The national regulatory authorities (hereinafter – NRAs) of Finland, Estonia, Latvia and Lithuania agreed to determine the best methodology for calculating natural gas transmission service tariffs that would be applied across the common Baltic - Finnish entry-exit system. To this end, the NRAs appointed Baringa Partners LLP to undertake a study of the range of options available under the Commission Regulation (EU) 2017/460 of 16 March 2017 establishing a network code on harmonised transmission tariff structures for gas and to assist the NRAs in coming to a decision, supported by clear evidence-based economic analysis. Therefore, Baringa Partners LLP carried out the study where three alternative tariff methodologies - Postage Stamp, Capacity-Weighted Distance, and Matrix, were analysed, and based on tariff methodology selected by the NRAs proposed a tariff methodology for the common Baltic - Finnish entry-exit system.
It should be noted that the regulatory authorities, taking into account the results of the cost-benefit analysis of the three alternatives and the results of the survey of the market participants on the pricing elements, have chosen the "postage stamp" methodology that presented the most economical benefit for all Baltic-Finnish region countries.
General outputs from „Baringa Partners LLP" study:
The Reference Price Methodology for the Baltic-Finnish Region is based on a Postage Stamp methodology and has the following features:
- Postage Stamp methodologies applied separately in each country;
- Interconnection points within the region are eliminated, including the Inčukalns UGS Interconnection Points;
- Flat entry tariffs are set across the region on the basis of justification to be provided through benchmarking (except the case when the LNG discount is applied);
- Expected inter-TSO transfers are minimised by setting appropriate and flat exit tariffs separately in each country;
- Exit tariffs are set to recover each TSOs remaining transmission revenue after recovery of entry revenues on their networks.
More information can be found here.
According to the results of the study, the National Commission for Energy Control and Prices (hereinafter – Commission) starts to apply the principles of "postage stamp" methodology for transmission system tariffs setting from 2019. Transmission system operator's "Amber Grid" tariffs approved by the Commission, can be found here.