On 1 July 2006, Regulation (EC) No 1775/2005 of the European Parliament and of the Council of 28 September 2005 (the “Regulation”) on conditions for access to the natural gas transportation networks applies directly across the European Union came into effect. As it applies directly, Member States do not have to transpose its provisions into national law.
The background to the Regulation is the somewhat patchy and diverging implementation of the TPA provisions of the Second Gas Directive. The Regulation builds on the work of the European Gas Regulatory Forum (“EGRF”). The EGRF, which meets bi-annually in Madrid, had agreed on a set of non-binding guidelines (commonly referred to as “Guidelines for Good TPA Practice” or the “Guidelines”) in February 2002 which TSOs pledged to respect when receiving requests for TPA.
However, following a significant lack of compliance with the Guidelines, and major differences in the application of the Guidelines between individual system operators, it became necessary to introduce the Regulation to remedy these discrepancies.
The Regulation introduces detailed rules in respect of:
- tariffs and methodologies
- capacity allocation and management of congestion
- trading of capacity rights
- derogations and exemptions
Annexed to the Regulation are Explanatory Notes with detailed provisions on, for instance, principles underlying the capacity allocation mechanisms and the congestion management procedures and their application in the event of contractual congestion.
There is some debate and uncertainty as to the status of these Explanatory Notes, as they are expressed not to be legally binding. However, commentators have suggested that the Explanatory Notes will create a legitimate expectation as to market behaviour. Their exact application and importance is likely to develop over time and in line with any case law.
As the Regulation has only recently entered into force, its impact on the European gas market is yet a matter of conjecture. The European Commission has indicated that they expect the Regulation to have a “harmonising” effect across the European gas market. It is difficult to predict the impact of the Regulation across the EU as a whole as its impact will differ in the various Member States, depending on their level of liberalisation of the national gas markets.