ACER's Questions and Answers on REMIT
III.3.48. [**New 29 July 2021**] According to REMIT, shall natural gas storage contracts (other than “Virtual gas storage” ones) determining a volume, a price and a contractually agreed period by the end of which a returning obligation of the contracted volume is activated, be reported to the Agency?
In order to understand whether contracts termed as gas lease and sublease contracts are reportable under the REMIT data reporting obligation, it is necessary to assess pursuant to Article 2(4) of REMIT whether such contracts refer to the supply or transportation of electricity or natural gas in the Union.
Gas lease and sublease contracts induce a temporary transfer of the possession of natural gas (but not of the legal ownership), and the counterparty (lessee) that receives the gas has the obligation to return the same amount of the commodity at the end of the leasing period. As a consequence, during such a period the gas cannot be resold or used for any trading activity on the energy market. Such a transfer may occur based on a financial compensation (e.g. leasing fee, service fee, price for the commodit y itself, etc.). Because the title of the ownership is not conveyed, such contracts do not represent supply or transportation contracts and are therefore not reportable under REMIT.
However, there might be contracts indicated as ‘lease or sublease’ that foresee a temporary transfer of the ownership of gas. Just like in a genuine lease contract, in such contracts there is a physical delivery of the gas (not only in terms of possession but also ownership) with the obligation to return the gas at the end of the contractual period. In these type of contracts, the temporary transfer occurs based on a predetermined price accompanied by a compensation clause indicating the commodity price in case the contractual terms are not met (e.g. gas is not returned in full). Since in this contract a change in the ownership of gas occurs, the temporarily transferred commodity can be freely used by the new owner, who retains full ownership rights for the duration of the contract. In order to assess whether a transfer of ownership occurs, it is important to take into account the liabilities and responsibilities (e.g. balancing responsibility) which are transferred to the counterparty for the contract duration. Due to the temporary transfer of ownership, such contracts might be assimilated to the repurchase transactions (‘sell and buy-back agreements’), and could therefore be considered supply contracts reportable to ACER according to Article 8 of REMIT and Article 3 of REMIT Implementing Regulation No. 1348/2014.
As such ‘non-genuine lease/sublease’ contracts are bilateral and are not traded on an organised market place, based on Article 5(1) of REMIT Implementing Regulation No. 1348/2014 they are expected to be reported as non-standard contracts according to the indication provided in the Transaction Reporting User Manual. Such a consideration applies even in case the ‘lessees’ (temporary owners) are selected via dedicated auctions, as long as such an auction is not organised on a multilateral system that could qualify as an organised market place.
Regardless of whether the above contracts are reportable under Article 8 of REMIT, the obligation to report fundamental data described in Article 9 of the REMIT Implementing Regulation No. 1348/2014 is not affected and lies with t he owner of the gas whenever reference is made to ‘market participant’.
Questions and Answers on REMIT, III.3.48.