Non-discriminatory Third Party Access to the Gas Transmission ...

Non-discriminatory third party access to the gas transmission network: what
does it mean and where does objective justification of different treatment for
creditworthiness reasons come from
Hannah Kruimer*
Abstract
The article identifies what is meant by the principle of non-discrimination in the context of
Article 13 (1b) Directive 2009/73/EC and Article 14 (1a) Regulation 715/2009. According to
these Articles Transmission System Operators (TSOs) of natural gas must refrain from
discriminating amongst system users in the terms and conditions for services offered or provided.
The article explores when system users have to be treated the same in general, according to this
principle. It is argued that the principle of non-discrimination pursuant to Directive 2009/73/EC
and Regulation 715/2009 does not strive to reach absolute equality of system users. Furthermore,
the article examines whether it follows from Directive 2009/73/EC and Regulation 715/2009 if
system users with a ‘low’ creditworthiness are equal or different from system ‘users’ with a
sufficient creditworthiness. It is argued that natural gas TSOs have the possibility to distinguish
system users for reasons of creditworthiness, since Article 14 (3) Regulation 715/2009 makes it
clear that system users with a ‘low’ creditworthiness are not equal to system users with a
‘sufficient’ creditworthiness and therefore must not be treated the same. Nonetheless, a number
of proportionality and transparency requirements must be met in order to be permitted to
distinguish system users for reasons of creditworthiness.
Keywords: natural gas, non-discriminatory third party access, Transmission System Operators
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Objective of this study
Article 13 (1b) Third Gas Directive 1 (TGD) requires the operator(s) of the national Transmission
System of Gas (TSOs) to refrain from discriminating amongst the users of the transmission
system (system users 2 ) and classes of system users, particularly in favour of its related
undertakings. Article 14 (1a) Second Gas Regulation 3 (SGR) more or less repeats this rule. It
requires TSOs to offer TPA services to all network users 4 . For the purpose of this study, both
requirements fall, within the concept of non-discriminatory third party access (TPA). In this
study non-discriminatory TPA is described as:
The TSOs obligation to refrain from discriminating amongst system users/network users (who are
either seeking -or have gained- access to the transmission system) in the terms and conditions of
services offered or provided.
The two primary questions of this study are: (1) what is meant by discrimination in the context of
Article 13 (1b) TGD and Article 14 (1a) SGR and (2) does a TSO act contrary to the TGD and
the SGR if it treats system users/network users differently, based on their creditworthiness The
choice to focus on creditworthiness was primarily inspired by the fact that most TSOs asses the
creditworthiness of system users by which they conclude agreements. If the system user is
insufficient in his creditworthiness, TSOs may refuse to provide TPA services or require
* Ph.D.-Researcher at the University of Groningen and staff member of the Groningen Centre of Energy Law. My
research focuses on the content and application of the principle of non-discrimination contained in EU gas law.
Article 13 (1b) Third Gas Directive requires Transmission System Operators (TSOs) to refrain from discriminating
between users of the transmission system. I examine how TSOs in the Netherlands, Germany and the United
Kingdom carry out this obligation and what the implications are. The question whether or not discrimination between
system users can be justified is an important part of my research. Within the context of my PHD research, this
contribution to the third annual conference of CRNI belongs to that series of studies I perform to clarify whether or
not TSOs are allowed to discriminate between system users and to what extent. Thanks to Hans Vedder, Martha
Roggenkamp, Marijn Holwerda, Nichola Cho and Erik Gottschal for the helpful suggestions; the usual disclaimer
applies. Thanks also to De Nederlandse Vereniging voor Energierecht, Energy Delta Institute and NV Nederlandse
Gasunie for providing me with the opportunity to conduct research on this topic.
1 Directive 2009/73/EC of the European Parliament and the Council of 12 July 2009 concerning common rules for
the internal market in natural gas.
2 Ibid, at Article 2 (23) is worded as follows: ‘system user’ means a natural or legal person supplying to or being
supplied by, the system. In this context, also see Article 2 (1.13): ‘system’ refers to transmission networks owned
and/or operated by a natural gas undertaking, including linepack and its facilities supplying ancillary services and
those of related undertakings necessary for providing access to transmission.
3 Regulation 715/2009 of the European Parliament and the Council of 28 September 2005 on conditions for access to
the natural gas transmission networks.
4 Ibid, at Article 2 (11), is worded as follows: ‘network user’ means a customer or a potential customer of a TSO, and
TSOs themselves in so far as it is necessary for them to carry out their functions in relation to transmission. The
terms ‘system users’ and ‘network users’ are used interchangeably in this study. Network users and system users are
persons (mostly undertakings) who are either seeking, or have gained, access to the transmission network.
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additional financial securities. 5 Given that creditworthiness policies are commonly used by TSOs,
it is interesting to test ‘these policies’ against the non-discriminatory TPA rule. Furthermore, in
this paper the focus lies on the TGD and the SGR, while the Second Gas Directive 6 and First Gas
Regulation 7 are still in force today, seeing as both are repealed within a couple of months (from
March 3 rd 2011). 8 Moreover, this paper consists of 8 paragraphs in the following order:
1. What is the background of the non-discriminatory TPA rule
2. What reasons have TSOs to discriminate
3. What type of categories of discriminatory TPA can be distinguished
4. What type of non-discriminatory TPA rules exist
5. What is meant by discrimination in the context of the non-discriminatory TPA rules
6. Is a TSO allowed to treat system users differently
1. When are system users the same
2. When is different treatment of similar system users justified
7. Case study: Is a TSO allowed to treat its system users differently based on their
creditworthiness
1. What does ‘creditworthiness’ mean in Article 14 (3) SGR
2. In which a situation is it appropriate to ask for a guarantee and when would a
guarantee be appropriate
8. Conclusion: this paragraph provides the answers to the main questions of this paper.
§1. What is the background of the non-discriminatory TPA rule
At EU level, the liberalisation 9 process of the energy markets (gas and electricity) started with the
First Electricity Directive adopted in 1996 10 and was followed by the First Gas Directive in
5 For instance, see the creditworthiness policies of the following TSOs: E.ON Gas transport, ONTRAS – VNG Gas
transport GmbH and Gas Transport Services B.V.
6 Directive 2003/55/EC of the European Parliament and the Council of 26 June 2003 concerning common rules for
the internal market in natural gas.
7 Regulation 1775/2005 of the European Parliament and the Council of 28 September 2005 on conditions for access
to the natural gas transmission networks.
8 Article 53 Directive 2009/72/EC and Article 31 Regulation 715/2009.
9 In this study liberalisation is understood as the removal of restrictions on the movement of goods, services and
capital in the energy markets.
10 Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common
rules for the internal market in electricity.
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1998 11 . Both Directives require Member States (MS) to gradually remove restrictions on the
movement of goods, services and capital in their monopolised energy markets. 12 A new package
of liberalisation Directives was adopted and became operational on July 1, 2004 for Electricity 13
and July 1, 2006 for Gas 14 . These Directives require MS to remove restrictions on free trade step
by step, leading to a liberalised EU energy market on July 1, 2007. The date when all customers
are free to choose their energy suppliers. 15 In order to realise such free trade in energy within and
across the MS, for two reasons non-discriminatory access to infrastructure services is a major
issue in the liberalisation process. 16 First, supply undertakings 17 cannot carry out their business
without access to energy infrastructure and for that reason they are dependent on whether or not
the system operators of the infrastructure provide access to them (services). 18 Second, supply
undertakings run the risk of being discriminated by a system operator. Since the focus of this
paper lies on transmission infrastructure, reasons for and categories of discriminatory behaviour
of TSOs of natural gas are discussed in paragraph 2. The dependency on TSOs and the risk of
discriminatory behaviour by them makes that equal competition between gas supply undertakings
is only possible in the first place, if non-discriminatory TPA to infrastructure is ensured. Such
competition is necessary to make it possible for customers to choose their energy supplier and
ultimately lower the prices and provide more choice and differentiated services for consumers
which are all objectives that the internal energy market aims to deliver since 1999. 19
11 Directive 98/30/EC of the European Parliament and the Council of 22 of June 1998 concerning common rules for
the internal market in natural gas.
12 Recitals 1 Directive 98/30/EC and Directive 96/92/EC.
13 Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules
for the internal market in electricity.
14 Directive 2003/55/EC.
15 Article 23 Directive 2003/55/EC and Article 21 Directive 2003/54/EC.
16 See for instance (gas): Recitals 11 and 22 and Articles 7(2) and 13-17 Directive 98/30/EC, recitals 2, 6-10, 13, 15
and 21 and Articles 8(1b),9, 13, 18 and 21 Directive 2003/55/EC, recitals 4,6,8,23,31 and Articles 9, 13(1b), 23, 35
Directive 2009/73/EC, recitals 6,10,14 and Articles 1 and 4(1a) Regulation 1775/2005 and recitals 7, 11 and 28 and
Articles 1 and 14(1a) Regulation 715/2009.
17 Article 2 (7 and 8) Directive 2009/73/EC: ‘Supply’ means in case of gas: the sale, including resale, of natural gas,
including LNG, to customers and ‘supply undertaking’ meaning any natural or legal person who carries out the
function of supply. Article 2 (18 and 19) Directive 2009/72/EC: ‘Supply’ means, in case of electricity: the sale,
including resale, of electricity to customers.
18 In this respect, the energy industry is characterised as a network industry. For information about competition issues
in network industries see NEWBERY, D.M. (1999) Privatization, Restructuring, and Regulation of Network
Utilities. Cambridge: The MIT Press and GERADIN, D. (2000) The Liberalization of State Monopolies in the
European Union and Beyond. London: Kluwer Law International.
19 Recitals 1 Directive 2009/73/EC and Directive 2009/72/EC: The internal market in natural gas/electricity, which
has been progressively implemented throughout the Community since 1999, aims to deliver real choice for all
consumers of the European Union, be they citizens or businesses, new business opportunities and more cross-border
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Discriminatory behaviour of the TSO counteracts this. Now it can be stated that nondiscriminatory
TPA is an instrument to create competition between gas supply undertakings in
order to deliver lower prices, more choice and differentiated services which are all objectives of
the internal market in natural gas.
§2. What reasons have TSOs to discriminate
As mentioned before, system operators as TSOs have the possibility and incentives to
discriminate between gas supply companies. The following two market circumstances in the
natural gas market create a situation in which TSOs have the possibility and incentives to
differentiate amongst network users. First, TSOs in most cases have a dominant position in the
national market for gas transportation as a service. Second, TSOs are often (traditionally)
vertically integrated. As a result of (1) or (2) or a combination of both, there are incentives for
TSOs to favour particular undertakings above others and for that reason non-discriminatory TPA
does not yet exist and- as a consequence-competition is not yet functioning in the natural gas
market. 20 The above mentioned market circumstances will be discussed below.
§2.1 TSOs have a monopoly position
Transmission systems are the important and often long distance transportation phases between
piping in the context of gas production and the final end consumer distribution. 21 The supply of
natural gas to customers depends on the possibilities to use existing transmission pipelines 22
given that (a) the construction of competing parallel gas transmission pipelines is not
economically viable and (b) there are no technical alternatives for gas transmission 23 . In most
trade, so as to achieve efficiency gains, competitive prices, and higher standards of service, and to contribute to
security of supply and sustainability. See also: EUROPEAN COMMISSION (2007) Inquiry pursuant to Article 17 of
Regulation (EC) No 1/2003 into the European gas and electricity sectors (SEC(2006) 1724). Brussels: DG
Competition, at p.232.
20 Recital 8 Directive 2009/73/EC.
21 KESTING, S. (2006) Transmission Network Access Regulation in the European gas Market. Baden-Baden:
Nomos, p. 31.
22 EUROPEAN COMMISSION (2007) Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the
European gas and electricity sectors (SEC(2006) 1724). Brussels: DG Competition, at p.26.
23 Furthermore, pipeline transport is still more economical for the European gas market than LNG technology. For
more information, see: KESTING, S. (2006) Transmission Network Access Regulation in the European gas Market.
Baden-Baden: Nomos, p. 35.
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European countries there is no pipe-to-pipe/system-to-system competition 24 and suppliers are
dependent on a single pipeline/system if they want to reach their customers. It follows from (a)
and (b) that undertakings that want to be connected to the transmission have no other option than
seeking access to an existing transmission system. Therefore the TSO on a given transport market
can often be considered to be in control of a natural monopoly. 25 In addition, TSOs of electricity
transmission are also considered to be in control of a natural monopoly. 26 To have a monopoly
position is not condemned in itself. It is, under Article 13 (1b) TGD and Article 14 SGR the
abuse of such a position by discriminating amongst system users, particularly in favour of its
related undertakings that is prohibited. Competition law, in particular Article 102 (c) of The
Treaty on the Functioning of the European Union 27 (TFEU), contains a similar prohibition as the
non-discriminatory TPA rule in the TGD and the SGR. Similar to the non-discriminatory TPA
rule, Article 102 TFEU does not condemn, as such, the existence of a monopoly/dominant
position. It is the abuse of such a position by discriminating amongst system users, particularly in
favour of its related undertakings that is prohibited. Both rules prohibit the use, or rather abuse,
of this dominant position of which is to expel (potential) competitors out of the market or
imposing excessive conditions on customers. To determine whether dominant firms are harming
competition, a primarily effects-based approach is used; focusing on the economic impact of anti-
24 It means that there is only one pipeline or network available for a certain transportation way and therefore
competition on a given transport market between TSOs does not exist.
25 The definition of a natural monopoly is that the cost function is subadditive. This means that ‘a single buyer is
technically able to serve the entire market at lower total costs than any feasible combination of two or more
suppliers’. Historically, the sectors most subject to natural monopolies have been the ‘the public utilities’, such as
gas, electricity, water en telecommunications as well as various forms of transport. At the core of these industries are
‘indivisible’ assets such as pipes, cables, wires, satellites, rail and road links, waterways and so on. About this
subject see: CREW, M. and PARKER, D. (2006) International Handbook on Economic Regulation. Massachusetts:
Edward Elgar Publishing, p.41-47, KIP VISCUSI, W. (2005) Economics of Regulation and anti-trust. Cambridge:
The MIT Press, Chapter 11: The theory of a Natural Monopoly, NEWBERY, D.M. (1999) Privatization,
Restructuring, and Regulation of Network Utilities. Cambridge: The MIT Press, p. 189 and LYONS, B. (2009)
European Competition Policy- TheEconomic Policy. Cambridge: Cambridge University Press, p.11.
26 Ibid.
27 Article 102 TFEU: Any abuse by one or more undertakings of a dominant position within the internal market or in
a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade
between Member States. Such abuse may, in particular, consist in:
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;
(b) limiting production, markets or technical development to the prejudice of consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a
competitive disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which,
by their nature or according to commercial usage, have no connection with the subject of such contracts.
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competitive conduct on consumer welfare. 28 In this respect, the focus of the European
Commission (Commission) is on protecting consumers and protecting the process of competition
instead of on protecting individual competitors. 29 According to the Commission, the obligations
to provide non-discriminatory access to gas infrastructure networks are based on principles
underpinning the ‘essential facilities doctrine’ in Competition law. 30 Furthermore, it is generally
accepted that essential facility cases are a ‘subset’ of the ‘refusal to deal’ and ‘applying dissimilar
conditions to equivalent transactions’ categories under Article 102 TFEU. 31 It follows from the
aforementioned that non-discriminatory TPA is a lex specialis of Article 102 TFEU as nondiscriminatory
TPA is built on principles underpinning the ‘essential facilities doctrine’ and this
doctrine is a ‘subset’ of the ‘refusal to deal’ and ‘applying dissimilar conditions’ categories under
Article 102 TFEU. As the focus of this paper lies on the non-discriminatory TPA rules contained
in the TGD and SGR, the Competition law rules are further left out of consideration.
§2.2 TSOs are traditionally vertically integrated
One of the central problems concerning non-discriminatory TPA in the energy markets (natural
gas/electricity) is the traditional vertical integration of these industries. A vertically integrated
gas/electricity undertaking is defined as: a natural gas/electricity undertaking or a group of
undertakings of which the same person or the same persons are entitled, directly or indirectly, to
exercise control and where the undertaking or the group of undertakings perform at least one of
28 EUROPEAN COMMISSION (2009) Guidance on the European Commission’s enforcement priorities in applying
Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings (2009/C 45/02). Brussels.
29 Ibid.
30 EUROPEAN COMMISSION (2007) Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the
European gas and electricity sectors (SEC(2006) 1724). Brussels: DG Competition, at p.70. This doctrine provides
that, under a number of conditions, companies having control of an ‘essential facility’ may be obliged to offer
available capacity to interested third parties. The essential facilities concept originates from the United States and has
developed to require a company with monopoly power to contract with a competitor where five conditions are met
(1) an essential facility is controlled by a monopolist, (2) a competitor is unable practically or reasonably to
duplicate the essential facility (3) the use of the facility is denied to a competitor (4) it is feasible for the facility to be
provided (5) there is no legitimate business reason for refusing access to the facility. (Opinion of Mr Advocate
General Jacobs delivered on 28 May 1998: Oscar Bronner (Case C-7/97) [1998], paragraph 34) According to the
essential facilities doctrine a company which has a dominant position in the provision of facilities which are essential
for the supply of goods or services on another market abuses its dominant position where, without objective
justification, it refuses access to those facilities. ‘Up to now, the legal status of the doctrine is remarkably unclear
and neither in the United States nor in the EU have the have the highest Courts been willing to pronounce on its
validity as a basis for antitrust claims’. (STOYANOVA, M. (2008). Competition Problems in Liberalized
Telecommunications. Alphen aan de Rijn: Kluwer Law International, p.89-91).
31 Ibid, at STOYANOVA, M. (2008), p.89-91.
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the functions of transmission, and at least one of the functions of generation/production or supply
of gas/electricity. 32
To simplify: a vertically integrated gas/electricity undertaking is an undertaking of which the
same person owns or controls the infrastructure 33 that at the same time is competing in one of the
markets served by the infrastructure. As a consequence, a vertically integrated TSO has
incentives to abuse its monopoly position to discriminate between its downstream activities and
those of its competitors. 34 Discriminatory TPA by TSOs has been attempted to eliminate in
various ways, such as (a) regulated TPA, (b) separating activities related to the network from
activities related to the supply of gas (known as unbundling) and (c) rules 35 included in EU
gas/Electricity law and national law regarding how TSOs must carry out their services in a nondiscriminatory
matter. Below, both (a) and (b) will be briefly discussed. Issue (c) is discussed in
paragraph 4 of this paper. Regulated TPA in short, is a model/system in which prices and
conditions are set by a National Regulatory Authority (NRA) instead of by a TSO itself so TSOs
are at least providing non-discriminatory prices and conditions. According to the TGD, NRAs
should play an active role in ensuring non-discriminatory access. 36 Besides setting prices and
conditions, NRAs should ensure compliance with the non-discriminatory rules in EU gas
legislation. 37
Unbundling refers to the separation of network and other activities. The TGD states that without
effective separation of the network from activities of generation/production and supply (effective
unbundling) there is a risk that vertically integrated TSOs will start discriminating. Moreover, the
incentive for vertically integrated TSOs to discriminate against particular gas supply undertakings
can be removed by means of unbundling. From this perspective, unbundling is a prerequisite for
effective TPA. TSOs of gas and electricity must comply with the requirements regarding
ownership unbundling. Ownership unbundling is the model where the same person or persons are
not entitled to exercise control over a generation/production or supply undertaking and practice
32 Article 2 (21) Directive 2009/73/EC and Article 2 (20) Directive 2009/72/EC.
33 In the case of natural gas the infrastructure are high pressure pipelines and with regard to electricity high tension
cables.
34 EUROPEAN COMMISSION (2007) Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the
European gas and electricity sectors (SEC(2006) 1724). Brussels: DG Competition, at p.26. From this report follows
that operators of the network/infrastructure are suspected of favouring their own affiliates.
35 See paragraph 4 of this paper.
36 Recital 31 and Article 40 Directive 2009/73/EC and Article 36 Directive 2009/72/EC.
37 Recital 30 Regulation 715/2009 and Article 36 Directive 2009/72/EC.
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control or any right on a TSO at the same time and vice versa. 38 Furthermore, the TGD and Third
Electricity Directive provide three separate ownership unbundling options for TSOs with the
objective to create as much independence between the transmission and production and/or supply
activities as possible. In this respect, there is one option that requires more or less full ownership
unbundling 39 and two options that emulate the full ownership unbundling model (independent
system operator model 40 and independent transmission operator model 41 ). MS could choose
between the three options for TSOs. However, where MS already have opted for full ownership
unbundling of TSOs under the Second Gas Directive, they lost their right to transform the full
ownership unbundled TSO into an independent system operator or an independent transmission
operator under the TGD. 42 The question whether or not the unbundling models are sufficient
enough to remove all discriminatory incentives against rivals is not attended to in this paper.
§3. What type of categories of discriminatory TPA can be distinguished
Two broad categories of discriminatory TPA can be distinguished. The difference between these
categories does not lie in how the discriminatory conduct is executed by the TSO. It lies in the
reason why TSOs discriminate between system users. The first type concerns discrimination by a
vertically integrated TSO against its rivals (non-integrated undertakings). Where a TSO is
38 Article 9 (2) Directive 2009/73/EC and Directive 2009/72/EC.
39 Ibid. Ownership unbundling is considered to be the most far reaching form of the separation of network and other
activities. Under this model the same person or persons are entitled neither directly or indirectly to exercise control
over an undertaking performing any of the functions of generation/production or supply, and directly or indirectly to
exercise control or exercise any right over a transmission system operator or over a transmission system and vice
versa. It is, however, possible for a production or supply undertaking to be able to have a minority shareholding in a
TSO or transmission system.
40 Article 14 and recital 13 Directive 2009/73/EC and Article 13 Directive 2009/72/EC. Where the transmission
system belongs to a vertically integrated undertaking, Member States may decide not to apply with full ownership
unbundling and designate an independent system operator upon a proposal from the transmission system owner. It
allows vertically integrated undertakings to keep the transmission assets on their balance sheets through a
transmission system owner under five preconditions pursuant to Article 14 (5) Directive 2009/73/EC and Article 13
(5) Directive 2009/72/EC. Detailed Regulation and extensive regulatory control mechanisms are put in place to
ensure to independence of the TSO.
41 Article 17 and recital 13 Directive 2009/73/EC and Article 17 Directive 2009/72/EC. This option is considered to
be the least far reaching ownership unbundling model. It allows vertically integrated undertakings to remain all
activities (generation/production or supply) within the vertically undertaking. Detailed Regulation and extensive
regulatory control mechanisms are put in place to ensure to independence of the TSO. See Article 17 Directive
2009/73/EC and Directive 2009/72/EC
42 Recital 18 Directive 2009/73/EC and recital 21 Directive 2009/72/EC.
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vertically integrated and supplies non-integrated rivals with inputs as TPA services, it may have
strong incentives to directly/indirectly:
(a) Refuse to offer/provide non-discriminatory TPA and thereby benefit from the exit of the
competition firm.
(b) Favour its own affiliates above that of non-integrated rivals in the terms and conditions
for offered or provided services and thereby placing the rivals at a competitive disadvantage
and benefit from that. The abuse may show itself in charging higher prices and degrading the
quality of the access services provided to downstream competitors and numerous covert
methods of discrimination, such as manipulating rate categories or capacity allocation, longterm
exclusive dealing, fidelity rebates and similar practices, abusing commercial information
or cross-subsidizing. 43
The second type of discriminatory TPA concerns discrimination by a TSO amongst customers
(anti-rivals) with whom the TSO is not in competition. This type of discrimination aims at equal
opportunities for all system users in order to institute a system that ensures competition is not
distorted. In this situation the TSO has no obvious interest in taking actions that would affect the
competiveness of one customer when compared to another customer. One could even argue; the
more (satisfied) customers the better, because a TSO would gain no advantage by discriminating
amongst customers (anti-rivals) and might even suffer a disadvantage through a reduction in its
sales. However, this does not suggest -when discrimination of this type occurs- that the TSO is
likely to have a valid reason for this discrimination. TSOs may have incentives to direct/indirect
distinguish between customers (anti-rivals):
(a) For efficiency considerations; for example, different treatment in terms and conditions
based on the volume of purchase of TPA services (such as quantity rebates);
(b) For strategic reasons; for example, different treatment based on whether or not a TSO
cooperates with a system user during a project. For example, in building new pipelines
(preserve a good relationship with business partners);
(c) As part of a strategy to divide markets in order to be able to exploit market power better
on the long term. 44 The abuse may take on the shape of exploitative abuse, a conduct which is
43 JONES, C.W. (2005) EU Energy law Volume 1: The Internal Energy Market. Leuven: Claeys & Casteels, p. 61-
62. GERADIN, D. (2000) The Liberalization of State Monopolies in the European Union and Beyond. London:
Kluwer Law International, p.10.
44 Irish sugar (Case T-228/97) [1999], paragraphs 123 and 151-154.
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unfair or unreasonable towards those system users that depend on the TSO for access to the
system and ancillary services and do not have any alternatives. One could think of unfairly
high prices, unfair conditions, refusal to supply, limiting access, and failure to satisfy
demand, margin squeezing and cross-subsidization.
(d) To foster/protect the objectives of the internal market in natural gas. Especially to protect
the particular tasks assigned to the TSO under the TGD and SGR (as well as national law).
Given the fact that the background of non-discriminatory TPA is set above as well as the reasons
for discriminatory behaviour by TSOs and related categories of discrimination, it is now
interesting to study the non-discrimination rules TSOs must comply with according to the TGD
and SGR.
§4. What types of non-discriminatory TPA rules exist
As mentioned above, discrimination amongst system users is prohibited subsequent to Article 13
(1b) TGD and 14 (1) SGR. This general obligation for TSOs of natural gas ‘not to discriminate’
is further detailed in several provisions in the TGD, SGR, network codes as envisaged in the SGR
and national law.
Article 13 (1b) TGD requires TSOs to refrain from discriminating between the users of the
transmission system or classes of system users, particularly in favour of their related
undertakings. The TGD notes four subordinate duties regarding the TSOs obligation to provide
non-discriminatory TPA. First, TSOs must provide all system users with the information they
need to efficiently access the system 45 . Second, the rules that TSOs adopt for balancing the gas
transmission system must be objective, transparent and non-discriminatory, including rules for
charging system users of their networks for energy imbalance 46 . Terms and conditions, including
rules and rates, for the provision of such services by TSOs must be established following a
methodology in compliance with Article 41(6) in a non-discriminatory and cost-reflective way
and must be published. 47 Third, TSOs are required to use sensitive information obtained from
45 Article 13 (1d) Directive 2009/73/EC.
46 Ibid, at Article 13 (3).
47 Ibid.
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third parties in a non-discriminatory manner 48 . Fourth, TSOs must meet the unbundling
requirements 49 to ensure that the TSO tasks are executed in a non-discriminatory manner. The
obligation for TSOs ‘not to discriminate’ includes undertakings either seeking access or already
having gained access to the transmission network. As all Directives, the TGD as well as the result
that is to be achieved, is bound to each MS to which it is addressed to, but leaves the choice of
form and methods to the MS. 50 This means that the TGD requires individual MS to transpose its
requirements into national law in order to implement it. 51
Article 14 (1a) SGR further details the non-discriminatory TPA rule for TSOs. In general, it
requires TSOs to offer TPA services to all network users. 52 Specific rules regarding nondiscrimination
are that if a TSO offers the same service to different customers, it must do so
under equivalent contractual terms and conditions, either using harmonised transport contracts or
a common network code. 53 Furthermore, transport contracts signed with non-standard start dates
or with a duration that is shorter than a standard annual transport contract, this must not result in
arbitrarily higher or lower rates that do not reflect the market value of the service. 54 Moreover,
the SGR prescribes what the harmonised non-discriminatory rules for TSOs are 55 regarding the
services they offer and how this must be done. It states rules about the rates for network access 56 ,
capacity-allocation mechanisms and congestion-management procedures 57 , transparency
48 Ibid, at Article 16.
49 These requirements can be distinguished in ten areas: accounts, organizational, legal, identity, informational,
personnel, management, services, decision making rights and control.
50 Article 288 The Treaty on the Function of the European Union.
51 The Court of Justice of the European Union (CJEU) held in the Marshall case (Marshall (Case 152/84) [1986],
paragraph 46.) that ‘wherever the provisions of a Directive appear, as far as their subject-matter is concerned, to be
unconditional and sufficiently precise, those provisions may be relied upon by an individual against the State where
the State fails to (a) implement the Directive in national law by the end of the period prescribed for or (b) where it
fails to implement the Directive correctly. This rule only applies to individuals against the State and does not apply
to individuals against individuals, such as a gas supply undertaking against a TSO. However, there is a possibility
that relying on a provision of a Directive by an individual against the State negatively affects other individuals
(Faccini Dori (Case C-91/92) [1994], paragraphs 22, 23 and 24 and Wells (Case C-201/02) [2004]).
52 Article 14 (1) Regulation 715/2009 is discussed below.
53 Ibid.
54 Ibid, at Article 14 (2).
55 Ibid.
56 Ibid, at Article 13: Rates, or the methodologies used to calculate them, must be applied in a non-discriminatory
manner.
57 Ibid, at Article 16: The TSO must implement and publish non-discriminatory and transparent (a) capacityallocation
mechanisms and (b) congestion-management procedures which facilitate cross-border exchanges in
natural gas on a non-discriminatory basis.
12

(regarding the offered services) 58 , balancing rules 59 and capacity trading 60 . Furthermore, as all
Regulations, the SGR has a general application, is binding in its entirety and is directly applicable
in all MS. 61 The SGR provides a common minimum set of TPA services for all TSOs in all MS
which, according to the SGR, is necessary to provide a common minimum standard of access in
practice throughout the community, to ensure that TPA services are sufficiently compatible and
to allow the benefits accruing from a well-functioning internal market in natural gas to be
exploited. 62 It follows from Article 1 SGR that the aim of the SGR is to set harmonised nondiscriminatory
rules for access condition to natural transmission systems, taking into account the
special characteristics of national and regional markets with a view to ensuring the proper
functioning of the internal market in gas. 63 Besides complying with the rules regarding nondiscriminatory
TPA in the TGD (transposed in national law) and direct binding rules in the SGR,
TSOs must also operate their networks in accordance with the so-called network codes as
envisaged in the SGR. 64 In order to provide a minimum guarantee of equal market access
conditions in practice, networks codes are developed on an EU level. 65 The procedure regarding
the development of the codes is laid down in the SGR. In short, this procedure includes the
following: the Commission determines the priorities of the codes 66 , the Agency of Energy
Regulators (ACER) defines the framework of the codes 67 and consults the European Network of
TSOs (ENTSO) for Gas and other relevant stakeholders in this and the ENTSO for Gas works out
the details of the codes 68 . The network codes can be declared to be legally binding if the
58 Ibid, at Article 18: The TSO must make public detailed information regarding the services it offers and the
relevant conditions applied, together with the technical information necessary for network users to gain effective
network access
59 Ibid, at Article 21: Balancing rules must be designed in a fair, non-discriminatory and transparent manner and shall
be based on objective criteria.
60 Ibid, at Article 22: A TSO must take reasonable steps to allow capacity rights to be freely tradable and to facilitate
such trade in a transparent and non-discriminatory manner.
61 Article 288 The Treaty on the Function of the European Union.
62 Recital 10 Regulation 715/2009. According to the CJEU, Regulations have equal force to nationals of all MS and
become part of the legal system applicable within the national territory, which must permit direct effect provided for
in Article 189 (now Article 288 TFEU) to operate in such a way that reliance thereon by individuals may not be
frustrated by domestic provisions and practices (Leonesio (Case 93/71) [1972], paragraph 22). Different to
Directives, individuals can rely on a provision of a Regulation against both the State and other individuals (Munoz
(Case C-253/00) [2002], paragraphs 27-31). Hence it follows that it is possible to enforce an obligation of, for
instance, the SGR by means of civil proceedings instituted by a gas supply undertaking against a TSO.
63 Article 1 Regulation 715/2009.
64 Ibid, at recital 15.
65 Ibid.
66 Ibid, at Article 6 (1).
67 Ibid, at Article 6 (2).
68 Ibid. at Article 6 (6).
13

Commission adopts the codes through the comitology procedure. With regard to the codes; it is
determined that they must contribute to non-discrimination, effective competition and the
efficient functioning of the market in areas as rules regarding network connection rules and TPA
services rules. 69
With regard to compliance of the TSOs with the obligation to provide non-discriminatory TPA,
NRAs play a key role on national level. 70 NRAs have the duty to ensure compliance of TSOs
with the obligation concerning non-discriminatory TPA rules under the TGD and other relevant
community legislation as well as national law. 71 Article 40 (1a-1h) TGD clarifies the general
objectives of the NRA. The following objectives are interesting in the context of nondiscriminatory
TPA: NRAs must take all reasonable measures (such as a penalty) in pursuit of
(1a) helping to achieve developing competitive and properly functioning regional markets, (1b)
eliminating restrictions on trade in natural gas between MS, (1c) the development of secure,
reliable and efficient non-discriminatory systems, (1e) facilitating access to the network for new
production capacity, in particular removing barriers that could prevent access for new market
entrants and of gas from renewable sources. 72 ACER has the task to coordinate the action of the
NRAs. 73
§5. What is meant by discrimination in the context of the non-discriminatory TPA rules
The rules as stated above describe the non-discriminatory rules for TSOs, but do not answer the
question of what is meant by ‘discrimination’ in the context of the rules. The TGD and the SGR
do not provide an answer to this question and neither does jurisprudence of the Court of Justice
of the European Union (CJEU) given the lack of case law on the subject in this context. However,
69 Articles 4 and 6 Directive 2009/73/EC. According to Article 8 (6) SGR, the network code covers the following
areas that, amongst other things, must contribute to non-discrimination: (a) network security and reliability rules, (b)
network connection rules, (c) TPA services rules, (d) data exchange and settlement rules, (e) interoperability rules,
(f) operational procedures in an emergency, (g) capacity-allocation and congestion-management rules, (h) rules for
trading related to technical and operational provision of network access services and system balancing, (i)
transparency rules, (j) balancing rules including network-related rules on nominations procedure, rules for imbalance
charges and rules for operational balancing between transmission system operators’ systems, (k) rules regarding
harmonised transmission rate-structures, and (l) energy efficiency regarding gas networks.
70 Recital 30 Regulation 715/2009 and Article 41 (1b) Directive 2009/73/EC.
71 Article 41 Directive 2009/73/EC. Article 41 TGD notes twenty-one (21) duties and powers of the National
regulatory authorities.
72 Ibid, at Article 40 (1a-1e).
73 Article 1 Regulation No 713/2009 of the European Parliament and of the Council of 13 July 2009 establishing an
Agency for the Cooperation of Energy Regulators.
14

‘since discrimination is essentially an abstract idea, it should be possible to transfer definitions
from other discrimination law’ 74 and apply them to the non-discriminatory TPA rule in the
transmission gas context. 75 In particular this study compares the non-discriminatory TPA rule in
the TGD and the SGR with the non-discriminatory TPA rule in Electricity law. Electricity and
gas are alike in the way that both were once thought to require vertical integration because of
their natural monopoly properties and public service obligations. 76 Although there are similarities
in the issues raised by competition and regulation in gas and electricity, there also are important
differences. This paper only focuses on one rule in the TGD and the SGR, namely to provide
non-discriminatory TPA. Given that a similar rule consists in Electricity law, with the same aim
as the non-discriminatory TPA rule in the TGD and the SGR, namely making competition
between gas supply companies possible in order to ultimately lower prices, create more choice
and differentiated services for consumers as the internal market in energy aims to deliver, in this
paper, EU Electricity law is used to understand and explain the non-discriminatory TPA rule in
the TGD and the SGR. 77 Article 12 (1f) of the Third Electricity Directive 78 requires the same as
Articles 13 (1b) TGD and 14 (1) SGR in equal wording: ‘each TSO is responsible for ensuring
non-discrimination as between system users or classes of system users, particularly in favour of
its related undertakings’. In several electricity cases concerning non-discriminatory TPA, the
CJEU has emphasised that non-discriminatory TPA is a specific expression of the general
principle of equality. 79 The CJEU has held that EU law recognises a general principle of equality
or non-discrimination. 80 This is apparent from its case law in which the CJEU held that the
principle of non-discrimination on grounds of age 81 and sex 82 must thus be regarded as general
principles of EU law. Fundamental rights include the general principle of equality and non-
74 Such as nationality discrimination, race discrimination and sex discrimination.
75 DAVIES, G. (2002) Nationality Discrimination and Free Movement law. London: Kluwer Law International,
p.29.
76 Here the fact should be noted that the comparison between gas law and electricity law does not always bear up.
NEWBERY, D.M. (1999) Privatization Restructuring, and Regulation of Network Utilities. Cambridge: The MIT
Press, p.343 and GERADIN, D. (2000) The Liberalization of State Monopolies in the European Union and Beyond.
London: Kluwer Law International, p.343-357.
77 Ibid.
78 Directive 2009/72/EC.
79 Cityworks (Case C-439/06) [2008], paragraph 42 and VEMW and Others (Case C-17/03) [2005], paragraphs 42 to
46.
80 Scholten Honig (Joined Cases 103 and 145/77) [1987], paragraph 26 and Cityworks (Case C-439/06) [2008].
81 Mangold (Case C-144/04) [2005[, paragraph 75, Kücükdeveci (Case C-555/07) [2007], paragraph 50.
82 Rinke (Case C-25/02) [2003], paragraph 25, Deutsche Telekom AG v Lilli Schröder (Case C-50/96) [2000],
paragraph 56, Defrenne III (Case 149/77) [1978] ECR 1365, paragraphs 26 and 27, Razzouk and Beydoun (Joined
Cases 75/82 and 117/82) [1984], paragraph 16, and P. v S. (Case C-13/94) [1996], paragraph 19.
15

discrimination. 83 It matters little which description is used; the ‘principle of equal treatment’ or
the ‘principle of non-discrimination’. 84 They are simply two tag-names for a single general
principle of EU law, which prohibits both treating similar situations differently and treating
different situations in the same way, unless there are objective reasons to do so. 85 The general
principle of equal treatment means that there should be ‘no discrimination’ whatsoever, either
directly or indirectly. 86 Non-discriminatory TPA as a specific expression of the principle of
equality must not be interpreted too strictly in the view of the general principal of equality/nondiscrimination.
It should not go any further than necessary for achieving the true purpose of nondiscriminatory
TPA. As mentioned before, non-discriminatory TPA aims to create competition
between gas supply undertakings in order to ultimately deliver lower prices, more choice and
differentiated services for consumers as the internal energy market aims to deliver. The latter
implies the following: as long as treating similar system users differently and treating different
system users in the same way is not contrary to the objectives of the internal market in natural
gas, it is not forbidden. Following from this is that the TGD and the SGR do not strive to reach
absolute equality of system users. Non-discriminatory TPA aims at equality of system users to
the extent necessary to achieve the objectives of the internal market in natural gas. Applying the
foregoing within the EU gas transmission context it means that the concept of non-discriminatory
TPA involves:
Treating similar system users similar and treating different system users different to the
extent necessary in order to achieve the objectives of the internal market in natural gas,
unless there are objective reasons for unequal treatment.
83 Cityworks (Case C-439/06) [2008], paragraph 42, VEMW and Others (Case C-17/03) [2005], paragraphs 42 to 46.
84 Ibid.
85 Ibid.
86 P. v S. (Case C-13/94) [1996], paragraph 17 and Dimossia Epicheirissi Ilektrismou (Case C-147/95) [1977],
paragraphs 25-29, Kathleen Hill and Ann Stapleton (Case C-243/95) [1996], paragraph 44 and De Weerd (Case C-
343/92) [1994], paragraph 33. Nonetheless, sometimes indirect discrimination can be objectively justified.
Distinguishing between direct and indirect discrimination is only of importance in the case of non-discrimination
rules where the objectives are laid down explicitly in the non-discrimination rule itself (i.e. non-discrimination on the
basis of nationality as far as employment is concerned). In the case of nationality discrimination, the CJEU has
consistently held that the equal treatment rule prohibits not only overt/direct discrimination by reason of nationality
but also all covert/indirect forms of discrimination which, by the application of other distinguishing criteria, lead in
fact to the same result. It is otherwise only if those provisions are justified by objective considerations independent of
the objective of the non-discrimination rule itself (i.e. nationality of the workers), and if they are proportionate to the
legitimate aim pursued. See: Sotgiu (Case 152/73) [1974] and O’Flynn (Case C-237/94) [1996], paragraph 19). Since
the objectives of the non-discriminatory TPA rule are not laid down explicitly in the non-discrimination rule itself;
all forms of discrimination are contrary to EU gas law.
16

Furthermore, in the context of the interpretation of non-discriminatory TPA in the electricity
context, the CJEU has emphasised the general nature of the principle of non-discrimination
amongst system users in a case concerning open access of third parties to electricity systems. 87
‘General nature’ means that Article 13 (1b) TGD is not limited to covering specific rules 88 , but
must be interpreted as applying to all discrimination amongst system users. Hence it follows from
this case law that the subject of discrimination does not matter (technical rules, tariffs, balancing
mechanisms, creditworthiness etc.), all is prohibited unless there are objective reasons for such
treatment.
§6. Is a TSO allowed to treat system users differently
In a real situation, different treatment of similar system users is sometimes not the greatest of
evils and has to be accepted. For instance, measures to interfere system users with a ‘low’
creditworthiness can, on balance, be very sensible measures. A TSO refusing to grant TPA to a
system user who is not sufficiently creditworthy in respect to its intended transport obligations
may be a positive step in security of supply protection; an objective of the internal market in gas.
On the other hand, a TSO may use strict creditworthiness rules as an excuse to favour affiliated
system users above non-affiliated system users or as part of a strategy to divide markets in order
to better exploit the market power on the long term 89 . The question arises: when should system
users be treated the same (§6.1) and when is different treatment of similar system users justified
in general (§6.2)
§6.1 When are system users the same
Non-discriminatory TPA involves treating similar system users similar and treating different
system users different to the extent necessary to achieve the objectives of the internal market in
natural gas, unless there are objective reasons for unequal treatment. In this respect, ‘a finding of
comparability of system users is a prerequisite for equal treatment and hence also for finding the
discrimination resulting from unequal treatment’. 90 To show discrimination it is necessary to
determine whether or not situations/system users are alike, or rather ‘equal’ in the word of non-
87 Citiworks (Case C-439/06) [2008], paragraph 42 and VEMW and others (Case C-17/03) [2005], paragraphs 42 to
46.
88 Such as technical rules. See: VEMW and Others (Case C-17/03) [2005], paragraphs 42 to 46.
89 Irish sugar (Case T-228/97) [1999], paragraphs 123 and 151-154.
90 TOBLER, C. (2005) Indirect Discrimination. Antwerpen: Intersentia, p.73.
17

discrimination TPA. If there are relevant differences between system users in this sense, the
system users require different handling by the TSO. This requires a comparison of the system
users, taking their relevant characteristics into account. The issue of comparability of system
users acquires particular importance in cases in which there are no grounds for justification of
different treatment, because in those cases only the argument of non-comparability presents any
possibility to avoid a finding in which different treatment constitutes discrimination. 91
The question is whether all system users of the transmission system must be treated as one group
to avoid violation of the non-discriminatory TPA principle or whether the system users can
possibly be divided into more groups. The TGD and the SGR do not provide a clear answer to the
previous questions. The TGD does, however, state that TSOs must refrain from discriminating
amongst system users or classes of system users, particularly in favour of their related
undertakings. 92 The part ‘classes of system users’ leaves room for TSOs to divide system users in
different groups. This possibility is confirmed in a communication from the Commission 93 : ‘Such
rates may be divided into objective classes of customers, providing that this does not result in
discrimination.’ Nevertheless, whether or not TSOs have the possibility to divide system users in
different groups depends on how national law transposes this possibility. As mentioned above,
you cannot tar everyone with the same brush. If there are relevant differences between system
users, they require different handling. This paper does not seek after what all relevant differences
between system users can be in order to nail down when system users require equal or different
handling. It does, however, seek after one characteristic of system users, namely their
creditworthiness. Perhaps that creditworthiness of system users is a relevant characteristic a TSO
can take into account in determining whether system users/network users are similar or not and,
thus, should be treated equally or not. This will be further examined in paragraph 7.
§6.2 When is different treatment of similar system users justified
91 Ibid.
92 Article 13 Directive 2009/73/EC.
93 EUROPEAN COMMISSION (2001) Completing the internal energy market: Communication from the European
Commission to the Council and the European Parliament (COM (2001) 125 final). Brussels.
18

Not all differences of treatment of similar system users are discriminatory. With respect to this, it
is important to stress the differences between differentiation and discrimination. In the
Outokumpu case 94 , the CJEU states the following:
As regards the compatibility of such a duty with Article 95 of the Treaty(Now 110
TFEU 95) , it is settled case-law, first, that in its present state of development Community
law does not restrict the freedom of each Member State to establish a tax system which
differentiates between certain products, even products which are similar within the
meaning of the first paragraph of Article 95 of the Treaty, on the basis of objective
criteria, such as the nature of the raw materials used or the production processes
employed. Such differentiation is compatible with Community law, however, only if it
pursues objectives which are themselves compatible with the requirements of the Treaty
and its secondary legislation, and if the detailed rules are such as to avoid any form of
discrimination, direct or indirect, against imports from other Member States or any form
of protection of competing domestic products.
Non-discriminatory TPA aims at preventing TSOs to detract from the objectives of the internal
market in general (new business opportunities and more cross-border trade, so as to achieve
efficiency gains, competitive prices and higher standards of service, and to contribute to security
of supply and sustainability). In particular, it aims to create competition between gas supply
undertakings in order to ultimately deliver lower prices, more choice and differentiated services
for consumers. 96 Following from the Outokumpu case and the concept of non-discriminatory
TPA developed in this paper is that TSOs are allowed to differentiate between similar system
users as long as it is not directly or indirectly contrary to the objectives of the internal market in
natural gas. This means that all differentiation between similar system users on the basis of
objective criteria that serve one or more of the objectives of the TGD and SGR is compatible with
94 Outokumpu Oy. (Case C-213/96) [1998], paragraph 30. See also: Chemial Farmaceutici SpA v DAF SpA (Case
140/79) [1981], paragraphs 12 -13, European Communities v Italian Republic (Case 200/85) [1986], paragraph 8-10,
John Walker & Sons Ltd v Ministeriet for Skatter og Afgifter (Case 243/84) [1986], paragraphs 22-23, Nádasdi en
Németh (Joined Cases C-290/05 en C-333/05) [2006] Bundesminister für Land- und Forstwirtschaft (Case C-221/06)
[2007], paragraph 56, Ákos Nádasdi (Joined Cases C-290/05 en C-333/05) [2007], paragraph 51 and Azienda
Agricola Disarò Antonio (Case C-34/08) [2009], paragraph 67-69.
95 Ibid.
96 EUROPEAN COMMISSION (2001) Completing the internal energy market: Communication from the European
Commission to the Council and the European Parliament (COM (2001) 125 final). Brussels. EUROPEAN
COMMISSION (2007) Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and
electricity sectors (SEC(2006) 1724). Brussels: DG Competition.
19

the non-discrimination TPA rule. However, it follows from the general principle of nondiscrimination/equality
that differentiation between similar system users is required to be both (a)
justified and (b) proportionate. Both (a) and (b) are discussed below.
§6.2.1 Justification
With regard to justification (a) the TGD and the SGR do not mention exactly when different
treatment of system users is justified 97 , however, they do create exemptions to provide
access/access services to the transmission system. TSOs are allowed to refuse access/access
services to the transmission system:
(a) Article 35 (1)TGD : based on of lack of capacity;
(b) Article 35 (1)TGD : based on where the access to the system would prevent them
from carrying out the public service obligations which are assigned to them;
(c) Article 35 (1)TGD : based on serious economic and financial difficulties with
take-or-pay contracts 98 regarding the criteria and procedures set out in Article 48 TGD
(derogations in relation to take-or-pay commitments) and the alternative chosen by the
MS in accordance with paragraph 1 of that Article.
With respect to (a), (b) and (c), it follows from Article 35 (2) TGD that TSOs must give duly
substantiated reasons for a refusal of access to the system where another undertaking (equal to the
refused undertaking) has been granted TPA services (equal to the refused services) by the TSO. It
follows from the foregoing that the TGD and the SGR in two situations accept an exemption to
providing access to the transmission system, namely (I) based on a pure objectively factor that is
beyond the control of the TSO ((a) in case of lack of capacity) and (II) for reasons of public
policy considerations, namely exemptions (b) and (c). According to the TGD, the idea behind
exemption/justification option (b), is that respect for the public service requirements is a
fundamental requirement of the TGD given that public service obligations relate to security,
including security of supply, regularity, quality and price of supplies, and environmental
97 VEMW and Others (Case C-17/03) [2005], paragraph 54.
98 GERADIN, D. (2000) The Liberalization of State Monopolies in the European Union and Beyond. London:
Kluwer Law International, p. 283. These contracts are characterized by a clause obliging purchases to pay for a
specific volume of gas, regardless of whether the gas is used or not.
20

protection, including energy efficiency, energy from renewable sources and climate protection. 99
Furthermore, the idea behind the take-or-pay commitments (c) is to mitigate the effect of the
transition to a liberalised gas market on the performance of take-or-pay contracts entered into by
transmission undertakings. 100 The above exemptions involve that it is not forbidden to
refuse/offer TPA to an undertaking where another system user (equal to the refused undertaking)
has been granted with TPA services by the TSO if this is a consequence of either (a), (b) or (c). It
is important to stress that the foregoing examples are not an exception to the duty ‘to not
discriminate between system users’ but that they form an exemption to the obligation to
offer/provide access at all times.
The TGD and the SGR do not mention when other possibilities of justification of different
treatment of similar system users are accepted. However, from case law of the CJEU 101 in the
electricity context it does not follow that justification of different treatment of similar system
users is limited to the possibilities that are expressly mentioned in the TGD and the SGR. It says
that there must be ‘objective reasons’, but does not speak of objective reasons expressly
mentioned in the TGD and the SGR. 102 Technically, the CJEU achieved this by modelling its
interpretation of non-discriminatory TPA after the general principle of equality/nondiscrimination
where an element of justification is part of the principle’s very definition. 103 This
leaves room for TSOs to balance the effect of the differentiation of system users against the
benefits in light of the objectives of the internal natural gas market.
§6.2.2 Proportionality
As mentioned above, conduct of a TSO that involves differentiation between similar system users
is required to be both (a) justified and (b) proportionate. Regarding (b), the TGD and the SGR do
not mention when different treatment of similar system users (that is not directly or indirectly
contrary to the objectives of the internal market in natural gas) is proportionate. Furthermore,
99 Recital 44 and Article 3 (2) Directive 2009/73/EC.
100 CAMERON, P. (2002) Competition in Energy Markets: Law and Regulation in the European Union. Oxford;
New York: Oxford University Press. p. 196.
101 Citiworks (Case C-439/06) [2008], paragraph 42 and VEMW and others (Case C-17/03) [2005], paragraphs 42 to
46.
102 VEMW and others (Case C-17/03) [2005], paragraphs 42 to 46.
103 TOBLER, C. (2005) Indirect Discrimination. Antwerpen: Intersentia, p. 317, Citiworks (Case C-439/06) [2008],
paragraph 42 and VEMW and Others (Case C-17/03) [2005], paragraphs 42 to 46.
21

there are various definitions of the principle of proportionality by the CJEU. 104 However, some
would say that in order to meet the proportionality principle, three main elements of the principle
must be met, i.e. the tests of (1) effectiveness or suitability, (2) necessity or subsidiary and, (3)
proportionality stricto sensu. The first test includes that an act or measure must be suitable (or
effective) to achieve the aims pursued. 105 Furthermore, the act or measure must not go beyond
what is necessary for that purpose (necessity or subsidiary test). 106 The last test balances the
negative effects (losses) of a measure against the positives effects (benefits) of it, for instance:
will the benefits for public health be larger than the losses to person’s/undertakings rights and
interests 107 In the case of the transmission context it implies that the benefits of the different
treatment of similar system users by the TSO must equal out the losses of such treatment. In this
particular case the test would, however, make no sense as this leads to a regime in which a TSO
is allowed to refuse access to system users who would not ‘add’ anything in the first place. Now,
it can be stated that a TSO must meet the following two elements if it treats similar system users
differently on the basis of objective criteria that serves one or more of the objectives of the TGD
and SGR:
1. The different treatment of similar system users must be suitable to achieve the pursued
aims;
2. There are no less restrictive means capable of producing the same results as the applied
different treatment.
§7. Case study: Is a TSO allowed to treat its system users differently based on their
creditworthiness
This paragraph applies the non-discriminatory TPA rule in practice by examining whether or not
it is in line with the non-discriminatory TPA principle if a TSO treats its system users differently
based on their creditworthiness.
104 CRAIG, P. (2006) EU Administrative Law. Oxford; New York: Oxford University Press, p. 681 and TRIMIDAS,
T. (2006) The general principles of EU law. Oxford; New York: Oxford University Press., p.137.
105 Clean Car Auto service (Case C-350/96,) (1998), paragraph 34 and Radlberger Getränkegesellschaft mbH & Co.
(Case C-309/02) [2004], paragraph. 79.
106 Ibid.
107 ABNA (Joined Cases C-453/03, C-11/04, C-12/04 and C-194/04) [2005], paragraphs 82-83.
22

Article 14 (3) SGR provides a rule which in first instance looks like a possibility to distinguish
between system users for creditworthiness reasons. Article 14 (3) SGR is expressed as follows:
‘Where appropriate, TPA services may be granted subject to appropriate guarantees from
network users with respect to the creditworthiness of such users. Such guarantees must
not constitute any undue market entry barriers and must be non-discriminatory,
transparent and proportionate’.
It could be stated that Article 14 (3) SGR provides the following possibilities for TSOs: To refuse
to offer/provide TPA services:
i. To system users that are not creditworthy and do not or cannot furnish
financial securities by means of a guarantee;
ii. To system users that already have a contract with the TSO because of a
change in creditworthiness.
A more disputable possibility: to offer ’ TPA services that are less good to system users in the
situations (i) and (ii), because TSOs could have refused the system user to provide any services,
but instead of refusing, they offer the ‘leftovers’ of system users that are sufficient enough.
If the above explanation of Article 14 (3) SGR is true, then this Article provides:
A. Clarity about the fact that system users that are creditworthy are not the same as
system users that are not creditworthy and should thus not be treated the same or
B. Clarity about the fact that system users that are creditworthy are the same as
system users that are not creditworthy and should thus be treated the same, but
different treatment can be justified pursuant to Article 14 (3) SGR.
With respect to options (A) and (B) the two following questions arise and are discussed below:
1. Are system ‘users’ with a ‘low’ creditworthiness equal to or different from system
‘users’ with a sufficient creditworthiness and must they be treated the same
2. If system ‘users’ with a ‘low’ creditworthiness are equal to system ‘users’ with a
sufficient creditworthiness, can different treatment of them be justified pursuant to the
TGD and the SGR
23

With respect to option (A), the idea behind this is that if there are relevant differences between
system users, the system users require different handling by the TSO. The question that arises is:
when is a situation different and when is it similar To reveal discrimination it is necessary to
determine whether or not situations/system users are alike or rather ‘equivalent’ in the words of
the non-discrimination principle. This requires a comparison of the system users, taking their
relevant characteristics into account. If option A is true, then a TSO is required to take the
‘creditworthiness’ of system users into account by determining whether or not system users are
alike and whether or not they must be treated the same. However, Article 14 (3) SGR can also
mean that system users, in spite of their creditworthiness, are the same and must be treated as
such (option B). In that case, Article 14 (3) SGR provides a justification rule. The TGD and the
SGR and the documents of the Commission however do not mention the purpose of the
‘creditworthiness provision’. Furthermore, EU Electricity law cannot help in understanding the
creditworthiness provision, as it does not contain a rule similar to Article 14 (3) SGR. For this
reason the creditworthiness provision will be explained in light of the concept of nondiscriminatory
TPA as developed in this paper.
By looking at Article 14 (3) SGR, at first sight it seems to be based on option B, given the
conditions ‘where appropriate’ and ‘appropriate guarantees’. The reason for thinking this is that
the concept of justification is based on the principle of proportionality and the conditions ‘where
appropriate’ and ‘appropriate guarantees’ both imply a test similar to the proportionality test as
mentioned in paragraph 6.2. In spite of this, option B however, is not in line with ‘the concept of
non-discriminatory TPA’ 108 since equal treatment of system users with different creditworthiness
does not contribute to the objectives of the internal market in natural gas as required by the
purpose of non-discriminatory TPA. Moreover, there is a possibility that equal treatment of
system users with different creditworthiness (poor and sufficient) is in conflict with one of the
objectives of an internal market in gas, because of a financial insecure system, users may not
meet their intended transport obligations which may have a negative effect on security of supply.
In contrast, an equal treatment of new- and existing system users does contribute to the
108 Equality of system users to the extent necessary to achieve the objectives of the internal market in natural gas,
unless there are objective reasons for unequal treatment.
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establishment of a competitive market in natural gas/electricity by granting effective market
access to all market players. Distinguishing between new and existing system users would create
an enormous obstacle for new entries and thereby would limit competition. Furthermore, the
exemptions to offer/provide TPA services at all times provided in the TGD 109 are aimed at
situations instead of characteristics of system users (such as creditworthiness). The TGD speaks
of the following situations that could justify refusal of TPA: (a) beyond the control of the TSO or
(b) regarding public policy. If Article 14 (3) SGR would include a justification rule, then it would
fall within the scope of the justification type (b) public policy; protecting the financial position of
the TSO and security of supply protection. From that perspective, it seems logical not to do
business with undertakings that cannot furnish financial securities. This however, seems not only
logical as an exemption, but more logical as a general rule. Because of the aforementioned,
Article 14 (3) SGR, as a justification rule would, take on the shape of a general/principle rule
instead of an exception to the general rule ‘not to discriminate between system users’. From the
aforementioned it follows that Article 14 (3) SGR does not provide a justification rule for
discriminatory TPA. At this point, the question is; what type of rule is provided by Article 14 (3)
SGR
It seems that Article 14 (3) SGR makes a division of two classes of system users: (a) system users
that are sufficiently creditworthy and of whom it would not be appropriate to ask for financial
security through a guarantee and (b) system users that are not sufficiently creditworthy and of
whom it would be appropriate to ask for financial security through a guarantee. In this respect,
Article 14 (3) SGR makes clear that system users with a ‘low’ creditworthiness are not equal to
system users with a ‘sufficient’ creditworthiness and therefore must not be treated the same
(option A). This means that the following situation does not constitute discriminatory conduct of
a TSO: a refusal of a TSO to provide TPA services to a system user that is not creditworthy and
does not/cannot provide financial securities services where another system user that is
creditworthy has been granted with TPA services by the TSO. If a TSO, however, abuses Article
14 (3) SGR to discriminate between system users, then a NRA has the possibility to proceed
109 Directive 2009/73/EC: (a) Article 35 (1): based on lack of capacity; (b) Article 35 (1): based on where the access
to the system would prevent them from carrying out the public service obligations which are assigned to them; (c)
Article 35 (1): on the basis of serious economic and financial difficulties with take-or-pay contracts having regard to
the criteria and procedures set out in Article 48 (derogations in relation to take-or-pay commitments) and the
alternative chosen by the MS in accordance with paragraph 1 of that Article; (d) Article 36 (1): in the case of major
new gas infrastructure, i.e. interconnectors.
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under Gas law (Article 13 (1b) TGD or/and Article 14 (1a) SGR and national legislation) or
under the competition rules. Having stated what type of rule Article 14 (3) SGR provides, the
following questions must be answered in order to clarify how Article 14 (3) can be applied by a
TSO:
1. What does ‘creditworthiness’ mean in Article 14 (3) SGR
2. When is it appropriate to ask for a guarantee and when is a guarantee appropriate (and
does not constitute undue market-entry barriers and shall be non-discriminatory, transparent
and proportionate)
Questions (1) and (2) are answered below.
§7.1 What does ‘creditworthiness’ mean in Article 14 (3)
The TGD and the SGR do not answer the question of what creditworthiness means. For that
reason it is interesting to look at common understanding with regard to creditworthiness.
According to the Cambridge dictionary, creditworthy describes someone who has enough money
or property for banks and other organizations to be willing to lend them money. The Oxford
dictionary defines creditworthy as: creditworthy (of a person or undertaking) considered suitable
to receive credit, especially because of being reliable in paying money back in the past.
Furthermore, the Van Dale dictionary uses the following description: economically strong
enough to get credit. All of the above definitions aim at a person/undertaking that wants credit
and has to have enough money/property, be suitable or economically strong enough to get the
requested credit. When applying these definitions to Article 14 (3) SGR, creditworthiness
probably means that a system user must be economically strong enough, not to get credit as such,
but specifically with respect to its intended transport obligations. Apart from the meaning of the
word creditworthiness, it is also important to look at the purpose of Article 14 (3) SGR.
Nonetheless, the TGD and the SGR do not mention what the purpose of the provision is. The
following reasons however seem sensible concerning granting or refusing to offer/provide TPA
services subject to the creditworthiness of system users:
(a) In order to secure security of supply to meet transport obligations (and
prevent unexpected decrease of supply);
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(b) In order to secure financial stability of the TSOs, so the TSOs are able to
execute the particular tasks assigned to them pursuant to EU and national law (and
thereby prevent a TSO from finding itself in financial difficulties).
With regard to (a), it seems a legitimate reason, as it contributes to security of supply which
according to Article 15 SGR 110 is one of the eight objectives of the internal market in natural gas.
Furthermore, (b) also seems a legitimate reason, as long as the behaviour of the TSO is not in
conflict with the rules that consist in the TGD and the SGR, in particular regarding the rules on
discrimination and competition. Moreover, it must be prevented that a TSO finds itself in
financial difficulties because of doing business with financial unstable system users that may
obstruct the performance, in law or in fact, of the particular tasks assigned to the TSO. 111
Applying the definition of creditworthiness and the assumed purpose to Article 14 (3) SGR leads
to the following purpose of creditworthiness in Article 14 (3):
A TSO offers/provides TPA services to a system user that is economically strong enough
in respect to its intended transport obligations in order to prevent security of supply
problems and obstruction of the performance, in law or in fact, of the particular tasks
assigned to the TSO.
The questions that rise are: how does a TSO determine whether or not the creditworthiness of the
system user is sufficient enough and which criteria are allowed to rate creditworthiness The
SGR does not answer these questions. It does, however, seem logical that the creditworthiness
rule is only used for what it is meant for: to prevent security of supply problems and obstruction
of the performance, in law or in fact, of the particular tasks assigned to the TSO. Then the
question rises, which creditworthiness requirements are suitable/effective to achieve that It
follows from this that whether or not a system user is sufficiently creditworthy is built upon the
principle of proportionality as elaborated in paragraph 6.2. When applying this principle to the
concept of ‘creditworthiness’, it means that the decision of the TSO concerning a system user
being creditworthy enough, is only justified if it pursues (a) an aim of EU (Gas) law (e.g. security
of supply), in (b) an effective way to its purpose (e.g. suitable requirements are used for the credit
110 Article 15 Regulation 715/2009
111 This idea is based on Article 35 (1) Directive 2009/73/EC and Article 106 (2) TFEU.
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analysis) and (c) goes no further than necessary (e.g. no stricter requirements than necessary to
achieve financial security). The question when the rating of creditworthiness is effective (to its
purpose) and when it does not go any further than necessary rises. Since there is no description of
how TSOs must determine the creditworthiness, TSOs have a lot of room to interpret this rule. It
follows from this that as long as the concept of creditworthiness is not used contrary to EU (Gas)
law, in particular to the rules on discrimination and competition, it is permitted pursuant to
Article 14 (3) SGR. If, for example, the number of system users with a ‘small’ capacity request
that can meet the creditworthiness requirements is considerably smaller than the number of
system users with a ‘large’ capacity request, it is possible that the credit policy of the TSO is
aiming at working with undertakings with a large capacity request instead of working with
several undertakings with small capacity requests. This example could constitute discrimination
and could therefore be forbidden pursuant to Article 13 (1b) TGD and Article 14 (1a) SGR.
Moreover, in order to prevent a breach with, in particular, discrimination, it follows from Article
14 (3) SGR that TSOs are required to have open policies about how they rate creditworthiness
and that these policies are applied equally to all system users that request TPA services. This
policy of creditworthiness rating must therefore include the criteria the TSO uses in the rating
process. In addition, perhaps needless to say, TSOs could also use the ratings of undertakings
given by credit rating entities such as Standard & Poor's, Fitch Ratings, and Moody's Investors
Service instead of developing their own credit rating system.
§7.2When is it appropriate to ask for a guarantee and when is a guarantee appropriate
Article 14 (3) SGR states that ‘where appropriate, TPA services may be granted subject to
appropriate guarantees from network users with respect to the creditworthiness of such users.
Such guarantees shall not constitute undue market-entry barriers and shall be nondiscriminatory,
transparent and proportionate.’ In these sentences the word ‘appropriate’ is
mentioned three times. This raises two questions:
A. With respect to ‘where appropriate’: in which situations is it appropriate to ask for
a guarantee
B. With respect to ‘appropriate guarantee’: when is a guarantee appropriate (and does
not constitute undue market-entry barriers and shall be non-discriminatory,
transparent and proportionate)
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With respect to question (A), when is a TSO allowed to ask for a guarantee The answer,
according to Article 14 (3) SGR, is ‘where appropriate’. This implies that a TSO is allowed to
ask for a guarantee when suitable or proper in certain circumstances. It follows from this that the
circumstances determine whether it is appropriate or not to ask for a guarantee. The TGD and the
SGR do not provide an answer regarding what these conditions might be. However, it follows
from Article 14 (3) SGR that the conditions must relate ‘to the creditworthiness of such users’.
This implies that the TSO, before asking for a guarantee, must determine whether or not it is
reasonable to do so in that particular situation or whether it goes beyond what is reasonably
necessary. From this it follows that whether or not it is appropriate to ask for a guarantee, as the
concept of creditworthiness, is built upon the principle of proportionality. Whether or not it is
appropriate to ask for a guarantee goes hand in hand with whether or not the creditworthiness of a
system user is sufficient enough. If according to the TSOs credit rating a system user is not
sufficiently creditworthy enough and thus cannot furnish financial security, it is appropriate to
ask for a guarantee. It follows from the aforementioned, including the analysis of the concept of
creditworthiness, that a TSO must meet the following requirements before asking a guarantee:
(a) The decision of the TSO concerning a system user being creditworthy enough pursues an
aim of EU (Gas) law (e.g. security of supply), in (b) an effective way to its purpose (e.g.
suitable requirements are used for the credit analysis) and (c) goes no further than necessary
(e.g. no stricter requirements than necessary to achieve financial security);
(b) The creditworthiness policy is applied equally to all system users that request TPA
services.
With respect to (a), these conditions are explained above. With respect to (b), it would be
discriminatory to ask a system user with a creditworthiness rating of Baa3 112 for a guarantee or
even to refuse to offer/provide TPA services where another system user with the same rating
(equal to the refused system user) has been granted with TPA services (equal to the services that
the refused system user requested) by the TSO.
112 Baa3 means, according to Moody’s credit rating system, a lower medium grade meaning a speculative
investment.
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With respect to question (B), when is a guarantee appropriate, the following can be stated. A
guarantee is appropriate if the guarantee alters the fact of a system user not being economically
strong enough with respect to its intended transport obligations and thereby meets the conditions
with regard to furnishing financial securities. Furthermore, according to Article 14 (3) SGR, the
guarantee (i) shall not constitute undue market-entry barriers and shall be (ii) non-discriminatory,
(iii) transparent and (iv) proportionate. Regarding point (i), the purpose of a guarantee is to
furnish financial security and not to make it more difficult to enter the market. If particular
undertakings cannot meet the guarantee requirements (i.e. with a small capacity request)
compared to other third parties (i.e. with a large capacity request) the guarantee requirement
might include market-entry barriers for particular undertakings. Furthermore, the guarantee
must be non-discriminatory. This probably means that system users (equal to in the meaning of
the same risk category) must furnish equal financial securities. With respect to (c), TSOs must
operate in a transparent manner. According to Article 18 SGR, TSOs are required to make
detailed information regarding the services it offers and the relevant conditions applied public,
together with the technical information necessary for system users to gain effective network
access. It follows from ‘the relevant conditions applied’ that a TSO must make public detailed
information about the creditworthiness requirements that the TSO applies with respect to
offering/providing TPA services concerning:
- The creditworthiness requirements;
- How the analysis of the creditworthiness of a system user is performed;
- The possible outcome of the analysis (risk categories);
- The financial securities (guarantee) that must be furnished by risk category;
- The consequences of being not creditworthy and/or not able to furnish financial securities
through a guarantee.
The final requirement for a guarantee being appropriate is that the guarantee must be
proportionate. The financial securities that must be provided by a system user in the case of
‘poor’ creditworthiness must not go further than necessary to furnish financial security similar to
the test whether a system user is creditworthy enough: the decision of the TSO concerning the
requested financial securities through a guarantee is only justified if it pursues (a) an aim of EU
(Gas) law (e.g. security of supply), in (b) an effective way to its purpose (e.g. suitable
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equirements are used for the credit analysis) and (c) goes no further than necessary (e.g. no
stricter requirements than necessary to achieve financial security).
Conclusion
The purpose of this paper was to provide an answer to two questions, namely (1) what does
discrimination mean in the context of Article 13 (1b) TGD and Article 14 (1a) SGR, and (2)
does a TSO act contrary to the TGD and the SGR if it treats system users differently, based on
their creditworthiness The first six paragraphs have shown that non-discriminatory TPA aims at
equality of system users to the extent necessary to achieve the objectives of the internal market in
natural gas. This means that as long as distinguishing between system users is not contrary to the
objectives of the internal market in natural gas, it is not forbidden pursuant to the TGD and the
SGR. This means that the TGD and the SGR do not strive to reach absolute equality of system
users. It must be prevented that the non-discriminatory TPA rule is applied too strictly in the
view of the general principal of equality/non-discrimination. Subsequent to the first six
paragraphs, the paper applied the concept of discrimination to Article 14 (3) SGR. Paragraph 7
revealed that TSOs have the possibility to distinguish between system users for reasons of
creditworthiness, given that Article 14 (3) makes it clear that system users with a ‘low’
creditworthiness are not equal to system users with a ‘sufficient’ creditworthiness and therefore
should not be treated the same. Nonetheless, TSOs should meet a number of proportionality and
transparency requirements in order to be permitted to distinguish between system users for
reasons of creditworthiness.
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