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Wednesday 24.01.2018 | Name days: Krišs, Eglons, Ksenija
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Latvijas Gāze to pay 1.56 million for abuse of monopoly

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvijas Gāze (LG) has abused its position as a monopoly by rejecting the restoration of gas supply contracts for new clients who have not paid the debts owed by previous clients.

This was uncovered by the Competition Council (CC). As a result, LG now faces a penalty of LVL 1,567,180.

Even thought LG can challenge this decision, violations that were uncovered by CC will need to be rectified immediately after the company receives the final decision of CC, as representatives of CC have told journalists.

Clients and users of natural gas supply service – households and companies – that have suffered as a result of LG strategy can turn to the company with request to compensate the unjustified losses caused by paying other people’s debts. If LG refuses to pay compensations, clients can turn to court.

During the investigation of the matter, CC received a number of complaints in regard to more than 500 cases when LG declined to form new contracts because of unsettled debts.

After analysing aforementioned complaints, CC uncovered multiple serious violations. LG demanded new tenants to pay the debts owed by previous tenants prior to signing a contract on gas supply. LG also demanded the covering of gas supply debts from companies that used premises for economic activities, even though the debt itself was compiled by the previous tenant or company.

In its decision, CC explains that by not collecting debts from clients who create them, LG creates financial difficulties for new clients, forcing them to pay the debts. On top of that, LG’s strategy increases the volume of such debts, because clients are not too eager to pay debts of someone else. LG itself is not actually motivated to collect debts in a timely fashion and handle such problems before debts grow out of proportion. This is largely because there is no competition in this market. Natural gas users have no other service provider to choose, CC reports.

In order to make sure debtors are unable to swap responsibility to new tenants and thereby avoid having to pay the debt, CC does not disapprove of LG’s strategy not to sign gas supply contracts with new tenants who live in the same household as the owner. LG can also not sign contracts with a company that rents premises and is considered of the same market as the owner of the property being rented (if the two companies have the same owner).

Given the total number of natural gas users in Latvia, there may be other exceptions.

CC emphasizes that its decisions cannot be interpreted as a reason for LG to increase tariffs. This is prohibited by the current tariff calculation methods. Judging from CC’s reviewed complaints, LG’s attempts to recover old debts from new tenants apply for 5% of LG’s debts.

Ref: 102.109.109.9319


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