A New Legal and Regulatory Framework for the Greek Gas Market 8 th - - PowerPoint PPT Presentation

A New Legal and Regulatory Framework for the Greek Gas Market

8th Greek National Energy Conference: Energy and Development 2003 Carlos Lapuerta The Brattle Group November 27, 2003

15 Berners Street London, W1T 3LJ Tel: +44-20-7907-1180 Fax: +44-20-7907-1181

• ffice@brattle.co.uk

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The Brattle Group

The Need for Detailed Rules and Regulations One day, Greek consumers will be eligible to pick suppliers. How do we prepare for that day?

n You cannot just pass a law that says: “consumers: you are free” n This was the German approach: immediate 100% market opening.

Nothing else.

n Germany lacked a legal and regulatory framework that could

permit the development of competition.

n For years the German ministry argued that the Competition

Authorities could compensate for the absence of detailed rules and regulations.

n This approach has failed.

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The Project RAE has hired a consortium of economists and legal experts to design a legal framework that could permit the development of effective competition.

International Greek Economic Legal The Brattle Group Freshfields Bruckhaus Deringer

The project has involved many aspects of policy in the gas sector, but this presentation focuses on the development of competition in gas supply.

Exergia Stelios Koussoulis & Associates

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The Brattle Group

DEPA’s Position in the Gas Market

n For many years DEPA will have a strong position in the Greek gas

market.

n There is nothing wrong with this, as long as we can be sure that

DEPA must compete effectively to retain its position.

Two Strategies Prevent Abuse While Dominant Reduce Entry Barriers Rules for Access to the Transportation System Restrictions on Behaviour

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Restrictions on Supply Practices

Prevent Abuse While Dominant Market Share Regulation

100% 80% 40%

n Full Price Regulation n Dominant suppliers required to: a) charge same

price formula within major customer categories, b)

• ffer a standard, published and approved gas

contract that gives customers flexibility.

n Below certain market share, no regulation

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Reducing Entry Barriers

Reduce Entry Barriers

• 1. Entry/Exit System
• 2. Balancing Rules
• 3. Making Capacity

Available

• 4. Rules for Sharing

Revythoussa

Prevent Abuse While Dominant

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An Entry/Exit System

n An entry/exit system does not mean different tariffs for different

places on the transportation network.

n We are talking about the flexibility of transportation contracts.

Point-to-Point

A B C ?

TSO says: Sorry, need a new contract

A B C D

Entry/Exit Entry Exit

• Separate contracts for

“A” and “C”

• If you lose customer,

refund for “C”

• “A” still useful

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The Brattle Group

Balancing Rules

n An imbalance means: amount of gas injected = gas withdrawn n There are two ways of viewing imbalances:

• A. Balancing is bad behaviour. People should pay penalties. The TSO should

have the responsibilities of a policeman.

• B. Just pay for any costs caused by imbalances.

n We reject the first view as inherently discriminatory.

• A. Large shippers naturally find it easier to stay in balance. Yet this is only an

inherited advantage, not the result of superior management.

• B. DEPA should not care if it pays imbalance penalties: the money will just

move from one subsidiary (supply) to another (transportation). But other shippers care a lot if they pay penalties.

n Penalties are also inefficient, since they imply paying more than

• costs. Our proposals avoid any penalties, to permit efficient

competition.

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Making Capacity Available In most Member States, the following can still happen

n Company “A” serves a customer gas. n Company “B” is willing to supply gas from the same source more

cheaply.

n The customer wants to switch. n The Transmission System Operator says “sorry, I have no

transportation capacity available! Company A owns it.”

n Company B complains: “you have sufficient transportation

• capacity. As soon as I serve the customer, you know that Company

A will stop.

We propose rules for the transportation network that would automatically allow Company B to serve the customer.

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Sharing Revythoussa

n Company A wants to supply X amount of gas per year through

Revythoussa.

n Company B wants to supply X/2. n Delivering X involves two vessels per month to Revythoussa.

We propose:

n Every day, Company A could regassify something close to X/365,

and Company B half this amount. The key is: B does not have to wait until Jan. 20 to start withdrawing gas.

• Jan. 10
• Jan. 20
• Jan. 30

A’s vessel B’s vessel A’s vessel

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The Brattle Group

Conclusions

n

The obstacles to competition in other Member States provide strong lessons for designing an appropriate legal framework.

n

We are near completion of a proposed legal framework that would:

• A. Allow new companies to use the transportation network in a flexible

manner to compete effectively with DEPA

• B. Prevent DEPA from abusing any market power while dominant.
• C. Relax restrictions if the market becomes more competitive.

If implemented, our proposed legal framework would be among the most advanced in Europe.