Latvijas Gāze, JSC: Saeima Approves Energy Law Amendments
On February 11 the Saeima of the Republic of Latvia adopted on final hearing the amendments to the Energy Law laying down the procedure of opening of the natural gas market and unbundling of the company.
Under the law, a legal unbundling of the transmission and storage operator from the natural gas trade and distribution operator is to take place by April 3, 2017 with an inclusion of all assets and human resources necessary for the provision of services into the transmission and storage operator’s commercial company. The law stipulates that the controlling shareholders of both commercial companies shall be separated by December 31, 2017, with the state having pre-emptive rights on the shares and assets of the transmission and storage operator.
The law also foresees a legal unbundling of the distribution operator from the trading company by January 1, 2018.
As of April 3, 2017 the law introduces full opening of market and the possibility of trading natural gas in Latvia for other traders as well. Households may opt to remain captive consumers , i.e., keep buying natural gas for regulated tariffs.
Pursuant to the interpretation by the authors of the amendments and the Ministry of Economy, the Saeima has included provisions that enable consumers to purchase natural gas in another country and have it supplied for own consumption before the market is opened. Such provisions are contrary to the stipulation of the law that a free choice of trader shall only take effect after April 3, 2017 because the possibility to choose trader is effectively a market opening. The JSC „Latvijas Gāze” holds that such legislation is in breach of the privatisation agreements whereby the JSC „Latvijas Gāze” has been granted exclusive rights of gas supply in Latvia by April 3, 2017.
The use of the natural gas distribution system is governed by the Cabinet regulations, while the use of the transmission and storage systems is governed by the rules issued by the Public Utilities Commission.
Given the non-compliance of the law with the privatization agreements, the company might apply before the Satversme Court (Constitutional Court) and the Stockholm Court of Arbitration. Furthermore, the timeframes allowed for the divestiture of the transmission and storage operator are unreasonably short and may cause losses for the shareholders. The further action shall be decided upon by the Council of the company.
The full text of the draft law (in Latvian) is available on the website of the Cabinet of Ministers:
Phone: + (371) 67 369 144