Statutory Instrument

S.I. No. 320 of 2005

European Communities (Internal Market in Natural Gas) Regulations 2005

S.I. No. 320 of 2005

European Communities (Internal Market in Natural Gas) Regulations 2005

I, Noel Dempsey, Minister for Communications, Marine and Natural Resources, in exercise of the powers conferred on me by section 3 of the European Communities Act 1972 ( No. 27 of 1972 ) and for the purpose of giving effect to Directive 2003/55/EC¹ of the European Parliament and of the Council of 26 June 2003 hereby make the following regulations: --

1. These Regulations may be cited as the European Communities (Internal Market in Natural Gas) Regulations 2005.

2. The following section is substituted for section 10A (as amended by section 14 of the Gas (Interim) (Regulation) Act 2002 and the European Communities (Internal Market in Natural Gas) Regulations 2004 ( S.I. No. 426 of 2004 )) of the Gas Act 1976 :

“10A -- (1) In this section --

‘Directive’ means Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC;

‘facility’ means a transmission or distribution pipeline, an LNG facility or a natural gas storage facility;

‘LNG’ means liquefied natural gas;

‘LNG facility’ has the same meaning as in the Directive;

‘operator’ means the holder of a natural gas licence in respect of the operation of a downstream distribution or transmission pipeline, an LNG facility, or a natural gas storage facility;

‘pipeline operator’ means the holder of a natural gas licence in respect of the operation of a distribution or transmission pipeline;

‘storage facility’ has the same meaning as in the Directive;

‘third party access’ means-

(a)       in the case of a downstream natural gas pipeline, transportation of natural gas through a pipeline operator’s pipeline,

(b)       in the case of an LNG facility, access to and use of an LNG facility under the control of the operator, and

(c)       in the case of a storage facility, access to and use of a storage facility, or to related ancillary services under the control of the operator in circumstances where the Commission considers that it is technically or economically necessary for providing efficient access to the natural gas system for the supply of customers, (but excluding temporary storage and ancillary services that are related to LNG facilities and are necessary for the re-gasification process and subsequent delivery to the transmission system)

and the Commission shall determine that which constitutes ‘circumstances where it is technically or economically necessary for providing efficient access to the natural gas system for the supply of customers’ referred to in subparagraph (c).

(2) (a)  Subject to subsection (7) and subject to such exemptions as may be granted in accordance with Article 22 of the Directive, where an application is received for third party access in respect of a facility operated by a person licensed under section 16 of the Gas (Interim) (Regulation) Act 2002 from or on behalf of an eligible customer, the facility operator shall offer to enter into an agreement for such access, subject to terms and conditions specified in directions issued by the Commission under subsection (4).

(b) In paragraph (a), ‘eligible customer’ means --

(i) the holder of a natural gas licence under section 16 of the Gas (Interim) (Regulation) Act 2002 , for the purpose of carrying out any activity for which the holder is licensed;

(ii) the holder of a petroleum lease under section 13 of the Petroleum and Other Minerals Development Act 1960 , for the purpose of carrying out any activity connected with the lease;

(iii) a person in respect of whom an order has been made under section 2(1) of the Gas (Amendment) Act 1987 , for the purpose of carrying out the functions conferred on the person by the order;

(iv) a person who operates a gas-fired generating station, irrespective of its annual consumption level, for the purpose of providing energy for the generation of electricity at that station; or

(v) a customer (within the meaning of section 2 of the Gas (Interim) (Regulation) Act 2002 ) purchasing natural gas which is not exclusively for his or her household use.

(3)  Notwithstanding the generality of subsection (2),-

(a) an offer made under that subsection may include an offer to grant access at a rate or for a volume or at a rate and for a volume different from that requested-

(i) where the offer is as well as an offer of access at the requested rate and volume, or

(ii) where the request may be refused in accordance with subsection (7);

(b) the Commission shall have the power to examine the reasons for making an offer under paragraph (a) and to give appropriate directions with regard to the volume and rate to be offered, without prejudice to any direction given under subsection (4);

(c) where connection to the facility of the operator is required by the applicant or enhancement of that facility would be necessary to grant the application, an offer made under that subsection-

(i) shall include the terms for such a connection or enhancement, including any charges for connection or enhancement, and details of all technical aspects relating to the connection or enhancement that might be reasonably required by that person, and

(ii) at the request of the applicant, may be on the basis that the applicant constructs, or that either or both the applicant and the operator make arrangements to have constructed, the connection to the facility, and the ownership of any such connection constructed or arranged to be constructed by the applicant shall, subject to subsection (10), be a matter for agreement between the parties.

(4)  The Commission may by direction provide for--

(a) the matters to be specified in an agreement for third party access, including terms and conditions relating to price;

(b) the matters to be specified in an agreement for connection to or enhancement of the facility of the operator;

(c) the terms and conditions, including terms and conditions relating to price of the connection or enhancement, upon which an offer for connection to or enhancement of the facility of the operator is made;

(d) the methods for determining the proportion of the costs to be borne by the person making the application for connection to or enhancement of the facility of the operator and to be borne by the operator being costs which are directly or indirectly incurred in carrying out works under an agreement or making an enhancement or connection or modifying an existing connection;

(e) the terms and conditions upon which applications for an agreement are to be made and the period of time within which an offer or refusal pursuant to an application is to be made by the operator; and

(f) any other matters which the Commission considers necessary or expedient for the purpose of making an offer for third party access, or connection to a facility.

(5)  An operator shall comply with any direction made by the Commission under subsection (3) or (4) within such time period as may be specified by the Commission in the direction.

(6)  An operator shall not make an offer under subsection (2) of this section other than to a person who is an eligible customer within the meaning of subsection (2).

(7)  An operator may refuse to enter into an agreement under subsection (2)--

(a) on the basis of a lack of capacity in its facility save where it is economical for the operator to make the necessary enhancements to the capacity of the facility in accordance with such conditions as may be specified by the Commission in a direction made under subsection (4);

(b) on the basis of a lack of connection to that facility save where the person making the request is willing to pay for such a connection in accordance with such conditions as may be specified by the Commission in a direction made under subsection (4);

(c) where, to enter into an agreement under this section would be likely to involve the operator in a contravention or a breach of--

(i) this Act, the Electricity Regulation Act 1999 , the Gas (Amendment) Act 2000 , or the Gas (Interim)(Regulation) Act 2002;

(ii) regulations made under any of the aforesaid Acts;

(iii) the conditions of any licence granted or consent given to the pipeline operator under this Act or the Gas (Interim)(Regulation) Act 2002;

(iv) the code of operations (within the meaning of section 13 of the Gas (Interim)(Regulation) Act 2002) of the operator; or

(v) a public service obligation imposed on the operator by an order made under section 21(1) of the Gas (Interim)(Regulation) Act 2002, or

(d) the person making the application does not undertake to be bound by the terms of the code of operations of the operator referred to in paragraph (c)(iv) in so far as those terms are applicable to that person.

(8)  Where an operator refuses to offer to enter into an agreement under this section, the operator shall serve notice on the applicant of the reasons for such a refusal.

(9)  For the purposes of Article 25 of the Directive the Commission shall be the competent authority in the State to settle expeditiously disputes concerning refusal to offer to enter into an agreement under this section within the scope of the Directive.

(10)  Any dispute between an operator and any person who is, or claims to be, a person to whom the operator is obliged to make an offer for third party access or, where appropriate, connection to a facility of the operator (and whether as to the making of an offer, the terms offered, the proposed charges or otherwise) where the operator makes an offer or refuses to make an offer, may, upon the application of that person, be determined by the Commission and the operator shall comply with and be bound by any such determination.

(11)  Where an application is made under subsection (10) to the Commission in relation to a dispute concerning a downstream pipeline, part of which is situated in the territory of another state, on the seabed under the territorial seas of another state or on the continental shelf belonging to another state, the Commission shall consult the relevant authorities in that other state with respect to the application.

(12)  In the event of a cross border dispute, the deciding regulatory authority shall be the regulatory authority which has jurisdiction in respect of the system operator, which refuses use of, or access to, the system.

(13)  The parties to a dispute referred to in subsection (9) shall provide all documents, records, accounts, estimates and other information, whether oral or written, requested from time to time, by the Commission in the form and at the times specified by the Commission, for the purpose of making a determination under subsection (10).

(14)  In order to ensure compliance with a determination made under this section the Commission may apply in a summary manner on notice to the High Court for an order requiring an operator to comply with the determination.

(15)  Where providing for third party access or where offering terms for the carrying out of works for the purpose of connection to a facility of an operator, the operator shall not discriminate unfairly as between any persons or classes of persons.

(16)  An operator shall not, in the context of sales or purchases of natural gas by that operator or related undertakings, abuse commercially sensitive information obtained from third parties in the context of providing or negotiating third party access to a facility under the control of the operator.

(17)  (a)  Subject to paragraph (b) and subsection (19), an operator shall, within such time as the Commission may direct, prepare a statement for the approval of the Commission setting out the basis upon which charges are imposed--

(i) for third party access to a facility of an operator, and

(ii) for connection to a facility operated by that operator.

(b)  The Commission may--

(i) give directions to an operator from time to time in respect of the basis for charges for third party access to, or connection to, a facility under the control of the operator, and

(ii) issue a direction specifying those classes of operators to whom paragraph (a) does not apply.

(c) Notwithstanding the generality of paragraph (b), directions given by the Commission under this subsection may provide for--

(i) the methods of charging to be included in the statement to be prepared by an operator,

(ii) the form and the extent of the information to be provided by an operator to applicants,

(iii) the form of charges and information about those charges to be included in the statement to be prepared by an operator,

(iv) the procedure to be adopted in the submission by an operator of a statement of charges and the approval by the Commission of such statement, and

(v) the nature of information to be provided to applicants seeking third party access to, or connection to a facility under the control of the operator and its presentation and transparency.

(d) An operator shall comply with directions given to it by the Commission under this subsection.

(e) A charge for third party access to, or connection to, a facility under the control of the operator shall be calculated in accordance with directions given by the Commission under this section so as to enable the operator to recover--

(i) the appropriate proportion of the costs directly or indirectly incurred in carrying out any necessary works, and

(ii) a reasonable rate of return on the capital represented by such costs.

(f) The Commission, solely, shall determine that which constitutes an ‘appropriate proportion’ referred to in paragraph (e)(i) and a “reasonable rate of return” referred to in paragraph (e)(ii).

(18)     (a) An operator shall send each statement prepared in accordance with subsection (17) (in this section referred to as the ‘statement’) to the Commission for its approval.

(b) The Commission shall consult with an operator and have regard to any submission made by the operator to the Commission prior to making a decision as to whether to approve of or not, as the case may be, a statement submitted by the operator to the Commission for approval.

(c) A statement and, in particular, charges referred to such statement, shall not take effect until such time as it is approved of by the Commission, subject to such modifications, if any, as the Commission considers appropriate, and published, including publication in electronic form.

(d) Any charges imposed by an operator on or before the coming into operation of this section shall, subject to the approval of the Commission, continue in force until a statement has been approved of by the Commission under this Section and thereafter all charges shall be in accordance with a statement approved of by the Commission.

(19)     (a) Notwithstanding the generality of subsections (3) and (17), the Commission may, on a case by case basis, following an application in writing by an operator of a storage facility, grant an exemption, on such terms and conditions as the Commission considers appropriate, to an operator from the provisions of those subsections in relation to the terms, conditions and charges for access to the storage facilities under the control of that operator.

(b) When granting an exemption under paragraph (a), the Commission shall ensure that the granting of such an exemption would not lead to distortion of competition or to discrimination in the access to storage.

(c) The Commission shall, by direction, provide for the procedures and conditions under which access to the storage facility under the control of the operator shall be negotiated.

(d) A holder of an exemption under paragraph (a) shall negotiate the terms, conditions and charges for access to the storage facilities under the control of that operator in good faith and in accordance with the procedural conditions referred to in subparagraph (c).

(e) The Commission shall direct the holder of an exemption under paragraph (a) to publish his or her main commercial conditions for the use of the facilities under his or her control within six months of the grant of that exemption and on an annual basis thereafter.

(f) The Commission shall, solely, determine that which constitutes the ‘main commercial conditions’ referred to in paragraph (e).

(20)     (a) The Commission shall, from time to time, review the grant of an exemption under subsection (19)(a).

(b) Following a review under paragraph (a), the Commission may, where it considers it necessary for the promotion of competition in the natural gas market -

(i) revoke the exemption, or

(ii) amend the terms and conditions imposed under subsection (19)(a) as the Commission considers appropriate.

(c) The Commission shall inform the holder of the exemption of the results of a review under this subsection as soon as may be after the completion of the review.”.

3. Section 10B (inserted by section 14 of the Gas (Interim) (Regulation) Act 2002 and amended by the European Communities (Internal Market in Natural Gas) Regulations 2004 ( S.I. No. 426 of 2004 )) of the Gas Act 1976 is amended:

(a)  by substituting for subsection (1) the following:

“(1)  (a)  Subject to subsection (6) and subject to such exemptions as may be granted in accordance with Article 22 of the Directive, where an application is received for third party access in respect of an upstream pipeline from or on behalf of an eligible customer, the upstream pipeline operator shall offer to enter into an agreement for such access, subject to terms and conditions specified in regulations made by the Minister under subsection (3).

(b) In paragraph (a), ‘eligible customer’ means --

(i) the holder of a natural gas licence under this Bill or under section 16 of the Gas (Interim)(Regulation) Act 2002, for the purpose of carrying out any activity for which the holder is licensed;

(ii) the holder of a petroleum lease under section 13 of the Petroleum and Other Minerals Development Act 1960 , for the purpose of carrying out any activity connected with the lease;

(iii) a person in respect of whom an order has been made under section 2(1) of the Gas (Amendment) Act 1987 , for the purpose of carrying out the functions conferred on the person by the order;

(iv) a person who operates a gas-fired generating station, irrespective of its annual consumption level, for the purpose of providing energy for the generation of electricity at that station; or

(v) a customer (within the meaning of section 2 of the Gas (Interim)(Regulation) Act 2002) purchasing natural gas which is not exclusively for his or her household use.”;

(b)  by substituting for subsections (2) and (3) the following:

“(2)   Notwithstanding the generality of subsection (1)--

(a) an offer made under that subsection may include an offer to grant access at a rate or for a volume or at a rate and for a volume different from that requested--

(i) where the offer is as well as an offer of access at the requested rate and volume, or

(ii) where the request may be refused in accordance with subsection (6),

(b) the Minister shall have the power to examine the reasons for making an offer under paragraph (a) and to give appropriate directions with regard to the volume and rate to be offered, without prejudice to any regulations made under subsection (3), and,

(c) where connection to or enhancement of the upstream pipeline of the operator is required by the applicant, an offer made under that subsection--

(i) shall include the terms for such a connection or enhancement, including any charges for connection or enhancement, and details of all technical aspects relating to the connection or enhancement that might be reasonably required by that person, and

(ii) on request of the applicant, may be on the basis that the applicant constructs, or that either or both the applicant and the upstream pipeline operator make arrangements to have constructed, the connection to the pipeline, and the ownership of any such connection constructed or arranged to be constructed by the applicant shall, subject to subsection (8), be a matter for agreement between the parties.

(3)     The Minister may, following consultation with the Commission, by regulations provide for--

(a) the matters to be specified in an agreement for transportation of the natural gas through the pipeline of the upstream pipeline operator, including terms and conditions relating to price,

(b) the matters to be specified in an agreement for connection to or enhancement of the pipeline of the pipeline operator,

(c) the terms and conditions, including terms and conditions relating to price of the connection or enhancement, upon which an offer for connection to or enhancement of the pipeline of the pipeline operator is made,

(d) the methods for determining the proportion of the costs to be borne by the person making the application for connection to or enhancement of the pipeline of the pipeline operator and to be borne by the pipeline operator being costs which are directly or indirectly incurred in carrying out works under an agreement or making a connection or modifying an existing connection,

(e) the terms and conditions upon which applications for an agreement are to be made and the period of time within which an offer or refusal pursuant to an application is to be made by the upstream pipeline operator, and

(f) any other matters which the Minister for the Marine and Natural Resources considers necessary or expedient for the purpose of making an offer for the transportation of natural gas through a pipeline or connection to a pipeline.”;

(c) by substituting for subsection (6)(a) the following:

“(a) on the basis of a lack of capacity in its pipeline, save where it is economical for the operator to make the necessary enhancements to the capacity of the pipeline, in accordance with such conditions as may be specified by the Minister in regulations made under subsection (3) of this section,”;

(d) by substituting for subsection (8) the following:

“(8) The Minister or any person nominated in that behalf by the Minister, for the purposes of Article 20 of the Directive, shall be the competent authority (in this section referred to as the ‘competent authority’) in the State to settle expeditiously disputes concerning refusal to offer to enter into an agreement under this section within the scope of the Directive.”; and

(e) by substituting for subsection (19) the following:

“(19) In this section--

“Directive” means Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003;

“pipeline” means an upstream pipeline and includes facilities supplying technical services incidental to acquiring access to such pipelines;

“third party access” means the transportation of natural gas through an upstream pipeline operator’s pipeline and includes access to facilities supplying technical services incidental to such access except for the parts of such pipelines and facilities which are used for local production operations at the site of the field where the gas is produced;

“upstream pipeline operator” means a person operating an upstream pipeline in accordance with a consent given by the Minister under Section 40(1).”.

4. Subsections (2), (3), (4) and (5) of section 14 of the Gas (Interim) (Regulation) Act 2002 are repealed.

5. Section 9 of the Electricity Regulation Act 1999 is amended by inserting after subsection (1B) the following:--

“(1BA)(a) Any dispute between a transmission, distribution or LNG system operator and a person as respects--

(i) the matters specified in section 9(1B),

(ii) the terms and conditions for the provision of balancing services or the methodologies used to calculate such terms and conditions, or

(iii) the terms and conditions, including tariffs or the methodologies used to calculate or establish such terms and conditions for connection and access to the national networks

shall, upon the application of such person, be determined by the Commission, and the Commission shall issue a direction regarding its determination and the system operator shall comply with and be bound by any such determination.

(b) The Commission shall issue the determination referred to in paragraph (a) within 2 months from the date of the receipt of the complaint. This 2 month period may be extended by 2 months where the Commission seeks additional information in the matter, and such further extension as may be consented to by the applicant.

(c) This section does not apply to a dispute between a final customer and a system operator where the dispute concerns a refusal to offer to enter into a third party access agreement within the meaning of section 10A or 10B of the Gas Act 1976 .”.

EXPLANATORY NOTE

(This note is not a part of the Instrument and does not purport to be a legal interpretation)

These Regulations give legal effect to Articles 18 through 21 of Directive No. 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules on third party access to upstream and down stream facilities, including access to storage. They also give legal effect to Article 25.5 by enabling the Commission for Energy Regulation to settle disputes within the meaning of this Article.

¹ OJ L176/57 of 15 July 2003