NMa: 'Gas Transport Services Can Work More Efficiently'

NMa has ascertained that GTS (Gas Transport Services), the operator of the national gas transmission network, can operate more efficiently. NMa reached this conclusion after calculating projections of the turnover and costs of GTS for the period of 2006 to 2009. For this reason, NMa has imposed an efficiency discount or price cap (the x factor) on GTS. This discount requires GTS's income to fall by 4.2% per annum, for instance due to a reduction in its tariffs.

'This does not mean that we forbid GTS to achieve a higher turnover. The opposite is true," according to Gert Zijl, a member of the Executive Board of NMa. "On the basis of all the data which GTS has given us, we conclude that the company can operate more efficiently. In fact, we have placed restrictions on the profit of GTS, which is a monopoly with the government as its sole shareholder," according to Mr Zijl. 'In our view, GTS may transmit as much gas as it wishes, but a higher turnover will not automatically result in higher profits for GTS due to NMa's intervention. However, in principle this will result in lower tariffs. This is in the interests of gas suppliers and consumers." NMa has the statutory duty to regulate national gas transmission by GTS. NMa ensures that GTS operates efficiently and supplies the market with services at the lowest possible, but nevertheless fair, rates. At the end of August, after consultation with all market parties, NMa approved a method of ensuring that GTS's revenues are in line with its costs, increased on the basis of a return which NMa deems fair. The efficiency discount or price cap of 4.2%, the x factor, is derived from this method decision. If inflation is taken into account, the price cap amounts to 5.7%.

The calculation model and the price cap have been set for the period from 2006 up to and including 2009. NMa has built into the decision a number of measures which ensure the supply of gas to gas distributors and consumers in the Netherlands. In its decision, NMa takes into account GTS's investments to guarantee the quality and capacity of the gas transmission network. In addition, careful consideration is given to the international context in which GTS operates.

GTS is required to submit a tariff proposal to the Office of Energy Regulation of NMa within two weeks, based on the method used and the price cap. At the end of this year, NMa will determine the definitive tariffs which will apply as of 1 January 2006. The tariffs are reviewed and approved annually.