Agency rejected an initiative from Zagreb City Gas – Supply (GPZ) against the undertaking Natural Gas Ltd.

Agency rejected an initiative from Zagreb City Gas – Supply (GPZ) against the undertaking Natural Gas Ltd., as a preliminary investigation of the relevant market led to the conclusion that there are no conditions to initiate proceedings of determining alleged abuse of dominance.

In March 2013 the Agency received the initiative which states that NG has the absolute dominant position in the gas market and thus destroys the development of the gas market in the Republic of Croatia. The initiative states that natural gas in terms of organizing the balance group (customer category), offering energy balance as well as the use of gas storage in the storage Okoli, has a fully privileged market position, not given to any other suppliers in Croatia. For example, given that the overall gas storage facility in Croatia is leased to NG, other entrepreneurs have no place to store the unused amounts of gas, which directly leads to them being penalized by suppliers.

Natural gas, allegedly, also began to act as a direct supplier of end customers on the distribution system, and took over some end customers from its competitors including the GPZ ‘s. At the same time, only one of the suppliers does not import all its gas, but has the exclusive right to purchase the entire quantity of produced natural gas in Croatia, according to the agreements that were, according to GPZ, completely transparent.

At the same time, GPZ believes that NG is abusing its position when offering balancing energy and that NG has only one balance-sheet group, whose members are all the suppliers with the obligation to provide public services with regulated prices, as well as suppliers who buy natural gas in the market in order to supply tariff group “businesses”, while the other leaders of balance-sheet groups must be members of two groups which puts them in an unequal position in that respect as well.

The agency conducted the preliminary examination in the relevant market and found that the position and operation of NG in this case stems from the laws and regulations. Government has appointed NG gas provider for the suppliers of tariff customers. At the same time, every energy-industry entity that holds a license for the supply of gas shall be entitled to supply natural gas to all eligible customers in the Republic of Croatia. However, this does not include customers from the “household “ category which use the public service of gas supply under regulated conditions and to whom the gas is supplied only those suppliers who have a public service obligation.

Given the fact that NG has for a limited time leased all capacities in the only underground gas storage in Croatia – PSP Okoli , it is under the current legislation appointed to offer balancing energy until 31 March 2014, i.e. it has been imposed the obligation to ensure gas for balancing the gas system.

The fact that NG has signed contracts with firms that were contracted by the GPZ is not controversial in terms of competition regulations.

Also, the Agency has determined that there is no evidence or indication by GPZ indicating to the abuse of dominant position by NG. In fact, NG is no longer the sole gas supplier in Croatia; a license to supply gas is now held by more than 50 businesses. Consequently, NG is not an inevitable partner of GPZ for the supply to eligible customers. GPZ itself procures gas from other entrepreneurs as well. Thus, it is evident that there are no administrative or other significant barriers to entry that would have prevented the GPZ from purchasing gas from other firms for the supply of eligible customers. For example, in the current gas year 2012/2013 GPZ does not buy gas from NG for further sale to commercial customers, which clearly shows that GPZ can operate on the market of selling the gas to the category “businesses” independently from NG.

With regard to the lease of the entire volume of underground gas storage PSP Okoli , NG is only a tenant, not the owner or operator of gas storage Okoli, so there is no dominant position in terms of gas storage in the warehouse. Since this is a regulated activity, storage system operator shall distribute storage capacities upon the expiry of lease, in accordance with the applicable legislation.