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DOCUMENTS "COM"
COM(82)603
Vol.1982/0191

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(82)603 final
Brussels,29September1982
Draft
COUNCILRECOMMENDATION
onthemethodsofsettingnaturalgaspricesandtariffsintheCommunity
(presented fromth
V-
.CommissiontotheCouncil)
.
■
COM(82)603final

Draft
COUNCILRECOMMENDATION
onthemethodsofsettingnaturalgaspricesandtariffs
intheCommunity
THECOUNCILOFTHEEUROPEANCOMMUNITIES,
HavingregardtotheTreatyestablishing theEuropeanEconomicCommunity,
HavingregardtothedraftRecommendation submittedbytheCommission,
HavingregardtotheopinionoftheEuropeanParliament,
Whereasinitsconelusionsof3December1981and16March1982the
CouncilemphasizedtheneedfortheMemberStatestodevelopacommon
approachtoenergypricingandlaiddowngeneralprinciplestobeobserved
bytheMemberStatesintheirenergypricingpolicies;
Whereastheseprinciplesshouldbeadaptedtotheconditionsofthe
marketinnaturalgassoastoensuregreaterconsistency inenergy
pricingwithintheCommunity;
Whereas,inviewofthecomparativescarcityofnaturalgasandthe
advantagesofusingit,thebestpossibleuseofavailablesupplies
andtheoptimumallocationoftheseresourcesshouldbeensuredbymeans
ofanappropriatepricingpolicy;
Whereasnaturalgaspricesshouldbeallowedtoadjustrapidlytotrends
inthecostofsupplyandtochangesinthecompetitivesituationonthe
-market;
Whereaspricingpoliciesencouragingcertaincategoriesofconsumption
whichpreventtherationaluseofnaturalgasshouldbeavoided;

Explanatory Memorandum
Thedraftrecommendation onthemethodsofsettingnaturalgaspricesand
tariffsintheCommunityhasbeenpreparedinresponsetotheconcernexpressed
bytheCouncilonanumberofoccasionsabouttheconsistencyofenergypricing
policieswiththeMemberStates'commonenergystrategyobjectives.^^
Basically,itseekstolaydownthegeneralprincipleswhichshouldgovernthe
methodsofsettingnaturalgaspricesandtariffswithaviewtomakingthem
consistentwiththeobjectivesofdiversification ofresources,rationaluseof
energyandenergyconservation withintheCommunity.
Informulating theseprinciples,accounthasbeentakenofthespecificfeatures
ofnaturalgasandtheparticularconditionsofcompetition onthemarketforgas,
onwhichthepricesofcompetingenergysourcesonthevariousend-usemarkets
haveadecisiveeffect.
Particular emphasishasbeenplacedoncommontariffstructures,sincethese
willhelptomakethesupplyconditions morehomogeneous andfacilitate more
consistentpriceformationwithintheCommunity.
Mentionisalsomadeoftheneedtoensurethat,asfaraspossible,pricescover
gassupplycostsandtheamortization oftheinvestmententailed.Theentire
proposalisbasedontheconsideration thatasgasisacomparatively scarce
commodityintheCommunitycareshouldbetakentoensurethatitisused
judiciously anditsintrinsicadvantages warrantmakingthebestpossibleuseof
availablesuppliesandtheiroptimumallocation .
TheCommission isawarethatcertainstructures alreadyreflectacommonapproach,
andthattheeffortstoachievehomogeneousness andconsistency shouldbe
continued,andreinforcedifpossible.
Thefactthatpricesaffectusers'choiceshasnotbeenforgotten.TheCommission
isproposingthattheMemberStatesshouldensurethatconsumerpricesandcosts
arecharacterised bythegreatestpossibledegreeoftransparency andaremade
publicasfaraspossible.
(1)Conclusions oftheCouncilmeetingsof2December1981and16March1982.

Whereasnaturalgastariffsystemsshouldalsoreflectasaccuratelyaspossible
thestructureofthesupplyanddistribution costsforthevariouscategories
ofsupplies;
Whereas,inviewofthequantitiessupplied,itisappropriate,wherelarge-
scaleindustryisconcerned,toenableeconomiesofscaleinrelationto
transporttobepassedonbymeansofappropriatedecreasingscalesofcharges;
Whereasinordertoensurethatoptimumuseismadeofthetransmission networks
andthatdeliveries aremoreregularduringtheyear,provisionshouldbemade
forspecialpriceslinkedtotheinterruption ofsupplies;
Whereaspricingpolicyplaysadecisiveroleasregardstrendsonthemarketfornatural
gasandwhereasthereisaneedtomonitorconsumption trendswithaviewto
adjustingnaturalgaspricesaccordingly ;
Whereasconsumerscanhavefreedomofchoiceonlyifthereisanadequatedegree
ofmarkettransparency ,
HEREBYRECOMMENDS TOTHEMEMBERSTATES:
(a)thattheytakeappropriate steps,iftheyhavenotalreadydoneso,to
ensurethatthemethodsofsettingnaturalgaspricesandtariffsinthe
Communityarebasedonthefollowing commonprinciples :
1.Methodsofsettingnaturalgasprices,whetherornotinthecontext
oftariffs,shouldbedesignedtoensurethatthebestpossibleuse
ismadeofgassuppliesandtoensuretheiroptimumallocation.They
shouldbeestablished withdueregardfortherationaluseofenergy
andthecompetitive situation betweennaturalgasandtheotherforms
"ofenergy.
Naturalgaspricesshouldtherefore beascloseaspossibletomarket
valueinrelationtothepriceofsubstitute energiesandprovidea
guaranteeofsufficient proceedstocoverthecostofsupplyingconsumers
2.Naturalgaspricingmethodsshouldbedesignedinsuchawayasto
enablenaturalgaspricestoadjustrapidlytochangesinthecompetitive
situationonthemarketandtotrendsincosts,particularly

thecost togasundertakings ofacquiring gas;changes insuch costs
should bepassed oninthesales tariffs without delay .
3.Prices which areartificially low inrelation tothemarket situation
andtocosts ,having theeffect ofsubsidizing certain classes ofcon­
sumption orcertain uses and/orofencouraging waste ,should notbe
charged .
4.Thetwo-part tariff system ,consisting ofafixed component tocover
fixed costs ,inparticular the cost ofpermanent connection tothe
network ,and acomponent which varies with thequantity ofgassupplied
isthesystem which ,ofthevarious tariff opitons available ,should be
generally used .
This should bethe case ,inparticular ,forcategories ofconsumers
which have homogeneous features from thepoint ofview ofuse,the
scale ofconsumption and the regularity ofofftakes and towhich tariff
based onthese features would beapplied .
5.Fortheother categories ofconsumption subject totariffs ,provision
should bemade fortwo (ormore )components which decrease ascon­
sumption rises ,inorder totake account ofeconomies ofscale in
transport which arise asvolume increases .Thetariffs applied for a
given location should also vary inrelation totheoff-take characteris
tics ,such asthe load factor ,inorder better topass onthe costs .
6.With theaim oftransferring tooff-peak periods ortoallow load-
shedding ,provision should bemade fortheapplication ofspecial
tariffs orprices linked toarrangements fortheinterruption of
supplies ;
<b)that they carefully monitor thetrend inthedemand fornatural gas in
thevarious sectors ofuseandthe long-term trend indemand /inclose
cooperation atCommunity level with aview tofurther improving the
tariff structures ;

-L-
(c)thattheyensurethatnaturalgasprices
greatestpossibledegreeoftransparency
totheconsumerbemadepublicasfarasarecharacterized bythe
andthatpricesandcosts
possible.