COMMISSION DECISION (EU) 2022/444

of 28 June 2021

on the state aid scheme SA.49414 (2020/C) (ex 2019/NN) implemented by France in favour of operators of natural gas storage infrastructure

(notified under document C(2021)4494)

(Only the French text is authentic)

(Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union, and in particular the first subparagraph of Article 108(2) thereof,

Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments pursuant to those articles (1), and having regard to their comments,

Whereas:

1. PROCEDURE

(1) By letter of 23 October 2017, the French authorities informed the Commission of the draft reform of the legal and regulatory framework applicable to natural gas storage (‘the reform’). The French authorities pre-notified the draft on 23 November 2017 and, following adoption of the reform by the French Parliament, sent additional information to the Commission.

(2) By letter of 28 February 2020, the Commission informed France of its decision (‘the opening decision’) to initiate the procedure laid down in Article 108(2) of the Treaty on the Functioning of the European Union (‘the formal investigation procedure’) in respect of the measure.

(3) The opening decision was published in the Official Journal of the European Union. The Commission called on interested parties to submit their comments on the measure.

(4) During the formal investigation procedure, the Commission received comments from interested parties. It forwarded them to France, giving it the opportunity to comment. The French authorities submitted their comments by letter of 3 August 2020.

(5) The French authorities submitted additional information on 21 September 2020, 26 January 2021, 15 March 2021 and 10 May 2021.

2. BACKGROUND TO THE MEASURE

2.1. Natural gas storage in France

(6) Underground natural gas storage infrastructure enables natural gas stocks connected to the transmission network to be built up. It contributes to gas flow management in the network.

(7) Storage is used as a means of ensuring a balance between the amount of natural gas in the network and the amount consumed, for example in the event of supply disruption or a peak in demand linked to a cold spell in winter. Together with pipelines and compressors, storage also makes it possible to deliver gas within the transmission network, particularly in the event of congestion.

(8) Storage operators offer storage capacity to natural gas suppliers operating in retail and wholesale markets and to transmission system operators. The willingness of natural gas suppliers to pay for storage capacity depends on the difference in the natural gas price between summer and winter (‘the spread’). Natural gas production levels are relatively stable throughout the year, whereas gas consumption varies considerably depending on temperature.

(9) There are 14 storage facilities in France, 11 of which are in operation (2), and 3 storage operators: — Storengy, a wholly owned subsidiary of ENGIE, owns and operates 12 sites, 3 of which are on standby and 9 in operation. The latter account for a working volume of 102,1 TWh (74 % of total national capacity); — Teréga (formerly TIGF), owned by Snam (40,5 %), GIC (31,5 %), EDF Investissement (18 %) and Predica (10 %), runs a site in operation with a working volume of 33,1 TWh (24 % of total national capacity); — Géométhane, owned by Storengy (50 %), CNP (49 %) and Géostock (1 %), runs a site in operation with a working volume of 3,3 TWh (2 % of total national capacity).

(10) Seasonal variations in natural gas prices have decreased since 2009. Until 2011, the spread was high enough to induce suppliers to take up all available storage capacity. Since 2011, the spread has been insufficient to cover the storage price offered by operators (spread of EUR 1,5-2/MWh at a price of EUR 6-7/MWh). As a result, storage capacity has not been fully taken up since 2010-2011. Three sites were run at reduced capacity (‘placed on standby’) in 2014 and 2015, while the take-up rate of the storage infrastructure in operation was 63 % in 2017-2018.

2.2. Legal and regulatory framework

(11) To safeguard security of supply, France initially introduced a decree in 2014 to strengthen the obligations on natural gas suppliers to build up natural gas stocks (3). It subsequently took the view that this system had several flaws, and some natural gas suppliers brought an action challenging the legality of the decree. In the light of this, France decided to introduce an adjusted measure, which is the subject of this Decision (‘the measure in question’).

(12) Article 33 of Directive 2009/73/EC of the European Parliament and of the Council (4) allows Member States to regulate storage infrastructure. Natural gas storage is also one of the measures that Member States may put in place to comply with the obligations arising from Regulation (EU) 2017/1938 of the European Parliament and of the Council (5) under the conditions laid down therein, in particular the obligation to safeguard security of supply for national customers while ensuring the proper and continuous functioning of the internal market in natural gas.

3. DETAILED DESCRIPTION OF THE MEASURE IN QUESTION AND GROUNDS FOR INITIATING THE PROCEDURE

3.1. Objective of the mechanism

(13) The regulatory mechanism is intended to ensure continued operation of the storage infrastructure necessary to safeguard security of natural gas supply in France in the medium and long term.

(14) In particular, the mechanism aims to ensure that the network is able to meet demand, especially during cold spells, and that natural gas can be delivered within the transmission network, in particular in the event of congestion.

3.2. Legal basis

(15) The mechanism for regulating essential natural gas storage infrastructure was incorporated into the Energy Code (code de l’énergie) by Act No 2017-1839 of 30 December 2017 (6) (loi Hydrocarbures, ‘Hydrocarbons Act’), which entered into force on 1 January 2018.

(16) In particular, Article 12 of the Hydrocarbons Act provides that the scope of the regulatory mechanism is defined by the multiannual energy programme (‘PPE’), referred to in Article L.141-1 of the Energy Code. The PPE is adopted by decree after consultation with several advisory bodies and revised at least every 5 years for two 5-year periods. The PPE for the period 2019-2028 was established by Decree No 2020-456 of 21 April 2020 (‘Decree No 2020-456 on the PPE’).

(17) In addition, under Article 12 of the Hydrocarbons Act, the Energy Regulatory Commission (‘CRE’) lays down certain procedures under the regulatory mechanism, in particular as regards the auctioning of storage capacity, the authorised revenue of storage operators and the arrangements for collecting that revenue through the sale of capacity and the tariffs for using the natural gas transmission network, which are paid to storage operators (see recitals 20 to 22).

3.3. Overall functioning of the mechanism

(18) The mechanism for regulating natural gas storage adopted in France in 2017 is based on three principles.

(19) First, the scope of the mechanism covers the underground storage infrastructure necessary to safeguard security of supply in France in the medium and long term (7) (‘essential storage infrastructure’). The list of essential infrastructure is established by the Decree on the PPE. This infrastructure must be kept running by its operators (8).

(20) Secondly, essential storage infrastructure capacity is auctioned according to procedures laid down by the CRE (9). The auctions are open to any supplier established in an EU Member State or other State with authorisation to supply the French retail or wholesale market. As of January 2018, 213 French and foreign suppliers had such authorisation. Auction revenues are collected directly by storage operators.

(21) Thirdly, operators of essential storage infrastructure are guaranteed that their costs will be covered in so far as they correspond to those of an ‘efficient operator’ (10). In this regard, they receive regulated revenue set by decision of the CRE (‘authorised revenue’). If their direct revenue from customers is lower than their authorised revenue, storage operators receive compensation equal to the difference between the two amounts (see recital 89). This compensation is financed by natural gas shippers based on their portfolio of firm-service customers connected to the public natural gas distribution network who have not declared that they can be cut off without risk (see recitals 104 and 105). The compensation is collected by the transmission system operator in the form of a dedicated charge incorporated into the tariff for using the transmission network (‘ATRT’ tariff) and is then paid to storage operators.

(22) However, if the storage operators’ revenue exceeds their authorised revenue, they must repay the surplus through the tariff for using the transmission network (see recital 90).

3.4. Scope of the regulatory mechanism

(23) According to the explanations provided by the French authorities, essential storage infrastructure is identified by determining the infrastructure needed to ensure the network can meet demand and the infrastructure needed to deliver natural gas within the transmission network.

3.4.1. Infrastructure needed to ensure the network can meet demand in the event of a cold spell

(24) The level of security of supply expected from the gas system is set out in Article R.121-4 of the Energy Code. The aim is to safeguard supplies to all consumers who have not contractually agreed to having supply interrupted in extremely cold weather conditions, such as those occurring statistically once every 50 years.

(25) The infrastructure needed to ensure that the system can meet demand is identified on the basis of work carried out by the transmission system operators, which compare demand for natural gas during cold spells of 1 to 30 days with natural gas supply capacity, in particular from liquefied natural gas (LNG) interconnectors and terminals.

3.4.1.1. Estimated demand for natural gas

(26) First of all, the French authorities examined five scenarios for the expected evolution of natural gas consumption over the next 10 years, excluding electricity generation. The expected reduction ranges from 2 % to 18 % compared with the reference year of 2012. The French authorities finally assumed a 2 % reduction in natural gas consumption, excluding electricity generation.

(27) Average daily consumption of natural gas (excluding electricity generation) during a cold spell was then estimated at around 3 640 GWh/d in 2025, excluding the consumption of low calorific natural gas (‘L-gas’). The consumption of natural gas for electricity generation during a cold spell was estimated at 310 GWh/d.

(28) The French authorities also took into account the interruptible share of natural gas demand, i.e. the consumers who have concluded an interruptible contract with the operator of the network they are connected to. In this respect, at the time the regulatory mechanism was implemented, interruptibility measures for cold spells were still being formulated. The French authorities assumed potential interruptibility was 138 GWh/d.

(29) The French authorities specified that load shedding was a last resort in the event of a supply crisis and not a flexibility mechanism. This is why load shedding was not taken into account when estimating the demand for natural gas during cold spells.

(30) The fact that average consumption during a short cold spell is higher than that during a longer cold spell was also taken into account.

(31) Lastly, the French authorities took account of the gradual decrease in the use of L-gas, in view of a programme for conversion to high-calorific natural gas (‘H-gas’), which today accounts for 90 % of the natural gas consumed in France. The conversion operation started in 2018 and will be completed by 2028 at the latest. The French authorities estimate that demand for L-gas converted into H-gas will be 180 GWh/d in 2025.

(32) In the light of the above, the French authorities estimated the overall demand for natural gas during a cold spell of 4 days in 2025 to be around 4 000 GWh/d.

3.4.1.2. Estimated natural gas supply capacity

(33) The French authorities estimated natural gas supply capacity by taking into account interconnectors, LNG supply from LNG terminals and the performance of natural gas stocks.

(34) First, as regards interconnectors, estimates of firm capacity, based on the assumption of 100 % utilisation of firm H-gas interconnector capacities, amount to 1 780 GWh/d for imports and 425 GWh/d for exports (11). Net imports of H-gas via pipelines are estimated at 1 355 GWh/d.

(35) The French authorities pointed out that it would be very costly to strengthen the gas network and interconnectors (12), especially compared with using existing storage facilities. In any case, the infrastructure concerned would not be available in the medium term because of long construction times.

(36) Secondly, as regards LNG supply, the four French LNG terminals can feed a total of 1 160 GWh/d into the network (13). However, this capacity can be mobilised only if LNG is available in the tanks at the LNG terminals. For a contingency like a cold spell of less than 10 days, the French authorities considered that only LNG stocks in tanks would be released. However, beyond 10 days, LNG shipments could be delivered, and LNG terminals could be used to their full capacity. Two scenarios were chosen based on the average level of LNG stocks observed in tanks: the worst winter (scenario 1) and the best winter (scenario 2).

(37) Both scenarios reflect a level of use of LNG terminals which is higher than the average use during the winters of 2011 to 2018. France finally opted for scenario 1 and estimated the potential feed-in from LNG terminals at 330 GWh/d for a 4-day cold spell.

(38) The French authorities pointed out that the existing liquefaction terminals operate at close to maximum capacity in order to recoup the significant investment cost. In addition, almost all LNG shipments are covered by long-term contracts owing to the capital intensity of the projects and are therefore already sold before being produced. The lower cost of storing natural gas in gaseous form also explains the lack of development of LNG storage worldwide. The quantities of LNG available in the short term are therefore limited.

(39) Thirdly, as regards the performance of underground natural gas stocks, the French authorities explained that the aquifers used, which account for 90 % of storage infrastructure in France, must be filled to a sufficiently high level and emptied to a sufficiently low level each year. The rate at which gas can be withdrawn from storage infrastructure also decreases as the stock decreases.

(40) Given that, during the nine winters preceding France’s analysis, storage facilities were on average 42 % full on 1 February and 85 % of the cold spells recorded over the last 70 years started before 5 February, the French authorities assumed that a withdrawal rate associated with a filling level of 45 % of working volume is available in each storage facility at the beginning of a cold spell.

(41) The French authorities also took into account the buffer stocks that the natural gas transmission system operators must build up in order to supply essential social services as a last resort in the event of the failure of a supplier, i.e. a withdrawal rate of 124 GWh/d at a filling level of 45 % of working volume.

(42) On the basis of all of these assumptions, for the period 2019-2025 the French authorities established an annual need for storage infrastructure of 138,5 TWh in working volume and a withdrawal rate of 2 376 GWh/d at a filling level of 45 % of working volume in order to ensure the network can meet demand during a cold spell (14).

3.4.2. Infrastructure needed to deliver natural gas within the transmission network

(43) The French authorities also identified the storage infrastructure needed to safeguard supply throughout the country taking into account the delivery capacity of the natural gas transmission network. To this end, they examined the various instances of congestion in the transmission network.

(44) The transmission system operators (‘TSOs’) identified the most likely congestion scenario, which reflects the situation observed at the time in a market where, according to the French authorities, suppliers seek to maximise natural gas imports from Norway and Russia, currently the most competitive sources of natural gas in Europe, and to reduce imports of LNG, for which higher valuations can be obtained in Asia. In this situation, four main operational limitations are likely to be observed (see Figure 1 below). L0902022EN11810120220303EN0005.000111911213DRAFT DECISION OF THE EEA JOINT COMMITTEE No …of …amending Annex IV (Energy) to the EEA AgreementTHE EEA JOINT COMMITTEE,Having regard to the Agreement on the European Economic Area (the EEA Agreement), and in particular Article 98 thereof,Whereas:(1)Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the energy performance of buildingsOJ L 153, 18.6.2010, p. 13. (the EPBD) is to be incorporated into the EEA Agreement.(2)Due to the specificities of Iceland’s relatively recent and uniform building stock, a temporary and conditional exemption from applying Directive 2010/31/EU on the energy performance of buildings is agreed. That exemption should apply to Directive 2010/31/EU as in force before the amendment by Directive (EU) 2018/844 of the European Parliament and of the Council of 30 May 2018. The exemption should be strictly limited in time and should apply only until an agreement is reached concerning the incorporation of Directive 2010/31/EU as amended by Directive (EU) 2018/844 into the EEA Agreement.(3)In line with the very small size of the building stock in Liechtenstein and its climatic and building typology, Liechtenstein is exempted from the obligation under Article 5 of the EPBD to carry out its own calculations for the establishment of cost-optimal levels of minimum energy performance requirements for buildings.(4)Pursuant to the conditions of adaptation (c), Norway and Liechtenstein may stipulate regulations on minimum energy performance requirements using a different system boundary than primary energy use which is the one required under the EPBD, provided that the conditions stipulated in adaptation (c)are met.(5)Adaptation (d) ensures that the user-operated energy performance certification system in Norway produces equivalent results to certificates issued by independent experts as required by Article 17 of the EPBD.(6)Annex IV to the EEA Agreement should therefore be amended accordingly,HAS ADOPTED THIS DECISION:Article 1The text of point 17 (Directive (EC) No 2002/91 of the European Parliament and of the Council of 16 December 2002) of Annex IV of the EEA Agreement is replaced by the following:32010 L 0031: Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the energy performance of buildings (the EPBD) (OJ L 153, 18.6.2010, p. 13).The provisions of the Directive shall, for the purposes of this Agreement, be read with the following adaptations:(a)The Directive shall not apply to Iceland.(b)The following shall be added to Article 5(2):For the purpose of establishing the cost-optimal levels of minimum energy performance requirements, Liechtenstein may use the calculations of another Contracting Party having comparative parameters..(c)For the purpose of Article 9(3)(a) and Annex I of the EPBD, Liechtenstein and Norway may base their requirements for energy use on net energy, provided that the following conditions and safeguards are fulfilled:(i)The minimum energy performance requirements are set in line with the requirements of Article 5 of the EPBD, following the basic principles of the methodology framework, which has been established for the calculation of cost-optimal levels of minimum energy performance requirements.Commission Delegated Regulation (EU) No 244/2012 of 16 January 2012 supplementing Directive 2010/31/EU of the European Parliament and of the Council on the energy performance of buildings by establishing a comparative methodology framework for calculating cost-optimal levels of minimum energy performance requirements for buildings and building elements (OJ L 81, 21.3.2012, p. 18).(ii)A numeric indicator of primary energy use corresponding to the energy performance requirements set in the building code is published.(iii)The Commission reserves the right to revisit this specific adaptation in the context of the future negotiations on the EPBD as amended by Directive (EU) 2018/844.(d)The following shall be added to Article 17:EFTA States may establish a simplified user-operated energy performance certification system for residential buildings that can be used as an alternative to the use of experts if the following conditions are met:(i)There is a thorough knowledge and good quality data available on the entire residential building stock, including all the building typologies and age bands, and the characteristics of the building envelope and technical building systems in use per typology, which enables the calculation of the energy performance of individual buildings and building units with a high degree of certainty on the basis of user inputs,(ii)Detailed information is available on cost-optimal or cost-effective improvements for each building typology,(iii)Measures are in place to support the users to operate the system for the purpose of the system issuing building certificates. These measures may include a helpline or advisory services that will enable contact between the users on the one hand, and independent experts and system experts on the other,(iv)To ensure negligible risk of manipulation of results, the user-operated certification system includes quality control and verification mechanism(s) to check users’ input data and that the users’ input data are transparent,(v)Independent control systems are in place to ensure that the user-operated energy performance certification produces equivalent results to certificates issued by experts, in terms of quality and reliability,(vi)The user-operated system issues recommendations which can advise the users of cost-optimal or cost-effective improvements specific for their buildings and building units...Article 2The text of Directive 2010/31/EU in the Icelandic and Norwegian languages, to be published in the EEA Supplement to the Official Journal of the European Union, shall be authentic.Article 3This Decision shall enter into force on […], provided that all the notifications under Article 103(1) of the EEA Agreement have been made[No constitutional requirements indicated.] [Constitutional requirements indicated.]*.Article 4This Decision shall be published in the EEA Section of, and in the EEA Supplement to, the Official Journal of the European Union.Done at Brussels, […].For the EEA Joint CommitteeThe PresidentThe SecretariesTo the EEA Joint Committee Figure 1: Main operational limitations likely to be observed in the transmission network when suppliers seek to maximise natural gas injections from north-eastern France

(45) The methodology takes account of the fact that natural gas suppliers need LNG stocks to be able to meet consumer demand, but there is no constraint on them as regards how LNG stocks are distributed among the four French LNG terminals.

(46) Where a constraint applies, it is assumed that transmission system operators initially use the interruptible capacity of the interconnectors to address congestion. When congestion persists, the volume of natural gas that would need to be removed from underground storage infrastructure downstream of the congestion point is noted.

(47) This makes it possible to establish the underground natural gas stocks required downstream of each congestion point to be able to deliver natural gas within the transmission network.

(48) When this method is applied to the winter of 2018-2019 with regard to the main congestion points likely to be observed when suppliers seek to maximise natural gas injections from north-eastern France, the estimated combined working volumes needed from underground storage are at least: — 16 TWh downstream of congestion point NS4 (Izaute, Lussagnet and Manosque storage facilities); — 54 TWh downstream of congestion point NS3 (Céré-la-Ronde, Chemery, Izaute, Lussagnet and Manosque storage facilities); — 55 TWh downstream of congestion point NS2 (Céré-la-Ronde, Chemery, Etrez, Izaute, Lussagnet, Manosque and Tersanne storage facilities); — 64 TWh downstream of congestion point NS1 (Beynes, Céré-la-Ronde, Chemery, Etrez, Germigny-sous-Coulomb, Gournay-sur-Aronde, Izaute, Lussagnet, Manosque, Saint-Illiers-la-Ville and Tersanne storage facilities).

3.4.3. List of facilities falling within the scope of regulation

(49) The French authorities pointed out that, since the work on identifying essential infrastructure could not be completed sufficiently early in view of winter 2018-2019, the regulatory mechanism was initially applied as a provisional measure for the year 2018-2019 to all natural gas storage facilities in France. The facilities were identified by the 2016 PPE as necessary for security of supply (15).

(50) The Decree of 26 December 2018 (16) subsequently removed from the list of necessary infrastructure the three Storengy sites running at reduced capacity (Soings-en-Sologne, Saint-Clair-sur-Epte and Trois-Fontaines) and the Lussagnet phase 1 (Teréga) and Manosque 2 (Géométhane) projects. This infrastructure has not been used since the introduction of regulated access to natural gas storage.

(51) Lastly, for the period 2019-2023, Decree No 2020-456 on the PPE sets out the underground natural gas storage infrastructure which must be kept running in order to safeguard security of supply in the medium to long term. It represents a working volume of 138,5 TWh and a withdrawal capacity of 2 376 GWh/d at a filling level of 45 % of working volume: Facility Operator Year of entry into service Type of storage Beynes Storengy 1956 Aquifer Céré-la-Ronde Storengy 1993 Aquifer Cerville-Verlaine Storengy 1970 Aquifer Chemery Storengy 1968 Aquifer Etrez Storengy 1980 Salt cavern Germigny-sous-Coulomb Storengy 1982 Aquifer Gournay Storengy 1976 Aquifer Lussagnet/Izaute Teréga 1957 Aquifer Manosque Géométhane 1993 Salt cavern Saint-Illiers-la-Ville Storengy 1965 Aquifer Tersanne/Hauterives Storengy 1970 Salt cavern Table 1: Natural gas storage installations required to remain in operation until 2023

(52) The PPE expects storage needs to decrease for the period 2024-2028. The list of storage infrastructure could be reduced by a withdrawal capacity of at least 140 GWh/d at 45 % of working volume by 2026. Given the uncertainties surrounding the volumes necessary for security of supply after 2026, these volumes should be confirmed in 2023 and set out in the next PPE.

3.5. Auctioning of storage capacity

(53) In accordance with Article L.421-5-1 of the Energy Code, regulated storage capacity is auctioned according to procedures laid down by the CRE. In particular, under the CRE decision of 22 February 2018, the auctions are carried out with a reserve price of zero (17).

(54) The results of the first auction were as follows: Storage period Revenue (million EUR) Average award price (EUR/MWh) 2018-2019 68,4 0,53 2019-2020 233,6 1,80 2020-2021 504,6 3,85 Table 2: Auction results and revenue from additional sales during the year

3.6. Coverage of the authorised revenue of storage operators as laid down by the CRE

(55) Under Article L.452-1 of the Energy Code ‘tariffs for the use of transmission networks ... shall be set in a transparent and non-discriminatory manner in order to cover all the costs incurred by transmission system operators and operators of the storage infrastructure referred to in Article L. 421-3-1, in so far as those costs correspond to those of efficient operators’.

(56) The same article also provides that those costs ‘shall take into account the characteristics of the service provided and the costs associated with that service’ and that, in the case of storage operators, they must include in particular ‘a normal return on the capital invested’.

(57) Article L.452-2 of the Energy Code empowers the CRE to lay down the ‘methods used to set tariffs for the use of natural gas transmission networks’ and to ask storage operators to provide it with the information necessary to set those tariffs, in particular accounting and financial data.

(58) It follows from these provisions that the CRE is empowered by law to set the authorised revenue of storage operators in such a way as to cover the costs of an ‘efficient operator’ and to ensure a normal return on the capital invested.

(59) The CRE set the projected authorised revenue by decision, initially for a regulatory period of 2 years. This first storage tariff was valid in 2018 and 2019 (‘ATS 1’) (18). The CRE then harmonised the regulatory framework for storage operators with that of other infrastructure tariffs. The second storage tariff (‘ATS 2’) applies from 2020 for a period of 4 years (19).

(60) The general approach to setting the projected authorised revenue is the same for the various storage tariffs. The authorised revenue of storage operators was set ex ante by the CRE on the basis of forecasts sent by operators, which are then adjusted the following year and subject to ex-post audits. The costs of storage operators are taken into account by the CRE to the extent that they are considered efficient.

(61) However, given the particularly short deadlines for implementing the reform, a simplified framework was applied for 2018 and 2019. For these first years, the CRE adopted a tariff framework in which the differences between the projected and actual level of all costs and revenue were adjusted retrospectively. This mechanism guarantees a tariff level which is ultimately exactly the same as the operator’s actual expenditure and revenue. For the period 2020-2023, the CRE wished to extend the regulatory principles incentivising storage infrastructure and, after completing its analyses, assumed a stable progression of operators’ costs in a context marked by a downward trend in natural gas consumption.

(62) According to the method set out by the CRE, projected authorised revenue is equal to the sum of estimated net operating expenses, estimated regulatory capital costs and settlement of the balance of the previous year’s clawback account (‘CRCP’). Authorised revenue = net operating expenses + regulatory capital costs + clawback account

(63) Only activities falling within the scope of regulation are taken into account for the calculation of these components.

3.6.1. Net operating expenses

(64) Net operating expenses correspond to the gross operating expenses (energy costs, external consumption, staff costs, taxes and charges) of an ‘efficient operator’ after deducting operating income (in particular, capitalised production, non-tariff income, profits or losses from the purchase/sale of stored natural gas).

(65) Given the short deadlines for implementing the reform, the CRE could not determine for the period 2018-2019 whether the operators’ costs corresponded to those of an ‘efficient operator’. As a result, the costs taken into account during this period ultimately correspond to the actual costs borne by the storage operators, as validated by the CRE. For the ATS 2 tariff, the CRE implemented an incentivising regulatory mechanism for net operating expenses, with the exception of certain predefined items. With a few exceptions, any deviation from the operating expenses projected for the ATS 2 period will thus be borne by the operator or accrue to the operator.

3.6.2. Regulatory capital costs

(66) Regulatory capital costs comprise depreciation of and return on fixed capital. This item thus corresponds to the sum of the depreciation of the regulated asset base (‘RAB’), the return on fixed capital calculated on the basis of the weighted average cost of capital (‘WACC’) for the RAB already put into service and the cost of the debt for assets under construction (‘AUC’). Regulatory capital costs = RAB depreciation + RAB x WACC + AUC x cost of debt

(67) The CRE confirmed that this methodology corresponds to the regulatory practice for regulated facilities in the natural gas and electricity markets in France and Western Europe (20).

(68) In order to determine the initial level of the RAB on 1 January 2018 (‘initial RAB’ or ‘opening RAB’), the CRE uses the ‘current economic costs’ method (21). This involves calculating the net economic value of assets (i) on the basis of the gross accounting value of assets included in the operators’ accounts (historical construction costs), (ii) adjusted for inflation, then (iii) depreciated over the useful life of the assets.

(69) Each year, the RAB evolves according to: — depreciation, based on the useful life of the assets, deducted from the RAB; — new investment put into service, which increases the RAB; — where appropriate, assets dismantled before being fully depreciated, which reduces the RAB; — the revaluation of assets for inflation (consumer price index excluding tobacco).

(70) The CRE considers that the most representative measure of the initial value of investments carried out by operators is the gross value of assets recorded in their company accounts. According to the CRE, this value, examined by auditors as part of their annual audit, is documented and objective. This method is identical to that applied in 2002, when natural gas TSOs were first regulated, and is also used for regulated LNG terminals in France.

(71) The CRE did not take into account the replacement cost of assets, but a depreciated value, in line with the depreciation recorded by the storage operators before 2018, so as not to impose on the community a cost already paid in the past or the depreciation of assets already taken into account.

(72) For most assets, the depreciation periods applied by operators in their historical accounts are similar to those they requested in their tariff proposals. They also correspond to standard data for the sector seen in other countries.

(73) As regards cushion gas (22), however, the CRE rejected the operators’ request to consider a uniform depreciation period of 250 years. The CRE took into account the fact that cushion gas, unlike their other assets, was depreciated by operators over periods which varied from one operator to the next and over time (from 25 years to 250 years). As a result, in order to establish the initial RAB of the storage operators, the CRE assumed a degree of depreciation of cushion gas in line with the level of accounting depreciation recorded by each of the three operators. For the future, it has set the depreciation period for cushion gas at 75 years, corresponding to three renewals of the concession to operate the underground cavern for 25 years.

(74) The useful life assumed by the CRE for the different asset categories of operators is as follows: Asset category Useful life Cushion gas 75 years Wells, caverns, collection 50 years Processing, compression, delivery and metering installations 20-30 years Real estate and buildings 30 years Miscellaneous equipment 10-15 years Software, small items 5 years Table 3: Depreciation period assumed by asset category

(75) In addition, in 2017 the CRE asked the external consultant […] to audit the storage operators’ initial RAB request. The result of the calculation for Storengy is [EUR 3-5 billion].

(76) In the case of Teréga, an additional study carried out by the consultancy PwC based on a discounted cash flow approach values the RAB at [EUR 1-2 billion].

(77) For the implementation of the regulatory mechanism, the CRE thus revised the initial RABs requested by the storage operators in order to take into account the independent economic assessment of the market value of the assets. The CRE then adopted the following initial RABs: As of 1 January 2018 Storengy (billion EUR) Teréga (billion EUR) Géométhane (billion EUR) Operator’s request 4,0 1,37 0,20 RAB set by the CRE 3,5 1,15 0,19 Table 4: Initial RABs of storage operators on entry into force of the regulation

(78) As regards the rate of return on capital, the CRE used the WACC method to enable the operator to finance interest costs and obtain a return on equity comparable to the return it could obtain for investments with comparable levels of risk. The CRE pointed out that the WACC method is commonly used by European regulators to determine the rate of return on regulated infrastructure assets.

(79) On the basis of economic studies and the work of external consultants (23), the CRE set the WACC at 5,75 % for 2018 and 2019. For the period 2020-2023, the CRE assumed a WACC of 4,75 %. The method used to establish the WACC for ATS 2 is unchanged from that used for ATS 1. This is justified by lower financing costs, the planned reduction in corporation tax and an increase in asset beta. This increase in asset beta reflects consideration of the financial risk, in particular the stranded costs borne by shareholders in natural gas infrastructure companies on account of the energy transition.

(80) In the absence of a comparable storage operator listed on the stock market, the CRE took the WACC of the natural gas TSOs as the reference rate and increased it by a specific risk premium for storage. This premium is set at 50 basis points owing to the concentration of storage facilities, the geological risk below ground and the risk of substitutability by LNG terminals as well as of interconnectors with other countries.

(81) The CRE also specified that this rate of return is lower than that granted to regulated operators of LNG terminals (7,25 % when the measure entered into force), whose activity is more risky, especially in commercial terms, because of the co-existence of regulated and unregulated LNG terminals and a smaller number of customers. Furthermore, the CRE referred to the example of the 6,5 % rate of return used by the Italian regulator for natural gas storage.

3.6.3. Investment

(82) Each year, under Article L.421-7-1 of the Energy Code, underground natural gas storage operators submit their annual investment programme to the CRE for approval. In this context, the CRE ‘ensures that the investment necessary for the proper development of storage and transparent and non-discriminatory access to it is carried out’.

(83) In the second storage tariff, the CRE introduced an incentive to control the costs of various categories of investment.

3.6.4. Clawback account

(84) The authorised revenue is set by the CRE on the basis of the operators’ forecasts of their expenditure and revenue for the following year. The clawback account was introduced to take into account the difference between the projected expenditure or revenue and the expenditure or revenue actually recorded for a number of predefined items. This therefore protects operators from variations in certain expenditure or revenue items. The clawback account is also used for the payment of financial incentives resulting from the application of incentivising regulatory mechanisms and for taking into account any capital gains or stranded costs, once validated by the CRE.

(85) For the ATS 1 tariff, in the first period of regulated storage, the CRE adopted a tariff framework in which the differences between projected total expenditure and revenue and actual total expenditure and revenue were adjusted retrospectively. The tariff was therefore ‘100 % clawback’ and no cost or revenue items were incentivised.

(86) For the ATS 2 tariff, the CRE defines the scope of the clawback account in line with the general framework for all tariffs for electricity networks and natural gas infrastructure. Only certain predefined items are thus subject to ex-post coverage of the differences between forecast and actual amounts via the clawback account. These items relate in particular to investment expenditure and sales revenue. By contrast, almost all operating expenses are subject to an incentive, which may be total (100 % of the differences between forecast and actual amounts are at the expense of or accrue to the operator) or partial (e.g. for energy costs, where the incentive is 20 %, with 80 % of the differences being covered by clawback).

3.7. Beneficiaries

(87) The beneficiaries of the measure are the operators of the natural gas storage infrastructure falling within the scope of the regulatory mechanism. Since the entry into force of the measure, the beneficiaries have been Storengy, Teréga and Géométhane.

3.8. Financing of the measure through tariffs for using the transmission network

(88) The authorised revenue of the storage operators is financed from their direct revenue and, where this is lower than the authorised revenue, also from storage compensation equivalent to the difference between the authorised revenue and direct revenue. Compensation = authorised revenue – direct revenue

(89) The operators’ direct revenue mainly stems from auctions, but also from any historical long-term contracts and additional services.

(90) Storage compensation is collected by TSOs from natural gas shippers in the form of a dedicated charge, the ‘storage charge’, incorporated into the tariff for using the transmission network (ATRT tariff) under conditions set by the CRE (see recital 21).

(91) It should be noted first that there are two TSOs in France, i.e. two holders of an authorisation to use natural gas transmission pipelines under Article L.431-1 of the Energy Code: GRTgaz and Teréga (formerly TIGF).

(92) GRTgaz is a public limited company, owned 75 % by ENGIE and 25 % by Société d’Infrastructures Gazière. GRTgaz, directly controlled by ENGIE, is independent from the other parts of its vertically integrated undertaking (the ENGIE group) in line with the independent TSO model, ensuring effective separation of TSO activities from production and supply activities (24).

(93) As described in recital 9, Teréga is owned 40,5 % by Snam, 31,5 % by GIC, 18 % by EDF Investissement and 10 % by Predica. Teréga also meets the conditions of an independent TSO (25).

3.8.1. Setting by the CRE of the storage charge incorporated into the tariffs for using the transmission network

(94) In accordance with the sixth subparagraph of Article L.452-1 of the Energy Code, ‘tariffs for the use of natural gas transmission networks shall be collected by the operators of those networks. Transmission system operators shall pay to the underground natural gas storage operators referred to in Article L. 421-3-1 a share of the amount collected in accordance with methods set out by the Energy Regulatory Commission.’

(95) Under Article L.452-2 of the Energy Code, ‘the methods used to establish tariffs for the use of natural gas transmission networks ... shall be set by the Energy Regulatory Commission’.

(96) On the basis of those provisions, by its decision No 2018-069 of 22 March 2018 (26), the CRE laid down procedures for calculating the storage charge, applicable from 1 April 2018.

(97) According to the CRE, the storage charge paid by each shipper must reflect the value of ‘security of supply’, i.e. the remuneration for storage which gives priority to supplying natural gas to customers whose supply cannot be interrupted, in particular domestic customers.

3.8.2. Payment of the storage charge by shippers and passing on to final customers

(98) With regard to shippers’ obligation to pay the storage charge, by its decision of 22 March 2018 the CRE incorporated the storage charge into the ATRT tariffs by inserting new provisions in its decision No 2018-022 of 7 February 2018 on the adjustment of the tariff for the use of the natural gas transmission networks of GRTgaz and TIGF on 1 April 2018.

(99) It follows from that amendment that ‘any shipper who is assigned firm delivery capacity at at least one transport distribution interface point (PITD) is subject to a storage charge based on the winter modulation of the customers connected to the public gas distribution networks in its portfolio on the first day of each month’.

(100) ‘Shipper’ refers to any ‘natural or legal person who enters into a contract with a TSO for the delivery of gas in the transmission network. The shipper may be the eligible customer, the supplier or their authorised representative.’ A PITD is defined as a ‘physical or notional interface between a transmission network and a public distribution system’.

(101) Moreover, it follows from the wording of the sixth subparagraph of Article L.452-1 of the Energy Code that TSOs must levy ATRT tariffs (see recital 94 – ‘shall be collected’).

(102) As regards passing on the storage charge to end users, the CRE pointed out that shippers will pass the storage charge on to their final customers included in the compensation calculation in the ‘transmission’ part of their invoice. The CRE does not have a list of the customers concerned.

(103) More specifically, this passing-on is mandatory only for the regulated tariffs for the sale of natural gas under Articles L.445-3 and R.445-3 of the Energy Code (27). For market offers, it is at the discretion of the supplier.

3.8.3. Distribution of funds collected by TSOs among storage operators according to procedures laid down by the CRE

(104) In accordance with the CRE’s decision on the storage charge, once the revenue from the storage charge is collected, it is paid by the TSOs to the various storage operators in proportion to the compensation to be received (28). The share allocated to each operator corresponds to the ratio between the operator’s projected annual compensation and the total projected compensation of all regulated storage operators, as set by the CRE. These shares are specified annually in the CRE decision adapting the storage charge.

(105) To that end, in accordance with the CRE decision, TSOs enter into a contract with each storage operator in order to set out the arrangements for collecting and paying compensation, the cost of which is set by the CRE and covered by the authorised revenue of the operators. For 2018, the cost was EUR 130 000 per TSO per storage operator (29).

3.9. Budget

(106) Each year, the total amount of compensation paid to regulated operators depends on auction revenues and the authorised revenue set by the CRE. The compensation paid to the three regulated storage operators amounted to EUR 528 million in 2018, EUR 540 million in 2019 and EUR 251 million in 2020. 2018 (million EUR) 2019 (million EUR) 2020 (million EUR) Storengy 402 392 199 Teréga 101 113 25 Géométhane 26 36 28 Total 528 540 251 Table 5: Level of storage compensation for 2018, 2019 and 2020

3.10. Duration

(107) The provisions of the Hydrocarbons Act relating to the mechanism for regulating storage operators entered into force on 1 January 2018. The CRE set the authorised revenue of storage operators from 1 January 2018. In addition, the first auction of storage capacity took place from 5 to 29 March 2018 for the period 2018-2019, and further auctions were held in 2019-2020 and 2020-2021 (see Table 2 in recital 54).

(108) The storage charge was also incorporated into the ATRT tariff with effect from 1 April 2018. The CRE first set the projected authorised revenue for a regulatory period of 2 years (30). It then harmonised the regulatory framework for storage operators with that of other infrastructure tariffs. This second storage tariff applies for the period 2020-2023 (31).

(109) The French authorities have not set an end date for the mechanism. However, the scope of the mechanism was defined by the last PPE (32) until the PPE is next revised. That revision is planned for 2023 and will take place by 31 December 2028 at the latest.

3.11. Commitments

(110) The French authorities have given two commitments. First, they have undertaken to submit a report to the Commission by the end of 2024. The points to be covered in the report are as follows: — information on the implementation of the measure during the previous period (2018-2023), in particular the auction results in terms of volumes and prices and the amounts of remuneration received per site; — an updated overview of the functioning of the natural gas market in France and in particular of the factors justifying the continuation of the measure for the period 2023-2028, including the spread, the level of demand, investment in the gas network in France and abroad, and investment in LNG terminals; — information on the revision of the PPE in 2023 and any impact on the scope of the measure; — the method for calculating the guaranteed remuneration during the regulatory period 2023-2028. If the calculation method changes, the Commission would like information on the reasons for the change; — data on the impact of the measure on competition, with an emphasis on the potential distortion of competition identified in the Decision, e.g. the impact of the measure on natural gas storage facilities in neighbouring Member States, on interconnectors and on French LNG terminals. This information should be supported by historical data on the use of the assets and by relevant changes to the regulatory regime for natural gas storage in the countries neighbouring France. The impact of the measure on the retail trade in France must also be assessed and quantified.

(111) Secondly, the French authorities undertake to publish the following information on a comprehensive website dedicated to State aid in France (33) and on the Transparency Award Module: a link to the full text of the mechanism and the procedures for implementing it; the identity of the beneficiaries of the funding; the form of the funding; the amount granted to each beneficiary; the date of award; the type of undertaking (SME/large company), the region in which the beneficiary is established and the main economic sector in which the beneficiary operates.

3.12. Grounds for initiating the formal investigation procedure

(112) The Commission took the preliminary view in its opening decision that the regulatory mechanism constituted State aid within the meaning of Article 107(1) TFEU which could be compatible with the internal market under Article 107(3)(c) TFEU. Nevertheless, during the formal investigation procedure, the Commission had expressed doubts as to the proportionality of the regulatory mechanism and the possible distortion of competition.

(113) More specifically, the Commission had found that, for the purpose of setting the storage operators’ authorised revenue, the CRE allows them to obtain a return on their fixed capital. The calculation of this return involves assessing the value of the regulated assets. The Commission expressed doubts about the process of independent economic assessment of the market value of the assets when the regulatory mechanism was introduced by the CRE, which could have called into question the proportionate nature of the measure.

(114) In the light of the information supplied to the Commission during the formal investigation procedure, the Commission could not rule out that the mechanism might distort competition. Excessive distortion of competition could have existed between (i) natural gas suppliers in France and those in other Member States, (ii) natural gas storage operators, on the one hand, and LNG and interconnector operators, on the other, and (iii) natural gas storage operators in France and those in other Member States.

4. COMMENTS BY FRANCE

(115) France sent its comments to the Commission with the CRE’s comments in annex. The CRE’s comments are thus considered to be an integral part of the comments by France.

(116) France considers that the doubts expressed by the Commission with regard to the reform of natural gas storage are unfounded.

4.1. Existence of aid

(117) First, France disputes that the measure in question involves State resources. Furthermore, in France’s view, requiring an operator to move from a negotiated scheme to a regulated scheme cannot be considered to confer an economic advantage on that operator. France also contests the notion that operators of interconnectors and LNG terminals are competitors of storage operators.

(118) Next, with regard to financing through State resources, France disputes the notion that covering part of the costs borne by operators of essential facilities for natural gas storage constitutes a mandatory contribution. The tariff for using natural gas transmission networks is paid by natural gas suppliers in exchange for a delivery service that is designed to ensure a high degree of reliability and the long-term ability to meet a reasonable level of demand (34).

(119) France also notes that it is only mandatory to pass on the cost of using the transmission network to natural gas consumers in their bills if a consumer has chosen to benefit from regulated sales tariffs for natural gas. According to France, only a small proportion of natural gas supplied in France is offered at the regulated tariff (35); moreover, regulated sales tariffs for natural gas are due to be gradually phased out (36).

(120) Furthermore, with regard to the advantage conferred, France notes that, first, the lower risk to which regulated activities are exposed is taken into account when determining the cost of capital since the return on invested capital is lower compared with non-regulated activities. Second, France contests the notion that revenue received by a storage operator under the regulated scheme is systematically higher than that received by the same operator under a negotiated scheme (37). France also points out that the regulatory framework that has been in place since 2018 is symmetrical: ‘compensation’ could work in reverse and be paid out by storage operators if their sales revenue exceeded the authorised amount set by the CRE. Thus, the regulated model cannot be dissociated from the obligations and loss of economic opportunity to which storage operators are subject under that model.

(121) The EUR 494 million write-down of ENGIE group’s regulated storage operations came only a few days after the CRE’s chosen parameters for the storage tariff were published, illustrating that there was no longer an expectation that profits could be made as a result of favourable market conditions. Lastly, France notes that the introduction of the regulatory mechanism did not lead to an increase in revenue for French storage operators between 2017 and 2018, with the exception of Storengy. France also points out that, at comparable spread levels, Storengy’s authorised revenue under the regulated framework is lower than its revenue from sales under the negotiated scheme.

(122) France considers that it is not appropriate to analyse the situation of storage operators located in other Member States when assessing the selective nature of the advantage conferred. It quotes the General Court and the Court of Justice, which found that ‘the condition relating to selectivity […] can be assessed only at the level of a single Member State’ (38). In any event, France points out that storage operators in other Member States are not in a comparable factual and legal situation with regard to the objective of the measure in question, namely, to guarantee the security of natural gas supplies in France.

(123) With regard to interconnector operators, on the one hand, and operators of LNG terminals, on the other, France notes that all of these operators are regulated in France (39). They are therefore subject to regulatory mechanisms that are very similar to the mechanism in place for storage, with the regulator setting an amount of authorised revenue allowing them to cover their costs. Consequently, France considers that it cannot be disputed that the measure in question confers a selective advantage on these operators vis-à-vis operators of gas interconnectors and LNG terminals.

(124) With regard to the effect on competition and trade between Member States, France takes the view that operators of interconnectors and LNG terminals are not in competition with storage operators (see recitals (133) et seq.).

4.2. Compatibility of the measure with the internal market

4.2.1. Proportionality

(125) France points out that regulation based on operators’ costs is an approach that has been widely adopted by European regulators. This approach guarantees that operators have sufficient revenue to safeguard their operations and ensures that end consumers do not pay for storage at a price that exceeds that of the service provided. Conversely, France notes that, in its view, a method based on spread levels would be volatile and, depending on short-term market price fluctuations, might not allow operators to cover their costs or could, on the other hand, generate undue profits.

(126) In order to set the storage tariff, the CRE has adopted a regulatory system based on covering what are deemed to be efficient costs borne by operators. Thus, the CRE sets an amount of authorised revenue for each operator to cover operating costs as well as the depreciation of assets and the cost of capital. To calculate storage operators’ initial RAB value on 1 January 2018, the CRE reassessed the gross book value of operators’ assets on 31 December 2016 (see recital (55) et seq. on setting authorised revenue).

(127) In the alternative, France provides additional information to demonstrate that other methods give RAB values that are consistent with the CRE’s method.

(128) Storage operators’ value for their shareholders is determined by applying accounting rules and on the basis of long-term revenue forecasts for their operations. For Storengy, the CRE took an initial RAB value of EUR 3,5 billion, with Storengy valued at [EUR 3 to 5 billion] in ENGIE’s balance sheet on 31 December 2016. For Teréga, the CRE took an initial RAB value of EUR 1,156 billion, with the storage operation valued at around [EUR 1 to 2 billion] in the parent company’s balance sheet on 31 December 2016.

(129) Recent transactions also shed light on the value of the undertakings and the valuation of storage operations in transactions. For example, based on transactions involving Teréga’s share capital in 2013 (40) and 2015 (41), its storage operation assets are estimated to be worth [EUR 1 to 2 billion].

(130) Moreover, France states that external consultants also worked on calculating the operators’ RAB values. For Storengy, the calculation made by the consultant […] for the CRE gave a value of [EUR 3 to 5 billion]. France also refers to a study by PwC, commissioned by Teréga, which gives an RAB value of between [EUR 1 and 2 billion] in 2018.

(131) Lastly, France considers that an alternative method, involving drawing up an historical overview of an operator’s revenue to determine whether it covered past investment, would not be a sufficiently sound basis for determining the RAB value. This method would involve reconstructing an overview, from the date of the initial commissioning, of the oldest storage assets (from the end of the 1950s) and the free cash flows of each operator i.e. the cash flow available to the operator after financing its working capital requirements, taxes and investments, so as to compare those figures against the gross value of its assets.

(132) It would be particularly complex to piece together this overview owing to the exhaustive document-based searches required and the changes in the current storage undertakings’ organisational and ownership structures. For Storengy, which is part of an integrated model within Gaz de France/GDF Suez, reconstructing this historical overview would require carve-out scenarios to be drawn up for the activity. Meanwhile Teréga has undergone successive changes of ownership.

4.2.2. Negative effects on competition and trade

(133) As regards distortions of competition between French suppliers and suppliers from other Member States taking up storage capacity in France, France explains that the ‘nationality’ of the supplier is irrelevant. Public auctions are open to all authorised suppliers of natural gas. Authorisation to supply natural gas is not restricted to French suppliers and may be granted to any person established in the territory of an EU Member State (42). Second, the French authorities stress that, for the same delivery service, the same tariff is charged to French suppliers and suppliers from other Member States for use of the natural gas transmission networks.

(134) Furthermore, according to France, storage operators are not in competition with interconnectors and LNG terminals. First, France points out that the Commission has never considered that a single market exists for the storage of natural gas, regasification facilities and interconnectors. France also notes that, in assessments of the gas system’s ability to meet a reasonable level of demand, essential facilities for natural gas storage complement the full use of interconnectors and the use of LNG terminals at full capacity, in line with available stocks of liquefied natural gas.

(135) Furthermore, France notes that the Commission has, on several occasions, acknowledged the existence of a separate market for underground natural gas storage, both in France (43) and in other Member States (44). Following a market investigation concerning a transaction on French territory, the Commission found that storage and other forms of flexibility were not substitutable (45). France also notes that in two decisions, the Commission took the view that the natural gas storage market was regional or even national in scope (46).

(136) France considers that each flexibility instrument has its own functions and features, meaning that it cannot be substituted by another flexibility instrument. Interconnectors are used to supply the country’s natural gas. Were it not for storage, interconnectors would need to have the capacity to guarantee the supply of natural gas across French territory at times of peak demand. Capacity on such a scale would be inefficient. Moreover, the EU has set the objective of reducing natural gas consumption. There are no plans for any further investment in France’s current interconnectors. The question raised by the Commission with regard to competition and long-term investment signals would therefore appear to be purely theoretical.

(137) LNG terminals offer the option of arbitrage as a means of supplying the country at a lower cost. The availability of LNG is uncertain and depends to a great extent on global supply and demand conditions that regularly cause shipments to be redirected. Furthermore, LNG terminals have limited storage capacity (47), which, even in a best-case scenario, could not be drawn on for more than 5 days. This is less than the average duration of a cold spell, which is 5 to 15 days, meaning that an inbound shipment could not be arranged quickly enough to prevent a breakdown in supply (48).

(138) Natural gas storage therefore offers trans-seasonal flexibility that cannot be provided by interconnectors in comparable economic conditions or by LNG terminals. However, the existence of energy stocks in France cannot in itself guarantee the security of natural gas supplies for the country. It remains vital to use interconnectors and LNG terminals to supply the country.

(139) The different types of infrastructure are therefore complementary and are not competing to ensure security of supply in France.

(140) Even if interconnectors, LNG terminals and natural gas storage were considered to be in competition, France notes that French interconnectors and LNG terminals are all regulated, with the exception of the Dunkirk terminal. The profitability of the infrastructure therefore corresponds to the rate of return on the assets set by the CRE. As a result, implementation of the regulatory scheme for storage cannot have an impact on the profitability of other regulated infrastructure.

(141) Furthermore, France notes that recent history contradicts any hypothesis of there being competition that is detrimental to interconnectors or LNG terminals. Since the end of 2018, levels of usage of French and European terminals have been particularly high compared to the previous 10 years. Moreover, operators of LNG terminals have recently successfully launched procedures to sell their medium-term capacity. Regulation of storage, combined with the merging of zones in France that took place at the end of 2018, has made a significant contribution to improving the depth and liquidity of the market in France and Western Europe.

(142) France also contests the notion that regulation of storage could reduce incentives to use LNG terminals and existing interconnectors. These incentives come from price signals sent by the various natural gas markets (49). In this context, storage is an additional means of optimising the cost of supplying natural gas and ensuring competitive market prices.

(143) France also notes that decisions to invest in interconnectors and LNG terminals are based on supply strategies that are not negatively impacted by natural gas storage.

(144) Lastly, France considers that the situation of storage operators in other Member States is in no way affected by the measure in question. The French authorities note that, as a result of the design of the French gas system, whereby 100 % of available capacity at interconnectors is taken into account, means of supply upstream of interconnectors, particularly natural gas storage facilities in other EU Member States, are taken into account automatically. Moreover, the French authorities note that some of these facilities are also regulated.

(145) Storage capacity is sold by means of auctions and at market price. Consequently, the measure in question does not disadvantage storage operators in other Member States. Moreover, the measure in question can have only a minimal effect on price formation. Around 130 TWh (50) can be stored in France, which is a low figure compared with the quantities traded on the market. In 2018, 28 220 TWh were traded on the TTF (51).

(146) Storage operators in the various Member States are therefore all subject to market conditions over which French storage facilities have little influence, and thus it cannot be considered that the introduction of the measure in question could reduce their profitability.

(147) France also notes that filling levels are high at German and Belgian facilities and that these levels increased between 2018 and 2019 (52). These high levels illustrate that the regulation of French storage facilities does not prevent operators in other Member States from selling all of their storage capacity in favourable market conditions.

5. COMMENTS BY INTERESTED PARTIES

(148) The Commission received comments from 18 interested parties, three of whom are beneficiaries of the measure in question. Their comments are summarised in recitals (149) to (233).

5.1. Comments by beneficiaries of the measure

5.1.1. Géométhane

(149) Géométhane highlights the positive effects of the introduction of the measure in terms of energy security. Géométhane sent a detailed report to the Commission to support its arguments (53).

5.1.1.1. Existence of aid

(150) According to Géométhane, for various reasons the measure in question does not constitute State aid.

(151) First, Géométhane notes that State resources are not used to finance the measure given that the storage charge cannot be considered a mandatory contribution: resources are transferred between private operators only (natural gas suppliers and storage operators), the State has limited control over the funds, the measure in question does not draw on the State budget, and it requires operators to maintain the essential storage facilities covered by the scheme.

(152) Moreover, the measure in question cannot be considered to confer a selective advantage on storage operators operating on French territory vis-à-vis operators located abroad since they are not in a legal and factual situation that is comparable to that of storage operators located on French territory with regard to the objective of the measure in question. Furthermore, operators of other flexibility instruments are not in a comparable legal and factual situation.

(153) Lastly, Géométhane states that the measure in question does not have an impact on competition and trade between Member States.

5.1.1.2. Compatibility of the aid

(154) If the measure in question were found to constitute State aid, Géométhane argues that the measure ought to be considered compatible with the rules on State aid. The measure in question helps ensure energy security, which is an objective of common interest. Moreover, the measure is necessary and appropriate as a means of achieving this objective, in the light of analysis of alternative measures.

(155) The introduction of the measure in question has an incentive effect given that, without such a measure, low take-up rates for storage capacity and the drop in revenue from auctions as a result of a decrease in spreads would have led storage operators to mothball, or even permanently close, facilities that are essential for ensuring the security of natural gas supplies in France.

(156) Calculating authorised revenue using the RAB valuation method based on current economic costs is justified and proportionate given that: — the RAB value was subject to an independent economic evaluation when the regulatory mechanism was introduced, by means of an external audit carried out by the consultancy firm […]; — the initial RAB value proposed by the operators was not accepted by the CRE; — the current economic costs methodology is based on the gross book value of the assets for the RAB valuation; — the methodology makes it possible to reflect the cost of replacing assets net of depreciation; — the methodology applies to all tariffs for regulated infrastructure in France; — the methodology is used by almost all European regulators.

(157) Alternatively, establishing an RAB value based on the market value as represented by spreads would not be appropriate as it would not cover operators’ costs, which goes against the principle of covering costs set out in Directive 2009/73/EC. Thus, taking into account the market value would jeopardise the regulatory mechanism, the aim of which is to ensure that storage facilities which are essential for the proper functioning of the transmission network remain in operation. Furthermore, there is a risk of overpayment in the event of an increase in spread. The RAB value applied by the CRE is consistent with the market value of the infrastructure over the medium and long term.

(158) It would not have been appropriate to assess whether or not the revenue generated prior to the introduction of the regulatory mechanism was sufficient to cover their initial investment costs, since taking this revenue into account in the assessment would go against the practices of European regulators and would be complex and unreliable.

(159) Lastly, measures are in place to limit the scope for operators to make profits (namely, the weighted average cost of capital, effective cap on costs for operators of storage infrastructure and an incentivising regulatory mechanism).

(160) In the alternative, Géométhane notes that the RAB value used by the CRE corresponds to the value of a recent transaction. In 2016, 98 % of the share capital of Géosud, which itself holds a 50 % stake in Géométhane, was transferred from Total, Ineos and Géostock to the undertaking CNP Assurances for […]. It is thus possible to calculate the total value of Géométhane as estimated by the purchaser at the time of this transfer, namely […] (54) (added to which was […] in available cash flow, making a total of around […]). According to Géométhane, this market value is consistent […] with the RAB value of EUR 188,9 million given by the CRE in 2018, in addition to which were assets under construction […].

(161) The measure in question prevents negative effects on competition and trade between Member States. — There is no distortion of competition between French suppliers of natural gas and foreign suppliers of natural gas. The method of auctioning storage services ensures equal treatment of French and foreign natural gas suppliers. The method of financing storage compensation set out in the regulatory mechanism also ensures that foreign and French suppliers are treated equally. Foreign suppliers do not benefit from lower prices than their French counterparts; — nor is there any distortion of competition with respect to storage operators in neighbouring countries. Since the regulatory mechanism came into effect, filling levels have been on the rise throughout the EU and have reached particularly high levels; — nor is there any distortion of competition between storage operators and LNG terminals or interconnectors given that LNG terminals and interconnectors are not substitutable. When adopting decisions on mergers, the Commission has defined the natural gas storage market as a separate market. It is more a matter of natural gas storage, LNG terminals and interconnectors being complementary.

5.1.2. Storengy

(162) Storengy highlights the positive effects of the introduction of the measure in terms of the energy security objective. Storengy sent a detailed report to the Commission to support its arguments (55).

5.1.2.1. Existence of aid

(163) According to Storengy, for various reasons the measure in question does not constitute State aid.

(164) First, Storengy notes that State resources are not used to finance the measure given that the storage charge cannot be considered a mandatory contribution, resources are transferred between private operators only (natural gas suppliers and storage operators), the State has limited control over the funds, the measure in question does not draw on the State budget, and it requires operators to maintain the essential storage facilities covered by the scheme.

(165) Moreover, the measure in question cannot be considered to confer a selective advantage on storage operators operating on French territory vis-à-vis operators located abroad since they are not in a legal and factual situation that is comparable to that of storage operators located on French territory with regard to the objective of the measure in question. Furthermore, operators of other flexibility instruments are not in a comparable legal and factual situation.

(166) Lastly, Storengy states that the measure in question does not have an impact on competition and trade between Member States.

5.1.2.2. Compatibility of the aid

(167) If the measure in question were found to constitute State aid, Storengy argues that the measure ought to be considered compatible with the rules on State aid. The measure helps ensure energy security, which is an objective of common interest. Moreover, the measure in question is necessary and appropriate as a means of achieving this objective, in the light of analysis of alternative measures.

(168) The introduction of the measure in question has an incentive effect given that, without the measure, low take-up rates for storage capacity and the drop in revenue from auctions as a result of a decrease in spreads would have led storage operators to mothball, or even permanently close, facilities that are essential for ensuring the security of natural gas supplies in France.

(169) Calculating authorised revenue using the regulated asset base valuation method based on current economic costs is justified and proportionate given that: — the RAB value was subject to an independent economic evaluation when the regulatory mechanism was introduced, by means of an external audit carried out by the consultancy firm […]; — the initial RAB value proposed by the operators was not accepted by the CRE; — the current economic costs methodology is based on the gross book value of the assets for the RAB valuation; — the methodology makes it possible to reflect the cost of replacing assets net of depreciation; — the methodology applies to all tariffs for regulated infrastructure in France; — the methodology is used by almost all European regulators.

(170) Alternatively, establishing an RAB value based on the market value as represented by spreads would not be appropriate as it would not cover operators’ costs, which goes against the principle of covering costs set out in Directive 2009/73/EC. Thus, taking into account the market value would jeopardise the regulatory mechanism, the aim of which is to ensure that storage facilities which are essential for the proper functioning of the transmission network remain in operation. Furthermore, there is a risk of overpayment in the event of an increase in spread. The RAB value given by the CRE is consistent with the market value of the infrastructure over the medium and long term.

(171) It would not have been appropriate to assess whether or not the revenue generated prior to the introduction of the regulatory mechanism was sufficient to cover their initial investment costs, since taking this revenue into account in the assessment would go against the practices of European regulators and would be complex and unreliable.

(172) Lastly, measures are in place to limit the scope for operators to make profits (namely, the weighted average cost of capital, effective cap on costs for operators of storage infrastructure and an incentivising regulatory mechanism).

(173) The measure in question prevents negative effects on competition and trade between Member States. — There is no distortion of competition between French suppliers of natural gas and foreign suppliers of natural gas. The method of auctioning storage services ensures equal treatment of French and foreign natural gas suppliers. The method of financing storage compensation set out in the regulatory mechanism also ensures that foreign and French suppliers are treated equally. Foreign suppliers do not benefit from lower prices than their French counterparts; — nor is there any distortion of competition with respect to storage operators in neighbouring countries. Since the regulatory mechanism came into effect, filling levels have been on the rise throughout the EU and have reached particularly high levels; — nor is there any distortion of competition between storage operators and LNG terminals or interconnectors given that LNG terminals and interconnectors are not substitutable. When adopting decisions on mergers, the Commission has defined the natural gas storage market as a separate market. It is more a matter of natural gas storage, LNG terminals and interconnectors being complementary.

5.1.3. Teréga

(174) Teréga stresses that the main objective of the storage reform is ensuring the security of natural gas supplies in France, something which was under threat prior to the entry into force of the regulatory mechanism.

5.1.3.1. Existence of aid

(175) Teréga considers that the measure cannot be classified as State aid. Teréga notes that regulatory systems based on the principles of covering the costs of an efficient operator and a normal return on invested capital are commonplace in the EU, and are not considered to constitute State aid.

(176) First, Teréga considers that the measure in question is simply a tariff regulation instrument that is not financed through State resources. It has no impact on the State budget and does not generate any extra costs that must be passed on to final customers. Moreover, the French State does not exert government control over the funds collected by TSOs or over the TSOs themselves, which are private-law undertakings controlled by shareholders that are mostly from the private sector.

(177) Next, Teréga considers that the measure in question does not confer a selective advantage on the operators concerned. The regulatory mechanism is based on auctions and also comprises efficiency incentives and an ex-post adjustment instrument for all costs and revenue. Furthermore, the symmetrical nature of the regulatory mechanism means that storage operators do not necessarily receive compensation but may in fact be required to repay any overcompensation.

(178) Moreover, with regard to the criterion of selectivity, Teréga considers that the situation of foreign operators is not relevant when assessing this aspect. Storage operators are in a factual and legal situation that differs in many respects from that of LNG terminal operators and interconnector operators, particularly with regard to the objective of ensuring security of natural gas supplies in France.

(179) Lastly, Teréga states that the measure in question in no way affects competition and trade between Member States. Storage capacity is assigned through auctions, using a market mechanism that does not discriminate against operators located in other Member States. Moreover, when adopting decisions on mergers and anti-competitive practices, the Commission has always defined the relevant natural gas storage market as, at most, national in scale and has never considered there to be a larger-scale market, either in terms of the services in question or in terms of geography. In any event, the fact that gas infrastructure is very widely regulated is incompatible with the view that competition on the natural gas markets is distorted.

5.1.3.2. Compatibility of the aid with the internal market

(180) Even were the regulatory mechanism to constitute State aid (which it does not), Teréga maintains that the regulatory mechanism meets all the conditions for it to be compatible with the internal market within the meaning of Article 107(3)(c) TFEU.

(181) Teréga considers that the objective of the measure in question is one of common interest as it aims to ensure security of natural gas supplies in France. By increasing the amount of natural gas available at storage sites, the regulatory mechanism seeks to achieve a specific and quantifiable level of supply security. Moreover, the measure in question constitutes a necessary intervention by the State that is based on a reasonable assessment and addresses well-identified market flaws, such as final consumers’ inability to indicate the value they assign to security of supply (such as the insurance value or system value). Furthermore, Teréga stresses that the measure at issue is an appropriate means of strengthening security of supply on French territory, not only compared with other available flexibility measures, but also compared with other types of storage regulation.

(182) Teréga questions the Commission’s reasoning in the Opening Decision with regard to the proportionality of the measure in question. The regulatory mechanism limits the amount of alleged aid to the minimum amount required. The regulatory mechanism is based on the principle of covering the costs of an ‘efficient operator’, capping storage operators’ revenue and having in-built incentives for operators to encourage efficiency with regard to their operating expenditure. Moreover, the CRE had an independent cost assessment carried out to be certain that only acceptable costs are taken into account. The CRE also referred to a set of objective, contemporary and credible economic studies carried out by independent experts to value the regulated assets. In this respect, the method used by the CRE to value the assets is consistent with and corresponds to the practices of other European regulators. Contrary to what the Commission suggests, Teréga considers that taking into account pre-regulation revenue in the regulated asset base value would necessarily be incomplete in the absence of available data and, in any event, might be contrary to general principles of law. Moreover, the CRE’s work relates to storage operators’ operating costs as well as the valuation of their assets, information which has systematically been made public in the CRE’s tariff-setting decisions, thus ensuring that the measure is transparent.

(183) Lastly, Teréga takes the view that the measure in question does not distort competition between natural gas suppliers located in France and those located abroad. The measure at issue is non-discriminatory. All retail suppliers can purchase capacity at French storage sites through auctions. Also, all retail suppliers serving French customers pay ATRT tariffs, thereby supporting the compensation mechanism. The measure even has a positive impact on the retail markets for natural gas by limiting periods of system stress and reducing the risk of network congestion. Nor is there any distortion of competition with respect to LNG operators and operators of interconnectors. These operators are themselves subject to significant regulation of their revenue, and rather than competing with storage operators, they complement their activities to ensure security of supply. The measure in question does not favour one source of natural gas supplies over another, nor does it prohibit or discourage the use of interconnectors and LNG terminals as complementary tools. For example, capacity take-up rates at European LNG terminals in recent years illustrate this trend. Lastly, the measure in question does not introduce a distortion of competition with regard to foreign storage operators, since they could not be placed at a disadvantage by the auctions, which use a market-based mechanism. Furthermore, in practice, the introduction of the measure has not hindered the general increase in take-up rates for storage in Europe.

5.2. Comments by other interested parties

5.2.1. French Independent Electricity and Gas Association (AFIEG) (56)

(184) The AFIEG provided its comments on the method of valuing storage assets and the scale of storage assets required in terms of volume and withdrawal rate to ensure security of supply.

(185) The AFIEG points out that the distortions of competition that existed prior to the reform, caused by the previous system’s lack of transparency, have been eliminated.

(186) With regard to the method used to value the regulated asset base, the AFIEG does not have precise figures available that would make it possible to confirm the CRE’s valuation, but it considers that economic value should take precedence over book value. Using the economic value would make it possible to reflect stocks at a given time (‘t’) rather than giving a more historical overview. Moreover, the AFIEG considers that the valuation of cushion gas is a fundamental aspect of the valuation of storage assets, and it therefore expressed its desire for the chosen cushion gas depreciation rules to be taken into consideration with regard to their financial impact on the RAB value. Furthermore, the AFIEG points out that storage operators are not exposed to greater business risks than transmission network operators. Consequently, the rate of return on the RAB value used for storage operators should not be higher than the rate of return for TSOs.

(187) The AFIEG considers that the scale of storage assets required in terms of volume and withdrawal rate to ensure security of supply should be reduced by the French authorities in order to maximise the cost-benefit ratio of storage for consumers. The French authorities have set out the minimum natural gas stock levels required to ensure security of supply, namely a withdrawal rate of 1 990 GWh/d and a volume of 64 TWh (57), whereas the list set out in the Decree on the PPE for 2023-2028 refers to a withdrawal rate of 2 376 GWh/d and a volume of 138,5 TWh. The AFIEG considers that the figures set out in the Decree on the PPE are too high in relation to the storage requirements needed to guarantee security of supply in France. The figures should therefore be lowered so as to avoid extra costs for end consumers and to ensure that other natural gas flexibility capacity is not placed at a disadvantage. Furthermore, the AFIEG notes that the figure chosen by the French authorities for disruption risk coverage is too stringent at 2 % compared with neighbouring countries, where it is 5 %.

5.2.2. French Gas Association (AFG) (58)

(188) In the AFG’s opinion, the regulatory framework for natural gas storage introduced by the French authorities on 1 January 2018 is a good one.

(189) The AFG considers that the measure in question is underpinned by the principle of cost-based regulation and has led to efficient and proportionate valuation of assets. The principle of cost-based regulation is used by the majority of regulatory authorities and applies to transmission activities, natural gas distribution and LNG terminals in France.

(190) According to the AFG, a method using market prices rather than the costs of ‘efficient operators’ could have led to a regulatory framework that was unstable and far removed from the most desirable economic outcome: if spreads were unfavourable, the method would not ensure coverage of operators’ costs and could potentially put them in a critical situation. Conversely, if market spreads were very favourable, operators’ revenue would have been too high and far removed from the best value for customers using storage facilities.

(191) According to the AFG, regulation of French storage facilities has not led to a distortion of competition vis-à-vis other natural gas infrastructure in France, LNG terminals in France and the EU, or storage operators in the EU. With regard to LNG terminals, the AFG notes that the volume of LNG imported into France has doubled in the space of 2 years, rising from 9,6 Gm3 in 2017 to 21,5 Gm3 in 2019. The AFG also mentions that LNG terminal development projects are currently being considered in Germany. With regard to storage operators in Europe, the AFG points out that filling levels in Germany, the Netherlands and Belgium increased between 2018 and 2019, and reached at least 95 % in Western Europe on 1 November 2019.

5.2.3. National Association of Energy Retailers (ANODE) (59)

(192) According to ANODE, the regulation of French storage facilities makes it possible to reconcile suppliers’ desire to have market rules governing the sale of storage capacity with a regulated mechanism to ensure security of supply.

(193) Furthermore, ANODE considers it crucial to regularly review the target take-up rates and filling levels for storage facilities and the scale of assets taken into account in the compensation mechanism for the purpose of guaranteeing security of supply so as to ensure that they correspond to actual requirements. ANODE argues that this point is all the more important given that France assumed a 2 % reduction in natural gas consumption, excluding electricity generation […].

(194) With regard to proportionality, ANODE considers that the CRE will need to take into account experience gained with regard to costs and the operation of storage facilities as well as the reduction in the risk borne by storage operators. In its view, the rate of return on the RAB value for storage operators should be aligned with the rate for TSOs.

5.2.4. Electricity and Gas Regulatory Commission (CREG) (60)

(195) The CREG considers that it has not been proven that all storage capacity in France is required at all times to ensure the security of natural gas supplies. Charterers use part of this natural gas, potentially a significant part, to make profits linked to speculation on the difference between summer and winter prices for natural gas. The compensation mechanism could therefore also be a way for charterers to make profits from natural gas for free. This gives charterers operating in France a competitive advantage that charterers in neighbouring countries do not have.

(196) Belgium has only one natural gas storage facility at the Loenhout site, operated by Fluxys Belgium (61). The CREG considers this site to be in competition with other storage sites in the north-west of the EU.

(197) Although the spread between winter and summer natural gas prices was small in 2017 and 2018, the fact that the largest storage facility in the United Kingdom was unavailable led to an increase in reservations for storage capacity on the north-western EU market. This explains the filling levels of 87 % and 84 % for Loenhout for the 2016-2017 and 2017-2018 seasons.

(198) However, the filling level for the 2018-2019 season was low, standing at 54 %, while the filling level for the EU 28 remained fairly stable. The CREG notes that the filling level for storage facilities in France increased from 75 % for the 2017-2018 season to 94 % for the 2018-2019 season. Loenhout’s role as a source of flexibility has been taken over by French storage facilities that have benefited from very low tariffs under a new regulatory support framework. The CREG considers that the introduction of the French compensation mechanism has therefore had a very significant impact on Loenhout: only market operators with existing long-term contracts have remained active at the Loenhout site. The CREG takes the view that the French compensation mechanism forces storage operators in neighbouring countries to sell their storage capacity at their marginal cost, or even at a lower cost.

(199) Moreover, the CREG notes that the filling level for the 2019-2020 season was exceptional, both for Belgium (97 %) and for the EU 28 (97 %). This level can be explained by the very low price of natural gas during the summer of 2019 and a wide spread.

(200) The CREG concludes that it cannot be ruled out that the compensation mechanism used in France causes distortions of competition between operators of storage facilities on French territory and those in neighbouring Member States, between market operators active on the French market and those active in neighbouring Member States, and between natural gas storage operators on the one hand and LNG operators and interconnector operators on the other.

5.2.5. […] (62)

(201) […] considers that it is imperative to build up stocks of natural gas to ensure security of supply in the short term and that the regulatory principles implemented in 2018 are appropriate. Given that the volume of stocks required to ensure security of supply is greater than the ‘economic’ volume that would be spontaneously arrived at by the market, it is necessary to supplement storage operators’ revenue.

(202) However, the scope of regulation must be restricted to storage capacity that is strictly necessary to ensure security of supply. This point is important to ensure that end consumers do not bear excessive costs. Too large a scope could also be detrimental to storage facilities located in another Member State and have an impact on LNG terminals and interconnectors.

(203) […] acknowledges that it is difficult to calculate precisely the storage volume required to ensure security of supply. However, […] considers that it could be necessary to include all underground storage facilities when determining the scale of facilities required to ensure security of supply. In light of recent developments, […] considers that the scenarios assumed by France could factor in greater use of LNG resources in particular, which would reduce the volume required to ensure security of supply.

(204) […] also questions the decision to limit the scope of regulation to underground storage facilities only, particularly given that French legislation acknowledges the existence of supplies in storage at LNG terminals and considers that these supplies could help ensure the security of natural gas supplies.

(205) In the medium and long term, […] expects that France will need to manage the decommissioning of some of its gas infrastructure. Consequently, even if strengthening import capacity reduced the volume that needed to be kept in storage to ensure security of supply, this alternative could ultimately prove very costly. As a result, to ensure security of supply, it would appear to be more appropriate to use existing storage facilities rather than build new import capacity.

5.2.6. European Federation of Energy Traders (EFET) (63)

(206) The EFET supports the reform introduced by the French authorities in 2018, which created an attractive and competitive market for natural gas storage in France.

(207) As regards the compatibility of the aid, the EFET does not cast doubt on the methodology used to calculate the base value or the rate of return on capital, as set by the CRE. The value of the regulated assets should correspond to the regulated asset base and a regulated rate of return.

(208) The EFET does not believe that the introduction of the reform has created distortions of competition between French natural gas storage operators and those in other Member States, as demonstrated by the steady increase in operators’ market participation in France and abroad since 2018; nor has it created distortions of competition between natural gas storage operators and LNG terminal operators, since the market value of LNG terminals has been increasing since 2018.

5.2.7. Elengy (64)

(209) The introduction of the reform has not resulted in an artificial reduction in incentives to use LNG terminals. First, activity at Elengy’s terminals has increased since the measure was implemented, reaching record levels in 2019 and 2020.

(210) Second, the appeal of LNG terminals is influenced by a number of factors: the gap between EU and Asian markets, tariffs, the existence of long-term contracts, the depth and liquidity of the market downstream, the flexibility of the terminal, and trade rules. The measure concerning storage does not have a direct impact on these factors, but has had indirect, positive effects. The reform has helped to maximise EU storage capacity by deepening the natural gas market in the EU, making it possible to store natural gas and reduce costs for consumers when demand for natural gas is high, and by increasing the liquidity available on the French market.

5.2.8. Enovos (65)

(211) Enovos considers that, when there are various players participating in the system in sufficient number, the market is best placed to set the value of an asset. The current auctioning mechanism ensures a fair market assessment. If the auction system leads to a situation where certain market players are remunerated more or less than others, adjustments will take place at auctions in subsequent years.

5.2.9. Fluxys (66)

(212) Fluxys notes that natural gas storage in the EU has been facing significant challenges in recent years, given that it is increasingly difficult for natural gas storage operators to cover operating costs. To adapt to rapid changes in the market, it is necessary to put in place an appropriate economic model that reflects the value of natural gas storage for the system and its contribution to security of supply. Establishing support mechanisms unilaterally could create distortions of competition with other EU Member States. Consequently, a compensation mechanism based on strict criteria should apply to all EU Member States.

5.2.10. National Federation of Mines and Energy CGT (FNME-CGT) (67)

(213) According to the FNME-CGT, the reform of natural gas storage in France has made it possible to achieve the following two objectives: guarantee energy security at a fair price for consumers and ensure the proper functioning of the transmission network to safeguard delivery.

(214) The FNME-CGT considers that the measure in quest