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ACER and CEER support consumption-based rather than capacity-based filling targets in contrast to Commission’s proposal

In a joint position, ACER (Agency for the Cooperation of Energy Regulators) and CEER (Council of European Energy Regulators) say that the European Commission’s proposals on mandatory gas storage levels are overly oriented towards national storage capacity, which may create a disproportionate burden on some Member States while introducing the need for complex cross-border financial compensation schemes. The regulators recommend an approach where national demand levels would be the main parameter in terms of setting the storage obligations.

In the current geopolitical context, the risk of supply disruption is historically high, underlining the vulnerability of the European market supplied predominantly by Russian gas. Acknowledging the importance of gas storage in its contribution to security of supply, the European Commission published a proposal at the end of March, which aims at ensuring that storage capacities in the Union are properly used and shared, in a spirit of solidarity, in the context of the dramatically changed geopolitical situation.

Setting a filling target for EU gas storage facilities is the cornerstone of the proposal. It is fixed at a minimum of 80 per cent for 1 November 2022 (which is postponed to 1 December in case of low injection rates) and a minimum of 90 per cent for the following years.

Europe’s energy regulators ACER and CEER welcomed the European Commission’s initiative to bolster the Union’s security of gas supply. However, they tabled proposals which would help to reach the objective of filling EU gas storage facilities more effectively, whilst protecting the consumer interest.

Under normal operating circumstances, gas suppliers would generally fill storage facilities to a very high level. ACER and CEER, therefore, underline that the proposed measures must be considered exceptional, temporary and specifically targeted to the current circumstances, where high wholesale prices, negative seasonal spreads and risks on the availability of import gas volumes prevent market players from storing gas. They also highlight that intervention should be proportionate to the goals and should avoid distorting the market where it is able to fulfil the adequate level of gas storage.

According to ACER and CEER, the filling targets should apply a demand-based rather than capacity-based rationale, combining a collective level and national levels. For this year they advise applying simple but realistic measures, taking into account national specific characteristics and constraints. The 80 per cent filling target is a pragmatic option that helps safeguard existing storage booking contracts according to the regulators.

For the future (2023 and beyond), ACER and CEER recommend determining the EU filling target and filling trajectories according to the level of expected demand. Additional relevant parameters in terms of risk analysis should also be included such as the dependence on Russian gas (and general reliability of supply sources), the seasonality of demand (i.e. winter demand’s share of annual consumption), cross-border interconnection capacity, storage capacities of a Member State in relation to its national consumption, the access to LNG and direct connection with upstream pipelines with gas producing countries with whom the EU has concluded bilateral trading agreements. The diversification of supply sources of countries and regions should be taken into account as they are less vulnerable to supply interruptions from a single source.

In their joint position, the European regulators underlined that risk mitigation measures should minimise the use of public funding. Finally, they recommend implementing EU-wide monitoring of storage filling levels and of prices paid for that fill.

Upon the announcement of the Commission’s proposal regarding mandatory storage levels, some Member States have already flagged concerns. The amount of gas EU countries can store varies widely and depends on geography. Member States with significant storage capacities signalled that in the current context of high gas prices, the proposal imposes a disproportionate burden on them.

“The EU institutions need to find the right balance between a top-down approach (EU target) and a bottom-up approach (national target) that takes into account national specificities,” said Pál Ságvári, Vice-President of Hungary’s regulator, HEA. Due to its significant storage capacities, Hungary already expressed concerns regarding the Commission’s proposal, warning that they would end up bearing a disproportionate amount of the cost.

Gas storage typically covers 25-30 per cent of EU gas consumption in a typical winter and plays a key role in guaranteeing the EU’s security of supply.

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