Gazprom and Fluxys: no respect for fundamental liberalisation rules?

In the margin of a visit of president Medvjedev to Belgiuml, today Fluxys, the natural gas transmission system operator, and Gazprom signed a protocol agreement with the aim of investigating the economical and legal possibilities of Gazprom using the only available gas storage system in Loenhout for long term storage purposes. Such use will be subject to an amendment of the Gas Act and the approval by the federal energy regulator, the CREG.

At this moment, the storage facilities in Loenhout are first and foremost dedicated for the supply licence holders for supply on the distribution system (article 15/11, § 2, Gas Act). The government may however, upon advice of the CREG, limit the preferential allocation for distribution in case new storage facilities are being developed and provided that the allocation for distribution remains equal to the existing situation.

In the past, Gazprom and Fluxys already tried to obtain dedicated storage capacity for the Russian monopolist. The plans for using the planned Poederlee storage system was blocked by the CREG. In its advice of 17 April 2007, the CREG stated:
“One would miss the opportunity to remove barriers for market entry of the several existing and potential suppliers in Belgium and to increase or even maintain the national security of supply. (…) Refusing access to the most active market participants in Belgium (…) risks endangering the development of competition in the Belgian gas market on the long run. (…) The CREG notes that no open season procedure has been organised and that the sponsor of the project has decided to dedicate all available capacity to the main shareholder. However it is not proven that third party access to the capacity or part of it, is necessarily to be excluded for economical reasons.”

In this case, the protocol agreement is not related to new to build storage facilities, but to existing ones. For existing storage facilities, third party access, based upon regulated tariffs and transparent and non-discriminatory procedures is the only possibility.

From a legal perspective, assigning a privilege for using the storage facilities by one market player is unacceptable and contrary to the fundamental principles of European and internal law.

Gazprom and Fluxys: no respect for fundamental liberalisation rules?

Renewable funds financed by the nuclear operators

At the end of 2009, the federal government requested from the nuclear operators (GDF Suez/Electrabel and EDF/SPE) to set up a fund with a working capital of EUR 250M for the support of renewable energy.

It turns out that both operators have each set up a fund.

The GDF Suez/Electrabel fund, BELGreen, has a working capital of EUR 213,300,200. GREENSTREAM is the fund of the EDF group, with a working capital of EUR 20,000 to be increased to EUR 36,699,800.

Four independent directors in the board of these funds and the government representative to these funds cannot be appointed in the absence of a new federal government.

Renewable funds financed by the nuclear operators

Belgian Constitutional Court rules on transit of natural gas

Today, upon request by the Belgian energy regulator CREG the Belgian Constitutional Court decided to annul the Act of 10 March 2009 modifying the Gas Act.

As one might recall, the Act of 10 March 2010 aimed at i) the establishment of a tarifary system for transit activities in Belgium different from transport activities in Belgium and (ii) interpreting indirectly article 32.1 of the Second Gas Directive and the scope of the transit parties falling under the provisions of article 3 of the Transit Directive.

The Constitutional Court annulled both the different tarifary system and the interpretation of the parties having concluded historical transit contracts falling under the sanctity of contracts rule.

With regard to the different tarifary system, the Court decided that the 2005 Gas Regulation and the Second Gas Directive do not anymore distinguish between (internal) transport and (border to border) transit. The establishment of different tarifary systems for both activities infringes the non-discrimination principle.

With regard to the interpretation of article 32.1 Second Gas Directive and article 3 of the Transit Directive, the Court explicitly stated that Annex 1 of the Transit Directive, listing the companies responsible for high pressure natural gas grids, is exhaustive. Moreover, the Court decided that the Annex not only lists the companies responsible for high pressure natural gas grids, but also the companies responsible for import and export of natural gas! The Belgian Constitutional Court thus states that only contracts related to transit activities concluded before 1 July 2004 between the companies listed in Annex 1 of the Transit Directive fall under the scope of article 32.1 of the Second Gas Directive. This interpretation might be important in discussions on the transit regulation in other EU member states.

The consequences for the historical transit contracts are multiple:
- Tariffs to be paid before 1 January 2010: the contractual tariffs apply to four historical contracts (E.ON Ruhrgas and WINGAS Zeebrugge-Eynatten forward flow, GDF Zeebrugge-Blaregnies forward flow and GDF 's-Gravenvoeren-Blaregnies) that have been marked as such in the May and June 2008 decisions of the CREG. For all other contracts, both Fluxys tariff proposal and the final CREG tariff decision discriminate between transit and transport contracts and are thus invalid. For these contracts one could expect that failing any valid tariff decision, the contractual prices remain applicable. However it will be important to know the outcome of the procedures initiated by Fluxys against the tariff decisions of May and June 2008 before the Court of Appeal, which in turn has raised a prejudicial question to the Court of Justice.
- Tariffs to be paid as from 1 January 2010: the exemption for the aforementioned four historical contracts remains valid. The arguments of the CREG relating to the implicit provision of the Gas Regulation was not withheld by the Constitutional Court. For all other contracts, the regulated tariffs apply, until a decision by the Court of Appeal at the request of WINGAS, Distrigas or BG International.

Belgian Constitutional Court rules on transit of natural gas

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New rules on transit of natural gas published in the Belgian official journal

On 29 April 2010, parliament adopted a majority proposal to amend the Gas Act and to withdraw the Act of 10 March 2009. This Act is published in the Moniteur belge/Belgisch Staatsblad of today.

The 2009 Act provided for a different tariff regime for transit activities compared to transport activities. Following fierce reactions from the Belgian energy legislator CREG and letters from the European Commission, parliament decided to withdraw this differentiation.

The 2010 Act also abolishes the interpretation of article 15/19, reiterating the exemption of article 32.1 of the Second Gas Directive for historical transit contracts, concluded on the basis of the Transit Directive 91/296/EEC.

Finally, the 2010 Act stipulates that the exemption for those historical contracts expires on 2 March 2011. The executive can decide on an earlier date. Given the resignation of the federal government and the upcoming elections and coalition talks, this appears unlikely.

New rules on transit of natural gas published in the Belgian official journal

Decision on Belgian internal burden sharing agreement postponed

The resignation of the federal government also has consequences for the agreement of the internal burden sharing agreement between the federal state and the three regions in view of reaching the EU climate targets. This decision (and the communication of this decision to the European Commission) had to be reached on 30 June 2010. The European Commission accepted a postponement until 30 December 2010.

Decision on Belgian internal burden sharing agreement postponed

The postponement of the nuclear phase-out postponed

Due to the resignation of the federal government the legislative decision to amend the Act of 2003 that set the phase-out of the nuclear power plants is postponed awaiting the result of the general elections on 13 June 2010.

In October 2009, the federal government reached an agreement with GDF Suez on the postponement of the nuclear phase-out for the three eldest nuclear power plants (Doel I, Tihange I and Doel II). By way of compensation it was agreed that the nuclear operators (GDF Suez and EDF-SPE) would be a yearly contribution of 215-245 million euro until 2014. As from 2014 the yearly contribution would be set by a special follow-up committee. GDF Suez also promised to maintain employment in Belgium and to invest in renewable energy.

Earlier this year, the European Commission send a five pages long questionnaire to the Belgian government, raising substantial questions on the agreement in principle. The Belgian minister of energy responded to this questionnaire beginning of April.

Although the minister invoked a force majeure situation (insufficient production capacity if the three plants would shut down in 2015) and thus seemed to head for a prolongation of the life cycle by means of a simple royal decree, the minister clearly indicated in its response to the European Commission that the agreement in principle would have to be translated into a formal legislative text, adopted by parliament. The minister was preparing a draft text.

The resignation of the government makes that the resigning minister cannot propose such legislative text to its colleagues in the resigning government. The issue of the nuclear phase-out will be part of the negotiations in view of the formation of a new government.

Some political parties (amongst others the Flemish social-democrats and the Flemish and Walloon green parties) have indicated that they will oppose the execution of the agreement between GDF Suez and the resigning government. From their side, the nuclear sector indicated that the agreement would be binding in principle and that a new government cannot alter the principle of postponement engaged upon by the former coalation.

The postponement of the nuclear phase-out postponed