Gas Supplier Switching

The natural gas market in a liberalised environment

As from 1 January 2007 all final customers have the right to change their supplier free of charge, which gives them an opportunity to influence a part of their outgoings on gas supplies.

The final price of natural gas supply is composed of two basic parts: a component regulated by the Energy Regulatory Office and an unregulated component resulting from the contractual relationship between the supplier and the customer. The regulated component includes the charges for natural gas transmission and distribution. The unregulated component of the final price includes the charge for gas storage in underground gas storage facilities and for the natural gas itself (i.e., the commodity). The level of these charges is not subject to control, and depends on the quotations offered by the various gas traders or storage service providers. The commodity charge and the gas storage charge are those parts of the price that customers can influence by selecting their supplier.

Due to the legal unbundling of the companies, which is taking place under Act No. 458/2000 on the Conditions for Business and State Administration in the Energy Industries and on Amendments to Certain Laws (hereinafter "the Energy Act"), the business of distribution was demerged from what until then had been regional gas distribution companies as from 1 January 2007. This unbundling has given rise to new independent companies that distribute natural gas. Since 1 January 2007 the original gas suppliers have been operating on the liberalised gas market only as gas traders, whose business is not limited by area in any way.

 

Supplier switching

Before changing their gas supplier customers are well advised to thoroughly consider the quotations available on the gas market. In assessing the quotations, customers should consider the level of the gas price quoted as well as the specific terms and conditions of supplies and, not least, the gas supplier's reliability and, potentially, experience. A good supplier should also act on behalf of the customer and take most of the steps required for supplier switching.

An up-to-date list of gas suppliers is available via the link under this text and also on the Energy Regulatory Office's website in the section Licences - Information about Holders.

It is the gas suppliers themselves who should inform final customers about the price for which they supply gas and about the other services they provide.

In the event that a supplier and a customer in the household or small offtake category fail to reach agreement these customers can, under Section 12a of the Energy Act, request a supplier of last resort to supply them with natural gas for prices set by the Energy Regulatory Office. The supplier of last resort is obliged to provide such supply, with the exception of cases where unauthorised offtake has been identified.

Once a final customer selects a different supplier and reaches agreement with this supplier on future gas supplies, it is important to set the right date from which the new supplier should start supplying gas. A supplier switch becomes effective as from the first gas day of a calendar month. Supplier switching is a process than cannot be completed overnight, because it requires a number of steps to be taken prior to the date of effect of the supplier switch. It is therefore advisable to set the latest dates for taking each of these steps and monitor them with the help of watching the number of days (workdays or calendar days) running up to the day on which the new supplier will start supplying the customer with gas.

The final customer should request the termination of his agreement with his current supplier well in advance, no later than by the date set out in the agreement or in the current supplier's commercial terms and conditions. Unless the final customer finishes its previous contract relationship properly, he/she has to bear law consequences, e. g. arise of responsibility for caused damage. Agreements that can be entered into in respect of gas supply are specified in Section 72 of the Energy Act.

The first and the easiest option for eligible customers is to enter into an agreement on bundled gas supply services, which covers all services related to gas supply. Another option is to enter into separate agreements with each of the service providers. This means that eligible customers can enter into a gas distribution agreement, gas transmission agreement, and, if their load profile requires so, a gas storage agreement.

 

Gas supplier switching using the option of a single agreement (suitable for households and small offtake customers)

From the Energy Regulatory Office's point of view, customers in the household and small offtake categories are best advised to enter into an agreement on bundled gas supply services with the new supplier. Under such agreements, the supplier is responsible for all the services related to gas supply, i.e., it not only supplies gas as such but also takes care of gas transmission, distribution, and storage. Market participants must enter into an agreement on bundled gas supply services no later than 20 calendar days before the date on which gas supply is to be started by the new supplier. It is important to specify all the details required by the applicable legislation in the new agreement.

 

Gas supplier switching using the option of separate agreements on each of the services

If a customer is switching supplier for the first time and does not intend to enter into an agreement on bundled gas supply services and has not yet entered into a gas distribution agreement, he should request the respective distribution system operator to whose system his gas consumption equipment is connected to enter into such agreement. The gas market participant must deliver his request for the entering into a gas distribution agreement to the distribution system operator no later than 18 calendar days before the date on which the new supplier is to start supplying gas and the agreement must contain all the required details. On the basis of this request the distribution system operator shall register the details about the customer's supply point in its information system, which is necessary for keeping records of this customer's future transactions. Subsequently, the distribution system operator and the customer enter into a gas distribution agreement in writing. However, the execution of this agreement does not mean that all the requirements for completing the supplier switching process have been met.

In fact, the customer must enter into a gas supply agreement with the new supplier. When entering into a gas supply agreement only the agreement must be executed no later than 20 calendar days before the date of effect of the supplier switch. However, in this case the eligible customer himself must make arrangements for the other services, and well in advance. Missing or incorrect details can make the whole supplier switching process much longer.

An inseparable part of gas supply is the payment for natural gas transmission and storage. In the case of agreements on bundled gas supply services, the gas transmission and storage services already are included in the services offered. Upon a supplier switch, the capacity contracted for the gas transmission and storage services for the customer is automatically tied to the customer. If final customers do not want to enter into an agreement on bundled gas supply services they can enter into separate gas transmission and gas storage agreements with each of the providers.

 

Conclusion

In terms of the steps to be taken in connection with supplier switching, the execution of the respective agreements marks the completion of the whole process for the customer. In the meantime, i.e., between agreement execution and the day on which the new supplier will start supplying gas to the final customer, the other gas market participants involved take some other steps of a technical and administrative nature, which are required for supplier switching.

In the event of a successfully accomplished supplier switch the new supplier will start supplying gas to the final customer on the date set out in the agreement.

The above-described processes are viable alternatives of the supplier switching mechanism. A detailed description of the supplier change process, including some other alternative options, is set out in f public notice no. 365/2009, which is available on the ERO's website in the section Legislation.

The gradual liberalisation of the market is a complicated and slow process which is under way throughout the European Union. Experiences from the whole of Europe suggest that gas traders will primarily focus on large customers. Only once their competitors, monopoly incumbents, have successfully established their position will traders also start to focus more on smaller customers. At present, the Energy Regulatory Office is not aware of any realistic offers of services related to gas supply targeted at customers in the household category.