A new paper has been added to our OGEL 5 (2019) Special Issue on "Natural Gas Pipeline Construction and Regulation"

EU Gas Market Regulation of Offshore Transmission Lines: The Derogation for Completed Projects (Art. 49a of Directive 2009/73)

Introduction

(Addendum 16/01/2020) By Directive (EU) 2019/692 the EU legislator has amended the Gas Directive 2009/73/EC with effect of 23 May 2019. Key elements of the regulatory regime of Directive 2009/73, namely unbundling, third party access, and tariff regulation, shall now also apply to gas transmission lines between a third country and an EU Member State.

It is already questionable how this amendment can be considered to enhance competition within the internal market. By definition, such third-country transmission lines do not connect Member States. Their sole effect is to increase market volume, which fosters competition and reduces prices on downstream markets. However, it is not the purpose of this article to elaborate in general on why the soundness and appropriateness of the new regulatory approach is questionable. Rather, we venture to analyze the impact, which the entering into force of the new legislation can have on third-country transmission lines that were conceptualized and financed under the old regulatory regime and are now being forced under a new and unforeseeable regulatory standard.

The new framework can bear significantly on the economic assumptions underlying such third-country transmission lines. Major gas infrastructure projects are characterized by special features that must be taken into consideration when defining the regulatory framework in which they operate. The significant volumes of financing often requires the conclusion of long-term agreements on the exclusive use of pipelines in order to make sure that sufficient income can be generated to recover the construction cost. Therefore, such long-term exclusive agreements are often linked to financing commitments of investors. Such financial structure would not be compatible with the normal requirements under EU gas market regulation. The direct extension of regulation, without any transition period, to also cover gas infrastructure projects already planned or financed, being under construction, or even in operation may, therefore, counteract the financing structure of such projects and thereby endanger their investment and eventually their efficient operation. This applies to gas transmission lines between EU Member States as well as to pipelines from a third country into an EU Member State.

You can download the paper here www.ogel.org/article.asp?key=3875

Footnotes omitted from this introduction.