The federal government slaughters the CREG

Last Friday, the federal governement decided to suspend the decision of the CREG on the interim transit tariffs, claiming that this decision is "contrary to the energy interests of Belgium" and would have "an unfavourable impact on the investment policy in the natural gas sector". The suspension increases the value of D&Co (in which Suez holds an indirect stake of 57%) with 500 MEUR to 700 MEUR.

The CREG has now fifteen days to issue a new decision, in which it has to follow the motivated suspension decision of the government.

Today, the federal minister of energy announced that he reached an agreement with the electricity producers. They will contribute to the budget 2008 by paying a tax of 250 MEUR. Suez is the major electricity producer in Belgium (market share of 96%).

Silly coincidence, isn't it?

The federal government slaughters the CREG

CREG's reaction on the negative reactions on transit tariffs

The CREG issued a press release today in which it concluded:

The different decisions of the CREG in relation to the transport and transit tariffs have been taken in the general interest:

1. The natural gas consumers are being protected against a take over price of the transit contracts of Distrigas & Co by Fluxys that might be too high;
2. A return on investment of 9% for a monopoly is a stimulus to keep on investing in the natural gas transmission system; in this way, Fluxys has the perspective for a higher profit margin for the planned investment projects (VTN/RTRbis and North-South);
3. Lower transit tariffs will attract foreign companies with a real chance of synergies on the Belgian market;
4. Belgium gains attractiveness as a transit country for natural gas, which will enforce the security of supply and the Belgian economy;
5. A balanced distribution of the costs of transport and transit will lead to a substantial decrease of interior transport tariffs for all Belgian gas consumers;
6. The non-regulated monopolistic profits of Distrigas&C°, which have never been reinvested in the gas network, will decrease;
7. The profits of the transit activity will finally be Fluxys’s, who will be able to invest in its transmission system.

CREG's reaction on the negative reactions on transit tariffs

Reactions on the reactions on the CREG's decision on transit tariffs

In the competent commission of the Chamber of Representatives, the Minister of Energy stated today:

“This week, the CREG has set the transit tariffs. The spokesman of the CREG was pleased that the tariffs were reduced by 70 to 75%. Nonetheless, as politically responsible person before the representatives of the Nation, I would like to ask the CREG who will pay the transit tariffs. It will be the international transit shippers. To whom will the transit tariffs be paid? To the TSO. What will he do with the money? He will invest in the modernisation and development of the network. He could also decide to set beneficiary transport tariffs for the consumers. Today, thanks to the tariffs set by the CREG, it is cheaper for Gazprom to have its gas transited to Belgium than to have it transported within Belgium. I see no logic in this decision. I do not think that it serves the general interest. I confirm thus that I am not convinced that impartial regulators always work in the general interest. Sometimes, they work in function of doctrines or calculated objectives and it is quite happy that a political authority conserves a certain margin, to be able to restart the debate, like I will do on the transit tariffs in the following days."

Some comments:

• The “doctrine” is laid down in the Second Gas Directive and in the Gas Act, voted an accepted by the representatives of governments and members of parliaments;
• If the role of Zeebrugge is of extreme importance for the government (as set out in the governmental agreement of last April), than lower tariffs will certainly enhance this role;
• If there will be no cross subsidisation between transport and transit, because only the transit shippers pay the transit tariffs, than how would it be possible that transit revenues would support the enlargement or development of the transport network or how the revenues be used for lower transport tariffs;
• The CREG has stated before that the interconnection between the transit and transport network in Belgium, and the limitations on the use of the transit network are burdensome for the development of a liberalised gas market in Belgium;
• Following the CREG’s decision, all but four contracts will not only be subject to regulated tariffs, but also to the code of conduct and the technical regulations on the gas market. This would normally allow shippers to access more easily the transit network, and, given the interconnection, the transport system.

Who’s general interest is the minister talking of?

Reactions on the reactions on the CREG's decision on transit tariffs

Monitoring of costs by the CREG (II)

The chamber of representatives adopted an act granting new powers to the CREG.

The CREG will monitor the compliance of every energy undertaking, supplying electricity or natural gas to off takers situated in Belgium, with the competition regulation and with the fair trade practices. These undertakings, individually or upon concertation with other undertakings, will refrain from all non-competitive behavior or unfair trade practices that could have an impact on the good functioning of the energy market in Belgium. If the CREG would establish an infringement to the competition regulations or the fair trade practices, it will send a report with its findings and with a proposal for remedies to the minister. The CREG will also inform the Competition Council of the content of its report (including the confidential preparatory documents).

With regard to unfair trade practices, based upon the proposal by the CREG, the federal executive can adopt the urgent measures the CREG could take. More generally, the CREG can formulate advices and propose all measures necessary to safeguard the good functioning of and the transparency on the energy market.

The undertakings must adopt an objective accountable ratio of the prices to the costs of the undertaking. The CREG will judge the ratio based upon a comparison of the costs and the prices of the undertaking with the costs and prices of comparable undertakings, if possible also internationally. In the event that an undertaking is a related undertaking, an abuse of dominant position is suspected if it proposed discriminatory prices and/or conditions to non related undertakings.If the CREG determines that there is no objective accountable ratio of the prices to the costs, it will send a report to the minister with its findings and the measures it proposes. The CREG will also inform the Competition Council of the content of its report (including the confidential preparatory documents). Based upon the proposal by the CREG, the federal executive can adopt the urgent measures the CREG could take.

The CREG can request from the undertakings all reports and information it judges necessary to be received within thirty days of its request. If the undertaking does not procure the information within these term, the CREG can visit the undertakings to review the necessary information and documents and can copy these documents.

Monitoring of costs by the CREG (II)

CREG's position on Transit of natural gas

The CREG issued its decision imposing provisional tariffs for the transport, storage and transit activities of Fluxys. It is the first time the CREG decides upon tariffs for transit activities. These activities are being operated by Fluxys for the account of Distrigas & Co.

In its decision, the CREG states that only four transit contracts fall under the scope of article 32.1 of the Second Gas Directive, that sets out that transit contracts which are concluded pursuant to article 3 of the Directive 91/296/EEC remain valid and implemented in accordance with the provisions of said Directive. These contracts are:
- The Contract between Distrigaz NV and WINGAS of 27 November 1996 related to the transit from Zeebrugge to Eynatten;
- The Contract between Distrigaz NV and Ruhrgas of 13 December 1996 related to the transit from Zeebrugge to Eynatten;
- The Contract between Distrigaz NV and Gaz de France of 30 June 1998 related to the transit from Zeebrugge to Blaregnies;
- The Contract between Distrigaz NV and Gaz de France of 27 April 1967 related to the transit from Poppel to Blaregnies.

CREG's position on Transit of natural gas