The PUC launches a consultation on the changes in the regulation of the Inčukalns underground gas storage facility

Natural Gas

The Public Utilities Commission (PUC) has launched a consultation on the regulations that provide for significant changes in the use of the Inčukalns gas storage facility. The changes have been made due to the growing role of the storage facility in the natural gas supply sector throughout the Baltic region.

The draft Regulations Regarding the Use of the Inčukalns Underground Gas Storage Facility provide for several changes that will improve the operational flexibility of the Inčukalns gas storage facility. Since the launch of the single natural gas market in Finland, Estonia and Latvia, the natural gas market of the Baltic region has experienced growing liquidity and competition. This has also significantly changed the role of the Inčukalns gas storage facility in the natural gas supply sector in the Baltic region.

The draft Regulations specify new storage capacity products in comparison with the current regulatory framework and provide for the use of an auction procedure for the reservation of basic storage capacity products (bundled capacity product, two-year bundled capacity product and interruptible capacity product). A storage user will be able to follow a specific auction schedule to choose which of the five scheduled auctions to participate in.

Market participants are invited to express their opinion on the most appropriate type of auction offered in the consultation document: the "last accepted bid" auction (two options) and the "pay as bid" auction.

Līga Kurevska, Director of the PUC’s Energy Department explains: "After assessing the situation elsewhere in Europe, we see that most Member States, such as France, the Czech Republic, Spain, Portugal, Hungary and Italy, reserve storage capacity on an auction basis. There is a widespread practice in Europe to transition to an auction procedure, which ensures the highest possible level of transparency and non-discrimination”.

The draft Regulations also clarify the procedure for the use of capacity products and the transfer of stocks, as well as provides for several other changes. The purpose of the stock transfer product is to incentivise users to withdraw as much natural gas as possible from the Inčukalns gas storage facility by the end of the withdrawal season to ensure a sustainable operation of the storage facility.

The amendments will be aligned with the requirements of the Methodology for the Calculation of Natural Gas Storage Service Tariffs. The draft Regulations are expected to enter into force on September 1, 2020. JSC Conexus Baltic Grid developed and submitted the draft Regulations to the PUC for approval in December 2019.

The consultation document is available on the PUC website. Please send proposals and comments on the draft consultation document to by 16 July 2020.