Network Code on Gas Balancing of Transmission Networks (NC BAL) stands for the Commission Regulation (EU) No 312/2014 of 26 March 2014 establishing the Network Code on Gas Balancing of Transmission Network.
25 July 2022
ACER sixth report on the gas balancing network code implementation finds that:
Member States have terminated all interim or transitory measures by June 2022. The only exception is Slovakia which still has interim measures.
Bulgaria, Finland, and Greece have progressed to a high implementation level. Ireland has improved its implementation level, which was already high.
Portugal, Romania, and Slovakia have still only partially implemented the code – whilst Portugal has made some progress, Romania and Slovakia have not.
ACER’s recommendations are:
ACER welcomes the termination of the interim and transitory measures and the progress across Europe.
ACER recommends that the relevant stakeholders increase their transparency on information provision (beyond the minimum requirements) and explore possible efficiency gains (e.g. via balancing zone mergers) to overcome the persisting structural market limitations that do not allow the code’s full implementation.
NC BAL establishes a set of market-based measures for balancing, where both the Transmission System Operator (TSO) and market participants are incentivised to buy and sell gas for balancing purposes on the spot markets.
This is subject to the publication by the TSO of reliable and updated data on the system's current and forecasted status and on the market participants' positions (became applicable in 2015).
ACER Market Monitoring Report 2019 – Gas Wholesale Market Volume, 23 September 2020, p. 9
The analysis of gas balancing markets reveals how an ambitious implementation of the BAL NC reduces the active role of TSOs in balancing activities, which also benefits spot markets’ liquidity. This Report analyses the balancing markets of MSs where the BAL NC was implemented before 2020. The results show significant differences across MSs in terms of the role of the TSO. It also detects the need to remove a series of national measures – directly and indirectly related to balancing design – which currently hinder its effectiveness in various markets.
Recital 19 of the European Commission Proposal of 15 December 2021 for a Regulation of the European Parliament Parliament and of the Council on the internal markets for renewable and natural gases and for hydrogen (recast - COM/2021/804 final) reads:
"While Commission Regulation (EU) 312/2014 establishing a Network Code on Gas Balancing of Transmission Networks provides rules for setting up technical rules that build up a balancing regime, it leaves various design choices for each balancing regime that is applied in a specific entry-exit system. The combination of choices made lead to a specific balancing regime that is applicable in a specific entry-exit system, which are currently mostly reflecting Member States territories".
Such an approach leads to the relative heterogeneity of gas balancing regimes in the EU Member States.
Neutrality principle for balancing operators
According to the provisions of the BAL NC, the balancing operators (usually the TSOs) shall not gain or lose by the payment and receipt of daily imbalance charges, within day charges, balancing actions charges and other charges related to their balancing activities.
Any costs or revenues arising from balancing activities shall be passed by balancing operators to network users and especially in case of a default attributable to a network users, the TSO (and where applicable other balancing operators) shall not be held liable, provided the measures and requirements referred to in Article 31(1) and (2) of the NC BAL were duly implemented.
NC BAL, Articles 29 - 31
Chapter VII Neutrality Arrangements
Article 29 Principles of neutrality
1. The transmission system operator shall not gain or lose by the payment and receipt of daily imbalance charges, within day charges, balancing actions charges and other charges related to its balancing activities, which shall be considered as all the activities undertaken by the transmission system operator to fulfil the obligations set out in this Regulation. 2. The transmission system operator shall pass to network users: (a) any costs and revenues arising from daily imbalance charges and within day charges; (b) any costs and revenues arising from the balancing actions undertaken pursuant to Article 9, unless the national regulatory authority considers those costs and revenues as incurred inefficiently in accordance with the applicable national rules. This consideration shall be based upon an assessment which: (i) shall demonstrate to what extent the transmission system operator could have reasonably mitigated the costs incurred when undertaking the balancing action; and (ii) shall be made with regard to the information, the time and the tools available to the transmission system operator at the moment it decided to undertake the balancing action; (c) any other costs and revenues related to the balancing activities undertaken by the transmission system operator, unless the national regulatory authority considers these costs and revenues as incurred inefficiently in accordance with the applicable national rules. 3. Where an incentive to promote efficient undertaking of balancing actions is implemented, the aggregate financial loss shall be limited to the transmission system operator’s inefficiently incurred costs and revenues. 4. Transmission system operators shall publish the relevant data regarding the aggregate charges referred to in paragraph 1 and the aggregate neutrality charges for balancing, at least at the same frequency as the respective charges are invoiced to network users, but no less than once per month. 5. Notwithstanding paragraphs 1 and 2, the transmission system operator in its balancing role may be subject to an incentive mechanism as referred to in Article 11.
Article 30 Balancing neutrality cash flows
1. The neutrality charge for balancing shall be paid by or to the network user concerned. 2. The national regulatory authority shall set or approve and publish the methodology for the calculation of the neutrality charges for balancing, including their apportionment amongst network users and credit risk management rules. 3. The neutrality charge for balancing shall be proportionate to the extent the network user makes use of the relevant entry or exit points concerned or the transmission network. 4. The neutrality charge for balancing shall be identified separately when invoiced to network users and the invoice shall be accompanied by sufficient supporting information defined in the methodology referred to in paragraph 2. 5. Where the information model variant 2 is applied and thus the neutrality charge for balancing may be based on forecasted costs and revenues, the transmission system operator’s methodology for the calculation of neutrality charge for balancing shall provide rules for a separate neutrality charge for balancing in respect of non daily metered off-takes. 6. Where relevant, the transmission system operator’s methodology for the calculation of the neutrality charge for balancing may provide rules for the division of the neutrality charge for balancing components and the subsequent apportionment of the corresponding sums amongst the network users in order to reduce cross subsidies.
Article 31 Credit risk management arrangements
1. The transmission system operator shall be entitled to take necessary measures and impose relevant contractual requirements, including financial security safeguards, on network users to mitigate their default in payment regarding any payment due for the charges referred to in Article 29 and 30. 2. The contractual requirements shall be on a transparent and equal treatment basis, proportionate to the purpose and defined in the methodology referred to in Article 30(2). 3. In case of a default attributable to a network user, the transmission system operator shall not be liable to bear any loss incurred provided the measures and requirements referred to paragraphs 1 and 2 were duly implemented and such loss shall be recovered in accordance with the methodology referred to in Article 30(2).
The TSOs should first take effective actions in a proactive and reactive way.
The TSOs shall report their efforts to the NRAs shortly after the events take place.
The NRAs shall set or approve the methodology for the calculation of the neutrality charges for balancing.
Balancing operators shall publish the aggregate neutrality charges for balancing at least once per month.
The monitoring carried out by both, ACER and ENTSOG, on the implementation status of the BAL NC highlight, based on the self-reporting of the TSOs and NRAs, that neutrality provisions have been implemented in the EU Member States, with only a few exceptions.
It is noteworthy, the ACER and the ENTSOG in the document of February 2021 “Misconduct at EU balancing zones, Policy paper with recommendations” recommended some legal amendments to the NC BAL, i.e. the insertion of paragraphs 4, 5, 6 and 7 to Article 31, as follows:
“4. A balancing operator that reasonably suspects a breach of the legal or contractual requirements as referred to in paragraph 1 shall notify the national regulatory authority and ENTSOG without any further delay. 5. When informed, ENTSOG shall share this information with transmission system operators or balancing operators of all Member States (and the Agency)7 without any further delay. 6. When notified, the Agency (or the national regulatory authority) shall share this information with the regulatory authority of all Member States without any further delay. 7. After consulting stakeholders, ENTSOG shall develop a draft template, which shall be approved by the Agency, giving guidance on the content of the notification to be reported in accordance with paragraph 1. The template shall be made available to the national regulatory authorities and to the balancing operators before [date to be defined by the legislator].”
In the ACER and ENTSOG opinion the legal ground for the above amendments can be found in Article 16(3) of the Gas Directive, however, to strengthen this basis, it is recommended to insert Article 16(4) to the Gas Directive as follows:
“Paragraph 1 shall not apply to information that shall be shared with other operators or national regulatory authorities under other legal provisions, including the REMIT Regulation, ACER Regulation, Regulation 715/2009 and the Network Codes”.