The natural gas market in Greece is comprised of several activities such as import/export, transmission, distribution, supply and storage of natural gas, each of which is governed by a special regulatory framework.
Greece also plays the role of a natural gas hub in the midstream market, with the development of major pipeline projects currently ongoing, such as TAP (designed to connect gas from the Caspian Sea area with Europe via Greece, Albania and Italy) and the IGB Pipeline (connecting the Greek natural gas system to the Bulgarian gas system). The Alexandroupolis FSRU project, an innovative and promising liquefied natural gas project, is also progressing well.
3. What is the Greek National Natural Gas System ("NNGS")?
The National Natural Gas System ("NNGS") transports natural gas to consumers connected to the NNGS on the Greek mainland from the Greek-Bulgarian borders, the Greek-Turkish borders and the
Liquefied Natural Gas (LNG) terminal installed on Revythoussa island in Megara. Pursuant to Article 67 of Law 4001/2011, and as described in the latest NNGS Operation Report released by the Hellenic Gas Transmission System Operator ("DESFA"), the NNGS consists of: the main pipeline which is512km in length, and branches totaling 951.58kKm in length, which connect various areas of the country to the main pipeline, the LNG station at Revythoussa, border metering stations, compression and decompression stations, regulating stations, control and dispatching centres, operation and maintenance centres, remote control and communications system and two underwater pipes, each one a back-up to the other, which connect the Revythoussa LNG Station to the mainland.
4. Who is responsible for the operation of the NNGS?
Under the provisions of Law 2364/1995, DEPA S.A., the state-controlled public gas corporation, was granted ownership of the NNGS, together with the planning, construction and exploitation rights to the NNGS and the distribution network and the right to import and export natural gas, and was assigned the transmission, storage, sale, distribution and trading rights. In 2007, and in order to comply with the Second EU Energy Package, DESFA was established by virtue of Presidential Decree 33/2007 as a wholly-owned subsidiary of DEPA, so that it could act as the Greek transmission system operator ("TSO").
According to Directive 2009/73/EC, Member States should select between the following unbundling models separating supply and production activities from natural gas transmission systems: (a) Ownership Unbundling model ("OU"), (b) Independent Transmission Operator model ("ITO"), or (c) Independent System Operator model ("ISO") (please refer to questions 5, 6 and 7 respectively). In order to comply with the Third Energy Package and the provisions regarding the effective unbundling of the national TSOs set out therein, Law 4001/2011 first opted for the ITO model for DESFA (Articles 63A - 63I of Law 4001/2011).
Subsequently, DESFA was included in Greece's privatizations scheme, and although the first tender launched was cancelled, the second tender launched in 2018 was successfully completed and led to the acquisition of a 66% stake in DESFA by the SENFLUGA consortium (established by Snam S.p.A., Enagás Internacional S.L.U. and Fluxys S.A.). Since the completion of this transaction, DESFA has been certified in accordance with Article 10 of Directive 2009/73/EC and Articles 19 and 64 of Law 4001/2011 (by virtue of Decision 1220/2018 of the Greek Regulatory Authority for Energy ("RAE")), and currently operates under the OU model, as per Articles 62 and 63 of Law 4001/2011.
DESFA conducts the operation of the NNGS based on the provisions of the NNGS Operation Code (the latest version being RAE Decision 123/2018 as published in the GG B' 788/07.03.2018)
5. What is the OU model?
The OU model implies the appointment of the system owner as the system operator and its independence from any supply and production interests. Pursuant to Article 9 of Directive 2009/73/EC and Article 62 of Law 4001/2011 transposing said Directive, the same person(s) are not entitled to exercise direct or indirect control over a generation or supply undertaking and, at the same time, exercise direct or indirect control or any right over a TSO or transmission system. Conversely, direct or indirect control over a transmission system or TSO should preclude the possibility of exercising direct or indirect control or any right over a generation or supply undertaking. Furthermore, the same person(s) cannot concurrently be a member of the managing board of a TSO or transmission system and a generation or supply undertaking. For the same reason, a person is not entitled to appoint members of the managing boards of a TSO or transmission system, and concurrently exercise control or rights over a generation or supply undertaking.
A fully effective separation of network activities from supply and generation activities applies throughout the European Union to both EU and non-EU undertakings. Therefore persons from third countries are only allowed to control a transmission system or TSO if they comply with the requirements of effective separation that apply in the EU (Article 11 of Directive 2009/73/EC).
6. What is the ITO model?
The ITO model may only be selected by Member States the transmission systems of which belonged to a vertically integrated undertaking at the time of entry into force of Directive 2009/73/EC (i.e. 3 September 2009). Under this model, the system operator is vested with ownership and operation of the transmission system while remaining in the same vertical structure as a subsidiary of the vertically integrated undertaking.
At the same time, numerous detailed rules referring, inter alia, to decision making, assets and financial and human resources of the ITO are regulated with a view to ensure effective unbundling from the vertically integrated undertaking. In this context, a key requirement for the ITO model is the existence of a Supervisory Body (Article 20 of Directive 2009/73/EC and Article 63E of Law 4001/2011) in combination with the appointment of a Compliance Officer (Article 21 of Directive 2009/73/EC and Article 63F of Law 4001/2011) in order to ensure the ITO's independence. It is noted that DESFA was initially certified under the ITO model (by virtue of RAE Decision 523/2014) and operated in accordance with the provisions of Articles 63A - 63I of Law 4001/2011 until its privatization.
7. What is the ISO model?
Under the ISO model the transmission system is owned by the vertically integrated company, but "leased out" to a third party, namely the ISO, which is responsible for the operation, maintenance and development of the system. The owner of the system is assigned with a number of tasks and obligations, such as the provision of all relevant cooperation, support and information to the ISO or financing of investments decided by the ISO and approved by the national regulatory authority. In cases where an ISO has been appointed, Directive 2009/73/EC requires legal and functional unbundling, as well as unbundling of accounts between the ISO and system owner (Articles 15 and 31 of Directive 2009/73/EC).
The ISO is responsible for granting and managing third-party access rights, including the collection of access and congestion charges, and for ensuring the long-term ability of the NNGS to meet reasonable demand through investment planning. When developing the NNGS, the ISO shall be responsible for planning (including authorization procedures), construction and commissioning of the new infrastructure. As in the case of the ITO model, the ISO model may be only selected by Member States the transmission system of which belonged to a vertically integrated undertaking at the time of entry into force of Directive 2009/73/EC.
8. Can a third party be imposed as Operator of NNGS?
In case DESFA systematically breaches its obligations as set out in Law 4001/2011, and particularly if it repeatedly discriminates in favor of vertically integrated undertakings, RAE may impose a third party as operator of the NNGS, by means of a duly justified decision and upon prior hearing of DESFA, in accordance with Article 63J of Law 4001/2011. This third party shall operate under the ISO model, pursuant to the provisions of Directive 2009/73/EC, in particular Article 14. In this case, the NNGS remains in the ownership of DESFA.
9. Which is the scope of DESFA?
DESFA is responsible for the operation, management, exploitation and development of the NNGS and its interconnections in a technically sound and economically efficient way, in order to best serve users with safety, reliability and adequacy.
Article 68 of Law 4001/2011 lays out the main competencies of DESFA. Inter alia, DESFA shall provide users with access to the NNGS in the most economically efficient, transparent and non-discriminatory way. In this context, DESFA enters into natural gas transmission agreements, LNG facility agreements and agreements for the use of storage facility, based on templates which have been pre-approved by RAE. DESFA may refuse access to the system in cases of lack of capacity or where user access would prevent it from carrying out its public service obligations.
Furthermore, DESFA: (i) organises the delivery and reception of natural gas in relation to the NNGS and its allocation among users and ensures its quality; (ii) is responsible for balancing the NNGS load and collecting the supply security charge from users, maintaining a separate account for this activity; (iii) applies mechanisms for managing congestion at inflow and outflow points based, to the extent possible, on market mechanisms, in accordance with transparent criteria as set out by the NNGS Code of Operation, so as to promote competition without any discrimination between NNGS users; and (iv) ensures emergency preparedness as per Article 73 of Law 4001/2011.
DESFA participates in the European Network of TSOs for Gas ("ENTSOG") established pursuant to Article 5 of Regulation (EU) 715/2009, and in energy exchanges, whereas it draws up the NNGS development plan. Finally, DESFA is vested with public utilities obligations, as per the provisions of Law 4001/2011.
10. Who is responsible for the distribution of natural gas?
Under the provisions of Law 2364/1995, DEPA was granted the right to natural gas distribution and supply. Pursuant to Article 4 of this Law, DEPA was entrusted with the right to establish regional gas distribution and supply companies, known as EDAs in the Attica, Thessaloniki and Thessalia regions. Aimed at the rapid development of the natural gas grid, these EDAs were entitled to launch international public tenders for the selection of private investors to participate in the establishment and management of special purpose companies, namely Gas Distribution Companies or EPAs, with the sole purpose of exercising rights for the supply and distribution of natural gas within specific geographic areas. These companies also undertake the obligation of developing the natural gas distribution system in their geographic area.
These tenders led to the establishment of EPA Thessaloniki S.A., EPA Thessalia S.A. and EPA Attiki S.A., which were awarded the licences for exclusive distribution rights, as well as rights for the supply of natural gas to non-eligible customers, (customers with consumption less or equal to 100 GWh and household customers) within the territories of Thessaloniki, Thessalia and Attiki respectively, for a period of thirty years. Consequently, consumers located within these areas were obliged to purchase natural gas from these three EPAs.
As a result of their acquisition by EDA Attiki S.A. of EDA Thessaloniki S.A. and EDA Thessalia S.A. in 2007, they merged leading to the formation of EDA S.A which was subsequently acquired by DEPA in 2010.
In accordance with Law 4001/2011, transposing the Third Energy Package, as amended by Law 4336/2015, the EPAs were obliged to proceed with the legal, accounting and functional unbundling of the operation of the Natural Gas Distribution Network from other activities, through the contribution, at their discretion, of either the distribution branch or supply branch of each one of them (Article 80A of Law 4001/2011) to a newly established EDA or EPA respectively. This unbundling was concluded through the spin-off of the supply branch of each EPA, with of the Thessaloniki and Thessalia EPAs contributing their supply branches to a new joint company (EPA Thessaloniki-Thessalia). Their distribution branches were merged into EDATHESS, the new distribution system operator ("DSO") for both areas.
In 2017 the supply branch of the Attiki region was also spun off to form the new EPA Attiki gas supply company, as well as EDA Attiki, the DSO for the Attiki area. In 2018, the newly established EPA Attiki changed its business name to Natural Gas Greek Energy Company.
In relation to the rest of Greece, DEPA proceeded with the spin-off of the distribution sector and formed the DSO DEDA. DEPA will continue its activity as wholesale gas importer, majority shareholder of the Natural Gas Greek Energy Company, EDATHESS, DEDA and EDA Attiki, and also as competitor of the EPAs in the supply of natural gas.
It is notable that since 1 January 2018 all customers are eligible, meaning that they have the right to select their supplier at their discretion. Finally, further to Article 80B of Law 4001/2011, the ownership of the distribution networks which were constructed by DEPA or the existing EPAs rests with DEPA, whereas the distribution works or works aimed at the extension of the existing distribution network to be undertaken in the future by the newly established companies, will be exclusively owned by them.
11. Who is responsible for the supply of natural gas?
Pursuant to Article 81 of Law 4001/2011, in order to supply gas to customers, a natural gas supply license is required. Such license is issued by RAE, as per the terms and conditions of the Natural Gas Licensing Regulation (Ministerial Decision no. οικ. 178065/08.08.2018). This Law, as amended and currently in force, was aimed at abolishing the distinction between eligible and non-eligible customers, as defined above, in order for all customers to be free to select their preferred natural gas supplier. As a result, since January 1st 2018 all non-household and household customers are eligible, pursuant to Article 82 of Law 4001/2011.
The EPAs established under the provisions of Law 2346/1995 and which in the past were exclusively supplied by DEPA by virtue of special agreements, are also considered eligible customers, in accordance with the terms set out in Article 82 para. 1d of Law 4001/2011.
Note: The author would like to thank Ms. Magdalini Vlachopoulou for her valuable contribution to this article.
