NMa: competition in wholesale gas market remains insufficient

The Office of Energy Regulation (DTe), part of the Netherlands Competition Authority (NMa), has concluded in its annual wholesale gas market monitor that significant progress has been made as compared to 2004.

Still, the market does not operate well enough as yet. Problems that were signalled before, have still not all been resolved, and in some areas the situation will deteriorate unless measures are put into place. This is relevant, for example, to the availability of import capacity for gas.

Progress has been made with regard to three important issues. Firstly, 50% of the costs of addressing quality conversion is now included in the transport tariffs. Quality conversion concerns the mutation of gas of a high caloric value to a low caloric value to serve, for instance, domestic customers. The Groningenveld provides the Netherlands with a natural source of low caloric value gas, but this is not accessible to all market parties. By sharing the costs, a level playing field is created for all parties, providing equal opportunities irrespective of direct access to low caloric value gas. This strengthens competition in the market for gas of a low caloric value, for the benefit of consumers.

Secondly, competition is stimulated as flexibility services are not only provided by market parties, but by GTS also. As a result, market parties are in a better position to balance supply with demand. As a final improvement, DTe lists the recently introduced balancing regime. All market parties may now make better use of the opportunities provided by the national transport network, while the costs of balancing this network are limited as much as possible.

Next to this progress, DTe furthermore establishes a number of problems which lead to higher entry barriers for new entrants in the wholesale gas market and may therefore restrict competition:

- Trade in low caloric value gas especially, is lagging behind in market place TTF. Low caloric value gas produced from the Groningenveld is not offered here. This gas in particular is important to the Dutch consumer. Moreover, trade in high caloric value gas should be further stimulated.

- There is a contractual shortage in gas import capacity. And DTe is concerned about a physical shortage though GTS is preparing an increase of import capacity.

- Quality conversion is insufficiently available. This is particularly relevant to new gas providers in order to supply low caloric value gas to consumers.

The annual monitor helps define priorities and actions in order to improve competition in collaboration with market parties. In dialogue with the sector, the NMa will draw up recommendations to address the signalled problems.