New law for open competition in gas sector proposed

The government on Wednesday placed a proposal before the Parliament concerning a Natural Gas Market Act with the provision for open competition in the wholesale and retail markets for natural gas from 2020.

For more than 40 years the natural gas consumed in Finland has come from Russia via pipelines. Opening the markets diversifies the supply of natural gas in Finland as in the future the alternatives to Russian gas include, besides biogas and liquefied natural gas, purchasing gas from the Baltic States and, after the connecting pipeline between Lithuania and Poland has been opened, from Central Europe.

According to the draft law, the natural gas transmission network of the transmission network operator will be separated from the production and sale of natural gas by 2020 using the so-called effective unbundling model in the EU Directive on the internal market for natural gas.

This will ensure that the transmission network operator acts as a neutral party maintaining the marketplaces, also in terms of new entrants to the market, and that the development of the natural gas transmission system and market will be guided by a comprehensive perspective on the market as a whole.

Increased competition in the supply of natural and renewable gas creates opportunities for the companies in the sector and gas users to diversify their procurement. New business opportunities are created for companies in the natural gas sector and it will also be easier for new suppliers to enter the market. Competition steers the market to function more efficiently and brings cost savings in the long term.

The aim is also to improve the competitiveness of natural gas. There will be less regulation concerning the wholesale and retail operations and distribution and, for the most part, the specific regulation of the pricing of natural gas will be abolished

According to the proposal, provisions are to be included in the Electricity Market Act and Natural Gas Market Act that limit unreasonable increases of the transmission and distribution fees of electricity and gas. An annual ceiling of 15% is proposed for increases in the fees.

The ceiling does not allow repeated 15% increases. The change means that the kind of excessive raises we have seen so far can be avoided. To ensure reasonable pricing, this will continue to be monitored by the Energy Authority, which will interfere if violations are detected.

The legislation on the natural gas market should enter into force on 1 January 2018, provisions concerning the separation of the activities of the transmission network operator and opening the natural gas market for competition on 1 January 2020, and the Act Amending the Electricity Market Act as soon as possible.