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Utility Week 1st May

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28 | 1ST - 7TH MAY 2015 | UTILITY WEEK Markets & Trading This week EU accuses Gazprom of rigging gas market European Union has Russian gas company in its sights for abuse of market position Russian gas giant Gazprom is set to face charges of gas market manipulation as Brussels levelled anti-trust legislation against Europe's largest supplier of gas last week. The European Union's commissioner for competition Margrethe Vestager alleges that some of Gazprom's business practices in Central and Eastern European gas markets constitute an abuse of its dominant market position. "We find that [Gazprom] may have built artificial barriers preventing gas from flowing from certain Central Eastern European countries to others, hindering cross-border competition. Keeping national gas markets separate also allowed Gazprom to charge prices that we at this stage consider to be unfair," Vestager said. "All companies that operate in the European market – no matter if they are European or not – have to play by our EU rules," she added. The move has sparked concern that increased ten- sions between the EU and Russia during legal wrangling over the case could put European gas supplies at risk. Analysts at RBC capital said: "Vestager's move is quite timely, as Europe heads into summer and as gas storage facilities remain available to help buffer any risk of shortages. That said, Russia makes up around 30 per cent of European gas consumption, and we do not see a scenario where Europe can wean itself off this gas source anytime soon." Gazprom has 12 weeks to respond to the Commis- sion's statement of objections. JA ELECTRICITY GDF Suez secures 15-year power deals Business energy supplier GDF Suez Energy UK has signed two power purchase agreements (PPAs) to secure 15 years of output from two new biomass projects due to begin operations within the next two years. The first agreement is with the 44.2MW Snetterton biomass plant in Norfolk, operated by BWSC East Anglia. The second is with the 39.3MW Templeborough Plant in Rotheram. GDF Suez will buy the full 350GWh and 315GWh annual output of each plant once they start generating at the end of 2016 and beginning of 2017. The deals broaden the company's renewable supply portfolio, which has previously focused on wind and energy- from-waste technologies. "It demonstrates the flexibil- ity of our PPAs, which present an attractive and secure proposition for any type of renewable energy plant," Roberts added. GDF Suez added that the output from Snetterton and Templeborough plants will be purchased at an index-linked rate, ensuring a market-reflective price for the electricity gener- ated. To provide an assured return on investment, the PPAs also include a floor price, guar- anteeing a minimum rate for the output from both plants. ENERGY EU regulators clash over carbon market The European Parliament and European Council are still at odds over the timing of crucial reform for the European Union's emissions trading system, according to analysts. Although there is broad agreement that a market stabil- ity reserve is needed to remove the glut of emissions allowances from the market and relieve the downward pressure on prices, the two sets of policy makers disagree about when the plans should be put into action, according to Point Carbon ana- lysts at Thomson Reuters. Senior analyst Emil Dim- antchev said: "The debate is intense and the details will determine how successful EU's climate efforts will be." Point Carbon said the parlia- ment wants to start the reserve by the end of 2018, but the coun- cil's current position is to start the mechanism in 2021. Bringing the mechanism in sooner would ensure that the allowances that have already been removed by backloading their release would not return, and could result in €15 billion euros in revenues from the car- bon market in the next decade, Thomson Reuters said. This could also bring an emissions cut equivalent to 50 medium- sized coal plants. Will gas keep flowing during legal wrangles? Tricks of the trade Jillian Ambrose "This could inflame tensions between the EU and Russia" Margrethe Vestager is a woman unafraid of causing a stir. And she seems intent on proving it if her recent actions as new EU commissioner for competition are anything to go by. First, it was anti-trust investigations into global internet giant Google, but more recently Vestager has taken aim at Russian gas giant Gazprom. Accusing any company as large and powerful as Google or Gazprom of market abuse is bound to raise eyebrows – but likely to be in August, bringing any possible flare-up in tensions closer to next winter season. For now, it seems, the market is holding its nerve and bank- ing on the cheaper-than-usual imports continuing to flow. But it wasn't so long ago that Russia reacted to a price dispute by threatening to cut supply. Talking tough isn't too hard in the summer, but when tempera- tures cool the EU will be hoping healthy storage stocks will back them up. in the case of the EU's largest single supplier of gas, market prices might be on the up too. As soon as news surfaced of the plans to level anti-trust allegations against the Russian state-owned company, com- mentators in the same breath noted that this could easily inflame tensions between the EU and Russian president Vladimir Putin. It's a dangerous business poking a bear. Small surprise then that the legal challenge has been mounted in the summer, not the high-demand winter season. But with 12 weeks before Gazprom is required to respond to the allegations, the next steps are

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