2018 NRAs of Finland, Estonia and Latvia (FinEstLat) signed the Memorandum of understanding to facilitate cooperation and coordination between the NRAs in order to create in good time the FinEstLat market which provides for the possibility for other NRAs to join. NRAs of Finland, Estonia and Latvia based on the findings of the Consultancy company Baringa Partners LLP study agreed that FinEstLat single natural gas transmission entry-exit system (FinEstLat system) shall have the following features:

  • no internal interconnection points within the FinEstLat system, including entry point from Inčukalns UGS and exit point to Inčukalns UGS;
  • the postage stamp reference price methodology is applied separately in each country of the FinEstLat single system;
  • flat tariff of 142.77 €/MWh/d/y is set at entry points of FinEstLat system using benchmarking;
  • the revenue of the natural gas transmission system service recovered from the tariffs of the entry points are distributed through the ITC mechanism in proportion to the yearly natural gas consumption in each country of FinEstLat system;
  • the exit tariffs are set to ensure that each TSO recovers transmission system service revenue which has not been recovered from flat entry tariffs;
  • non-transmission services revenue is individually decided by each single natural gas transmission entry-exit system country.

Based on the selected tariff model, the FinEstLat NRAs have amended the methodologies for calculating the transmission tariffs and approved the transmission tariffs, which will be applied as of January 1, 2020, taking all the actions specified in NC TAR. ACER published its analyses of the consultation documents of the Estonian, Latvian and Lithuanian reference price methodologies.

In turn, FinEstLat TSOs on October 8, 2018, signed the Memorandum of understanding, stipulating the goals, values and TSO-related principles for harmonisation of capacity management, establishment of single balancing zone, regional gas market model, and principles of the ITC mechanism. Memorandum also provides the option for other TSOs sharing its goals and values to freely join it. Signing of memorandum was followed on November 5, 2018 by submission of joint application on coordinated opinion on gas transmission system entry-tariff and ITC mechanism among Finnish, Latvian and Estonian TSOs. Supporting opinion of NRAs was the key for the development of the Agreement on the Implementation of Inter-transmission System Operator Compensation Mechanism (ITC Agreement), signed by the TSOs of Estonia, Finland and Latvia on February 14, 2019.

Considering the different level of natural gas market maturity in the countries of FinEstLat system and following the stepwise integration approach, for the transition period, two balancing areas are set up in the FinEstLat system – the common Estonian-Latvian balancing zone and the Finnish balancing zone.

For the implementation of the common balancing zone, TSOs of Estonia and Latvia jointly prepared and relevant NRAs approved the Common regulations for the use of natural gas transmission system and Common regulations for the natural gas balancing of transmission system, which entered into force on November 1, 2019 with the full application as of January 1, 2020.

For the communication with market participants, TSOs of Estonia and Latvia jointly develop the Common IT platform, ensuring WEB-interface and AS4 communication for the information exchange with market participants. TSOs also introduced the concept of Connecting TSO with the aim to minimise the administrative burden for market participants, requiring signing of just one set of agreements with the TSO of free choice in order to get access to all transmission infrastructure of the common balancing zone.

FinEstLat system becomes operational January 1, 2020.

In 2020, RGMCG will continue the work on four-country market model.