Security of Gas Supply Regulation

Introduction

Regulation (EU) 2017/1938, concerning measures to safeguard the security of gas supply, establishes a comprehensive framework to ensure the proper and continuous functioning of the EU's internal gas market. It repeals and replaces the previous Regulation (EU) No 994/2010, introducing a more robust, regionally-focused approach to preventing and responding to gas supply disruptions.

The regulation is built on the principle of shared responsibility among natural gas undertakings, Member States, and the European Commission. It mandates a three-level approach to crisis management, involving industry, national or regional authorities, and the Union. A key evolution is the establishment of 'risk groups'—predefined groups of Member States that must cooperate on assessing risks and developing joint preventive and emergency plans.

Recent amendments, notably Regulation (EU) 2022/1032, were introduced in response to geopolitical events to bolster the EU's energy security, primarily by mandating minimum gas storage levels ahead of winter periods.

Main Goal

The primary objective is to safeguard the security of gas supply across the European Union. This is achieved by establishing transparent, solidarity-based mechanisms for preventing gas crises and managing them effectively when they occur. The regulation aims to ensure that even in the event of a major supply disruption, the essential needs of citizens, especially protected customers, are met.

Who It Applies To

The regulation applies to a range of actors within the EU gas market:

• Member States and their designated Competent Authorities.
• Natural gas undertakings, which are responsible for implementing supply standards.
• Transmission System Operators (TSOs) and Distribution System Operators (DSOs), who have roles in infrastructure management and crisis response.
• Industrial gas customers and electricity producers, who are involved in emergency planning and may be subject to demand-side measures.

The regulation defines 'protected customers' who must be supplied with gas even during a crisis. This category always includes:

• Household customers connected to a gas distribution network.

Member States can also extend this protection to:

• Small and medium-sized enterprises (SMEs).
• Essential social services (e.g., healthcare, emergency services).
• Certain district heating installations.

Key Dates

• 1 November 2017: The regulation became applicable.
• 1 December 2018: The solidarity mechanism provisions became applicable.
• 1 October 2018: Deadline for the first common and national risk assessments.
• 1 March 2019: Deadline for the first preventive action and emergency plans. These are updated every four years.
• 1 November 2022: Deadline for Member States to meet an 80% gas storage filling target for 2022.
• From 2023 onwards: Member States must meet a 90% gas storage filling target between 1 October and 1 December each year.

Exemptions

• Luxembourg, Slovenia, and Sweden: May be exempt from the N-1 infrastructure standard under specific conditions (e.g., having multiple interconnectors and supply sources, no storage facilities).
• Malta and Cyprus: The regulation's obligations do not apply as long as no gas is supplied on their territories. Deadlines for compliance will be calculated from the date gas is first supplied.
• Ireland, Cyprus, and Malta: The gas storage obligations do not apply as long as they are not directly interconnected to the gas system of another Member State.

Key Provisions

• Infrastructure Standard (N–1 Formula): Member States must ensure that in the event of a disruption to the single largest gas infrastructure, the remaining network capacity can satisfy total gas demand on a day of exceptionally high demand.
• Gas Supply Standard: Natural gas undertakings must be required to ensure gas supply to protected customers during extreme cold spells or for a 30-day period of high demand or major infrastructure disruption.
• Risk Assessments and Plans: Member States, cooperating in regional 'risk groups', must conduct common risk assessments and establish joint Preventive Action Plans (to mitigate identified risks) and Emergency Plans (to manage supply disruptions).
• Crisis Levels: Establishes three crisis levels: Early Warning, Alert, and Emergency, each triggering specific measures and information flows.
• Solidarity Mechanism: As a last resort, a Member State facing a severe gas shortage can request solidarity from a directly connected Member State. The providing Member State must curtail supply to its non-protected customers to help supply the requesting Member State's 'solidarity protected customers'. This is provided on the basis of fair compensation.
• Mandatory Gas Storage: Amendments require Member States with underground gas storage to ensure their facilities are filled to a binding target (90% from 2023) before the winter season. Member States without storage must make arrangements to store gas in other Member States.

Obligations & Requirements

• Member States: Must designate a competent authority, conduct risk assessments, establish and test preventive and emergency plans, ensure compliance with infrastructure and supply standards, and enforce gas storage filling targets.
• Natural Gas Undertakings: Must take measures to guarantee supply to protected customers, provide detailed information to authorities (including on long-term supply contracts), and cooperate in emergency situations.
• Transmission System Operators (TSOs): Must enable permanent bi-directional capacity on interconnections between Member States (unless exempted) and cooperate during emergencies to manage gas flows.

Affected Products/Types/Actors/Processes

• Products: Natural gas, Liquefied Natural Gas (LNG).
• Actors: Natural gas undertakings, TSOs, DSOs, competent authorities, industrial consumers, electricity producers, district heating operators.
• Processes: Gas procurement, cross-border gas transmission, gas storage management, crisis management, risk assessment, and emergency response coordination.

Penalties

The regulation requires Member States to establish rules on penalties for infringements. These penalties must be effective, proportionate, and dissuasive. Specific areas where penalties apply include:

• Failure by natural gas undertakings to provide required information on gas supply contracts.
• Failure by market participants to meet storage obligations required to fulfill the national filling targets.