ENTSOG Tariff NC - Implementation Document 2nd Edition

ARTICLE 4(3) CAPACITY- AND COMMODITY-BASED TRANSMISSION TARIFFS

Responsibility: subject to consultation per Article 26(1) by TSO/NRA, as NRA decides; subject to decision by NRA; ACER analysis of the consultation docu- ment for Article 4(3)

General Article 4(3) of the TAR NC establishes the rule that by default, transmission tariffs must be capacity-based. The only allowed exceptions are two commodity-based transmission tariffs: (1) a ‘flow-based charge’ which may be established to cover costs that are mainly driven by the volume actually flowed; and (2) a ‘complemen- tary revenue recovery charge’ (‘CRRC’) to manage revenue under- and over-recov- ery. See below for details. The composition of a TSO’s transmission services revenue may include capacity- based transmission tariffs derived from the RPM, and commodity-based transmis- sion tariffs. Note that the capacity-commodity split of the transmission services revenue can be done before applying the RPM (ex-ante) , or after (ex-post) as with CRRC. TSOs incur certain costs that vary with the quantity of gas flowed. A key example is shrinkage gas, the main component of which is compressor fuel. As gas demand increases, the TSO has to switch on more compressors to maintain system pressures, and therefore requires more gas or electricity for compressor fuel. A flow-based charge provides one way of recovering the associated costs from network users. According to Article 4(3)(a)(ii), the charge must be the same at all entry points and the same at all exit points, thus allowing a distinction between all entry points and all exit points but not between separate entry points or separate exit points. The TAR NC clarifies the ability to express the flow-based charge either in monetary terms, or ‘in kind’ in terms of gas volumes or energy amounts. When charged in kind, network users must supply the TSO a flow-related quantity of gas to cover some cost elements directly related to volumes injected or withdrawn from the network, such as the costs of operating compression stations, losses, shrinkage and unaccounted for gas. The NRA sets or approves the charge in advance, which applies as a percentage to volumes injected/withdrawn by network users at entry/exit points. Depending on the particular system, such a charge can provide advantages for TSOs, network users and the system in general, mainly in terms of simplicity and cost-reflectivity. For example, if the NRA sets or approves a charge of 0.017% for ‘own gas use’ (e. g. gas used when operating a compression station) and a network user injects 25,000kWh of gas into the network, the flow-based charge in kind will be 4.25kWh of gas which will be taken off the overall 25,000kWh at a certain point. Flow-based charge

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TAR NC Implementation Document – Second Edition September 2017