PUC gives the green light for an auction to book the capacity of the Inčukalns underground gas storage facility

Natural Gas

The Public Utilities Commission (PUC) has agreed on regulations that provide for the procedure for organising an auction to book the capacity of the Inčukalns Underground Gas Storage (Inčukalns UGS). Such an auction in the natural gas sector will take place for the first time in Latvia and must be organized by 15 March 2021. JSC “Conexus Baltic Grid” will inform market participants about the exact time of the auction.

Until now, capacity booking at the Inčukalns UGS was carried out according to a principle, which is no longer widely applied in Europe, namely, storage users submitted applications to the system operator for each selected storage capacity product. There is currently a trend in Europe to book storage capacity through auctions to maximise the transparency and non-discrimination of the process.

Indra Niedrīte, Head of the PUC’s Cross-border System Operation Coordination Division of Energy Department, points out: "Any natural gas trader which uses the transmission system will be able to participate in the auction to obtain the rights to use a certain amount of storage capacity in the next storage cycle. These rights will allow the trader to store natural gas in the storage facility in accordance with the amount of storage capacity allocated thereto, as well as to inject natural gas into the storage and withdraw natural gas for the supply of its users. Auctioning based on similar principles is also taking place in, for example, France, Spain, Hungary, and this year it will also happen in Latvia. Last year, interest in the natural gas storage service was remarkably high, 100% of the storage was filled with natural gas reaching 21.5 TWh. With such a high demand for natural gas storage service, an auction is the most efficient way to ensure a clear and transparent process for the storage capacity booking".

In the first auction, JSC “Conexus Baltic Grid” plans to auction the unused capacity reserved in the 2020/2021 storage cycle, which is currently approximately 12.5 TWh, however, it will increase as the stock withdrawal continues.

The auction regulations will soon be available on the website of JSC “Conexus Baltic Grid”. They stipulate that at the end of the bidding, JSC “Conexus Baltic Grid” will arrange the bids of market participants in a merit order starting with the highest offered bid price, until the maximum available storage capacity is reached. The decision on the results of the auction will be announced by 11:00 the day after the auction. The results will be published on the website of JSC “Conexus Baltic Grid” and simultaneously also on the IT platform of the common Estonian and Latvian balancing zone, as well as sent electronically to each auction participant.

JSC “Conexus Baltic Grid” submitted the draft auction regulations to the PUC for evaluation and approval on 24 November 2020. In cooperation with the system operator, the draft auction regulations were updated, eliminating shortcomings. At the request of the PUC, JSC “Conexus Baltic Grid” publicly consulted on the draft auction regulations, receiving several proposals, which were taken into account.