As from 1 April 2011 several significant provisions of the Act "Wijziging van de Gaswet en de Elektriciteitswet 1998, tot versterking van de werking van de gasmarkt, verbetering van de voorzieningszekerheid en houdende regels met betrekking tot de voorrang voor duurzame elektriciteit, alsmede enkele andere wijzigingen van deze wetten1" will come into force. These provisions intend to improve the functioning of the Dutch gas market.

1. Improvement of the functioning of the gas market

In order to improve the functioning of the gas market, the Gas Act is amended as follows:

a) Integration of gas quality
 In the past, market parties were obliged to tender for conversion capacity as provided by the grid operator of the national gas transmission grid ("GTS")2, as a result of which this conversion capacity was fully booked in advance. In practice it turned out that the capacity booked was not always used, while the unused capacity did not become available for other parties. This caused a barrier for market parties with high-calorific gas ("H-gas"), because it was not possible, in the short term, to become active at the market for low-calorific gas ("L-gas"). Moreover, there were costs entailed to (reversed) quality conversion. Therefore GTS will have the obligation to offer quality conversion and reverse quality conversion without advance booking. The costs of quality conversion will be incorporated in the transmission tariffs. This results in an overall integration of the H-gas- and L-gas market which will lead to a more liquid gas market, where the quality of gas should not have any influence at the tradability of the gas.

b) Balancing regime
 To ensure that gas will be transported in a safely manner through the grid, the entry to and the exit of gas at the gas transmission grid have to be balanced. At this moment the gas transmission grid is regulated by the Groningenfield (Groningenveld), causing the balancing of the Dutch grid to be strongly dependent on this field. The Act introduces a market based balancing regime. The new balancing regime assumes programme responsibility as is also applied in the electricity sector, provided that a distinction will be made between the programme of the gas entry party and the programme of the gas exit party. Programme responsibility means that supply and off-take takes place in accordance with expected programmes of use which are compiled for a particular time unit. A programme responsible party has to provide GTS with its programmes giving GTS notice of the volume of gas which it will enter into and/or exit from the gas grid. Furthermore, the programme responsible party must state in his programme the volume of net gas and the identity of the party to which programme responsibility will be transferred. GTS receives all programmes and can give instructions in the event of mistakes in the individual programmes, inconsistencies between programmes or in the case that these programmes are not practicable. In principle the parties which enter gas into and/or exit the gas transmission grid have programme responsibility, but the programme responsibility can (voluntarily) be transferred to another party.

The task of GTS is to keep the gas transmission grid in balance. GTS hereby takes advantage of the buffer capacity of the gas transmission grid. In case the gas transmission grid suffers imbalance, taking into account this buffer capacity, GTS is then obliged to buy or sell gas during the day. GTS can buy or sell this gas on a intra-day market for gas (imbalance-market) and from parties which participate in the balancing of the grid. The costs are charged to the programme responsible parties which caused the imbalance.

c) Tradability of gas
 Gas transmission in the Netherlands is based on an entry-exit system. At this moment, the entry- and exit capacity is contracted by the entering party, who, consequently, directly controls the transmission of the gas. After passing the exit point, the gas can no longer be traded at the trade market. The buyer is in this construction not able to on sell or exit his gas, in the case that he does not need the gas at the day of delivery behind his exit point. The Act states that the gas entering party or the gas exiting party is solely responsible for his connection programme at the gas transmission grid. Programmes for entering and exiting gas are therefore in principle unlinked. The result is that a buyer of gas no longer needs consent from his supplier to determine what it will do with his gas. An important problem for the tradability of gas should be resolved by this Act. The programme responsibility will be transferred from the entering to the exiting party on a virtual point ("VPPV"). The entering party is programme responsible from its entry point until this virtual point and the exiting party is programme responsible for this virtual point until this exit point. In this system the exiting party determines where the gas leaves the gas transmission grid.

The Netherlands Competition Authority ("NMa") published a draft decision concerning amendments in the technical codes due to the introduction of the new market model and the balancing regime. This draft decision (in Dutch only) sets out clearly which meaning these amendments have.

2. Competence NMa to a one-time adjustment of the tariffs

The NMa is granted the competence to a one-time adjustment of the tariffs at the start of a new regulation period to a level that is in conformity with an efficient cost level, with due observance of a reasonable yield.

3. Gas connections by grid operator

The connecting of small end users (users with a connection with a transmission capacity of less than 40 m3 an hour) is going to be a legal and exclusive task of the grid operator. Connecting of connections with a transmission capacity over 40 m3 an hour shall remain at the free domain, but the creation of the connection point (the part of the connection from the gas transmission grid up to and including the first shutter) will become an exclusive legal task of the grid operator.

Other provisions

The other provisions of aforementioned Act, such as priority for sustainable production (voorrang voor duurzaam, however the costs for executing congestion management will be socialised in the transmission tariffs instead of charging the producers to which the congestion management is applicable) expansion investments in the grids (uitbreidingsinvesteringen in de netten), gas field policy (kleine veldenbeheer), system services tariff at private grids (systeemdienstentarief) and safety of grids (veiligheid van netten), will in all probability come into force as from 1 July 2011.

Footnotes

1. "Amendment of the Gas Act and the Electricity Act 1998, strengthening the force of the gas market, improving the security of supply and providing rules concerning the supremacy of sustainable electricity, and some other changes to these Acts".

2. In the Netherlands both L-gas and H-gas are used. Through the mixation of several gas qualities or the addition of nitrogen it is physically possible to convert H-gas to L-gas (quality conversion). Also reversed quality conversion (from L-gas to H-gas, which is an administrative process) is possible by the swap of L-gas to H-gas. (Reversed) quality conversion is offered by GTS by having conversion capacity available.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.