On November 17, 2015 the Administrative Regional Court suspended Article 8.5 of the “Regulations on the Use of the Natural Gas Transmission System” approved by the Public Utilities Commission (the Regulator), which, in contradiction to the Energy Law and the JSC “Latvijas Gāze” privatisation agreements, effectively opened the natural gas market.
In its decision the court finds that the Regulator, without consulting with society and the company, has undertaken the duty of opening the natural gas market, although such decisions may only be taken by law. Under the current Energy Law, a free choice of trader will only take effect on April 3, 2017 unless, for instance, an interconnection with a country other than Lithuania, Estonia or Finland is built earlier.
The court argues that the deadline of April 3, 2017 set in the Energy Law essentially results from the privatisation agreements which expire on that date. It should be noted that the privatisation agreements grant to the JSC “Latvijas Gāze” exclusive rights of gas supply for 20 years or until the said date. Consequently, the law clearly states that currently a user in Latvia may not switch to another trader, not least one from outside Latvia. The court also notes that the derogation under the Gas Directive of the European Union – whereby Latvia is allowed to postpone the market opening – has not yet expired.
The court also points out that the JSC “Latvijas Gāze” has reckoned with the privatisation agreements and has made investments for a long time securing the safety and reliability of services in Latvia. The investor is equally entitled to request observance of the privatisation agreements.
The court goes on to explain that the JSC “Latvijas Gāze” operates within the framework of the current Energy Law and the natural gas service and sale tariffs have been set accordingly. If the transmission access regulations as interpreted by the Regulator took effect, the JSC “Latvijas Gāze” would be subject to unfair competition. Unlike other potential suppliers from outside Latvia, the JSC “Latvijas Gāze” still has its tariffs fully regulated. Moreover, the exclusion of such consumers as the SJSC “Latvenergo” from the overall tariff structure might trigger a tariff increase for other consumers.
The second parliamentary hearing of the Energy Law amendments is due in November. The JSC “Latvijas Gāze” does not object to the opening of the natural gas market on April 3, 2017, but it does object to the time frames of unbundling of the company and divestiture of the unbundled company foreseen by the draft law.
Vinsents Makaris Phone + (371) 67 369 144 E-mail: IR@lg.lv
