Court ruling complicates bid for open gas market

The Administrative court has stepped in to the controversy over when Latvia's gas market will be open to competition by saying that gas deliveries from alternative sources are not yet permitted, Latvian Gas representatives told LSM. 

The company representative said that an earlier decision by the public utilities commission (SPRK) - effectively the gas regulator - was against the existing Energy Law and privatization agreements of the Latvian Gas utility. The latest decision is subject to appeal for 14 days. 

The watchdog had added the provision in question, judging that clients have the right to choose a provider now if it's located outside Latvia, but the current Energy law stipulates that the Latvian gas market will open up on April 3, 2017 barring the chance that a connection with a country other than Lithuania, Estonia and Finland has been built before. 

Latvian Gas noted in an irate press release that "[..] the law clearly states that currently  a user in Latvia may not switch to another trader, not least one from outside Latvia. The court also notes that the derogation under the Gas Directive of the European Union – whereby Latvia is allowed to postpone the market opening – has not yet expired."

Latvian Gas has agreed to the opening the gas market on the aforementioned date, but has recently proposed moving the deadline for selling the unbundled transmission and storage entity to the end of 2018. 

Latvian lawmakers at the end of October passed in the first reading draft amendments to the Energy Law providing for the opening of the Latvian gas market, which among other tings includes the unbundling of Latvijas Gaze natural gas utility by separating gas distribution and sale from transmission and storage. The Latvian government adopted the draft amendments in September despite objections from Latvijas Gaze.

The Latvian government on March 3, 2015, decided in principle to start the unbundling of Latvijas Gaze natural gas utility, separating gas distribution and sale from transmission and storage, in 2016.

The government intends to liberalize the Latvian gas market in line with the EU requirements by establishing Latvijas  Gaze's sister company in charge of gas transmission and storage operations next year and separating the companies' ownership on April 3, 2017, upon expiry of Latvijas  Gaze monopoly as provided for in the 1997 agreement on privatization of the natural gas company.

The draft amendments to the Energy Law have been announced at a meeting of state secretary and now have to be passed by the parliament. The management of Latvijas Gaze has been resisting the unbundling, warning of tariff hikes and international lawsuits.

Latvijas Gaze is engaged in purchasing, transportation, storage and distribution of natural gas. The company is quoted on the Secondary List of the Nasdaq Riga stock exchange. The company's key shareholders are Germany's E.ON Ruhrgas International (47.2 pct), Russia's Gazprom (34 pct) and Itera Latvija (16 pct).

The rules passed on September 10 by the SPRK panned out the rules of using the Latvian gas utility system and the Inčukalns underground storage facility. The rules have been criticized by Latvian Gas, which has asked the rules to be reworked. 

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