Baltic Countries Set up Single Zone

The gas transmission system operators (TSOs) of Finland, Estonia and Latvia have reached a new voluntary agreement on inter-TSO compensation system, they said February 14. Finnish Gasum, Latvian Conexus Baltic Grid and Estonia's Elering signed an inter TSO compensation (ITC) agreement, which enables the functioning of a single gas transmission tariff zone for Finland, Estonia and Latvia from the beginning of 2020.

The ITC agreement unifies the entry point tariffs on the external borders of the region and removes commercial interconnection points between countries. It will be used for transportation of the gas across Finland, Estonia and Latvia without additional charges. The ITC agreement also foresees compensation for TSOs of eligible variable costs and sets principles of the entry revenue re-distribution among the operators.

The agreement is expected to lead to higher market liquidity by making it easier for shippers and traders to sell gas in the whole market area, which is not a large volume annually.

The ITC agreement became effective on the date of signing for Elering and Conexus and it will become effective for Gasum once the changes required in national legislation enabling the Finnish TSO to enter into such agreement become into force. The ITC compensation mechanism will become effective on 1 January 2020.

There was no explanation for the absence of Lithuania from the list, but that country's network is being connected to Poland's, and so to other European countries; whereas until the Balticconnector with Estonia is built, Finland only has a pipeline connection with Russia. Latvia's grid connects Latvia to Russia, Estonia, and Lithuania.