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Gas Distribution Tariffs
Methodologies, International Practice and Evaluation of the Status Quo in Bosnia and Herzegovina
14th of December 2018
Dr. Daniel Grote, Waisum Steinborn-Cheng, Nebojša Filipović (DNV GL)
Agenda
Introduction and Objectives01
Principal options for gas distribution tariff
structures02
International experience03
2
Status Quo in Bosnia and Herzegovina04
Gap Analysis and Discussion05
Next Steps06
Coffee Break
Lunch (12:30)
Introduction and Objectives
Regulatory steps for the determination of network tariffs
4
Actual cost of company
Cost related to
gas network activities
Regulatory allowed revenues
Regulatory provisions on unbundling
Regulatory assessment of
cost efficiency
Analysed in
separate
sub-projects
Allocation of network cost
Network tariffs
Sum of network
tariffs needs to
match allowed
revenues
Analysed in
this sub-project
Regulatory provisions for cost allocation
Regulatory provisions on
network tariff structure
Cost related to other
(competitive) activities
Principal options for gas distribution tariff structures
Gas distribution network cost categories
6
One-off cost per
connection
Recurring cost per
connection
Capacity dependent
cost
Cost dependent on
distributed volumes
Shared service cost
Network connection
Network expansion (attributed to individual connection)
Maintenance of connection
Meter and Metering
Billing
Management services (attributed to network)
Energy used at gas pressure
regulating stations
Capital expenditures
of network assets
Network maintenance
Asset documentation / register
Network planning
Dispatch
Incident management
Asset
related
Gas odorization
Gas distribution network tariff elements
7
Network connection charges
(for the access of the user to the
network)
Use of network tariffs
(for the transport of gas across the
network)
Metering charges
(for installation, operation,
maintenance and reading of meters)
Shallow/deep connection charges
Individual/standardized connection charges
Capacity, commodity and fixed charges
Differentiation of tariffs by type of user
Locational tariffs
Time dependent tariffs
Could be part of standing (fixed) charge
Separate metering charge
Possible options for use of distribution network tariffs
8
Type of charge Type of userLocational
differentiation
Time
dependent
Capacity
Charge
Commodity
Charge
Standing / Fixed
Charge
Annual
consumption
(intervals or
bands)
Used capacityUniform tariff
(post stamp)
Pressure level
Flat tariff
Seasonal tariffsMetered /
non-metered
capacity
Connection
point
Other DSO
located
downstream
Time-of-use
tariffs
Cost allocation for different gas distribution network structures
9
Network area 1 Network area 2
Low pressure
Medium / high
pressure (blue lines)
Differentiation by pressure level Differentiation by network area
Differentiation by customer type
Industrial
customersHouseholds
(local distribution)
Cost allocation – from costs to tariffs
10
Cost categories
Sum of all cost categories
= allowed revenues
Depreciation
Return on assets
Operating Expenditures
(Labor, Material, Services)
Cost centers Network tariffs
Network costs
Connection
Cost centre connection
Billing
Cost centre m+b
Cost centre network
Metering
High pressure pipelines
Medium pressure pipelines
Low pressure pipelines
Regulating stations
Metering stations
Connection charge
Individual
(connection specific)
Standing (fixed) charge
Use of network charge
Customer group 1
Customer group 2
Customer group N
•
•
•
Capacity and
commodity
charges
Customer group 1
Customer group N
•
•
Standardized
• •
International experience
Requirements of EU Acquis on gas distribution tariffs
12
Only general requirements for the determination of gas distribution network tariffs
Regulatory authority to set or approve network tariffs or the tariff calculation
methodology based on a proposal by the gas DSO (or a proposal of the DSO and
the network users)
Regulatory authority to ensure that distribution network tariffs are non-
discriminatory and cost-reflective and are applicable objectively and without
discrimination to all network users
Methodologies for calculation of network tariffs to be approved by regulatory
authority prior to entry into force
Network tariffs and methodologies to be published prior to their application
Gas Distribution Network Tariffs in Europe (I)
Source: Study on tariff design for distribution systems (DG Ener, European Commission, Dec. 2014)13
Gas Distribution Network Tariffs in Europe (II)
14Source: Study on tariff design for distribution systems (DG Ener, European Commission, Dec. 2014)
Gas Distribution Network Tariffs in Germany (I)
15
Gas distribution tariff levels and structure set by each DSO (>700) based on allowed
revenues of the DSO and considering provisions of the gas network ordinance
Capacity and a commodity (energy) charge to apply for distribution network users with
metered capacity
Only a commodity (energy) charge to apply for standard load profile customers
(without metered peak capacity)
Optionally a monthly standard (fixed) charge may apply
Shares of different types of network charges should be in an “appropriate relation”
Distribution network tariffs need to be independent of pressure level network users is
connected to and independent of distance between point of entry and exit
Gas Distribution Network Tariffs in Germany (II)
16
Gas distribution tariff structure of Westnetz (large DSO in the west of Germany)
Tariff ID Consumption rangeStanding charge
(in € / month)
Energy already paid for by
standing charge
Commodity charge
(in €ct / kWh)
SZ-1 0 kWh – 1,000 kWh 0 0 kWh 3.1656
SZ-2 1,001 kWh – 4,000 kWh 2.6380 1,000 kWh 1.9433
SZ-3 4,001 kWh – 10,000 kWh 7.4693 4,000 kWh 1.5644
SZ-9 600,001 kWh – 1,000,000 kWh 540.1379 600,000 kWh 0.9189
SZ-10 > 1,000,001 kWh 846.4379 1,000,000 kWh 0.8137
• •
Standard load profile customers
Customers with metered peak capacity
Tariff ID Consumption rangeMinimum charge
(in €/year)
Energy already paid for by
minimum charge
Commodity charge
(in €ct/kWh)
RZ-A1 0 kWh – 1,500,000 kWh 0 0 kWh 0.236
RZ-A2 1,500,001 kWh – 2,500,000 kWh 3,540 1,500,000 kWh 0.177
RZ-A7 20,000,001 kWh – 1,000,000,000 kWh 25,460 20,000,000 kWh 0.097
RZ-A8 1,000,000,001 kWh – 10,000,000,000 kWh 976,060 1,000,000,000 kWh 0.097
• •
Tariff ID Consumption rangeMinimum charge
(in €/year)
Capacity already paid for
by minimum charge
Capacity charge
(in €/kW/year)
RZ-L1 0 Kw – 801 kW 0 0 kW 13.328
RZ-L2 802 kW – 801 kW 10,675.782 801 kW 9.852
RZ-L7 7,377 kw – 21,0787 kW 61,426.334 7,376 kW 7.898
RZ-L8 21,0788 kw – 1,516,504 kW 1,667,966.412 21,0787 kW 7.912
• •
Source: website of Westnetz (2018 tariffs)
Gas Distribution Network Tariffs in Germany (III)
17
Household customers(23,500 kwh/year)
Commercial customers(116 MWh/year)
Industrial customers(116 GWh/year)
below
1ct/kwh
above
2.2 ct/kwh
below
0.25 ct/kwh above
0.55 ct/kwh
below
1ct/kwhabove
2.2 ct/kwh
Source: BNetzA Monitoring Report 2018
Gas Distribution Network Tariffs in France (I)
Properties of gas distribution in France
− Gas DSOs operate only low pressure network
(regional transportation networks operated by two French gas TSOs)
− Gas distribution networks owned and operated by
GRDF and around 30 smaller local gas DSOs
− GRDF operates a 198,886 km long pipeline network,
distributing 96% of natural gas demand to customers
located within 9,541 French municipalities
French regulatory authority (CRE) sets gas distribution network tariffs
separately for each DSO corresponding to allowed revenues of DSO
Distribution tariffs set for duration of regulatory period (4 years) with
annual updates according to predefined formula (accounting for inflation
and elements not controlled by the DSO, e.g., the distributed volume
Natural gas DSOs in France
Gas transportation network
18
Gas Distribution Network Tariffs in France (II)
Tariff option
Consumption rangeStanding charge
(in €/year)Commodity charge
(in €/MWh)Capacity charge(in €/MWh/day)
T1 <6 MWh / year 41.16 28.70 -
T2 6 <x <300 MWh / year 142.20 8.34 -
T3 300 <x <5000 MWh / year 854.64 5,81 -
T4 > 5000 MWh / year 15,795.60 0.82 204.48
19
Tariff option
Consumption rangeStanding charge
(in €/year)Commodity charge
(in €/MWh)Annual distance charge (in €/m)
TP> 5000 MWh / year and eligibility for
a direct connection to the transmission network
36,729.72 102.00 66.96
Elements of the gas distribution network tariff structure:
− 4 customer groups differentiated by consumption range
− standing and commodity charge (large consumers also capacity charge)
− distribution network tariffs equalized within network served by a DSO
→ uniform tariffs apply across all areas served by GRDF
Source: GRDF website (tariffs for 2018)
Gas Distribution Network Tariffs in Serbia (I)
20
Properties of gas distribution in Serbia
− Distribution network length: 16,961 km
− 33 gas distribution companies
− Number of active connections: 270,626
− Household connections: 257,476
− Largest distributor: Srbijagas 8,295 km
Gas transportation network
Gas distribution network tariffs based on decision by regulatory authority
for Serbia (AERS): Decision on Methodology for Setting Natural Gas
Distribution Use-of-System Charges (legally binding since 1.1.2017
Elements of the Decision:
− Regulatory method for the access to the gas distribution system
− Categories and groups of network users
− Determination of allowed revenues
− Determination of tariff elements and tariffs
Gas Distribution Network Tariffs in Serbia (II)
Definition of customer categories defined by:
− Operating pressure and maximum capacity of metering device
− Uniformity coefficient of gas consumption
Category 1 (K1) p < 6 bar Category 2 (K2) 6 < p < 16
Small consumption
Off peak consumption Off peak consumption
Uniform consumption Uniform consumption
Non-uniform consumption Non-uniform consumption
Application of a commodity (energy) charge (in RSD/m³) and a capacity charge (in RSD/m³/day/year)
Application of a commodity (energy) charge only for small consumers
Within the same customer groups, the same commodity and capacity charge apply
Allocation of maximum allowed revenue commodity and capacity charge by 70:30 21
Gas Distribution Network Tariffs in Serbia (III)
22
Applied since Tariff element
Customer group
“Category 1" (p < 6 bar)
“Small
consumption"
“Off peak
consumption
К1"
“Uniform
consumption
К1"
“Non-uniform
consumption
К1"
01. October 2017
Energy
(RSD/m3)10.26 7.10 7.10 7.10
Capacity
(RSD/m3/day/year)146.19 310.66 365.48
01. October 2015
Energy
(RSD/m3)9.99 7.10 7.10 7.10
Capacity
(RSD/m3/day/year)233.89 284.01 334.13
01. October 2014
Energy
(RSD/m3)4.43 3.04 3.04 3.04
Capacity
(RSD/m3/day/year)77.75 94.41 111.07
Source: AERS website
Example for gas distribution tariffs
Gas Distribution Network Tariffs in Croatia (I)
23
Gas transportation network
Properties of gas distribution in Serbia
− Distribution network length: 19,153 km
− 35 gas distribution companies
− Total number of connected metering points: 659,914
− Consumption ≤ 100,000 kWh: 654,148 metering points
− Consumption ≥ 100,000 kWh: 5,766 metering points
Gas distribution network tariffs based on decision by regulatory authority
for Croatia (HERA): Methodology for the Determination of the Amount of
Tariffs for Gas Distribution (legally binding since 15 June 2018
Elements of the Decision:
− Regulatory model for gas distribution
− Formulas and elements for allowed revenue calculation
− Determination allowed revenues
− Determination of tariff elements and tariffs
Gas Distribution Network Tariffs in Croatia (II)
24
Croatian regulatory authority (HERA) sets gas distribution network tariffs separately for each DSO
corresponding to allowed revenues of DSO
12 customer categories (TM1 – TM12) defined by annual gas consumption
Application of a commodity (energy) charge (in HRK/kWh) and a fixed charge (in HRK)
Customer group Annual gas consumption of metering point
TM1 ≤ 5 000 kWh
TM2 > 5 000 kWh ≤ 25 000 kWh
TM3 > 25 000 kWh ≤ 50 000 kWh
TM4 > 50 000 kWh ≤ 100 000 kWh
TM5 > 100 000 kWh ≤ 1 000 000 kWh
TM6 > 1 000 000 kWh ≤ 2 500 000 kWh
TM7 > 2 500 000 kWh ≤ 5 000 000 kWh
TM8 > 5 000 000 kWh ≤ 10 000 000 kWh
TM9 > 10 000 000 kWh ≤ 25 000 000 kWh
TM10 > 25 000 000 kWh ≤ 50 000 000 kWh
TM11 > 50 000 000 kWh ≤ 100 000 000 kWh
TM12 > 100 000 000 kWh
Gas Distribution Network Tariffs in Croatia (III)
25Source: HERA website
Example for gas distribution tariffs
Coffee Break
Situation in Bosnia and Herzegovina
Gas Distribution in Bosnia and Herzegovina
28
Border BiH-Srbija
Zvornik Stan
-distribution-
~3,42 mill. Sm3/year
Main metering and
regulating station
Sarajevogas Sarajevo
-distribution-
~143 mill. Sm3/year
Sarajevo-gas Lukavica
-distribution-
~2,2 mill. Sm3/year
Metering station
Mittal Steel Zenica
-industrial consumer-
~40,6 mill. Sm3/year
Visokogas
-distribution-
~3,9 mill. Sm3/year
Gaspromet Pale, 22 km
-transmission-
Zvornik (Karakaj)
Sarajevo-gas Lukavica, 40 km
-transmission-
Kladanj
BH-Gas Sarajevo, 132 km
-transmission-
Sarajevo
Zenica
IGM Visoko
-industrial consumer-
~5,36 mill. Sm3/year
TC Kakanj
-industrial consumer-
~0,71 mill. Sm3/year
Željezara Ilijaš
-industrial consumer-
~ 0,19 mill. Sm3/year
Other industrial consumers
in area Zvornik
~ 0,87 mill. Sm3/year
BH-Gas Sarajevo,
-import-
Travnik
Gas pipeline Zenica -
Travnik, 40 km
-transmission-
▪ Properties of gas distribution in Bosnia and Herzegovina
− Gas distribution networks developed in a few cities (Sarajevo, Zvornik and Visoko)
− Bijeljina municipality is in the process of gasification, establishing a gas distribution network
− Zenica municipality is planning to gasify and establish a gas DSO
− Gas distribution regulated on entity level (i.e. Federation BiH and Republika Srpska)
Gas transportation network
Gas distribution network
Sarajevogas Sarajevo
Legislation for gas distribution in Federation BiH
29
▪ Currently no legislation regulating gas networks (incl. gas distribution tariffs) adopted
▪ No entity regulatory authority for gas sector established (regulation by Federal Ministry of Energy, Mining
and Industry (FMERI) and on cantonal level)
▪ Adoption of Draft Gas Law would implement the following:
− Establishment of Energy Regulatory Commission as regulatory authority for gas in Federation of BiH
− Entity regulator to develop and to adopt network tariff methodology (use of network and network
connection)
− Entity regulator to approve tariff rates for non-eligible customers and connection fees
− Establishment of objective, transparent, and non-discriminatory distribution network access for all
users
Gas Distribution Tariffs in Federation BiH
30
Gas end-users tariffs of Sarajevogas Sarajevo applicable as of 29 October 2015
Gas end-users tariffs of Visokogas applicable as of 1 August 2017
Source: Sarajevogas and Visokogas websites
▪ No separate distribution and retail supply tariffs determined and published
Legislation for gas distribution in Republika Srpska (I)
31
▪ Regulatory Commission for Energy of Republika Srpska (RERS) to adopt
− network tariff methodology
− to approve network tariffs calculated based on the methodology
▪ Regulatory Commission for Energy of Republika Srpska (RERS) to adopt
− connection tariff methodology
− to approve connection tariffs calculated based on the methodology
Law on Gas
▪ According to the Methodology connection tariffs are to be calculated based on the maximum capacity of
the connection (in Sm³/h) and the unit cost of the capacity (in BAM/Sm³/h)
▪ Further regulatory provisions on how regulated connection cost are to be determined
Connection tariffs are regulated by Rulebook on methodology for calculation of costs of
connection to the distribution or transport system of natural gas
Legislation for gas distribution in Republika Srpska (II)
32
▪ Network tariffs to be based on allowed revenues
Rulebook on tariff methodology and tariff system for distribution of natural gas and
natural gas supply
▪ Definition of three gas distribution network tariff elements:
− Capacity (KM / Sm³ / day / year)
− Consumption (KM / Sm³)
− Metering point (fixed value in KM)
▪ Distribution system users are classified into following categories:
− Industrial customers
− District heating systems
− Commercial customers
− Household customers
▪ Possibility to define network tariffs dependent on the consumption time
Legislation for gas distribution in Republika Srpska (III)
33
Rulebook on tariff methodology and tariff system for distribution of natural gas and
natural gas supply
▪ Capacity charges to be calculated based on:
− maximum daily consumption in the past year or planned consumption in the next years
(industrial and district heating customers, optional for commercial customers)
− maximum capacity of the connection, i.e., the metering device (commercial customers)
▪ Fixed cost of operation and maintenance of the distribution system to be allocated to capacity charges
▪ Variable cost of the distribution system to be allocated to commodity charges
▪ Costs of maintenance of the connection, including the metering devices, are to be allocated to metering
(fixed) charges
▪ Possibility to define network tariffs dependent on the consumption time
▪ RERS to publish decisions on network tariffs and tariff levels
Gas Distribution Tariffs in Republika Srpska
34
Customer GroupCommodity charge
(in KM / m³)
Fixed charge
(per metering point in KM /
month)
Households 0.1133 3.00
Commercial systems 0.1160 4.00
Industrial 0.0846 7.00
District heating 0.0955 7.00
Source: RERS website, , Decision on approval of tariffs for gas distribution and gas supply of tariff customers, April 2012
Gas distribution network tariffs for Zvornik Stan applicable since June 2012
Gap Analysis and Discussion
Gap Analysis (I)
36
Area Federation BiH Republika Srpska
Regulatory authority in charge of
gas distribution network tariffs
▪ No regulator for gas
▪ Would be implemented with
adoption of draft law
▪ yes, defined in Gas Law
Methodology for determination of
connection tariffs▪ Not adopted ▪ yes, adopted
Methodology for determination of
use of network tariffs▪ Not adopted
▪ yes, adopted
▪ Customer groups not well
defined
▪ Not accordingly applied in
practice
Gap Analysis (II)
37
Area Federation BiH Republika Srpska
Definition, application and
publication of a cost allocation
methodology
▪ Not in place
▪ Partially defined in Rulebook
▪ Practical guidance on
allocation of cost categories
to tariff elements missing
Publication of gas distribution
network tariffs
▪ No separate distribution
tariffs published
▪ Distribution tariffs only
published for Zvornik Stan (not clear whether tariffs from 2012
are still valid)
▪ No distribution tariffs
published for Sarajevogas
Lukavica
Next Steps
Next Steps
39
Integrate feedback from stakeholders in interim
report on distribution tariffs
Interim report shared with stakeholders,
opportunity to comment in writing
Development of recommendations
Presentation and discussion of recommendations
at 2nd meeting (first quarter 2019)
Submission of final report
(integrating stakeholder feedback)
Hvala!
Dr. Daniel Grote
Senior Consultant, Energy Markets & Technology
DNV GL Energy
DNV GL Energy Advisory GmbH
Zanderstr. 7
53177 Bonn
Phone: +49 228 44690 49
E-Mail: [email protected]
Principles and criteria for gas distribution network tariffs
41
Pricing principles
Evaluation criteria
cost recoverynon-
discrimination
economic
efficiencytransparency
and simplicity
balance stability
and flexibility
cost causationincentives for
network users
transparency
and simplicity
practicability /
administrative
burden
distributional
impacts
Gas Distribution Network Tariffs in Europe
42
Country Pressure LevelAnnual
ConsumptionUsed Capacity
Meter
Capabilities
Austria X X X
Czech Republic X X
Finland Depends on DSO
France X
Germany X X
Hungary X
Ireland X
Italy X
Netherlands X X
Spain X X
Sweden Depends on DSO
Great Britain X
Key variables used to define gas distribution tariffs