The introduction of new gas supply rules in Russia has been postponed due to contradictions between market participants

The introduction of new gas supply rules in Russia has been postponed until at least March 1, 2024 due to numerous contradictions between market participants. The main disagreements are related to the costs that suppliers, primarily Gazprom, incur for reserving capacities to cover uneven gas withdrawals by consumers. Suppliers demand to reduce the selection flexibility, increase gas overrun rates and tighten the take-or-pay principle. But power engineers are against it, and industrial consumers claim that they are generally excluded from the discussion and expect a significant increase in costs, including due to the rise in electricity prices.

The government has postponed from September 1, 2023 to March 1, 2024, the entry into force of the updated rules for the supply of gas on the domestic market. In the draft of the relevant resolution published by the Ministry of Energy, the reason is the lack of norms for the schedules for switching consumers to reserve fuels. This is not the first time shift: the new set of rules was originally supposed to come into force on September 1, 2022. It was approved in November 2021 and is intended to replace the 1998 rules. They are updated within the framework of the “regulatory guillotine”.

The new document caused a lot of sharp disagreements between suppliers and consumers, which have not yet been resolved. Thus, the Ministry of Energy proposes to tighten the conditions for uneven gas withdrawal within a month: the minimum daily supply volume should not be more than 20% lower, and the maximum one should not be more than 10% higher than the average daily rate. This is the so-called flexibility, which is currently free for consumers, but results in additional costs for suppliers. Gazprom, follows from the set of disagreements (Kommersant has it), proposes to narrow the corridor to 5%, NOVATEK – to supply only within the average daily rate, that is, in fact, to abandon the corridor. The Council of Energy Producers (CPE, unites generating companies) believes that the minimum daily deviations should, on the contrary, be expanded to 50% and 30%, respectively.

The uneven supply of gas according to the scenario proposed by the Ministry of Energy should not be paid for by household consumers and generating companies. Suppliers propose to narrow this category only to the population and public utilities.

Disagreements also persist around the introduction of the take-or-pay principle (“take or pay”) in contracts for the supply of gas with a volume of more than 500 million cubic meters of gas per year, that is, payment for the contractual volume of supply in case of non-selection, regardless of the reasons.

The shortfall is proposed to be paid in the actual volume of supply at a price not lower than the contractual one. Gazprom is proposing to expand the application of the take-or-pay principle to include contracts up to 10 million cubic meters per year, while Gazprom Mezhregiongaz is proposing to lower the bar to 100,000 cubic meters. At the same time, it is specified that the take-or-pay clause will not apply to energy producers.

However, the POC still proposes to delete it. The association “Kommersant” explained that the very fact that gas suppliers have such instruments is a “wake-up call” for the market, since the criteria for applying the take-or-pay condition may eventually expand to other gas consumers, regardless of their category or volume of consumption .

The discussion continues around the introduction of penalty coefficients for excessive consumption of gas. Thus, according to the proposed changes, if the consumer has not agreed on an overrun with the supplier, then seasonal multipliers will apply to him, taking into account the cost of transporting gas – 1.1 in summer and 1.5 in winter. And if the excess consumption of gas occurred during the period of limited supply, then a coefficient of 2 will apply to consumers (now it is not provided).

It remains controversial to introduce the concept of “imaginary gas losses” caused by the error of metering devices only upwards, and the obligation of buyers to pay for them, as well as the calculation of non-extraction or excess consumption of gas at each connection point (now the calculation is based on a set of points).

Gazprom, Gazprom Mezhregiongaz and the Ministry of Energy did not provide any comments. NOVATEK told Kommersant that they considered it necessary “to continue discussing the rules for gas supply at the site of the Ministry of Energy.” The company considers it expedient to keep the current version of the rules, removing from it non-working since 1998 and redundant provisions, as well as “to make changes necessary to implement the action plan for the implementation of a socially oriented and cost-effective gasification and gas supply system for the constituent entities of the Russian Federation, that is, the principle of take- or-pay”.

The PPA, meanwhile, emphasizes that the main task of generating companies is “to fully meet the demand for electricity and heat at any time”, including ensuring the readiness to perform the mandatory tasks of the “System Operator” (energy system dispatcher) to maintain the dispatch schedule. The disagreements of the parties on the range of unevenness are primarily related to the use of increasing (seasonal) coefficients for excessive gas consumption. “In the event of leveling this instrument, which has been used since 1998 and is currently economically unjustified, the existing disagreements on the range of unevenness will disappear by themselves,” the association believes.

According to the EIT estimates, the calculation of the volume of consumed gas according to the design capacity of the power plant in the event of a malfunction of metering devices with actual gas consumption in the amount of 1 billion cubic meters per year can lead to unjustified financial losses of up to 50 million rubles. per day. Regarding the use of multiplying factors, the analysis of the actual operation of heat generating facilities showed that the average daily volume of overflow from the existing range of unevenness in the context of individual months amounted to about 8% of the annual volume of consumption, respectively, the possible additional cost in case of gas overruns can be about 200 million rubles. on consumption in the amount of 1 billion cubic meters, added to the PPA.

Many interlocutors of Kommersant in large industrial companies fear that most of the proposed measures will increase their gas costs in the event of uneven loading of the main production due to lower demand or sanctions pressure. The adoption of the new rules will lead to a “negative multiplier effect – an increase in the cost of directly buying gas and an associated increase in electricity costs,” the power industry believes.

In the “Community of Consumers of Energy” (an association of large industry), they believe that the introduction of new rules is not being delayed in order to improve something in them. “In a mode closed to industrial consumers, changes beneficial only to gas suppliers are being discussed, which will worsen business conditions and limit the development of the entire economy,” the association emphasizes.

Sergei Kondratiev from the Institute of Energy and Finance believes that it would be more correct to resolve the issue of shortfalls and overruns of gas through market mechanisms, so that consumers have the opportunity to buy the missing or sell the unselected gas. He recalls that a similar mechanism in the field of gas transportation – commercial balancing – is already working.

Tatyana Dyatel