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The new stockpiling fee for natural gas is €0.45/MWh

Submitted by ospa on Thu, 11/30/2023 - 17:16

On 28 November 2023, Climate Minister signed a regulation that will apply a strategic gas stockpiling fee of €0.45 per megawatt-hour from 1 January 2024.

The new stockpiling fee is five cents higher than before. The stockpiling fee is being increased because domestic gas consumption has decreased, while the cost of managing the gas reserve has remained the same.

The largest cost to be covered by the stockpiling fee is related to the storage of the reserve. According to the price list established by the operator of the Inčukalns gas storage facility, Conexus Baltic Grid, a fee of €1.3581/MWh will be payable for the transfer of gas from one storage period to another (01/05/2023 to 30/04/2024).

In calculating the applicable stockpiling fee (0.4€/MWh), the Estonian Stockpiling Agency proceeded from the gas consumption forecast at the beginning of 2023, which was 3.74 TWh/year. In reality, gas consumption has decreased more than expected and will be around 3.2 TWh in 2023. Therefore, the current rate of the stockpiling fee will not be able to cover the future costs of storage.

The new rate of the stockpiling fee is deliberately based on the period from 01/01/2024 to 30/04/2024, as the pending amendment to the Natural Gas Act plans to include the administrative costs associated with the LNG jetty under the stockpiling fee in the future. The development of the Pakrineeme port will ensure Estonia’s capacity to receive FSRUs in crisis situations or should market players wish to bring additional gas into the region. The annual administrative costs of managing the jetty are approximately 700,000 euros.

Upon the adoption and entry into force of the amendment to the law, the period for calculating the strategic gas reserve and the expected costs for the management of the LNG terminal jetty and infrastructure will be set to 1 May – 30 April, which coincides with the accounting period of the gas storage facility (gas year), for the purpose of establishing the stockpiling fee. It is therefore planned to change the calendar year-based calculation of the gas sales quantity to a gas year-based calculation, which will also be the basis for the calculation of the gas stockpiling fee. The rate of the stockpiling fee to enter into force on 1 January 2024 will therefore most likely apply until the end of April. In March, a new stockpiling fee rate will be announced, which will take into account the costs of managing the jetty and is expected to apply from 1 May 2024.