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COUNCIL RECOMMENDATION

of 21 April 1983

on the methods of forming natural gas prices and tariffs in the Community

(83/230/EEC)

THE COUNCIL OF THE EUROPEAN

COMMUNITIES,

Having regard to the Treaty establishing the European Economic Community, and in particular Article 235 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament (1),

Whereas in its conclusions of 3 December 1981 and 16 March 1982 the Council emphasized the need for Member States to develop a common approach to energy price formation and laid down general principles to be observed by each Member State in its energy pricing policies;

Whereas, without prejudice to the various systems for the formation of natural gas prices which exist in the Member States, these principles should be adapted to the characteristics of the market in natural gas so as to ensure greater consistency in energy price formation in the Community;

Whereas, in view of the comparative scarcity of natural gas and the advantages of using it, the best possible use of available supplies and the optimum allocation of these resources should be ensured by means of an appropriate pricing policy;

Whereas natural gas prices should be allowed to adjust to trends in the cost of supply and to changes in the competitive position of natural gas;

Whereas pricing policies which would prevent the rational use of natural gas in certain areas of consumption should be avoided;

Whereas natural gas tariff systems should reflect as accurately as possible the structure of the supply and distribution costs for the various categories of supplies;

Whereas, in view of the quantities supplied, economies of scale in large-scale industry should be reflected in appropriate decreasing scales of charges;

Whereas, in order to ensure optimum use of the transmission networks and greater regularity in supplies during the year, provision should be made for special prices for interruptible supplies;

Whereas pricing policy plays a decisive role as regards trends on the market for natural gas and whereas consumption trends should be monitored with a view to adjusting natural gas prices accordingly;

Whereas consumers can make a valid choice only if there is an adequate degree of market transparency,

HEREBY RECOMMENDS TO THE MEMBER STATES:

(a) that they take appropriate steps, if they have not already done so, to ensure that natural gas prices and tariffs in the Community are based on the following common principles:

1. The formation of natural gas prices should make it possible to ensure the best possible use of gas supplies and the optimum allocation of this resource, taking into account production, acquisition and distribution costs. In forming prices, account should be taken of the rational use of energy and of the market value of natural gas in relation to the prices of other forms of energy with which natural gas is in competition.

Natural gas prices for consumers should therefore be as close as possible to the market value of natural gas in relation to the price of substitute forms of energy and guarantee sufficient proceeds to cover the cost of supply to consumers.

2. Methods of forming natural gas prices should be designed in such a way as to enable such prices to adjust to changes in the competitive situation on the market and to trends in costs, and more particularly the cost to gas undertakings of acquiring gas, changes in which should be passed on to tariffs and selling prices as soon as possible.

3. Prices should not be artificially low in relation to the market situation and to costs, thereby having the effect of subsidizing certain categories of consumption or certain uses and/or of encouraging waste.

4. The two-part tariff system, consisting of a fixed component to cover fixed costs, in particular the cost of permanent connection to the network, and a component which varies with the quantity of gas supplied, is the system which, of the various tariff options available, should be generally used for charging domestic users and small industrial users, taking account of local conditions.

This should be the case, in particular, for categories of users which have the same characteristics as regards use, scale of consumption and regularity of off-takes and which would be charged tariffs based on these characteristics.

5. For larger users subject to tariffs, to whom fixed costs represent only a small fraction of their overall costs, a single tariff should normally be applied, but provisions should be made for two (or more) components which decrease as consumption rises, in order to take account of the economies of scale that are achievable in transmission as volume increases. The tariffs charged for a given location should also vary in relation to the off-take characteristics, such as the load factor, in order to pass on the costs better.

6. In the case of non-tariff sales to large users (i.e. contractual sales) prices should be calculated in the light of cost and market conditions.

7. With the aim of transferring demand to off-peak periods or to allow load-shedding, provision should be made for special tariffs or prices linked to arrangements for interruptible supplies;

(b) that they carefully monitor the trend in demand for natural gas in the various sectors of use and its trend in the long term, in close cooperation at Community level with a view to further improving tariff structures;

(c) that they ensure that natural gas prices are characterized by the greatest possible degree of transparency and that these prices and the cost to the consumer are made public as far as possible.

Done at Luxembourg, 21 April 1983.

For the Council

The President

D. von WUERZEN

(1) OJ No C 96, 11. 4. 1983, p. 105.