Annual Report. Summary COMMISSION FOR ELECTRICITY AND GAS REGULATION

Transcription

1 Annual Report 2004 Summary COMMISSION FOR ELECTRICITY AND GAS REGULATION

2 Annual Report 2004 Summary COMMISSION FOR ELECTRICITY AND GAS REGULATION

3 FOREWORD BY THE CHAIRMAN If asked, I would say that the year 2004 flew by. Of course, this is a subjective impression, but nevertheless one based on objective elements. In fact, those with a heavy workload are always short of time. In 2004, the workload facing the CREG built up, reaching its maximum level. Having been granted the authority to approve the tariffs applied on natural gas distribution networks, for the first time since 2004 the CREG obtained and was able to exercise all the areas of competence conferred upon it pursuant to the basic federal laws of 1999 on the plan for the liberalisation of the electricity and gas markets. This meant that the CREG processed 66 new rates dossiers on distribution networks, not to mention numerous old tariffs dossiers from 2003, in which tariffs had been imposed for three-month periods in 2004, each of which had to be processed four times during the course of the year. Although the CREG s area of competence as regards tariffs is the most visible and directly perceptible, its tasks do not end there. For instance, the CREG has been endeavouring to convince the electricity transmission system operator and the natural gas transmission companies to offer more balanced contractual conditions for access to and use of the networks. I could go on to list the many equally important dossiers dealt with by the CREG in 2004, but by doing so, I would simply be rewriting the annual report that follows. The dossiers which I have just mentioned specifically were not selected randomly. In fact, these are dossiers dealt with exclusively by the Management Board of the CREG. There are also dossiers for which the Council-General took the initiative in One of these is the study on the structure and operation of the Belgian electricity market in a European context, carried out at the request of the Council-General, which has now acquired a certain degree of recognition and has been widely commented on. It is also worth mentioning the opinion issued by the Council- General on the transposition into Belgian law of the two European Directives of 2003 on the continued liberalisation of the electricity and natural gas markets which has attracted a great deal of attention. Since 2004, the two bodies of the CREG have reached cruising speed and acquired their full areas of competence, and the effects of this have been certainly been felt. The most striking - but not the only - example of this is the sharp fall in network tariffs. The money invested in the CREG by electricity and gas consumers since 2000 is beginning to bear fruit. The CREG has allocated these investments to developing its knowledge still further. Now that these investments are beginning to bear fruit, it is important to use the knowledge acquired as effectively as possible, otherwise we would have failed - or at the very least shown a lack of respect for - the consumer. Unlike information, knowledge cannot be recorded in books or software programs, but is found in the minds of those who possess it, in this case the staff of the CREG, and in their teamwork. It is impossible to pass this knowledge on without incurring costs for consumers. The Council-General of the CREG seems to be keeping a close eye on this, as can be seen from the fact that they have asked the legislator not to transfer the CREG's current areas of competence to other bodies. The Council-General which, and let us not forget this, is the forum for representation and meeting of all the stakeholders in the liberalisation of the electricity and gas markets, is therefore asking the legislator to use the investment made by consumers to its fullest possible extent. Moreover, it is surprising to note that the Council-General s opinion on the transposition of the two European Directives tallies exactly with the opinion expressed by the Council of State. The latter clearly indicates that the European Directives of 2003 require not only the maintaining of the CREG s current areas of competence, but even the allocation of additional areas. I cannot shake off the impression that the Council of State is not an interested party as regards this dossier and that therefore its judgement is objective. The other bodies which express binding opinions on the validity of laws definitely leave me the same impression. Fortunately, these bodies do not allow themselves to be influenced by the criticisms expressed by those whose former privileges have been eroded by the liberalisation and who are therefore endeavouring to lighten the CREG s workload. The same, of course, applies to the CREG itself. Christine Vanderveeren Chairman of the Management Board 3

4 CONTENTS 4 BRIEF INTRODUCTION TO THE CREG PART 1: THE EVOLUTION OF THE NATURAL GAS MARKET 1. THE EUROPEAN NATURAL GAS MARKET THE DIRECTIVE 2003/55/EC THE BENCHMARKING REPORT FROM THE EUROPEAN COMMISSION ON THE IMPLEMENTATION OF THE INTERNAL GAS AND ELECTRICITY MARKET THE EUROPEAN GAS REGULATORY FORUM THE BELGIAN NATURAL GAS MARKET: REGULATION AND LEGISLATION THE NATURAL GAS TRANSMISSION AUTHORISATIONS THE NATURAL GAS SUPPLY AUTHORISATIONS THE TRANSMISSION AND DISTRIBUTION TARIFFS The transmission tariffs The tariffs for the 2005 operating year The multi-annual tariffs for the use of the LNG terminal in Zeebrugge after The analytical accounting plan for the operation of the LNG terminal in Zeebrugge after The report on tariffs for the 2003 operating year The bonus/malus relating to tariffs for the 2003 operating year The distribution tariffs The Royal Decree of 29 February The tariffs for the 2004 operating year The tariffs for the 2005 operating year The analytical accounting plan THE CODE OF CONDUCT The main conditions of FLUXYS S.A The main conditions of FLUXYS LNG S.A THE ELIGIBILITY WITHIN THE TRANSMISSION NETWORK PRICING BY DEFAULT SUPPLIERS THE MAXIMUM PRICES Adapting maximum prices on the captive market and maximum social prices Offsetting the real net cost resulting from the application of maximum social prices The maximum prices for the supply of natural gas to non-protected final customers whose contract has been terminated The G parameter THE FEDERAL CONTRIBUTION THE INDICATIVE NATURAL GAS SUPPLY PLAN THE COOPERATION BETWEEN THE MANAGEMENT BOARD, THE COMPETITION SERVICE AND THE COMPETITION COUNCIL The concentrations Exchanging information THE COMPETITION ON THE L GAS MARKET THE CONTROL STRUCTURE OF FLUXYS S.A. AND DISTRIGAS S.A THE BELGIAN NATURAL GAS MARKET: MARKET DATA THE NATURAL GAS SUPPLIES THE NATURAL GAS SUPPLY AND DEMAND The natural gas demand The consumption trends The sales per sector and per uptake segment The opening up of the Belgian natural gas market Supplying natural gas THE INDICATIVE NATURAL GAS SUPPLY PLAN PRICING THE CAPTIVE NATURAL GAS MARKET PRICING THE LIBERALISED NATURAL GAS MARKET Pricing the natural gas transmission Pricing the natural gas distribution PART 2 : THE EVOLUTION OF THE ELECTRICITY MARKET 1. THE EUROPEAN ELECTRICITY MARKET THE DIRECTIVE 2003/54/EC THE BENCHMARKING REPORT FROM THE EUROPEAN COMMISSION ON THE IMPLEMENTATION OF THE INTERNAL GAS AND ELECTRICITY MARKET THE EUROPEAN ELECTRICITY REGULATORY FORUM THE BELGIAN ELECTRICITY MARKET: REGULATION AND LEGISLATION THE ELECTRICITY GENERATION

5 The indicative programme for power generation The authorisations to establish electricity generating plants The domain concessions The green certificates Auctioning virtual generating capacity MANAGING THE TRANSMISSION NETWORK Corporate governance The grid code The general terms and conditions of access responsibility contracts and connection contracts The reconstruction code The reserve capacity The development plan THE TRANSMISSION AND DISTRIBUTION TARIFFS The transmission tariffs The tariffs for the 2004 operating year The tariffs for the 2005 operating year The report on tariffs for the 2003 operating year The bonus/malus relating to tariffs for the 2003 operating year Limiting uptakes on the transmission network The distribution tariffs The tariffs for the 2004 operating year The tariffs for the 2005 operating year Monitoring the pensions dossier The reports The bonus/malus relating to tariffs for the 2003 operating year THE FEDERAL CONTRIBUTION THE ELIGIBILITY WITHIN THE TRANSMISSION NETWORK THE ELECTRICITY SUPPLY AUTHORISATIONS CREATING AN ELECTRICITY EXCHANGE PRICING BY DEFAULT SUPPLIERS THE MAXIMUM PRICES Comparing maximum prices on the captive market in Belgium with the four neighbouring countries Adapting maximum prices on the captive market and maximum social prices Offsetting the real net cost resulting from the application of maximum social prices The maximum prices for the supply of electricity to non-protected final customers whose contract has been terminated THE COOPERATION BETWEEN THE MANAGEMENT BOARD, THE COMPETITION SERVICE AND THE COMPETITION COUNCIL The concentrations Exchanging information THE BELGIAN ELECTRICITY MARKET: MARKET DATA GENERATING ELECTRICITY THE ELECTRICITY SUPPLY AND DEMAND The electricity demand The opening up of the Belgian electricity market Supplying electricity THE ELECTRICITY TRANSMISSION The national electricity transmission network Managing available capacity on the links with other countries PRICING THE CAPTIVE ELECTRICITY MARKET PRICING THE LIBERALISED ELECTRICITY MARKET Pricing the electricity transmission Pricing the electricity distribution PART 3 : THE COMMISSION FOR ELECTRICITY AND GAS REGULATION (CREG) 1. HOW THE CREG WORKS THE CREG S STAFF THE FEDERAL CONTRIBUTION THE "PROTECTED CUSTOMER FUND" THE "COMPENSATION FUND FOR THE LOSS OF COMMUNE REVENUE" THE ACCOUNTS FOR THE ACTIVITIES OF THE CREG THE COUNCIL-GENERAL THE CREG WITHIN THE CEER THE CREG WITHIN THE ERGEG THE CREG AND CONSULTATION WITH THE REGIONAL REGULATORS IN BELGIUM

6 THE MANAGEMENT BOARD From left to right: Thomas LEKANE, Guido CAMPS, François POSSEMIERS, Jean-Paul PINON, Christine VANDERVEEREN, Bernard LACROSSE. THE COUNCIL-GENERAL Baudouin VELGE Chairman of the Council-General Anne PANNEELS Vice-Chairman of the Council-General

7 BRIEF INTRODUCTION TO THE CREG 1. AREAS OF COMPETENCE The Commission for Electricity and Gas Regulation (CREG) is the federal body responsible for regulating the electricity and natural gas markets in Belgium. It was created by the Law of 29 April 1999 on the organisation of the electricity market (hereinafter: the Electricity Law) and the Law of 29 April 1999 on the organisation of the gas market and the tax position of the electricity producers. The areas of competence conferred upon the CREG are listed in the Law of 12 April 1965 on the transmission of gaseous and other products by pipeline (hereinafter: the Gas Law) and in the Electricity Law 1. It is charged with advising the public authorities on the organisation and operation of the natural gas and electricity markets as well as being responsible for monitoring and supervising the application of the laws and regulations applicable to these markets. 2. COMPOSITION The CREG is made up of two bodies, the Council-General and the Management Board. The Council-General is made up of representatives of the federal government and the regional governments, organisations representing workers, employers, the small business sector and environmental associations, producers, distribution network operators, intermediaries, suppliers and consumers. The members of the Council-General were appointed by Ministerial Decree on 5 March for a three-year period beginning on 20 February The composition and working methods of the Council-General are laid down by Royal Decree 4. (b) The Management Board 5 is responsible for the operational management of the CREG and undertakes the acts necessary or useful for the fulfilment of its missions. It is a collegiate body which deliberates in accordance with the usual rules on deliberating assemblies. The Management Board consists of a Chairperson and five other members appointed by Royal Decree after deliberation in the Council of Ministers. 7 (a) The Council-General 2 fulfils the following missions: - on its own initiative or at the request of the Minister for Energy, it defines the approaches to be adopted when applying the Electricity Law and Gas Law and their implementing decrees; - it assesses the way in which the Management Board fulfils its tasks and gives opinions and recommendations on this subject to the Minister for Energy and the Management Board; - it formulates an opinion on any issue submitted to it by the Management Board; - it acts as a forum for discussion of the aims and strategies of the energy policy in the electricity and natural gas sectors. It may also ask the Management Board to carry out studies or give opinions. The CREG comprises six directorates, each run by a member of the Management Board: Ms Christine VANDERVEEREN, Chairman of the Management Board and Director of market litigation, Mr Guido CAMPS, Director of pricing and accounts control on the electricity market, Mr Bernard LACROSSE, Administrative Director, Mr Thomas LEKANE, Director of technical operation of the electricity market, Mr Jean-Paul PINON, Director of technical operation of the natural gas market, Mr François POSSEMIERS, Director of pricing and accounts control on the natural gas market. 1 Articles 23 of the Electricity Law and 15/14 of the Gas Law. 2 Article 24, 3, of the Electricity Law. 3 Ministerial Decree of 5 March 2004 (Belgian Gazette of 12 March 2004) amending the Ministerial Decree of 13 February 2001 on the appointment of members of the Council- General of the Commission for Electricity and Gas Regulation. 4 Royal Decree of 3 May 1999 relating to the composition and working methods of the Council- General of the Commission for Electricity and Gas Regulation. 5 Article 24, 2, of the Electricity Law.

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9 Part 1 The evolution of the natural gas market 1 THE EUROPEAN NATURAL GAS MARKET THE BELGIAN NATURAL GAS MARKET: REGULATION AND LEGISLATION THE BELGIAN NATURAL GAS MARKET: MARKET DATA

10 Rapport Annuel Creg 2004 ı Page THE EUROPEAN NATURAL GAS MARKET 1.1. THE DIRECTIVE 2003/55/EC At the request of the Council-General, the Management Board has carried out a study on the transposition into Belgian law of the Directives 2003/54/EC and 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and natural gas 6. This study was taken as the basis for the Council-General s opinion on this transposition process 7. Table 1 : Opening up of the European gas and electricity market as at 5 January 2005 (share of consumption by eligible customers in total electricity or gas consumption) Declared market Electricity Gas opening (%) Austria Belgium c. 90 c. 90 Denmark Finland 100 exemption France Germany Greece 62 exemption 1.2. THE BENCHMARKING REPORT FROM THE EUROPEAN COMMISSION ON THE IMPLEMENTATION OF THE INTERNAL GAS AND ELECTRICITY MARKET Ireland Italy Luxembourg Netherlands Portugal 100 exemption The table on the opening up of the European gas and electricity Spain market published by the European Commission on 5 January 2005 Sweden is given hereafter. United Kingdom Estonia THE EUROPEAN GAS REGULATORY FORUM Latvia 76 0 Lithuania n.k. 70 Poland The European Gas Regulatory Forum, also known as the Madrid Czech Republic 47 0 Forum, met on two occasions in 2004, on 8-9 July and on Slovakia December Hungary Slovenia Following the discussions held within the forum, it did not prove Cyprus 35 exemption possible to obtain an agreement from the storage system operators Malta 0 exemption to adopt the proposed Guidelines for Good TPA Practice for Storage System Operators (GGP-SSO) drawn up by the European regulators, on a voluntary basis. It was therefore agreed that both the storage system operators and the regulators would continue their efforts to reach an agreement at the start of Source : Commission of the European Communities, Annual Report on the Implementation of the Gas and Electricity Internal Market, Commission Staff Working Document, COM(2004)863, 5 January Moreover, in 2004, the Forum received two reports from the CEER 8, SNAM RETE GAS, obtained the best score in Europe as regards the the first on compliance with the Guidelines for Good TPA Practice quality of the entry-exit system introduced on 1 April for Transmission System Operators (GGP2) which indicated that it would be advisable to establish a binding regulatory framework, Interoperability between networks and the follow-up of the activi- and the second on the implementation of the entry-exit system, ties of the European Association for the Streamlining of Energy indicating, amongst other things, that FLUXYS S.A., along with Exchange-gas were also discussed at the Forum. 6 Study (F) CDC-353 on the transposition into Belgian federal law of the Directive 98/30/EC, 23 September Carried out in application of Article 24 of the Electricity Law. 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC, the Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive This study is now part of the administrative dossier of the Council-General. 7 See Part 3, point 2.1., of this report. 8 Council of European Energy Regulators. 9 See also Part 1, point , of this report.

11 2. THE BELGIAN NATURAL GAS MARKET: REGULATION AND LEGISLATION 2.1. THE NATURAL GAS TRANSMISSION AUTHORISATIONS The CREG, whose areas of competence include an advisory function, received twenty-one requests for opinions on natural gas transmission authorisations 10 in 2004 for which the Management Board expressed two negative opinions. In the first case, when the applicant was FLUXYS S.A., the CREG asked for the alternative, less costly solution of a connection to the vtn/rtr Zeebrugge- Eynatten natural gas pipeline to be examined in greater depth 11. The second, when the applicant was WINGAS GmbH, concerned laying a direct line in the Antwerp region THE NATURAL GAS SUPPLY AUTHORISATIONS In 2004, the Management Board, which provides advisory services on applications for authorisation to supply natural gas 13, issued a positive opinion in response to the application from ENI (UK) Ltd. and a negative opinion in response to that from NORSK HYDRO ENERGIE MARKETING B.V., the reason being that the applicant had negative capital and reserves. A third application, submitted at the end of 2004, had not been dealt with in full when this report was drafted. The Minister for Energy issued three supply permits in 2004, to RWE GAS VERKOOPMAATSCHAPPIJ S.A., ELECTRABEL S.A. and ENI (UK) Ltd THE TRANSMISSION AND DISTRIBUTION TARIFFS The transmission tariffs The tariffs for the 2005 operating year FLUXYS S.A. and FLUXYS LNG S.A. both submitted their tariff proposals to the CREG, within the deadlines set by law, together with a budget for the 2005 operating year 15. Having first of all been rejected by the Management Board, these proposals were revised further to the requests for adjustments from the CREG and were finally approved by the Management Board The multi-annual tariffs for the use of the LNG terminal in Zeebrugge after 2006 In accordance with the Royal Decree of 15 December , in July 2004 FLUXYS LNG S.A. submitted to the CREG its final multiannual tariff proposal for the use of the LNG terminal in Zeebrugge after Having first of all been rejected by the Management Board, this proposal was revised further to the requests for adjustments from the CREG and was finally approved by the Management Board on 30 September The analytical accounting plan for the operation of the LNG terminal in Zeebrugge after 2006 As the transmission company failed to submit its analytical accounting plan on the new transmission infrastructure within the deadlines set by law, the Management Board asked FLUXYS LNG S.A., which agreed to the request and forwarded its analytical accounting plan on 30 August 2004, to base the new infrastructures on the analytical accounting plan used in the annual tariff proposals for the use of the existing LNG terminal The report on tariffs for the 2003 operating year On 30 March 2004, the CREG sent the Minister for Energy, FLUXYS S.A. and FLUXYS LNG S.A., the report on tariffs for connection to and use of the natural gas transmission network, together with the tariffs for auxiliary services applied during This report describes in detail the procedure followed by the Management Board when approving these tariffs. It presents the supervision programme applied by the Management Board when approving the tariffs, gives a detailed description of the tariffs concerned applied in 2003 and compares the level of the tariffs applied in 2003 with that of In application of the Royal Decree of 14 May 2002 relating to the authorisation for the transmission of gaseous and other products by pipeline. 11 The Minister for Energy eventually granted the authorisation but asked FLUXYS S.A., the applicant in this dossier, to consult the CREG in time in respect of similar dossiers so that all the alternatives can be examined in advance. 12 The Minister for Energy has not yet announced a decision. 13 In application of the Royal Decree of 12 June 2001 relating to the general conditions for the supply of natural gas and the conditions for granting natural gas supply authorisations 14 Two of these authorisations concerned applications submitted to the CREG at the end of In application of the Royal Decree of 15 April 2002 on the general tariff structure and the basic principles and procedures on tariffs and accounting of natural gas transmission companies active on the Belgian territory (hereinafter: the Royal Decree of 15 April 2002). 16 Royal Decree of 15 December 2003 on the general tariff structure and the basic principles and procedures on tariffs and accounting of natural gas transmission companies active on the Belgian territory for their new transmission infrastructure recognised as being of national or European interest and necessary for the long-term development of this infrastructure (hereinafter: the Royal Decree of 15 December 2003). 17 Report TG2003 on the tariffs for connection to and use of the natural gas transmission network and the tariffs for auxiliary services applied in 2003, 25 March Drawn up in application of Article 13 of the Royal Decree of 15 April 2002.

12 Rapport Annuel Creg 2004 ı Page The bonus/malus relating to tariffs for the 2003 operating year With a view to monitoring the 2003 tariffs, on 13 February 2004, FLUXYS S.A. and FLUXYS LNG S.A. sent the CREG their annual report on the income statements for the transmission network during the past operating year 18. approved for 2004 as a whole and for the remaining fourteen provisional tariffs were introduced for a renewable, three-month period as of 1 January The tariffs for the 2005 operating year All nineteen tariff proposals with a budget for the 2005 operating year submitted by distribution network operators were rejected The Management Board analysed the differences between the and then revised further to the requests for adjustment from the accounts and the budget, as well as the capital gains and CREG. Six of these were approved by the Management Board, losses included in the equalisation account for transfer to the while provisional tariffs were imposed on the remaining thirteen following accounting period. This analysis focused chiefly on the distribution network operators for a renewable three-month margin before taxes, the closure of the storage facility in period as of 1 January Anderlues and the processing of financial income The analytical accounting plan In June 2004, the CREG approved a larger bonus for transport, amounting to 12.2% bearing in mind the budget submitted at Eight distribution network operators submitted analytical the end of 2002 for the 2003 operating year, and a smaller malus accounting plans and six of these were approved immediately for storage, amounting to 5.9% of the original budget, by the Management Board. Two others were rejected in the compared with that provided for in the report from FLUXYS S.A. first instance but then approved following the submission of a For FLUXYS LNG S.A., this was also a larger bonus than the revised proposal. amount put forward in its report of 13 February FLUXYS LNG S.A. actually recorded a capital gain and/or lower costs of As the remaining eleven distribution network operators did not 2.8% for the year 2003, compared with its 2003 budget. submit an analytical accounting plan for approval within the deadline set by law, the CREG asked them to send these plans These amounts were transferred to the equalisation account by within one month. All the network operators complied with the companies concerned and will be posted to the benefit this request, but all the analytical accounting plans were rejected, (bonus) or detriment (malus) of future tariffs. which meant that new, revised accounting plans had to be submitted The distribution tariffs 2.4. THE CODE OF CONDUCT The Royal Decree of 29 February 2004 The first step towards reforming access to and use of the trans- On the basis of the new Royal Decree of 29 February , the mission network was the submission of the main conditions of distribution network operators were supposed to send the CREG FLUXYS S.A. and FLUXYS LNG S.A. for the approval 20 of the their tariff proposals for the 2004 operating year ( ) and CREG on 11 July for the 2005 operating year ( ), and their analytical accounting plan ( ), within the deadlines set by law The main conditions of FLUXYS S.A The tariffs for the 2004 operating year On 8 January 2004, the CREG rejected the main conditions proposed by FLUXYS S.A. for its transmission and storage Of the nineteen tariff proposals with a budget for the 2004 activities and indicated the points to be adapted in order to operating year submitted by distribution network operators, obtain its approval. Further to Decree n of the three were immediately approved for 2004 as a whole. The Council of State of 5 January , the Management Board others were rejected by the Management Board and revised. Of did not express an opinion on the main conditions proposed these, the tariffs of two distribution network operators were for the transit activity of FLUXYS S.A. 18 In application of Article 14 of the Royal Decree of 15 April In application of Articles 10 and 11 of the Royal Decree of 4 April 2003 on the code of 19 Royal Decree of 29 February 2004 on the general tariff structure and the basic principles conduct on access to the natural gas transmission network (hereinafter: the code of conduct). and procedures on tariffs and accounting of natural gas distribution network operators active 21 This decree in fact suspends the execution of the code of conduct to the extent that this on the Belgian territory (hereinafter: the Royal Decree of 29 February 2004) (Belgian Gazette of 11 March 2004). applies to transit activities within the meaning of the Council Directive 91/296/EEC of 31 May 1991 on the transit of natural gas trough grids and Article 1, 7 bis, of the Gas Law, in particular, but not limited to the Articles 6, 48 and 64 of the code of conduct.

13 As FLUXYS S.A. did not adjust its main conditions satisfactorily, the Management Board decided to reject the adapted main conditions and imposed provisional main conditions for a six-month period. FLUXYS S.A. was asked to submit new main conditions. FLUXYS S.A. satisfactorily incorporated the comments made by the CREG and the reactions collected during the consultation process organised by the CREG via its website and by means of a shippers day. The CREG was able to approve this third proposal for main conditions in full on 20 December As a result, a constant, clear and well balanced framework has been set up both for existing contracts and for new routing and storage contracts on the Belgian market The main conditions of FLUXYS LNG S.A. The main conditions put forward by FLUXYS LNG S.A. were also rejected by the CREG in a decision taken on 8 January 2004 which again indicated the points to be adapted in order to obtain approval. The Management Board decided to reject the adapted main conditions submitted by FLUXYS LNG S.A. and imposed provisional main conditions for a six-month period. FLUXYS LNG S.A. was asked to submit new main conditions. The new main conditions presented by FLUXYS LNG S.A. on 4 June 2004 were approved by the Management Board 23. This approval formed the basis, amongst others, of the capacity subscription contracts concluded between FLUXYS LNG S.A. and three shippers for the use of the Zeebrugge terminal until 2026 (that is EXXONMOBIL/QATAR PETROLEUM, TRACTEBEL GLOBAL LNG and DISTRIGAS). The contracts concluded with the system users have to comply in full with the main conditions approved THE ELIGIBILITY WITHIN THE TRANSMISSION NETWORK The opinion of the Management Board was followed and resulted in the Royal Decree of 10 August PRICING BY DEFAULT SUPPLIERS In March 2004, the Management Board undertook a study 26 on its own initiative examining the differences between the tariffs which the default suppliers, ELECTRABEL CUSTOMER SOLU- TIONS S.A. (hereinafter: ECS) and LUMINUS S.A., apply for their active customers and their standard customers in Flanders. The Management Board expressed a number of objectives and asked the two default suppliers to review their tariff policy as regards natural gas supplies for eligible customers in depth and to improve the way in which they pass on information about the tariffs and the general terms and conditions applicable to their customers. As this report was being prepared, the Management Board was examining the new tariff system submitted by ECS. The CREG has not yet received any information from LUMINUS S.A THE MAXIMUM PRICES Adapting maximum prices on the captive market and maximum social prices The Management Board has put forward a proposal on adapted maximum prices for the supply of natural gas to final customers 27 with a view to avoiding a situation in which certain final customers pay the real net cost resulting for natural gas companies from the application of maximum social prices in the natural gas sector twice, the first time via the surcharge on the consumption of natural gas with a view to financing the fund set up in favour of protected household customers and a second time due to pricing levels that already include compensation. 13 On 17 June 2004, the Management Board, at the request of the Minister for Energy, issued an opinion on reducing the consumption threshold and bringing forward the liberalisation date for final customers connected to a natural gas transmission network 24. It recommended that all final customers connected to the natural gas transmission network be declared eligible by 1 July 2004 at the latest. The Ministerial Decree of 13 May was adopted further to the proposal from the Management Board to reduce the maximum prices for non-eligible final customers and for protected household customers as of 1 January Decision (B) CDC-244/3 on the request for approval of the main conditions for access to the FLUYXS S.A. transmission network, 20 December Decision (B) CDC-245/3 on the request for approval of the main terms for access to the Zeebrugge LNG terminal of FLUXYS LNG S.A., 17 June Opinion (A) CDC-310 on reducing the consumption threshold and bringing forward the date for the liberalisation of final customers connected to a natural gas transmission network, 17 June Given in application of Article 15/6 of the Gas Law. 25 Royal Decree of 10 August 2004 declaring eligible final customers connected to the natural gas transmission network (Belgian Gazette of 30 August 2004). 26 Study (F) CDC-259 on pricing on the market for the supply of electricity and natural gas by default suppliers, 11 March Carried out in application of Articles 23 of the Electricity Law and 15/14 of the Gas Law. 27 Proposal (C) CDC-249 for adapted maximum prices for the supply of natural gas to final customers, set on this date in the Ministerial Decree of 23 December 2003 on setting maximum social prices for the supply of natural gas to protected low-income or vulnerable household customers and in the Ministerial Decree of 12 December 2001 setting maximum prices for the supply of natural gas, 22 January Submitted in application of Articles 15/10 and 15/14 of the Gas Law. 28 Ministerial Decree of 13 May 2004 amending the Ministerial Decree of 12 December 2001 setting maximum prices for the supply of natural gas and the Ministerial Decree of 23 December 2003 on setting maximum social prices for the supply of natural gas to protected low-income or vulnerable household customers (Belgian Gazette of 9 June 2004).

14 Rapport Annuel Creg 2004 ı Page Offsetting the real net cost resulting from the application of maximum social prices The Royal Decree of 21 January 2004 determining the terms and procedures for offsetting the real net cost resulting from the application of maximum social prices on the natural gas market and the intervention rules on bearing these costs (hereinafter: the Royal Decree of 21 January 2004) 29 was adopted further to a proposal from the Management Board published in but differed from this in that it opted for offsetting on the basis of the real net cost and not on a flat-rate basis and stipulated that the offsetting system came into force as of 1 January 2004 and not 1 July 2003, which means that suppliers did not have a legal basis on which to claim the real net cost resulting from supplies of natural gas to protected household customers during the second half of 2003 from the fund set up in favour of protected household customers The G parameter Further to the decision of the Management Board not to consider any further the adoption of the Proxy G parameter to invoice non-eligible customers, the opinion on the new definition of the G parameter 34 was withdrawn. Consequently, the G parameter in its present form will continue to be the reference for establishing the Iga parameter, as defined in Article 3, paragraph 1, of the Ministerial Decree of 12 December 2001 establishing maximum prices for the supply of natural gas THE FEDERAL CONTRIBUTION On its own initiative, the Management Board carried out a study on the problems of implementing the federal contribution 36 which analyses the problems relating to the interpretation and application of the Royal Decrees of 24 March and shows the need for a reform of the federal contribution system The maximum prices for the supply of natural gas to non-protected final customers whose contract has been terminated 2.9. THE INDICATIVE NATURAL GAS SUPPLY PLAN The indicative natural gas supply plan, drawn up for the first time by the CREG on 18 October , has to be updated every three years for the next ten years 39. The CREG has formulated a draft proposal for the indicative natural gas supply plan and sent this to the Minister for Energy for approval 40. At the request of the Minister for Energy, the Management Board expressed an opinion on the draft Ministerial Decree setting maximum prices for the supply of natural gas by distribution companies to non-protected final customers whose contract has been terminated 31. The Management Board was in complete agreement with the draft Ministerial Decree stipulating that the tariffs could not be lower than the current market price, but suggested increasing the minimum value to the highest market price. In the draft, this value corresponds to the average market price 32. The aim of this proposal is to prevent a customer obtaining a better price by not paying or by paying poorly. However, a Council-General working group opted in favour of the average market price as the lowest price THE COOPERATION BETWEEN THE MANAGEMENT BOARD, THE COMPETITION SERVICE AND THE COMPETITION COUNCIL The concentrations In 2003 and 2004, the Competition Council was informed of various concentrations between ECS and the mixed intermunicipal utility companies regarding which the Competition Service requested information from the Management Board When this report was drafted, a Ministerial Decree had still not been adopted on this matter. 29 Belgian Gazette of 30 January Opinion (F) CDC-225 on the new definition of the G parameter, 16 October Belgian Gazette of 15 December Study (F) CDC-305 on the problems of implementing the federal contribution, 6 May Carried out in application of Articles 23 of the Electricity Law and 15/14 of the Gas Law. 37 Royal Decrees of 24 March 2003 establishing the terms and procedures for the federal contribution intended to finance certain public service obligations and the costs related to the regulation and monitoring of the electricity and natural gas markets. 38 See CREG, Annual Report 2001, Part 2, point (d). 39 Article 15/13 of the Gas Law. 40 See also Part 1, point 3.3., of this report. 30 See also CREG, Annual Report 2003, Part 2, point Opinion (C) CDC-309 on the draft ministerial decree setting maximum prices for the supply of natural gas by distribution companies to final customers whose supply contract has been terminated by their supplier and who may not be considered protected low-income or vulnerable household customers, within the meaning of Article 15/10, 2, of the law of 12 April 1965 on the transmission of gaseous and other products by pipeline, 3 June Given in application of Article 15/10 of the Gas Law. 32 The highest market price is the highest of the most recent prices announced by suppliers in the supply zone of the distribution company for a similar category of customers. 33 See Part 3, point 2.1., of this report.

15 and some of which gave rise to the submission of a request for a hearing from the Management Board to the Competition Council 41. In January and March 2004, the Competition Council took a number of decisions 42 concerning these concentrations, noting that a series of commitments made by the notifying parties offset the effects of strengthening their dominant position and therefore these concentrations should be declared admissible Exchanging information The CREG informed the Competition Service and the body of rapporteurs firstly, that it had sent the European Commission a dossier on the refusal by GASUNIE and GAZ de FRANCE to sell L gas to suppliers for the supply of L gas in Belgium and secondly, of the eleven sets of proceedings on the imposition of an administrative fine in accordance with Article 20/2 of the Gas Law. None of these proceedings has resulted in the imposition of an administrative fine. In each case, the illegalities noted were rectified THE COMPETITION ON THE L GAS MARKET The CREG has carried out a study on competition on the L gas market 43. This study shows that high-calorific value gas and lowcalorific value gas are two different market products, and establishes that Gasgebouw, which organises gas production in the Netherlands, and the exclusive concession granted to Gasunie on the Groningue field, have had a negative impact on competition on the Belgian L gas market. A number of measures were suggested with a view to introducing some competition at least. On the basis of the conclusions reached by the Management Board, the Council-General requested the latter to look into the advisability of ceasing supplies of L gas in Belgium THE CONTROL STRUCTURE OF FLUXYS S.A. AND DISTRIGAS S.A. At the request of the Minister for Energy, the CREG has carried out a study on the acquisition by SUEZ-TRACTEBEL of shares held by SHELL BELGIUM in DISTRIGAS S.A. and FLUXYS S.A. The study 45 shows that the legal consequences of this transaction are limited owing to the fact that this sale of shares scarcely alters the control structure of either FLUXYS S.A. or DISTRIGAS S.A. This study also makes recommendations aimed at integrating adequate guarantees of independence into the decision-making structures of FLUXYS S.A These are concentrations between ECS, on the one hand and INTERMOSANE, INTERLUX, SIMOGEL, SEDILEC, IDEG, IGH, on the other. See also CREG, Annual Report 2003, Part 2, point Decision No 2004-C/C-07 of 15 January 2004 ECS/INTERMOSANE; Decision No 2004-C/C- 08 of 15 January 2004 ECS/INTERLUX; Decision No 2004-C/C-09 of 15 January 2004 ECS/SIMOGEL; Decision No 2004-C/C-10 of 15 January 2004 ECS/SEDILEC; Decision No 2004-C/C-11 of 15 January 2004 ECS/IDEG; Decision No 2004-C/C-12 of 15 January 2004 ECS/IGH; Decision No 2004-C/C-26 of 8 March 2004 ECS/SIBELGA. 43 Study (F) CREG-313 on competition on the L gas market, 17 June Carried out in application of Article 15/14 of the Gas Law. 44 See also Part 1, point 3.3., and Part 3, point 2.1., of this report. 45 Study (F) CREG-359 on the consequences of the acquisition by SUEZ-TRACTEBEL of shares in DISTRIGAS SA and FLUXYS SA previously held by SHELL BELGIUM, 18 November Carried out in application of Article 15/14 of the Gas Law.