Published: 2015-09-18 10:18:14 CEST
Latvijas Gāze
Company Announcement

Latvijas Gāze, JSC: Under Energy Law natural gas supplies from other suppliers currently not possible

Having regard of Latvia’s failure to meet the „take or pay” conditions agreed with the natural gas supplier and the incompliance of the Regulator-approved rules with the Energy Law, natural gas supplies from other suppliers are currently impossible.

On September 16, 2015 the Rules on the use of natural gas transmission system and the Rules on the use of Inčukalns Underground Gas Storage Facility approved by the Council of the Public Utilities Commission (Regulator) took effect. The rules lay down the procedure how users are provided system services, including specification of entry and exit points of the transmission system in the territory of Latvia and towards cross-border interconnections.

According to the interpretation provided by the Regulator, this means that consumers are given an option to choose their natural gas supplier. Previously it had been ruled that the introduction of exit points would only be triggered by the conditions specified in the Energy Law and pertaining to the opening of the market on April 3, 2017.

The JSC "Latvijas Gāze" points out that the Directive and the Energy Law provide for a refusal of access in case commitments towards the natural gas supplier are not met. Due to the warm weather conditions of the previous two winters and the increase in the consumption of state-subsidised energy resources, already in 2014 the JSC „Latvijas Gāze” failed to meet the „take or pay” quota set by the supplier (179 million m3 of natural gas), as reported in the financial accounts of 2014. These circumstances constitute a basis for a motivated refusal, as supplies from other sources increase the extent of underperformance of the „take or pay” quota, thus exposing traders to risks of substantial financial losses and jeopardising the security of energy supply.

It should be kept in mind that, although natural gas supplies from the Lithuanian liquefied natural gas terminal are physically possible, currently due to technical limitations the alternate supplier can only cover part of the Latvian winter consumption. Hence, the JSC "Latvijas Gāze" still holds a key role in supplying Latvian consumers with natural gas.

Furthermore, the rules as approved by the Regulator are manifestly contrary to the Energy Law whereby a free choice of trader shall only become available as of April 3, 2017 (unless certain specific conditions take effect earlier) and contrary to the share sale-purchase agreements signed in 1997 whereby the JSC „Latvijas Gāze” is conferred exclusive rights to natural gas transmission, storage, distribution, and sale till April 3, 2017.

Nevertheless, the JSC "Latvijas Gāze" stresses that the company has ensured and will further ensure third-party access to natural gas transit in the territory of Latvia and the provision of these services does not affect the performance of the „take or pay” conditions of Latvia.

         Vinsents Makaris
         Phone + (371) 67 369 144
         E-mail: IR@lg.lv