London, U.K. — (METERING.COM) — October 20, 2006 – Datamonitor, a provider of online data, analytic and forecasting platforms for key vertical sectors (including the energy utility industry) has found that the FNA, Germany’s energy regulator, has made improvements in the country’s energy market since its inception. For example, in the electricity sector, it has already forced grid operators to lower their network fees. However, it is in the 996 TWh gas sector that its regulatory strength will really be tested.
In an effort to boost market opening, the FNA set interim targets that were formalized on October 1, 2006. The main target was for network operators to enter cooperation agreements facilitating access to their networks for competitors. Although most operators have signed, a significant number have yet to do so.
The FNA is in conflict with pipeline owners, as it is seeking to increase efficiency and transparency by consolidating the 19 separate market areas in which gas is traded. It is also seeking to decide how much network access should be given to municipal utilities and independent traders. After much discussion, two apparently competing network access models were legislated – the entry-exit model and the city gate model.
The FNA, municipal utilities, independent traders and suppliers support the entry-exit model, which promotes transparency and a single national gas trading zone. It allows independent traders freer access to gas pipelines, reducing their dependence on the local gas importer. The city gate model is favored by pipeline owners as it exploits the fragmented distribution structure by limiting access to one point in each distribution zone, and needs a third party to book deliveries.
Understandably, given the German gas market’s size and complexity, change cannot be expected overnight. However, the uncertainty is not doing gas customers any favors, as in the meantime prices are increasing and foreign and local gas investment is on hold.
Further issues such as integrating storage facilities into the system, and developing an IT infrastructure to operate the new access model, will undoubtedly take the FNA to task.
The FNA has jurisdiction over four sectors: energy (electricity/gas), post, telecommunications and railways. However, Germany needs a dedicated energy regulator in order to be effective. According to Datamonitor’s Market Competitiveness Index, which assesses the competitive intensity of 20 key European energy markets, the FNA has a current score of 3.7/10, somewhat lower than many other regulators. Addressing this area is crucial in improving the effectiveness of the German energy regulator.