Time - out for The Monopoly of the Public Gas Corporation S.A

The discussion on energy issues is ongoing in Greece and the importance of the energy regulator and the operator of the National Natural Gas Transmission System has been revealed. This is not unjustified. The Greek Regulatory Authority for Energy (RAE) and the Hellenic Gas Transmission System Operator S.A. (TSO) are going to play a significant role for the development of commercial activity with natural gas even though the above mentioned bodies are not permitted to engage in such activity. Their creation was an instrument in the hands of the European Commission in order to liberalise, to “open” the markets of import and sale of natural gas where until a few years ago only certain companies, mostly state owned but also private ones, were granted the privilege to act.

The European Commission recognized early on that the abolishment of monopolies and the creation of an internal market for gas in favor of the consumers and the safety of supply in periods of energy crises must be its priority. Its main instrument to achieve this goal was the introduction of competition rules and the creation of incentives in order for new players, mostly private sector organizations, to enter the market of import/production and sale of natural gas. Although in other Member States like Germany more than one private and public companies are active in this field, in Greece these activities are considered to be public utility services under state regulation with no outlook for free competition development.

So the transition from state monopoly to a free market needed to be monitored and controlled in order to protect the market players and the consumers, to accelerate the procedures and to punish those who do not adhere to the rules. This very difficult task has been appointed to RAE, the authority that keeps a close eye on the company that operates the backbone of the markets of import, transmission and distribution of natural gas, i.e. all gas pipelines and other infrastructure necessary to transport this commodity to the consumers. The Greek TSO is the sole operator of this system and has to act independently from other importers/producers and whole- or retail sellers of natural gas. Thus, two kinds of companies and one authority are the main players in Greece and the rules of the game are actually clear. Competition principles must be respected by the TSO and if not, RAE is the authorized referee in order to guarantee that the principles of equal treatment and transparency are always respected.

That the rules are not always respected has been obvious however in the last months. The former state monopoly, Public Gas Corporation SA (DEPA), represents the old system and had the exclusive rights to import and sell natural gas but it has lost its privileges under the new legal framework. Small and industrial natural gas consumers used to depend on DEPA to cover their needs in natural gas. This is still the reality, although the legal provisions that give them the right to choose their gas supplier are valid in Greece since 2005 with the issuance of the Law 3428/2005 “Liberalization of the natural gas market”. This Law provides inter alia for free access to the National Natural Gas Transmission System of all suppliers that ask for it in order to transport their gas to the customers. For this purpose the TSO has to sign Transmission Contracts with the suppliers where the concrete gas amounts to be transported and respectively the system capacity to be reserved for them are defined. The reservation of the system capacity percentage has to occur in such a way that the consumers can still be provided by the supplier of their choice. For this to be possible it is a prerequisite to allow the consumers to make such reservations so that they can truly practice their right to choose their gas supplier.

DEPA is the only supplier in Greece that has a Transmission Contract with the TSO. As it is the main supplier in Greece, it must have reserved a significant part of the system capacity, if not the whole of it. RAE underlined this in its recommendation addressed to the TSO of the 26th November 2009 pursuant to the Law 3428/2005. The TSO was hereby called by the Authority to assess the possibility under the light of national and European law for unblocking a percentage of the system capacity in favor of the new suppliers. The TSO has the power to decide on this matter and release a part of the system capacity reserved but not used by DEPA. The latter is then no longer obliged to pay the capacity charges for the released percentage. The application of that rule leads to the creation of a “free” capacity that new suppliers can use without being discriminated. The TSO is obligated to offer free access, under the same terms, not only to the pipelines but also to the liquefied natural gas (LNG) terminal at Revithousa. Finally, it is obliged to make available the transmission system to all the competitors in the most transparent and economical way in order to unburden the functioning of the gas markets and to promote competition.

Prerequisite to all of the above though is the existence of new suppliers capable to compete with DEPA and their equal treatment by the TSO. While the competent state bodies make significant efforts but unfortunately sometimes fail to enhance competition, private companies show interest for investing in the markets of import and sale of natural gas. The Mytilineos and Motor Oil Groups announced their intention to jointly import natural gas for industrial use and for use by power plants owed by these companies as well as for sale in Greece and abroad. Their effort to import a shipment last November was not successful, as the TSO, due to its inability to interpret an otherwise quite clear Ministerial Decision, denied the collection of the shipment from the Revithousa LNG Terminal and the conclusion of the required contract. The difficulties faced by the new suppliers proved the necessity for intervention by RAE and the fact that long consultations took place in order to make clear the undisputable right of free access for private sector organizations. Nevertheless, the important decisions have now been made towards the liberalization of the natural gas market, the strengthening of competition and the protection of the consumers.

Dr. Markela Stamati, LL.M., Senior Associate
Energy & Competition Law Team
I.K. Rokas & Partners (Athens)

© 2010 IKRP

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