The Natural Gas Authority determined the tariffs that would be levied by the Transmission licensee from consumers that are linked up to the distribution network or shippers operating in the distribution network for transmission services provided to these shippers, as follows:
1. The tariff for transmission services by the transmission licensee to shippers will be calculated according to the annual average forecasted load factor of consumers of the distribution network in accordance with the following formula:
DSTT = CT/LF+ GTT
Whereas
DSTT (Throughput Tariff) Throughput tariff for shippers in the transmission system
CT (capacity tariff) Capacity component in the transmission tariff for consumers of the transmission system
Load factor (LF) Average annual forecasted load factor in percentages
General Throughput tariff (GTT) Throughput component in the transmission tariff for consumers of the transmission system
2. The annual load factor (LF) has been set at 95%
3. The formula and the load factor have been set for a period of 5 years that commence on the day of connecting the first consumer in each region for which a distribution network license was granted in accordance with the law.
4. The throughput tariff in the transmission system for shippers in the distribution network will be automatically updated with the update of the general transmission tariff, based on formula in clause 1
5. The shippers in the distribution network will not pay the capacity component of the regular transmission tariff but rather the throughput tariff as explained in clause 1
6. For the removal of any doubt, this decision relates to shippers of the distribution network that are connected to the transmission system.
7. Re-examination of the load factor and the formula will be done after 5 years from the day of commencement of the connection of consumers to the distribution network in a particular region. Within this framework, the council will examine, inter alia, the ratio between the actual load factor and that which has been determined in clause 2 above, and as may be required the council will update the transmission tariff in such a manner so as not to harm the financial standing of the transmission licensee.
Explanation:
This decision is to help promote the use of natural gas by consumers of the distribution network by trying to facilitate the tariff structure.
The current situation is as follows:
A consumer connected to the distribution network actually consumes services from the distribution network as well as from the transmission system licensee through which gas is transmitted to the entry point of the distribution network. Thus, it is incumbent upon him to pay two tariffs for the services supplied to him by two license holders (in addition to the fee for the gas that he purchases from his supplier).
According to the conditions of the distribution tender that have been completed, the tariff that the distribution network licensee levies from his consumers is a tariff for throughput only (except for the additional connection fee), in accordance with the cubic meters of natural gas that he consumed. The distribution network licensee does not levy tariffs for the capacity flow and no order of capacity is done in the distribution network.
In accordance with decision #4/09 of the council, the transmission tariff that is paid by the consumers of the transmission system to the transmission system licensee is composed of two elements: capacity component of 59.52 agorot per mmbtu per hour – which is about 90% of the transmission licensee’s income) and a relatively low throughput component of of 13.16 agorot per mmbtu.
Ordering capacity from the transmission system’s licensee is a complex process for potential consumers. In addition, also potential shippers that are expected to enter the market place, mainly due to the high costs involved and the need for professionalism in this field, if shippers should enter the field, will manage on behalf of consumers that will request this, all the consumers’ relations – vis-à-vis the gas supplier, the transmission system licensee, the distribution network licensee – may also encounter similar difficulties.
The main difficulties stem from:
Risks to the shippers – charging the shipper for capacity tariff could potentially put at risk a shipper whose consumers have abandoned him in a state of owing him money for capacity charge to the transmission system licensee, when in actual fact he doesn’t have any consumers. This situation increases the risk of dealing in gas marketing, a matter which is not wanted, since the council wants the penetration of shippers/marketers to help consumers and not the opposite.
Making the procedures more complex – the existence of an additional tariff (the transmission capacity tariff) complicates the commercial process in the market since it brings to 5 the number of payments/tariffs that a consumer has to pay: link to the distribution network, distribution tariff, capacity tariff in the transmission system, throughput tariff in the transmission system and the price of the gas
The solution:
Set a tariff only for the actual flow of gas (without a capacity tariff) is likely to ease activities both for shippers/marketers and for consumers in the distribution network, in that it is a transparent and clear tariff.
The formula specified in clause 1 of this decision creates the incentive for consumers to link up to the distribution network through acceptance of a high load factor of 95% that characterizes the large industrial consumers of the distribution network. This method of tariffing is likely to incentivize consumers to link up to the distribution network and thus help promote the development of the distribution networks and that of shippers/marketers