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06|19
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Issue title:

Neutrality charges from October 2019

Publication date:
07.06.2019
In this issue:

The more or less frequent browsing through the Federal Gazette is one of my regular tasks. I am interested in the annual reports of gas companies. Several companies only fulfil their transparency duties by publishing the report in the Gazette. The big disadvantage is that in most cases it is published with substantial time-lags. Therefore, the reports are more of historical interest. Nevertheless, in this edition I have written about Wingas’ annual report 2017. After the redundancies and restructuring in 2018, it is at least interesting to see the figures on which these activities were based. And indeed, in 2017 the EBIT crashed compared to the previous year. However, on the other hand, there had been an interesting extension of sponsoring activities – but read it yourself.

I also elaborate on an absurd topic in this edition (I like this kind of topics). “Incremental Capacity”, i.e. the provision of additional transportation capacity (even BNetzA uses the English term). The procedures to determine “Offer Levels” are complex and have several stages. When I deal with the topic, I often have to think about a round table discussion I moderated at the sidelines of E-World around ten years ago (yes, I have indeed been working in that field for a long time). As senior managers of European gas companies, they were the ones who, in the early stages of gas market liberalisation, discussed the pro and cons of the process and how it might develop. They had a unanimous opinion on one issue: To create new capacity under that framework would be challenging – and the managers of the time were right.

Topic of the monthNeutrality charges from October 2019

The soaring balancing and conversion neutrality charges in October 2018 was one of the top topics last year. There were mainly two reasons for the steep increase:

• An expected increase in the net cost for system control energy after the experience from the winter 2017/18. The cost is only partly covered by the shippers’ payments for balancing energy.

• A massive increase of the NCG liquidity buffers and a decent increase of the Gaspool SLP buffer (only the buffer for the Gaspool RLM account decreased).

After the lifting of the neutrality charges an intense exchange of letters and emails took place between Stadtwerke, traders and sales companies or their associations and working groups on one side, and the market area operators (mainly NCG) and BNetzA on the opposite side. The stakeholders demanded more transparency and clar-ity regarding the basis of the calculations, as well as more predictability. However, nothing happened. At the beginning of this year (unreported by ener|gate Gasmarkt), utilities that do not operate their own balancing groups launched a new initiative to achieve improvements. For this initiative, two working groups of utilities, namely ARGE Gas Westfalen and gas group, formed a coalition. Their main argument and new perspective is that utilities that supply local end consumers but do not operate their own balancing groups get information about the future development of the neutrality charges much too late. This causes problems for the calculation of end consumer prices or enforces more frequent price adjustments.

Company strategies and resultsWingas

In 2017, Wingas achieved an EBIT of 12.2 million euros, according to the company report published in the Federal Bulletin (see also editorial). The EBIT is 90 per cent below the 2016 figure. Lower margins as a consequence of tough competition are the main reason for the sharp drop of the EBIT. But there is a second factor: In 2017, Wingas paid 27.6 million euros to sponsor ice hockey clubs that are members of the Kontinental Hockey League (2016: seven million euros donation). It is a Russian league but with participants from other countries. Wingas sponsors the Russian clubs HK Vitjaz and Dinamo Sankt Petersburg as well as Dinamo Riga (Latvia) and Slovan Bratislava (Slovakia). Wingas reported its sponsoring when it was commenced.

In August 2017, the company organised the Wingas Cup in Kassel (Wingas’ home town) with the mentioned teams (except St. Petersburg) and the local ice hockey team Kassel Huskies, which is also sponsored by Wingas. But the amount is surprising(allegedly, Gazprom pays the German football team Schalke 04 between 24 to 30 million euros per year depending on the team’s success. In the season that is just finished, Schalke performed poorly, which is good for Gazprom’s purse). Different sources told ener|gate Gasmarkt that over the last two years the amounts have been substantial and that the decision was not made in Kassel.