Albgaz Legislation Changes Recommendations

Energy Community Secretariat recommends changes to primary legislation before the Albanian TSO Albgaz can be considered fully independent of the Ministry

 

Introduction

The Energy Community Secretariat has recently published its opinion of 2 October 2017 on the certification of the Albanian natural gas transmission system operator Albgaz. It supports the certification of Albgaz in line with the Albanian regulatory authority’s (ERE) Preliminary Decision, subject to several requests for additional elaboration and conditions.

The Gas Directive 2009/73/EC transposed into national law, requires gas transmission to be unbundled, meaning that it has to be separated from other activities in the natural gas sector not related to the transmission. The national gas law has adopted the ownership unbundling model, which implies ownership of the natural gas transmission system by the designated TSO and the TSO’s independence from any natural gas and/or electricity production and supply activities. The same entity cannot exercise control on generation, production and/or supply activities, and at the same time directly or indirectly exercise control over any right over a transmission system operator or over a transmission system.

 

Background

In the Preliminary Decision, ERE found Albgaz to fully comply with the requirements of the provisions on ownership unbundling in conformity with the gas law. However, this was a conditional approval subject to compliance with some requirements and criteria imposed to the TSO.

The Secretariat supports the compliance of the Preliminary Decision with the unbundling model, but raises the following matters:

  • Albgas needs to be the owner of the transmission assets;
  • Albgas needs to perform the functions and tasks of a transmission system operator. The key elements for an undertaking to be considered a TSO are the operation, the maintenance and the development of a transmission network. A regulatory authority’s assessment in this respect needs to establish in particular whether a given undertaking is by law and factually performing the core tasks of a TSO, and whether it disposes of the necessary (human, technical, financial) resources for this.
  • control over and exercising any rights in Albgas need to be separated from control over and exercising any rights in production or supply of natural gas and electricity. The Ministries representing state’s shares in both Alpetrol and Albgas are considered to be a potential a conflict of interest. The separation of control between the two public bodies (Albpetrol and Albgas) must be effective in the sense that it ensures the full independence of the public body controlling a TSO from any other entity controlling generation and supply activities.

 

Status of the Albanian TSO

At the date of the Secretariat`s Opinion, there was no sufficient evidence available to prove that Albgaz was de jure owner of all transmission assets. Nevertheless, Albgaz explained that the ownership registration of transmission system assets in the name of the TSO was still ongoing and that certificates by the Real Estate Registration Office (cadastre) had not yet been issued in the name of Albgaz.

About the task and responsibilities of the TSO, the Secretariat acknowledged the compliance of the Albanian domestic legislation with EU Directives and that all technical resources and services necessary to perform natural gas transmission activities have already been transferred from Albpetrol to Albgaz. On the other hand, the procedure for adoption of a transmission tariff methodology, which is a precondition for the issuance of a Final Decision for the certification of the TSO, ensures the satisfaction of its tasks and responsibilities by Albgaz.

To fully achieve prevention of potential and actual conflicts of interest and to ensure unbundling of undertakings controlled by public bodies on equal footing with private undertakings, the Secretariat held the following:

 

  1. The TSO and the public or private body controlling it cannot be engaged in production and supply activities.

 

  1. ERE needs to establish de jure and de facto independence between the two public bodies tasked to exercise control over the state-owned undertakings Albgaz and Albpetrol, including the prevention of any common influence of a third public or private entity. For that purpose, the public body controlling the TSO must have clearly defined and delineated competences, must carry out the tasks in full autonomy and may not be subordinated to public or private entities controlling energy production or supply undertakings.

 

  1. The separation of control between the shareholders of the state owned undertakings must be effective in the sense that it ensures the full independence of the shareholder that controls the TSO from the shareholder that controls generation and supply activities. Where one of the two public bodies in question also exercises policy-making functions, which may actually or potentially affect the decision-making of the TSO, full independence may also call for the introduction of additional organizational measures within the public body concerned.

 

The Secretariat’s Conclusions

The Secretariat supported the certification of Albgaz, but before issuing its final decision, ERE must take actions to ensure the following:

  • To approve natural gas transmission tariff methodology and tariffs for Albgaz’s services (for all potential system users);
  • Albgaz must report on monthly basis to ERE on the ongoing procedure for registration of transmission assets;
  • Albgaz must replace the members of the supervisory board who are also part of the energy production and/or supply undertakings;
  • Albanian authorities must develop legislative amendments necessary to fully transfer the tasks related to Albgaz to its sole shareholder and ensure separation within the State, inter alia full independence of two public bodies which will control the TSO on one hand and the State-owned production and supply undertakings on the other hand.

 

For further information on this topic please contact Florian Piperi or Olsi Çoku at Optima Legal & Financial by telephone (+355 4 2221666 ext. 151) or email ([email protected] or [email protected]). Optima Legal & Financial website can be accessed at www.optimalaw.al

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