1 This request for a preliminary ruling concerns the interpretation of Article 41(8) of Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (OJ 2009 L 211, p. 94), and the first subparagraph of Article 13(1) of Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 (OJ 2009 L 211, p. 36).
2 The request has been made in the course of two actions for annulment brought, respectively, by AS ‘Gaso’ and by AS ‘Conexus Baltic Grid’ against the lēmums Nr. 109 ‘par kapitāla atdeves likmi dabasgāzes pārvades sistēmas, dabasgāzes sadales sistēmas un dabasgāzes uzglabāšanas pakalpojumu tarifu projekta aprēķināšanai’ (Decision on the rate of return on capital of the natural gas transmission system, the natural gas distribution system and natural gas storage for the calculation of access tariffs), of 20 August 2020 (‘the decision at issue’), adopted by the Sabiedrisko pakalpojumu regulēšanas komisija (Public Utilities Commission, Latvia; ‘the Latvian regulatory authority’).
3 Recitals 23 to 25, 30 and 32 of Directive 2009/73 are worded as follows:
4 Article 1(1) of the Directive provides: ‘This Directive establishes common rules for the transmission, distribution, supply and storage of natural gas. It lays down the rules relating to the organisation and functioning of the natural gas sector, access to the market, the criteria and procedures applicable to the granting of authorisations for transmission, distribution, supply and storage of natural gas and the operation of systems.’
5 Article 2 of that directive is worded as follows: ‘For the purposes of this Directive, the following definitions apply: … … … …’
6 Article 39 of the directive, entitled, ‘Designation and independence of regulatory authorities’, provides: ‘1. Each Member State shall designate a single national regulatory authority at national level. … 4. Member States shall guarantee the independence of the regulatory authority and shall ensure that it exercises its powers impartially and transparently. For this purpose, Member States shall ensure that, when carrying out the regulatory tasks conferred upon it by this Directive and related legislation, the regulatory authority: …’
7 Article 40 of Directive 2009/73, entitled ‘General objectives of the regulatory authority’, provides: ‘In carrying out the regulatory tasks specified in this Directive, the regulatory authority shall take all reasonable measures in pursuit of the following objectives within the framework of their duties and powers as laid down in Article 41, in close consultation with other relevant national authorities, including competition authorities, as appropriate, and without prejudice to their competencies: …
8 Article 41 of that directive, entitled ‘Duties and powers of the regulatory authority’, provides: ‘1. The regulatory authority shall have the following duties: 6. The regulatory authorities shall be responsible for fixing or approving sufficiently in advance of their entry into force at least the methodologies used to calculate or establish the terms and conditions for: 8. In fixing or approving the tariffs or methodologies and the balancing services, the regulatory authorities shall ensure that transmission and distribution system operators are granted appropriate incentive, over both the short and long term, to increase efficiencies, foster market integration and security of supply and support the related research activities. … 16. Decisions taken by regulatory authorities shall be fully reasoned and justified to allow for judicial review. The decisions shall be available to the public while preserving the confidentiality of commercially sensitive information. …’
9 Recitals 7 and 8 of Regulation No 715/2009 are worded as follows:
10 Article 1 of that regulation states: ‘This Regulation aims at: The objectives referred to in the first subparagraph shall include the setting of harmonised principles for tariffs, or the methodologies underlying their calculation, for access to the network, but not to storage facilities … This Regulation, with the exception of Article 19(4), shall apply only to storage facilities falling under Article 33(3) or (4) of Directive [2009/73]. …’
11 The first and third subparagraphs of Article 13(1) of the regulation provide: ‘Tariffs, or the methodologies used to calculate them, applied by the transmission system operators and approved by the regulatory authorities pursuant to Article 41(6) of Directive [2009/73], as well as tariffs published pursuant to Article 32(1) of that Directive, shall be transparent, take into account the need for system integrity and its improvement and reflect the actual costs incurred, in so far as such costs correspond to those of an efficient and structurally comparable network operator and are transparent, whilst including an appropriate return on investments, and, where appropriate, taking account of the benchmarking of tariffs by the regulatory authorities. Tariffs, or the methodologies used to calculate them, shall be applied in a non-discriminatory manner. … Tariffs, or the methodologies used to calculate them, shall facilitate efficient gas trade and competition, while at the same time avoiding cross-subsidies between network users and providing incentives for investment and maintaining or creating interoperability for transmission networks.’
12 Article 1 of Commission Regulation (EU) 2017/460 of 16 March 2017 establishing a network code on harmonised transmission tariff structures for gas (OJ 2017 L 72, p. 29) provides that that regulation establishes a network code setting out the rules on harmonised transmission tariff structures for gas, including rules on the application of a reference price methodology, the associated consultation and publication requirements as well as the calculation of reserve prices for standard capacity products.
13 Article 30 of that regulation, entitled ‘Information to be published before the tariff period’, states in paragraph 1 thereof: ‘The following information shall be published before the tariff period in accordance with the requirements set out in Articles 31 and 32 by the national regulatory authority or the transmission system operator(s), as decided by the national regulatory authority: … (b) the following information: …’
14 In accordance with Article 7(2) of the likums ‘Par sabiedrisko pakalpojumu regulatoriem’ (Law on public utility regulatory authorities) of 19 October 2000 (Latvijas Vēstnesis, 2000, No 394) the Latvian regulatory authority is a body governed by public law, institutionally and functionally independent and autonomous in the implementation of its budget, which is ratified by law. One of its tasks is to regulate the provision of public utilities in relation to the supply of natural gas.
15 Article 9(1)(2) of that law provides that the Latvian regulatory authority is to determine the methodology for calculating and fixing tariffs or tariff ceilings, as well as the procedures for applying tariffs or tariff ceilings, unless special laws and regulations of the sector provide for other principles for fixing tariffs.
16 Paragraph 9(2) of that law provides: ‘Within the exercise of its competence, the [Latvian] regulatory authority shall independently adopt decisions and administrative acts which are binding on the providers and users of the public utilities concerned.’
17 Article 20(1) of the Law on public utility regulatory authorities provides: ‘Tariffs are to be fixed at a level such that their payment by users covers the economically substantiated costs of public utilities and ensures their profitability, unless special laws and regulations of the sector provide for other principles for fixing tariffs. In the event of a change in the factors affecting tariffs, such as profitability, the regulatory authority may instigate a tariff review and require the public utility provider to submit, within a specified period, a draft tariff accompanied by an explanation of their cost components.’
18 The sabiedrisko pakalpojumu regulēšanas komisijas padomes lēmums Nr. 1/23 kapitāla atdeves likmes aprēķināšanas metodika (Decision of the regulatory authority committee No 1/23 on the methodology for calculating the rate of return on capital) of 13 August 2018 (‘the methodology decision’), established the procedures for calculating and applying the rate of return on capital for the preparation of draft tariffs for regulated services, including natural gas network services. In particular, that decision defines the formula for calculating the weighted average rate of return on capital in real terms.
19 The board of the Latvian regulatory authority, applying the methodology decision, adopted the decision at issue by which it found that natural gas transmission system operator, natural gas distribution system operator and natural gas storage system operator should apply the weighted average rate of return on capital in real terms.
20 Taking into account the rate of return on equity capital, the rate of return on invested capital, calculated in accordance with the methodology decision, the corporation tax rate and the average of the annual variations in the consumer prices index for the previous five calendar years, the Latvian regulatory authority determined that, for an operator which, according to the data of the last annual report available, fell within the category of medium or large undertakings, the rate of return on capital must be fixed at 2.65%, whereas, for an operator falling within the category of micro- or small undertakings, that rate must be fixed at 4.37%.
21 The decision at issue states that the rate of return of 2.65% is in line with the situation on the financial markets and that it is the result of an appropriate assessment of the risks connected with raising funds, thus ensuring that natural gas transmission, distribution and storage system operators are able to take out loans, invest in the renovation and development of the network and obtain a reasonable return, at the same time ensuring that users could receive uninterrupted, reliable and high-quality services whose tariffs (prices) corresponded to economically substantiated costs.
22 Gaso, which is the natural gas distribution system operator in Latvia, and Conexus Baltic Grid, which is the natural gas transmission and storage system operator in that Member State, each brought an action for annulment of the decision at issue before the Administratīvā apgabaltiesa (Regional Administrative Court), which is the referring court.
23 In support of their actions, those companies argued that the Latvian regulatory authority had exceeded its powers, committed serious procedural and substantive errors in the determination of the criteria and in the calculation of the rate of return on capital, and disregarded its obligation to state reasons by fixing an abnormally low rate of return on capital. In particular, according to them, the decision at issue infringed Directive 2009/73, which imposes on the national regulatory authorities an obligation to promote, inter alia, the development and functioning of the natural gas market by providing investors with sufficient incentives to make the necessary infrastructure investments. That decision also infringed Regulation No 715/2009, which requires regulatory authorities, when determining tariffs, to allow for an appropriate return on the investments made.
24 In that context, the referring court finds, first, that Article 40(f) and Article 41(8) of Directive 2009/73, as well as Article 13(1) of Regulation No 715/2009, read in conjunction with recitals 7 and 8 thereof, are relevant for the resolution of the dispute before it.
25 It emphasises, secondly, that, even though the provisions referred to in the preceding paragraph state that, when they determine the tariffs for access to natural gas transmission and distribution networks, Member States must provide for an ‘appropriate return on investments’, those provisions do not indicate how that expression should be understood, on which, moreover, the Court has not yet had occasion to provide a ruling. Hence, the referring court states that it does not have clear guidelines for assessing the compatibility with EU law of the methodology followed by the Latvian regulatory authority in fixing the rate of return on capital applied in the case before it.
26 Thirdly, that court observes that the Law on public utility regulatory authorities provides a regulatory framework which does not contain a provision corresponding to those of Articles 40 and 41 of that directive relating, respectively, to the general objectives of the regulatory authorities and their duties and powers. In that regard, the referring court states that it appears that Article 20(1) of that Law, on the basis of which the Latvian regulatory authority adopted the decision at issue, does not cover all of the objectives pursued by the provisions of that directive and referred to in paragraph 24 of the present judgment, in particular as regards the right of a regulated public utility provider to benefit from appropriate incentives over both the short and long term. The question therefore arises as to whether the provisions of that directive have been correctly transposed into Latvian law.
27 Lastly, fourthly, in the light of the provisions of Directive 2009/73 and of Regulation No 715/2009, the referring court wonders whether Article 13(1) of that regulation applies for the determination of the tariff relating to access to natural gas storage facilities, which in the present case are operated by Conexus Baltic Grid. Relying on the discretionary nature of the procedures provided for in Article 33(3) and (4) of Directive 2009/73, that court takes the view that Article 13(1) of that regulation, which lays down the conditions to be met by the tariffs applied by transmission system operators and approved by the regulatory authorities in accordance with Article 41(6) of Directive 2009/73, as well as the tariffs published under Article 32(1) of that directive, applies only to tariffs for the natural gas transmission system and does not cover the fixing of tariffs for gas storage facilities.
28 In those circumstances, the Administratīvā apgabaltiesa (Regional Administrative Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
29 The Latvian regulatory authority submits that the questions referred for a preliminary ruling are inadmissible.
30 In the first place, that authority alleges that the first question is hypothetical and relates to the interpretation not of EU law, but of national law. That question is based on the incorrect assumption that that authority is exempt from the obligation to state reasons both for the methodology used to calculate the rate of return on capital and the rates of return themselves. However, it is clear from the national legislation, in particular from Article 67(2) of the Administratīvā procesa likums (Law on administrative procedure), that the authority is required to give reasons for its decisions and, in the present case, that it has taken into account the applicable provisions of law, in particular Article 41(8) of Directive 2009/73 and of Regulation No 715/2009.
31 In the second place, the Latvian regulatory authority considers that the second to sixth questions are formulated in too general a manner and relate not to the interpretation of EU law, but to its application. Furthermore, owing to their general nature, the concepts or expressions used in those questions do not make it possible for the Court to give a precise response to them. Finally, it argues that both Article 41(8) of Directive 2009/73 and Article 13(1) of Regulation No 715/2009 merely state the objective to be achieved by regulatory authorities, while leaving them the choice of the means or methods to achieve it. However, the choice of those means or methods, as to which the referring court enquires, is not a question of interpretation of EU law for the Court to rule on, but of its application which falls within the competence of the national courts.
32 In the third place, the Latvian regulatory authority submits that the second, eighth and ninth questions do not concern the interpretation of EU law but of national law. In particular, as regards the second question, the concept of ‘profitability’ is not used by the relevant EU law but in Article 20(1) of the Law on public utility regulatory authorities.
33 In the fourth place, the Latvian regulatory authority submits that the fourth to eighth questions do not bear any relation with the situation of fact and law characterising the case in the main proceedings and does not respond to an objective need to decide the latter since Article 13(1) of Regulation No 715/2009 does not apply either to natural gas storage facilities of which Conexus Baltic Grid is, in the present case, the operator, or to the natural gas distribution system the operation of which is conferred, in Latvia, to Gaso.
34 In that regard, it is settled case-law that, in the context of the cooperation between the Court and the national courts, provided for in Article 267 TFEU, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. It follows that questions relating to EU law enjoy a presumption of relevance and that where the questions submitted concern the interpretation of EU law, the Court is in principle required to give a ruling. The Court may refuse to rule on a question referred by a national court for a preliminary ruling only where it is quite obvious that the interpretation of EU law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (judgment of 25 February 2025, Sąd Rejonowy w Białymstoku and Adoreikė, C‑146/23 and C‑374/23, EU:C:2025:109, paragraph 37 and the case-law cited).
35 In addition, since the order for reference serves as the basis for the preliminary ruling procedure before the Court under Article 267 TFEU, it is essential that the national court should, in that decision, expand on its definition of the factual and legislative context of the dispute in the main proceedings and give at the very least some explanation of the reasons for the choice of the EU law provisions which it seeks to have interpreted and of the link it establishes between those provisions and the national law applicable to the proceedings pending before it. Those cumulative requirements concerning the content of a request for a preliminary ruling are expressly set out in Article 94 of the Rules of Procedure of the Court of Justice (judgment of 12 December 2019, Slovenské elektrárne, C‑376/18, EU:C:2019:1068, paragraph 25 and the case-law cited).
36 In the present case, first of all, it is apparent from the request for a preliminary ruling that the provisions of Directive 2009/73 and of Regulation No 715/2009 have a clear connection with the dispute in the main proceedings, which concerns the determination of a rate of return on capital, imposed by a natural gas market regulatory authority inter alia on operators of natural gas systems of a Member State, which is liable to affect the tariffs applied by those operators.
37 Next, as to the requirement referred to in Article 94(c) of the Rules of Procedure, dealing, first, with the reasons that led the referring court to seek an interpretation of Directive 2009/73 and of Regulation No 715/2009 as well as, second, the connection that it makes between those two EU law acts and the national legislation applicable to the dispute in the main proceedings, it must be held that that court sets out its own assessments as to the questions that it has on the interpretation of those acts, in particular of Article 41(8) of Directive 2009/73 and of Article 13(1) of Regulation No 715/2009, as well as on the connection that it makes between those provisions and that national legislation, inter alia as regards the requirements that must be taken into consideration by the Latvian regulatory authority when fixing the tariffs for the transmission and distribution of natural gas.
38 Finally, as regards the questions referred concerning the interpretation of the two acts of EU law referred to in the preceding paragraph and their relevance as to access to natural gas installations operated by Conexus Baltic Grid, it suffices to recall that, where it is not obvious that the interpretation of an EU provision bears no relation to the facts of the main action or its purpose, the objection alleging the inapplicability of that provision to the case in the main action does not relate to the admissibility of the request for a preliminary ruling, but concerns the substance of the questions (see, to that effect, judgment of 12 December 2019, Slovenské elektrárne, C‑376/18, EU:C:2019:1068, paragraph 29 and the case-law cited).
39 It follows that the request for a preliminary ruling is admissible.
40 By its ten questions, the referring court raises, in essence, three legal issues concerning, first, the scope of application of the tariff principles laid down in Article 41(8) of Directive 2009/73 and in the first subparagraph of Article 13(1) of Regulation No 715/2009 (seventh, ninth and tenth questions), secondly, to the transposition into national law of the concept of an ‘appropriate incentive’, within the meaning of Article 41(8) of Directive 2009/73, and to the national regulatory authority’s obligation to state reasons (first and second questions), as well as, thirdly, the way in which that authority, when calculating and fixing the tariffs, must ensure that the operators of natural gas transmission and distribution systems benefit from such appropriate incentives and/or an ‘appropriate return on investments’, within the meaning of the first subparagraph of Article 13(1) of Regulation No 715/2009 (third to ninth questions).
41 It is appropriate to examine those three aspects in that order.
42 By its seventh, ninth and tenth questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 41(8) of Directive 2009/73 and the first subparagraph of Article 13(1) of Regulation No 715/2009 must be interpreted as meaning that the tariff principles laid down in those provisions apply not only to natural gas transmission and distribution system operators but also to storage facilities of that gas.
43 The origin of that question lies in the decision at issue by which the Latvian regulatory authority fixed an identical rate of return on capital both for Gaso, as operator of the natural gas distribution system in Latvia, and for Conexus Baltic Grid, as operator of the natural gas transmission system and storage facilities in that country. In that regard, it must be clarified that since only the tenth question refers, in fine, also to storage facilities of liquid natural gas, without the order for reference setting out the reasons why those facilities are the subject of the question, the Court’s reply must be limited to the seventh, ninth and tenth questions on the issue of whether the tariff rules laid down in Article 41(8) of Directive 2009/73 and in the first subparagraph of Article 13(1) of Regulation No 715/2009 apply to natural gas storage facilities.
44 Having made that clarification, it should be recalled that the aim of Directive 2009/73 is to pursue the achievement of an internal market in natural gas that is entirely and effectually open and competitive by establishing, as Article 1(1) states, common rules on transmission, distribution, supply and storage of natural gas (see, to that effect, judgment of 19 December 2019, GRDF, C‑236/18, EU:C:2019:1120, paragraph 34 and the case-law cited).
45 In that regard, paragraphs 4, 6, 9 and 10 of Article 2 of that directive define and distinguish between, respectively, a ‘transmission system operator’, a ‘distribution system operator’, a ‘storage facility’ and a ‘storage system operator’ of natural gas.
46 In addition, as underscored in recitals 23, 25 and 32, that directive seeks to ensure non-discriminatory access to natural gas transport and distribution systems by entrusting to national regulatory authorities, in accordance with Article 41(1)(a) of that directive, in particular, the duty of ‘fixing or approving, in accordance with transparent criteria, transmission or distribution tariffs or their methodologies’.
47 Article 41(6)(a) of Directive 2009/73 specifies that the national regulatory authorities are responsible for fixing or approving at least the methodologies used to calculate or establish the terms and conditions for access to national networks, including transmission and distribution tariffs.
48 Furthermore, Article 41(8) of the directive states that ‘in fixing or approving the tariffs or methodologies … the regulatory authorities shall ensure that transmission and distribution system operators are granted appropriate incentive, over both the short and long term, to increase efficiencies, foster market integration and security of supply and support the related research activities’.
49 It follows that the rules relating to tariffs laid down, inter alia, in Article 41(8) of Directive 2009/73 apply only to operators of ‘systems’ for the transmission and distribution of natural gas, within the meaning of Article 2(4) and (6) of that directive, and not to natural gas ‘storage facilities’ or their operators, within the meaning of Article 2(9) and (10) of that directive.
50 That exclusion of natural gas storage facilities is also found in the provisions of Regulation No 715/2009 which, according to its title, lays down the ‘conditions for access to the natural gas transmission networks’.
51 First, pursuant to the second paragraph of Article 1 of that regulation, the setting of harmonised principles for tariffs, or the methodologies underlying their calculation, is included in the objectives pursued by that regulation only for access to the network, and not for access to storage facilities. Second, it is clear from the wording of the first subparagraph of Article 13(1) of that regulation that only the natural gas transmission system operators are subject to tariff measures and obligations, including of tariff transparency and of tariff non-discrimination, which that provision lays down.
52 The difference, as a matter of principle, in the legislation on tariffs between rules that apply to ‘networks’ and those that apply to natural gas storage facilities is explained, as the European Commission correctly submitted, by the fact that those facilities, unlike ‘networks’, are not generally regarded as natural monopolies and may therefore compete with other facilities. It is for that reason, as its recitals 23 and 24 envisage, that Directive 2009/73 establishes a specific regime relating to natural gas storage facilities, comprising Article 33 thereof, which lays down particular rules for access to those facilities, whether in the case of negotiated access, in accordance with paragraph 3 of that article, or in the case of regulated access, in accordance with paragraph 4 of that article, but on certain conditions.
53 It nevertheless remains the case that, as the Advocate General observed in paragraph 45 of his Opinion, that neither that directive nor Regulation No 715/2009 prohibit national regulatory authorities from extending the tariff principles laid down in Article 41(8) of that directive and in the first subparagraph of Article 13(1) of that regulation, which govern ‘systems’ (or ‘networks’), to access to storage facilities.
54 As the Commission in essence observed, it cannot be excluded that the objective reasons such as the specific technical features or the importance of storage facilities for the security of energy supply on the territory of one or several Member States may justify the extension by a national regulatory authority of the tariff principles that it applies to natural gas transmission and distribution systems to access to those storage facilities.
55 For the foregoing reasons, the answer to the seventh, ninth and tenth questions is that Article 41(8) of Directive 2009/73 and the first subparagraph of Article 13(1) of Regulation No 715/2009 must be interpreted as meaning that the tariff principles laid down in those provisions do not apply to natural gas storage facilities in a Member State, without prejudice to the possibility for those national regulatory authorities to extend those principles to access to those facilities for objectively justified reasons.
56 By its first two questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 41(8) and (16) of Directive 2009/73 must be interpreted as precluding national legislation according to which an ‘appropriate incentive’, within the meaning of Article 41(8), is ensured only by the tariff payments by users covering the economically substantiated costs of public utilities and ensuring a profit, even at a minimum level, without any obligation being imposed on the national regulatory authority to set out the reasons for the manner in which it provides that natural gas transmission and distribution system operators benefit from an ‘appropriate incentive’.
57 As a preliminary point, it must be observed these questions arise from the doubts of a general nature that the referring court has as to whether Article 41(8) of Directive 2009/73 has been correctly transposed into the Latvian legal system. That court considers that the objectives provided for in that provision, in the context of fixing tariffs, are wider than those provided for by Latvian law, inter alia in Article 20(1) of the Law on public utility regulatory authorities, according to which the Latvian regulatory authority must ensure that tariffs are fixed so that they cover the economically substantiated costs of the public utility and ensure a profit.
58 As regards the provisions of Directive 2009/73 relating to the obligations of national regulatory authorities regarding tariffs of transmission and distribution system operators, it is clear from Article 41(6)(a) of that directive that those authorities are responsible for fixing or approving the methodologies used to calculate or establish the terms and conditions for access to natural gas national networks, including transmission and distribution tariffs thereof. That provision states that those tariffs must allow the necessary investments to be carried out to ensure the viability of the networks.
59 Furthermore, it should be recalled that, in accordance with Article 41(8) of that directive, in fixing or approving the tariffs or methodologies, the national regulatory authorities are to provide for an ‘appropriate incentive, over both the short and long term, to increase efficiencies, foster market integration and security of supply and support the related research activities.’
60 Moreover, under Article 41(16) of that directive, decisions taken by the national regulatory authorities must be fully reasoned and justified to allow for judicial review.
61 Article 41(6)(a) and Article 41(8) and (16) of Directive 2009/73, read in the light of recital 32 thereof, thus requires the national regulatory authorities, either at the time of adopting the methodology for the calculation of tariffs for the transmission and distribution of natural gas, or on the actual fixing of those tariffs, to provide for, in addition to coverage of the actual costs borne by the transmission and distribution system operators to enable access to those networks, on the one hand, coverage of the investments necessary for the viability of those networks and, on the other hand, an ‘appropriate incentive’, over both the short and long term, which allows those operators to ensure that the objectives listed in Article 41(8) of Directive 2009/73 are pursued and that the activities referred to in that provision are supported, whilst obliging those authorities to give reasons and justify their decisions with the aim of guaranteeing the exercise of a judicial review.
62 As regards the transposition into Latvian law of Article 41(8) of that directive, it is not apparent from the file before the Court that that Law on public utility regulatory authorities reproduces expressly the obligation for the Latvian regulatory authority to provide, either at the time of adopting the methodology for the calculation of tariffs for the transmission or distribution of natural gas, or on the actual fixing of those tariffs, the ‘appropriate incentive’ referred to in Article 41(8). In particular, as noted in paragraph 57 of the present judgment, Article 20(1) of the Law on public utility regulatory authorities, which is the sole relevant provision of that law cited by the referring court, merely requires the Latvian regulatory authority to ensure that the tariffs paid by users covers the economically substantiated costs of public utilities and ensures their profitability.
63 In that regard, the concept of ‘profitability’ used in that law appears to refer to the idea that natural gas transmission and distribution system operators may obtain a reasonable profit margin, without however, specifying the purposes to which that profit should be, at least partially, assigned. That concept appears therefore to have a more general scope and be less focused on the achievement of the objectives and activities relating to the functioning of the natural gas market than that of the ‘appropriate incentive’ referred to Article 41(8) of Directive 2009/73.
64 That being said, it should be recalled that, as the Court has consistently held, when national courts apply domestic law, they are bound to interpret it, so far as possible, in the light of the wording and the purpose of directive in question in order to achieve the result sought by that directive and consequently comply with the third paragraph of Article 288 TFEU. That obligation to interpret national law in conformity with EU law is inherent in the system of the FEU Treaty, since it permits national courts, for the matters within their jurisdiction, to ensure the full effectiveness of EU law when they determine the disputes before them (judgments of 5 March 2020, OPR-Finance, C‑679/18, EU:C:2020:167, paragraph 41, and of 26 June 2025, Makeleio and Zougla, C‑555/23 and C‑556/23, EU:C:2025:484, paragraph 85).
65 In addition, the principle that national law must be interpreted in conformity with EU law requires national courts to do whatever lies within their jurisdiction, taking the whole body of domestic law into consideration and applying the interpretative methods recognised by domestic law, with a view to ensuring that the directive in question is fully effective and achieving an outcome consistent with the objective pursued by it (judgments of 5 March 2020, OPR-Finance, C‑679/18, EU:C:2020:167, paragraph 42, and of 26 June 2025, Makeleio and Zougla, C‑555/23 and C‑556/23, EU:C:2025:484, paragraph 86).
66 Hence, it is for the referring court to ascertain whether its domestic law, in particular Article 20(1) of the Law on the regulation of public utilities, may be interpreted, so far as possible, consistently with Article 41(8) of Directive 2009/73, so that the profitability which must be guaranteed to natural gas transmission and distribution system operators also means that in so doing they benefit from an ‘appropriate incentive’, as referred to in Article 41(8). The guarantee of a certain rate of return may be capable of constituting an appropriate incentive intended to encourage operators of the systems concerned to pursue the objectives and support the activities listed in Article 41(8) of Directive 2009/73.
67 If, however, the referring court considers that such a consistent interpretation is impossible, it would be necessary to ascertain whether the obligation laid down in Article 41(8) of Directive 2009/73 is sufficiently precise and unconditional to be able to regard it as having direct effect and for parties, such as the natural gas transmission and distribution system operators, to be able to rely on it against the decision of an authority, such as the Latvian regulatory authority, in order to enable that court to disapply Article 20(1) of the Law on public utility regulatory authorities.
68 In that regard, it follows from the settled case-law of the Court that, whenever the provisions of a directive appear, so far as their subject matter is concerned, to be unconditional and sufficiently precise, they may be relied upon before the national courts by individuals against the State where the latter has failed to implement the directive in domestic law by the end of the period prescribed or where it has failed to implement the directive correctly (judgment of 8 March 2022, Bezirkshauptmannschaft Hartberg-Fürstenfeld (Direct effect), C‑205/20, EU:C:2022:168, EU:C:2022:168, paragraph 17 and the case-law cited).
69 The court has held that a provision of EU law is, first, unconditional where it sets forth an obligation which is not qualified by any condition, or subject, in its implementation or effects, to the taking of any measure either by the institutions of the European Union or by the Member States and, secondly, sufficiently precise to be relied on by an individual and applied by a court where it sets out an obligation in unequivocal terms. Moreover, even though a provision of a directive leaves the Member States a degree of latitude when they adopt rules in order to implement it, that provision may be regarded as unconditional and precise where it imposes on Member States in unequivocal terms a precise obligation as to the result to be achieved, which is not coupled with any condition regarding application of the rule laid down by it (judgments of 8 March 2022, Bezirkshauptmannschaft Hartberg-Fürstenfeld (Direct effect), paragraphs 18 and 19, and of 25 January 2024, Global NRG, C‑277/22, EU:C:2024:78, paragraph 28).
70 In the present case, as observed in paragraph 60 of the present judgment, it is clear from Article 41(8) of Directive 2009/73 that, in carrying out the duty of fixing or approving tariffs applicable to natural gas transmission and distribution systems that the Member States are required to confer on national regulatory authorities, those authorities, in so fixing or approving tariffs, must provide an appropriate incentive over both the short and long term to encourage the operators of those natural gas transmission and distribution systems to improve performance, foster market integration and security of supply, and support related research activities.
71 Even if Article 41(8) of Directive 2009/73 leaves a margin of discretion to the national regulatory authorities in its implementation of that provision, it remains the case that, by requiring them to adopt an appropriate incentive to encourage operators of those systems to pursue the objectives and support the activities that it lists in detail and exhaustively, Article 41(8) imposes on each Member State in unequivocal terms an obligation which is sufficiently precise and which is not qualified by any condition (see, by analogy, judgment of 6 October 2015, T-Mobile Czech Republic and Vodafone Czech Republic, C‑508/14, EU:C:2015:657, paragraph 53).
72 Article 41(8) of Directive 2009/73 thus lays down, unconditionally and sufficiently precisely, the obligation to guarantee to natural gas transmission and distribution system operators that, when fixing or approving the tariffs for transmission and distribution, the national regulatory authorities provide for the appropriate incentive referred to in that provision.
73 Therefore, Article 41(8) of Directive 2009/73 must be recognised as having direct effect such that the referring court must disapply a national law that is contrary to that provision where that law cannot be interpreted in a manner consistent with that provision.
74 As regards the concept of an ‘appropriate incentive’, beyond the context in which such an incentive must be provided for by each national regulatory authority, namely in fixing or approving the methodologies for determining the tariffs for the transmission and distribution of natural gas, or of fixing those tariffs, and the objectives and activities which they must ensure, Directive 2009/73 neither defines that concept nor specifies the form in which the national regulatory authorities should establish them. That directive therefore grants those authorities discretion as to the form that those incentives must take but also as to the assessment and determination of whether they are appropriate in order to meet, inter alia, the objectives listed in Article 40 of that directive, which impose on all national regulatory authorities the obligation to provide reasons, laid down in Article 41(16) of that directive, and in accordance with the particular features of the national market for natural gas.
75 In that context, as the Advocate General in essence observed in paragraph 53 of his Opinion, it is not apparent from Directive 2009/73 that the appropriate incentives in favour of operators of natural gas transmission and distribution systems, so that they pursue those objectives and support the activities referred to in Article 41(8) of that directive, must be assessed and determined only on the basis of a rate of return on capital, such as the weighted average rate of return on capital fixed in the decision at issue in accordance with the methodology decision.
76 Thus, and in the light of the information in the case file before the Court, since it is common ground that such a rate of return on capital is only one of the elements taken into account in the fixing of the level of tariffs, the fact that it does not appear that the decision at issue sets out specific reasoning as to how that rate is deemed to encourage the system operators concerned to pursue the objectives and support the activities listed in Article 41(8) of Directive 2009/73 does not mean that the Latvian regulatory authority, as it submitted before the Court, did not ensure, beyond what was required of it by Article 20(1) of the Law on public utility regulatory authorities, that it took into account an appropriate incentive, as referred to in that provision, in the more general context of the methodology for, or fixing of, the tariffs for the transmission and distribution of natural gas in Latvia.
77 However, it follows from Article 41(8) and (16) of Directive 2009/73 that, either in the context of the methodology for the calculation of tariffs for the transmission and distribution of natural gas, or, later, in fixing or approving those tariffs, the national regulatory authority is obliged to set out clearly, unequivocally and sufficiently precisely how it considers that those tariffs may be deemed to ensure that operators of those systems are given an incentive, both over the short and the long term, to pursue the objectives and to support the activities listed in Article 41(8) of that directive, so as to allow the interested parties to understand the reasons for its decision and to guarantee effective judicial protection.
78 Consequently, it is for the referring court to ascertain whether the Latvian regulatory authority has complied with the obligation to state reasons referred to in the preceding paragraph, including, as the case may be, outside the narrow framework of the decision at issue.
79 For those reasons, the answer to the first and second questions is that Article 41(8) and (16) of Directive 2009/73 must be interpreted as precluding national legislation according to which an ‘appropriate incentive’, within the meaning of Article 41(8), is ensured only by the fact that tariff payments by users cover the economically substantiated costs of public utilities and ensure a profit, even at a minimum level, without any obligation being imposed on the national regulatory authority to set out the reasons for the manner in which it provides that natural gas transmission and distribution system operators benefit from an ‘appropriate incentive’, unless it is possible for that national legislation to be interpreted consistently with Article 41(8) and (16).
80 By its third to ninth questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 41(8) of Directive 2009/73 and the first subparagraph of Article 13(1) of Regulation No 715/2009 must be interpreted as meaning that the obligation, imposed by those provisions on a national regulatory authority, of providing for an ‘appropriate incentive’ and an ‘appropriate return on investments’, respectively, when determining the tariffs or calculation methodologies applied to natural gas transmission and distribution operators requires: (i) recourse to specific methodologies for calculation, such as the WACC applied in the financial sector; (ii) a comparison of the cost of capital with that of unregulated companies; (iii) the making of adjustments to take account, inter alia, of inflation and/or corporation tax; (iv) the exclusion of taking account of the individual performance of the system operator concerned; and, (v) in the event of a challenge by the entities concerned, a call on the intervention of a third party.
81 In other words, the referring court asks whether the discretion available to national regulatory authorities as to the choice of methods applicable to the calculation of the rate of return on capital and as to the parameters of that calculation when fixing tariffs for the transmission and distribution of natural gas is framed, or even limited, and as the case may be, under which conditions, by the need for those authorities to provide for an ‘appropriate incentive’, within the meaning of Article 41(8) of Directive 2009/73, and/or an ‘appropriate return on investments’, within the meaning of the first subparagraph of Article 13(1) of Regulation No 715/2009, for the benefit of natural gas transmission and distribution system operators.
82 In that regard, it must first be recalled that, while Article 41(8) and (16) of Directive 2009/73 confers on national regulatory authorities the duty of fixing or approving, on the basis of given reasons, the tariffs for the transmission and distribution of natural gas in compliance with the objectives of transparency and non-discrimination, it does not specify the method by which those tariffs are to be fixed. A fortiori, Directive 2009/73 does not give any indication, for the purpose of fixing those tariffs, as to the methodology or modalities of the calculation of the rate of return on capital.
83 The same is true, secondly, of the first subparagraph of Article 13(1) of Regulation No 715/2009, which merely provides that the tariffs, or the methodologies used to calculate them, applied by the transmission system operator and approved by the regulatory authorities, in accordance with Article 41(6) of Directive 2009/73, must be transparent, reflect the actual costs incurred and include an appropriate return on investments, and be applied in a non-discriminatory manner.
84 Admittedly, Regulation 2017/460, adopted by the Commission on the basis of Regulation No 715/2009, to which the Commission refers in its written observations, provides, in Article 30(1), with the objective of increasing the transparency of the tariff structure for natural gas transmission system operators, for certain information to be published before each tariff period, including, in particular, the ‘cost of capital and its calculation methodology’, ‘incentive mechanisms and efficiency targets’ and ‘inflation indices’.
85 However, Regulation 2017/460 does not specify the content of those concepts nor, inter alia, the methods or procedures by which the ‘cost of capital’ or ‘incentive mechanisms’ can or should be calculated.
86 It follows that, in order to take into account such complex economic and technical factors, the national regulatory authorities must, also in accordance with the particular conditions applicable to the national market for natural gas and the operators concerned, have a wide margin of discretion in fixing the tariffs for the transmission or distribution of natural gas, inter alia, as the case may be, in relation to fixing the rate of return on capital of those operators. In that respect, those authorities cannot be required, as regards the need to provide an ‘appropriate incentive’, within the meaning of Article 41(8) of Directive 2009/73, and, as regards tariffs for the transmission of natural gas, ‘an appropriate return on investments’, within the meaning of the first subparagraph of Article 13(1) of Regulation No 715/2009, to adopt a particular methodology, such as that based on the WACC, or to compare the cost of capital with that of companies or non-regulated entities. In that context, those authorities must be empowered to adjust the method for determining those rates and their calculations according to different parameters, without there being, moreover, an obligation to carry out those calculations taking into account inflation and/or corporation tax.
87 By contrast, and in so far as the taking into account of the rate of return on capital corresponds to an ‘appropriate incentive’, within the meaning of Article 41(8) of Directive 2009/73, the argument advanced by the Latvian regulatory authority that national legislation prohibiting a national regulatory authority from adjusting the calculation of the rate of return on capital in accordance with the individual performance of each operator is compatible with the objectives of Article 41(8) of Directive 2009/73 cannot succeed.
88 In addition to the fact that such an interpretation would be contrary to the wide discretion which national regulatory authorities must have when examining complex economic and technical factors, it must be held that the ‘appropriate incentive’ referred to in Article 41(8) must, inter alia, make it possible for there to be improvements in the performance of natural gas transmission and distribution system operators and therefore requires that an incentive may be adapted or adjusted in accordance with the past performance of those operators. Such an adjustment cannot a priori be contrary to the principle of non-discrimination since it may be justified by objective considerations or by the fact that the situations of the different system operators are not comparable, precisely because of objectively documented differences in their past performance.
89 It must be added, in view of the referring court’s questions, that the assessment of the various parameters for calculating tariffs carried out by the national regulatory authorities, pursuant to Article 41(8) of Directive 2009/73 and the first subparagraph of Article 13(1) of Regulation No 715/2009, cannot, in the event of a challenge by the entities to which those tariffs apply, be subject to the involvement of a third party, such as a firm of experts, whose report has been drawn up exclusively at the request of one of those entities.
90 In that regard, it suffices to recall that Article 39(4) of Directive 2009/73, read in the light of recital 30 thereof, provides that those authorities are to exercise their powers independently of any public or private entity, ensuring that they adopt their decisions autonomously and solely in the public interest, without being subject to external instructions from other public or private bodies (see, by analogy, judgment of 2 September 2021, Commission v Germany (Transposition of Directives 2009/72 and 2009/73), C‑718/18, EU:C:2021:662, paragraph 109 and the case-law cited). Nevertheless, as the Advocate General stated in point 70 of his Opinion, respect for the independence of the national regulatory authority in the exercise of its powers is without prejudice to the possibility for the system operators concerned, where appropriate, to rely on third-party expert reports in support of their requests made to that authority or, in the event of judicial review, before the competent national courts, in so far as national law permits, in accordance with, inter alia, the principle of audi alteram partem. Moreover, to that same extent, it is open to the national regulatory authority or, in the event of judicial review, to the competent national court, to appoint one or more independent experts to assist them in their duties.
91 In the light of the foregoing, Article 41(8) of Directive 2009/73 and the first subparagraph of Article 13(1) of Regulation No 715/2009 must be interpreted as meaning that the obligation, which those provisions impose on a national regulatory authority, to provide, respectively, an ‘appropriate incentive’ and an ‘appropriate return on investments’, when determining the tariffs or calculation methodologies applied to natural gas transmission and distribution system operators, does not require recourse only to specific methods of calculation, such as the WACC applied in the financial sector, a comparison of the cost of capital with that of non-regulated companies, or adjustments to be made for, inter alia, inflation and/or corporate tax.
92 By contrast, Article 41(8) of Directive 2009/73 must be interpreted as meaning that, when determining the ‘appropriate incentive’ within the meaning of that provision, the national regulatory authority is required to take into account the past individual performance of the natural gas transmission and distribution system operators concerned.
93 In addition, Article 39(4) of Directive 2009/73 must be interpreted as precluding the assessment of the parameters for calculating the tariffs of the natural gas transmission and distribution system operators concerned, carried out by the national regulatory authority pursuant to Article 41(8) of that directive and pursuant to the first subparagraph of Article 13(1) of Regulation No 715/2009, from being, in the event of a challenge by those operators, subject to the intervention of a third party whose report has been drawn up exclusively at the request of one of those operators.
94 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. 1. Article 41(8) of Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC, and the first subparagraph of Article 13(1) of Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005, 2. Article 41(8) and (16) of Directive 2009/73 3. Article 41(8) of Directive 2009/73 and the first subparagraph of Article 13(1) of Regulation No 715/2009 4. Article 41(8) of Directive 2009/73 5. Article 39(4) of Directive 2009/73