Comments on Natural Gas Market Concept Design

The document is drafted by the Energy Secretariat, but USAID Energy Program finds it to be vague and lacking in structure. The program believes that the Concept Design does not provide the necessary legal and organizational preconditions for the natural gas market of Georgia as defined under Chapter I. The main identified issues with the Concept Design include repetition of language from the Draft Energy Law and the Grid Code, with some significant changes in terminology. Article 6 of the Concept Design changes the description of the components of the wholesale natural gas market used in Article 136.3 of the Draft Energy Law. The program also finds that the language in the Concept Design appears contradictory to market-based principles, particularly in Articles 18.3 and 18.4. The Concept Design does not provide the unbundling of network activities as a main component of the natural gas market development and part of the market concept. Additionally, it does not outline the Underground Gas Storage (UGS) facility as part of the considered design. The Concept Design also fails to include the creation of the Storage System Operator (SSO) as well. The Concept Design considers the day-ahead natural gas market and the organized natural gas balancing and ancillary services market, but it outlines all possible markets that can be implemented starting from the day-ahead market. The document goes beyond the confines of the Draft Energy Law and makes substantive changes that need to be reflected in the Law. The Concept Design lacks clarity, particularly in its references to the "transitory period" and the "special regulatory regime." The program also finds that the Concept Design fails to address the items listed in Article 139 of the Draft Energy Law, such as specifying the products to be sold in the gas market/gas exchange. The Concept Design repeatedly states a "competitive" natural gas market but does not provide a clear definition of such for Georgia's natural gas market, taking into account the existing exemptions associated with the cross-border pipelines. The program provides additional comments on various articles of the Concept Design, including Article 27, which deals with the procurement of gas for balancing and operational gas. The USAID Energy Program suggests modifications to the Concept Design, including the addition of definitions and clarification of terms. The program also recommends that the Concept Design be revised to provide a clear definition of a competitive natural gas market and to address the items listed in Article 139 of the Draft Energy Law. The Concept Design is intended to provide general guidance for the organization and functioning of the natural gas market in Georgia. However, the USAID Energy Program believes that the document is not well justified and that the necessary structure and legal and organizational preconditions for the natural gas market of Georgia are not provided. The program recommends that the Concept Design be revised to address these issues and to provide a clear and concise framework for the development of the natural gas market in Georgia.