- Internal Gas Market Directive 2009/73/EC
- Conditions for access to the natural gas transmission networks Regulation (EC) No 715/2009
- Gas Security of Supply Regulation (EU) 2017/1938 – newly adopted
- Commission Decision on the establishment of the annual priority lists for the development of network codes and guidelines for 2017 (2017/89/EU)
- Commission Implementing Decision (EU) 2015/1960 on the establishment of the annual priority lists for 2016 for the development of network codes and guidelines (2015/1960) Related legislation
- Regulation on Conditions for Access to the Natural Gas Transmission Networks (715/2009/EC)
A fully functioning and interconnected internal energy market is crucial for maintaining security of energy supply, increasing competitiveness and ensuring that all consumers can purchase energy at affordable prices. Europe’s cross-border gas networks operate according to rules that regulate who can use them and under what conditions. In the past, these rules were drawn up nationally.
However, with increased interconnections and trade between countries in the internal energy market, EU-wide rules have become increasingly necessary to effectively manage gas flows. These rules, known as network codes or guidelines, are legally binding European Commission implementing Regulations. They govern all cross-border gas market transactions.
MTG being the TSO of the Project will be obliged to prepare and manage the following gas network codes once the project is in full operation:
Interoperability
The Network Code on Interoperability and Data Exchange Rules aligns the complex technical procedures used by network operators within the EU, and possibly with those used by network operators in the Energy Community and other countries neighbouring the EU:
Commission Regulation establishing a Network Code on interoperability and data exchange rules (703/2015/EU)
Balancing
The Network Code on Gas Balancing of Transmission Networks sets out gas balancing rules including the responsibilities of transmission system operators and users. It has applied since 1 October 2015:
Commission Regulation establishing a Network Code on Gas Balancing of Transmission Networks (312/2014/EU)
Capacity Allocation Mechanism
The Network Code on Capacity Allocation Mechanisms in Gas Transmission Systems requires gas grid operators to use harmonised auctions when selling access to pipelines. These auctions sell the same product at the same time and according to the same rules across the EU. It has applied since 1 November 2015:
Commission Regulation (EU) 2017/459 establishing a network code on capacity allocation mechanisms in gas transmission systems and repealing Regulation (EU) No 984/2013
Commission Regulation establishing a Network Code on Capacity Allocation Mechanisms in Gas Transmission Systems (984/2013/EU)
Congestion Management Procedures
The European Commission’s rules on congestion management procedures aim to reduce congestion in gas pipelines. They require companies to make use of their reserved capacity or risk losing it. Unused capacity is placed back on the market:
Commission Decision (EU) 2015/715/EU amending Annex I to Regulation (EC) 715/2009 on conditions for access to the natural gas transmission networks
Commission Decision on conditions for access to the natural gas transmission networks [2012/490/EU]
Transmission Tariff Structures
The network code on harmonised transmission tariff structures for gas enhances tariff transparency and tariff coherency by harmonising basic principles and definitions used in tariff calculation, and also includes a mandatory comparison of national tariff-setting methodologies against a benchmark methodology. It also stipulates publication requirements for information on tariffs and revenues of transmission system operators:
Commission Regulation (EU) 2017/460 of 16 March 2017 establishing a network code on harmonised transmission tariff structures for gas
The Market Test was conducted in April-May 2018 to assess third parties’ interest in contracting capacity of MTGP. A Market Testing Questionnaire (MTQ) was distributed to all companies identified as potential users of the Project containing questions related to the expected profile of usage of the MTGP in the period 2025-2045 in the Italy to Malta direction. Specifically, the MTQ involved questions pertaining to gas flow volumes transmitted to Malta and perceived probability of making a binding booking in the future.
The Market Test was conducted for a period of 20 years post project commissioning (from 2025 up to 2044 – one extra year was added in the MTQ), in accordance with the 2nd ENTSOG CBA methodology draft from June 2017, being the most up to date set of guidelines.
Specifically, the questionnaire was addressed to three types of respondents:
- Shipper / Wholesaler – purchases wholesale amounts of gas and transports it to Malta for use of single large End Consumers and / or resale to Suppliers / Retailers,
- Supplier / Retailer – purchases natural gas from the Shippers / Wholesalers and then resells it to End Consumers,
- End Consumer – procures gas directly from the Shipper / Wholesaler or from Supplier / Retailer for own use and not for resale.
Companies participating in the MTGP Market Test were asked the probability of making a binding offer with the respective probability weights applied to the analysis in order to arrive at the expected values of gas flow volumes via MTGP.
The questionnaire was sent to 134 identified respondents with a response rate of 48%. This is however to be considered within the context that only one key shipper was determined through the questionnaire as being responsible for close to 100% of the gas flows volumes presented in the analysis for use in the power generation sector in Malta.
It is to be noted that the shipper has derived an estimate of the demand forecast taking into account various variables such as developments in population, sectoral economic growth, demand for electromobility, future supply capacity of the island, as well as developments in the renewable energy sector. Also the shipper has indicated a very high likelihood rating in making a binding booking, which has been translated into 100% probability weight in order to determine the overall level of demand.
According to the Market Testing results, the declared annual volumes of gas flowing via the MTG pipeline in the IT->MT direction vary between 4.6 TWh and 6.1 TWh in the period from 2025 to 2045.
Pursuant to Article 12 (3) of the Regulation 347/2013, “as soon as such a project has reached sufficient maturity, the project promoters, after having consulted the TSOs from the Member States to which the project provides a significant net positive impact, shall submit an investment request… to all the national regulatory authorities concerned”, MTG Co submitted the Investment Request, including all the relevant documentation, on 17th April 2019 to the Maltese and Italian NRAs:
- Investment Request key conclusions
- Business Plan
- Project Specific Cost-Benefit Analysis
- Cross-Broder Cost Allocation proposal
- Financial and Economic Model
After the assessment of the documentation, the relevant NRAs have jointly issued the Cross-Border Cost Allocation (CBCA) decision on 4th June 2019, stating that ‘Malta should bear 100% of the costs of the MTGP project and as such, no monetary transfer is needed between Italy and Malta’, which has been published on their respective websites: ARERA Website (Italy) & REWS Website (Malta).
Pursuant to Article 12 (3) of the Regulation 347/2013, “as soon as such a project has reached sufficient maturity, the project promoters, after having consulted the TSOs from the Member States to which the project provides a significant net positive impact, shall submit an investment request… to all the national regulatory authorities concerned”, MTG Co submitted on 17th April 2019 to the Maltese and Italian NRAs, the Investment Request including all the relevant documentation:
- Investment Request key conclusions
- Business Plan
- Project Specific Cost-Benefit Analysis
- Cross-Broder Cost Allocation proposal
- Financial and Economic Model
After the assessment of the documentation, the relevant NRAs have jointly issued the Cross-Border Cost Allocation (CBCA) decision on 4th June 2019, stating that ‘Malta should bear 100% of the costs of the MTGP project and as such, no monetary transfer is needed between Italy and Malta’, which has been published on their respective websites: ARERA Website (Italy) & REWS Website (Malta).
- The aim of the MTGP is to address the key challenges faced by the Maltese gas market.
- The Project has been welcomed by the market with interest and appreciation, as seen in the results of the Market Testing procedure conducted in 2018.
- The MTGP is not expected to be financially viable, as demonstrated by the negative FNPV. The value of the funding gap will need to be covered by additional cash inflows (external support and/or tariff increases).
- The economic performance of MTGP is significantly positive on a EU system-wide level, as demonstrated by the highly positive ENPV.
- The Maltese society is the clear and main beneficiary of the MTGP Project mainly related to tapping into the European gas market, increasing security of supply and sustainability.
- Regional impacts are expected in Italy as a result of the positive monetary transfers from the Maltese society.
- Regional impacts are also expected to the extended EU-region, namely to those countries acting as a transit market for gas heading towards Malta and therefore benefitting from a monetary transfer from the Maltese society.
- The Project is a clear case of how value can be added by interconnecting isolated energy islands to the EU gas market – both for the country hitherto isolated and countries already constituting part of the common market.
- Considering there are no Project net cost bearers to compensate and the value of benefits accruing in Italy fall below the 10% threshold of net benefits defined by ACER, the Project Promoter’s considers that there is no rationale for a CBCA compensation to close a part of the Project’s funding gap.
- Stability of the outcomes has been tested against sensitivities of the key project variables and supplemented by 10,000 Monte Carlo simulations.
CAPACITY
Incremental capacity is defined as capacity above technical capacity at an existing Interconnection Point (IP), the capacity linked to the creation of a new IP, or physical reverse capacity at an existing IP where previously gas could only flow in one direction. The Commission Regulation (EU) 2017/459 of 16 March 2017 establishing a network code on capacity allocation mechanisms in gas transmission systems, sets the EU-wide market-based approach to identify the need for incremental capacity and to allocate both existing and incremental capacity in an integrated way.
2019 MTGP Incremental Capacity Procedure
On the 2nd of July 2019, Melita TransGas Co. Ltd launched the Incremental Capacity Procedure pursuant the Chapter V of the Regulation (EU) NO. 2017/459 of 16th of March 2017, to request incremental capacity for establishing new interconnection points.
Demand Assessment Report
According to the article 26 of the Regulation (EU) NO. 2017/459 of 16th of March 2017 and following the requests received by 26/08/2019, Melita TransGas Co prepared the Demand Assessment Report for the Malta-Italy interconnection point:
Public Consultation Document
In accordance with the provisions set in Article 27 comma 3 of Regulation (EU) No. 2017/459 of 16th of March 2017, the public consultation document has been jointly prepared by SNAM and Melita TransGas to conduct a consultation on the identified draft project proposals to fulfil the received requests in the Demand Assessment Report (DAR) for the Malta-Italy gas interconnection point:
The Public Consultation period concluded on 13th March 2020 and the relevant comments received from the interested stakeholders will be considered in the Project Design finalization phase expected to be completed by the end of October 2020.
The Commission Regulation (EU) 2017/460 of 16 March 2017, also known as “TAR NC”, has established a network code on harmonised transmission tariff structures for natural gas. The TAR NC contributes to achieving transparent and non-discriminatory tariffs, or methodologies used to calculate them, facilitate efficient gas trade and competition, reflect the actual costs incurred and avoid cross-subsidies between network users.
In August 2019, pursuant to Article 6(1), Article 26(1) and Article 27(1) of the TAR NC, the Maltese National Regulatory Authority (“REWS”) delegated the task of preparing the reference gas tariff methodology to Melita TransGas Co. Ltd. as the prospective Maltese Gas Transmission System Operator. The gas tariff methodology will enable to charge the future users of the Melita TransGas Pipeline infrastructure fair and transparent fees for gas transmission to recover the outlays invested in the MTGP project.
The establishment of the tariff methodology is also required for the determination of the reference price in preparation for the binding phase of Incremental Capacity Procedure in accordance with EU Regulation 2017/459 establishing a network code on capacity allocation mechanisms in gas transmission systems.
MTG would like to express gratitude to the stakeholders which invested time and effort to analyse the provided documents and formulate their opinion on the proposed Reference Price Methodology (RPM).
MTG concludes that the proposed RPM has been met with the approval of the market and that the proposed RPM, once adopted, will result in fair, cost-reflective, transparent and non-discriminatory tariffs.
A summary of the Public Consultation including the comments received from the stakeholders and the relative replies can be accessed at the following link:
