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German regulator acts against gas firms over zones

Germany’s energy regulator has started proceedings against five gas transport companies over their failure to combine five market areas for low-calorific (L) gas into two from Oct. 1 as promised, the watchdog said.

The companies are E.ON Gastransport, RWE Transportnetz, Gasunie Deutschland Transport Services, EWE Netz GmbH, and Erdgas Muenster Transport. “There is a suspicion, that the companies are in breach of legal obligations to bring down the number of market zones,” said Matthias Kurth, president of the network regulation agency, in a statement on Monday.

“In addition, the market zones must not be constructed along ownership lines but in line with capacity bottlenecks and technical possibilities,” he said. A spokesman for the regulator said it would decide within one month whether the operators’ arguments were legally valid, or whether it could overrule them and force them to merge the zones.

The agency three years ago started forcing gas suppliers and their transport units to split their operations and to create bigger geographical market units so as to ease the flow of gas through pipeline grids and create better access for traders. This has taken place to a large extent -- the number has shrunk from over 700 such delivery zones three years ago to what will become 11 from October.

But observers say a liquid and tradable gas market necessitates the number of zones to be below 10, which operators had pledged to achieve but have failed to deliver. RWE and E.ON said last week they found regulatory stipulations too difficult to merge their L gas zones in the given timeframe, asking for patience. Too many zones mean that traders cannot reliably put a cost on the transport charges they will levy on their customers. Consumers therefore will be inclined to continue with their existing suppliers instead of comparing prices and switching.

The market affected by the probe is the smaller part of Germany’s gas market, that for L gas in the country’s northwest. The concentration of bigger H gas zones, a highly calorific type mostly piped from Russia and Norway, is further advanced.

A spokeswoman for E.ON Gastransport said her company was continuing to seek simplification with counterparts at RWE but found the technical and time aspects hard to reconcile. “We are not alone with these pressures and by contrast have achieved considerable progress in the H gas zones,” she said. (Reuters)