6. NATURAL GAS

with Gazprom at the end of 2015, Eesti Gaas AS entered into a new three-year contract with Gazprom in March 2016. Eesti Gaas AS remains the biggest wholesaler on the market (with a wholesale market share of 67.4% in 2017), followed by Eesti Energia AS (11%), and the remaining market share spread over four other companies, each with less than 10% (Baltic Energy Partners OÜ, Scener OÜ, Alexela Energia AS and 220 Energia OÜ) (Competition Authority, 2018).

Retail

With new gas importers entering the market, the dominance of Eesti Gaas AS in the retail sector has decreased. Gaasivõrgud AS, a subsidiary of Eesti Gaas, has the biggest market share and uses the 1 486 km long distribution network owned by Eesti Gaas under a commercial lease contract. In 2017, 27 companies were active on the Estonian retail gas market, compared to 23 the previous year. Eesti Gaas remains the dominant supplier in the retail sector, with 55% of the market in 2017. However, this is substantially lower than before, and compares to 93% in 2016 (Competition Authority, 2018). To promote further market competition, the obligatory supply licence was replaced with a simple registration as a supplier in mid-2017.

Price and tariffs

The Estonian Competition Authority is responsible for network tariffs and methodologies for calculating connection fees, which it approves in accordance with the Natural Gas Act. Eesti Gaas AS, as the predominant market player, must get approval from the Competition Authority on the sales margin to be included in the price of gas sold to household consumers. Other gas sellers add the approved sales margin to the import price of gas. The Competition Authority verifies annually that the weighted average price of gas sold in a calendar year does not exceed the weighted average purchase price in the same period, otherwise the company must settle the balance with its customers.

Pursuant to the Natural Gas Act, household consumers must be notified 30 days in advance of any change in price. The retail sale prices of the gas sold to final consumers are disclosed on the gas suppliers’ websites. Consumers can then decide whether they wish to switch gas suppliers. The price of natural gas was responsible for 68% of the total gas bill for the household consumer in 2017 (Competition Authority, 2018).

The continuous fall in gas demand is driving down the price of gas in Estonia. Estonia’s gas price for industry dropped significantly between 2013 and 2018, from USD 47.2/MWh to USD 36.9/MWh, despite a sharp increase in the tax rate (from 3% to 15%; see Figure 6.4). In the IEA comparison, Estonia is now a little closer to the IEA median, from the 11th lowest to the 14th lowest.

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