Saeima adopts historic gas market liberalization amendments

Saeima today passed amendments to the Energy Law in the final reading to support liberalization of the gas market and rules on breaking up the joint-stock company Latvijas Gaze, reported LETA Thursday.

63 Saeima members voted for the bill, while five For Latvia From The Heart MPs voted against, and 24 opposition members and Rihards Eigims from the Union of Greens and Farmers did not vote.

Last March, Saeima supported liberalization of the gas market and breaking up of Latvijas Gaze from April 3, 2017. Today the law has been supplemented with rules on opening up of the natural gas market, which stipulate that gas prices will be determined by market players.

The law now also describes the rights and obligations of the Public Utilities Commission in supervision of the natural gas transmission company and company in charge of natural gas storage.

According to the Economy Ministry, households will be able to choose their gas suppliers already from next April, including per tariffs set by the Public Utilities Commission, while companies included in a register of natural gas traders will have the right to begin supplying gas to consumers in Latvia.

According to the bill, Latvijas Gaze will have to become two legally-independent companies by April 3, 2017, of which one will be in charge of the gas transmission and storage system, and the other will be responsible for natural gas distribution and sale.

The government will have the right of first refusal to purchase shares in the natural gas transmission and storage company, the natural gas transmission system or any part thereof, and gas storage facilities. The law now also stipulates that, pursuant to agreement with Latvijas Gaze, companies will be able to use infrastructure of Latvijas Gaze to be supplied gas for their needs. This clause has been included in the law so the joint-stock power utility Latvenergo could buy gas from Lithuania.

The law also states that Incukalns underground gas storage facility belongs to the state.

Latvijas Gaze CEO Aigars Kalvitis has said his company does not object to the break-up of the company, but believes it must take place within a "reasonable" period of time.

"The Latvian state owns 1,167 shares in the company. Meanwhile, the company's private investors own 39 million shares. It would only be normal if the interests of the majority shareholders were respected. It is utopian to think that Latvijas Gaze could be completely broken up within nine months," said Kalvitis.

At the moment, there is one company in Latvia - Latvijas Gaze - that buys, stores, transport, distributes and sells natural gas in Latvia. Latvia's natural gas supply system is not connected to any other European Union member state's system, except Lithuania and Estonia, and Russia remains the sole supplier of natural gas to Latvia.

Russia's Gazprom owns 34 percent of Latvijas Gaze shares, Marguerite Fund has 28.97 percent, Uniper Ruhrgas International GmbH - 18.26 percent, Itera Latvija - 16 percent, and minority shareholders - 2.8 percent of Latvijas Gaze shares.

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