Austrian regulator plans to hike gas entry tariffs

Austrian energy regulator E-Control has proposed changes to the way it calculates gas transmission tariffs that would triple the cost of entry capacity from Germany and quadruple capacity from Italy from 2025.

A reorganisation of flow patterns since the start of the war in Ukraine has led to a "completely changed situation", the regulator said — transit flows have decreased significantly and Austria imports much more gas from Germany and Italy. E-Control plans to adapt its tariff calculation methodology to reflect these changes for the 2025-28 regulatory period, and is consulting on its proposal until 21 February.

The regulator wants to switch the reference price methodology to a capacity-weighted distance model because it is the "default" option in the EU law and "offers robust, cost-reflective tariffs in an environment of uncertain future gas flows". Final tariffs will be published at the beginning of June, ahead of the yearly capacity auctions. E-Control will begin calculating tariffs on a yearly basis, allowing it to "reflect changes in gas flow patterns and demand for transmission capacity more accurately".

E-Control plans to apply a 100pc discount for entry points from storage and no discount for exit points to storage. And it wants to reintroduce a commodity charge to cover the cost of transmission services — of roughly €0.12/MWh for entry flows and €0.13/MWh for exit flows. No commodity charge will be levied this year, while the charge had been much higher for June 2022-December 2023.

E-Control's planned entry tariff — using the capacity-weighted model and factoring in its predictions for contracted capacity in 2025 — would triple the entry tariff from Germany at Oberkappel to €2.97/kWh/h/yr. And the entry tariff for Arnoldstein on the Italian border would be four times higher at €4.18/kWh/h/yr (see 2025 vs 2024 table). At the same time, entry capacity at Baumgarten would increase by only 31pc to €1.11/kWh/h/yr. All interruptible entry tariffs will rise significantly.

Exit tariffs to the Storage Penta West point — where gas exits the grid for injection into the Haidach and 7Fields facilities — will climb under E-Control's proposal, as will exit tariffs to the storage facility just on the other side of the Slovak border.

In the following years, E-Control preliminarily expects entry tariffs to slip at Baumgarten and rise at Oberkappel and Uberackern. And it projects a rise in exit tariffs to Hungary by 55pc by 2028 from 2025 (see 2025-28 table).

The regulator wants a multiplier of 1 for annual transport capacity products, 1.5 for quarterly and monthly capacity, and 3 for daily and within-day products. This structure aims to promote efficient use of the system "by keeping tariffs for new long-term bookings competitive". Additional long-term bookings may in turn contribute to a reduction in future multipliers, E-Control said.

Potential effect on diversification

A significant rise in transmission capacity costs from Germany and Italy could hinder Austria's diversification efforts.

This is even before factoring in the German storage levy — set at €1.86/MWh for January-June — and a potential storage levy in Italy, proposed at €2.19/MWh from 1 April.

E-Control executive director Alfons Haber questioned the legality of the German storage levy, telling Argus that it and the planned Italian levy constitute a "serious setback for the internal gas market as the levies are higher than the transmission tariffs". It will "inevitably" reduce the efficiency of gas flows within the EU and "hinder effective competition", he said.

The European Commission is "aware of the German neutrality charge and the concerns expressed by various parties" and is "in touch with relevant national authorities on this matter", an EU official told Argus. It is also in touch with the Italian regulator "to get a better understanding of the design of the planned measure". The protection of the internal market and the avoidance of market fragmentation is "very important" for the commission, the official said.

But regardless of the levies, Austria's planned transmission tariff structure would already encourage firms to prioritise Russian gas flows ahead of imports through other routes — the regulator expects Baumgarten's entry tariff to be roughly a quarter of the Italian entry tariff.

National incumbent OMV last year booked significant entry capacities from Germany and Italy, reserving 40 TWh/yr for October 2023-September 2026 and about 20 TWh/yr for October 2027-September 2029. But if the use of these capacities comes with the additional costs of the much higher entry tariffs and the storage levies, Russian gas may remain the more economical option. That said, the future of Russian gas transit through Ukraine beyond the expiry of the transit contract at the end of this year in any case remains uncertain.

By Brendan A'Hearn