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Gas market’s liberalization – what will it mean for consumers?

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe liberalization of Latvia’s gas market will increase Latvia’s and the entire region’s energy security, making Baltic States and Nordic countries better connected. Big players will be able to operate better and procure gas at better prices. Consumers will be able to buy gas and electricity at cheaper prices, experts admit.

Although it may seem that 2017 is still a ways ahead, the liberalization of Latvia’s gas market is becoming a more and more topical matter for businessmen and consumers, experts say.

«At the Davos Forum, architecture of Latvia’s energy infrastructure was given 14th place, which put it ahead of our neighbouring countries. This success is not accidental – far-sighted decisions and targeted investments have made Latvia and energy independents and secure country. Our production plants provide energy security and serve as important market players in Latvia and Baltic States. We have formed an energy market with diversified supplies and growing competition and good connections in the international environment. By opening the gas market, we will be able to enhance our energy sector, acquire additional guarantee for independence and security in addition to better price offers and benefits for all consumers,» – notes Aris Zigurs, Chairman of Latvenergo.

Lower gas prices for households and businessmen

«Similarly to the electricity market, the gas price will be formed under influence of competition starting from 3 April 2017. It is expected that the price in Baltic States can come close to or equalize with prices in Western Europe, where wholesale natural gas price has been lower in comparison with our prices. Gazprom also offers lower prices there,» – admits Chairman of the Council of the Public Utilities Commission Rolands Irklis.

He allows that some of the electricity traders may start selling natural gas.

One of the biggest changes for consumers is related to the transition to natural gas inventory in energy units – MWh. This means changes for receipts. There is no need for an immediate change of gas meters, as it is possible to use equipment that measures energy units based on transmission and distribution system.

Lower electricity and heating price

The largest portion of electrical energy consumption was provided in Latvia by Riga TEC last year. Natural gas is used in production – 2,025 GWh of electricity was produced by Riga TEC in 2015. Reduction of gas prices contributes to the competitiveness of thermal power stations. This demonstrates the positive impact of the free market and the fact that synergy between electricity and gas market is beneficial to consumers.

If competition helps secure gas for better prices, electricity and heating costs of Riga TEC will become lower and thereby allow the production of more electricity at peak moments, protecting consumers from too high prices.

Thereby the liberalization of the gas market will only enhance the already central role in Baltic States.

The more suppliers, the more independent and secure everyone will be

The matter regarding the security of Baltic States’ energy security is basically resolved by modern gas power plants in Latvia – Riga TEC-1 and TEC-2. Their electricity interconnections allow the coordination and effective covering of state costs and also sell electricity at competitive prices and thereby secure better prices in the region, as the situation is described by Latvenergo’s Commercial Director Uldis Bariss.

Market liberalization in Latvia also means the entry of new suppliers to the market, increasing competition. The more suppliers enter the market, the more secure and independent the Baltic region will become.

Experts emphasize that Latvia still lacks a gas exchange. This is why the region’s wholesale trade will continue being influenced by long-term supply contracts. «We have to create conditions to help the market become more dynamic and sustainable to make it attractive for new suppliers,» – said Irklis.

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