LNG Fa­cil­i­ties

• Regulation in Germany
• Access regulation
• Tariff and cost regulation of LNG facilitites
• Transparency requirements

Regulation in Germany

In Germany, LNG facilities are subject to access and tariff regulation as these facilities are classed as gas supply networks. In addition, there are the directly applicable European provisions from Regulation (EC) 715/2009 of the European Parliament and of the Council of 13 July 2009, the LNG Ordinance and German Energy Industry Act.

Regulatory scope of the LNG Ordinance

The LNGV serves to create the regulatory framework for fixed and non-fixed LNG facilities. It regulates the basic elements of the allocation and management of capacity, the setting of tariffs and the underlying calculation of costs for the operation of LNG facilities as well as a separate rate of return on equity.

It does not contain comprehensive provisions on the methodology to be used to implement the approved cost pool in tariffs. This is intended to support the phase in which LNG facilities are being built in the current context of the diversification of energy sources with the aim of ensuring security of supply and also to take account of the very different marketing models of LNG facilities.

Regulatory procedure

Access regulation

Access to LNG facilities must be transparent and non-discriminatory. Part 2 LNGV contains provisions for access to LNG facilities as well as for the allocation and management of capacity.

In order to ensure that LNG facilities are utilised to the greatest extent possible, the LNGV requires their operators to market the full capacity of the facility. This marketing may be on a long or short-term basis. Long-term allocation refers to the allocation of capacity for at least 12 months.

LNG facility operators may set minimum booking amounts and durations for the allocation of capacity, among other things, as long as they comply with the restrictions. The procedural requirements must be observed in the allocation of long-term capacity.

Moreover, LNG facility operators are required to set aside a reserve quota of at least 10% of the annual throughput capacity for the short-term allocation of capacity. Short-term allocation refers to the allocation of capacity of LNG facilities for a booking period of less than 12 months. Very detailed provisions for the short-term allocation of capacity set aside are also imposed on the operators of LNG facilities.

LNG facility users have the right to trade capacity they have contracted from the LNG facility on the secondary market.LNG facility operators have to offer unused capacity of LNG facilities on the market and to include corresponding arrangements in their capacity contracts.

Tariff and cost regulation of LNG facilitites

LNG facility operators must calculate cost-reflective tariffs. They need network tariff approval as set out in the provisions of the LNGV.

The underlying regulatory framework in the LNGV includes an annual cost-reflective calculation of tariffs on the basis of a comparison of planned and actual costs including interest on the resulting balances that are spread out over each of the following years. The main provisions for this are found in part 3 LNGV on the calculation of tariffs and costs.

The costs are calculated partly as current outlay costs and partly as imputed costs:

• The current outlay costs comprise all operating costs in a calendar year corresponding to those of an efficient and structurally comparable LNG facility operator. The basis for this is the income statement of the activity report pursuant to section 6b(3) EnWG for the activity of operating an LNG facility. It includes interest for the raising of debt capital insofar as this does not exceed the customary market interest rate for comparable loans.
• The other capital costs of the calculation period (calendar year) are calculated on an imputed basis and are composed of the imputed depreciation, rate of return on equity and taxes.
  
  The imputed depreciation is regulated in section 17 LNGV. The imputed depreciation amounts correspond to the amounts for the decrease in value of the operationally necessary fixed assets within the meaning of the provisions mentioned and replace the corresponding balance-sheet depreciation of the income statement of the activity report pursuant to section 6b(3) EnWG for the activity of operating an LNG facility. The underlying imputed durations of use correspond to the expected operating life of the LNG facility, which is at least five years. The straight-line method of depreciation is prescribed. Depreciation to a value below zero is not permissible.
  
  The imputed rate of return on equity serves to provide interest on the capital employed by the operator of an LNG facility for that facility up to an equity ratio of 40% of the operationally necessary assets. An interest rate of 9% before tax has been set for this purpose. The operationally necessary assets are calculated as the sum of the imputed residual values of the operationally necessary tangible fixed assets valued at historical acquisition and production costs and the balance-sheet values of the operationally necessary financial assets and the current assets, deducting the capital made available without interest and interest-bearing debt capital. Equity capital beyond the equity ratio of 40% incurs interest at a rate similar to that for debt capital in line with the methodology for calculating the interest rate set out in section 18(4) LNGV.
  
  The imputed taxes comprise the appropriately allocated trade taxes calculated on the basis of the imputed rate of return on equity with the collection rate applicable to the LNG facility operator.

• Cost-reducing revenue and income are to be deducted in the calculation of the costs that apply to the calculation of tariffs.

Transparency requirements

Council Regulation (EU) 2022/2576 of 19 December 2022 enhancing solidarity through better coordination of gas purchases, reliable price benchmarks and exchanges of gas across borders entered into force on 29 December 2022. The purpose of the Regulation is to coordinate the gas purchasing of EU Member States and thus contribute to security of supply.

To this end, various measures and requirements were introduced addressed to LNG facility operators, among others. Some of these have very short implementation deadlines:

1. Secondary capacity booking platform
Article 12 of Regulation (EU) 2022/2576

All LNG facility operators, individually or regionally, must set up or make use of an existing transparent and non-discriminatory booking platform for LNG facility users to re-sell their contracted capacity on the secondary market. The provision of Article 12 of Regulation (EU) 2022/2576 is directed both at LNG facilities subject to access and tariff regulation and at those LNG facilities exempt from regulation under Article 28a of the German Energy Industry Act (EnWG) in conjunction with Article 36 of Directive 2009/73/EC.

2. Transparency platform
Article 13 of Regulation (EU) 2022/2576

LNG facility operators have to publish all the information required by Article 19 of Regulation (EC) No 715/2009 on a European LNG transparency platform in a transparent and user-friendly manner. For LNG facilities, this could be the „Alsi“ platform of the organisation Gas Infrastructure Europe (GIE), for example.

a) Regulated LNG facilities

The provision of Article 13(1) of Regulation (EU) 2022/2576 in conjunction with Article 19 of Regulation (EC) No 715/2009 applies in full to LNG facility operators subject to regulation. The operators of LNG facilities subject to regulation are thus required to publish the following information:

• detailed information regarding the services offered and the relevant conditions applied
• the technical information relevant for access
• the amount of gas in each LNG facility
• inflows and outflows
• the available capacity of the LNG facility
• detailed information on tariff derivation, the methodologies and the structure of tariffs

The further provisions of Article 19 of Regulation (EC) No 715/2009 and the relevant national legislation must be observed to this extent.

b) LNG facilities exempt from regulation

For operators of LNG facilities exempt from regulation in accordance with section 28a EnWG in conjunction with Article 36 of Directive 2009/73/EC, this requirement comprises the content set out in Article 19(4) of Regulation (EC) No 715/2009, pursuant to Article 30(b) of Regulation (EC) No 715/2009. The deadline for implementing Article 13(1) of Regulation (EU) 2022/2576 is also 28 February 2023.

In addition, operators of LNG facilities granted an exemption under section 28a EnWG in conjunction with Article 36 of Directive 2009/73/EC must also publish their final tariffs for infrastructure on a central European transparency platform.

In accordance with this provision, operators of LNG facilities that are exempt from regulation must publish the following information, with the information covered by Article 19(4) of Regulation (EC) No 715/2009 being updated at least daily:

• the amount of gas in each LNG facility
• inflows and outflows
• the available capacity of the LNG facility