State aid: the Commission authorises the regulatory mechanism for the storage of natural gas in France

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The European Commission has concluded that the regulatory mechanism for the storage of natural gas implemented by France since 2017 complies with EU rules on State aid. The measure will contribute to the security and diversification of the energy supply in France without unduly distorting competition.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: ‘Following an in-depth investigation, the Commission concluded that the regulatory mechanism for the storage of natural gas in France complied with EU rules on State aid. In particular, the measure is necessary and proportionate to ensure the security of energy supply to its citizens and businesses, while also guaranteeing that any possible distortions of competition are minimised.’

In December 2017, France introduced a regulatory mechanism for the storage of natural gas whose aim is to keep in operation existing storage capacities deemed necessary to ensure the security of the country’s natural gas supply.

This mechanism involves auctioning the storage capacities and covering the storage operators’ costs. To this end, where these operators’ revenue is below that set by the French independent energy regulatory authority (the CRE), storage operators receive compensation. This compensation is financed by means of the tariffs for use of the transmission network that are collected by the network operators from gas shippers under conditions set by the CRE. Conversely, if the storage operators’ revenue is more than their authorised revenue, they must pay back the surplus through the tariffs for use of the transmission network. There are currently three storage operators in France (Storengy, Géométhane and Teréga).

In February 2020 the Commission launched an in-depth investigation in order to verify whether this mechanism complied with EU rules on State aid.

The Commission had doubts as to whether there was sufficient justification for the method used to value the regulated assets, and whether the potential positive impact of the aid outweighs the potential negative impact on competition and trade between Member States.

The Commission’s in-depth investigation showed that the method of remuneration is set independently by the CRE, and that the valuation of the regulated assets in particular gives rise to proportionate compensation to limit the effects of the measure on the internal market.

Moreover, following the in-depth investigation, the Commission concluded that the negative impact that the measure could have in terms of distortions of competition is sufficiently limited for the overall balance of the measure to be positive.

On this subject, first, the Commission does not consider that the measure leads to distortions between French gas suppliers and suppliers from other Member States, since the auctions are open to all gas suppliers, under similar conditions, whether established in France or in another Member State. Second, the Commission has not found that there are significant distortions of competition between storage operators and suppliers of alternative flexibility instruments in France, but rather that the different flexibility instruments can provide supplementary services to gas storage. Lastly, the Commission notes that potential distortions of competition between storage operators from other Member States are limited by the significant level of subscription rates, based on long-term contracts.

France has undertaken to submit a report to the Commission by the end of 2024 with information on the impact of the measure on competition, in particular on natural gas storage facilities in neighbouring Member States, on interconnections and on French methane terminals, taking into account potential developments in these markets.

The Commission has therefore concluded that the mechanism complies with EU rules on State aid, since it strengthens the security and diversification of the energy supply without unduly distorting competition.

Background

The underground storage of natural gas is used as a means of ensuring the network’s capacity to respond to demand in the event of a cold snap or congestion in the network.

It falls to the European Commission to check that the measures implemented by the Member States to guarantee the security of energy supply, including natural gas, do not lead to unwarranted distortions of competition or, in the event of overcompensation to storage operators, to an excessive increase of the sale price of natural gas to the detriment of consumers.

For more information

The non-confidential version of the decision will be published under reference SA.49414 in the State aid register which can be found on the Commission website dedicated to competition as soon as any potential confidentiality issues have been resolved. The State Aid Weekly e-News newsletter provides the list of the latest decisions relating to State aid published in the Official Journal and online.