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The German Energy Efficiency Association for District Heating, Cooling and CHP (registered association, AGFW), the German Association of Energy and Water Industries (registered association, BDEW) and the German Association of Local Utilities (registered association, VKU) advocate the use of the European Gas Index (EGIX) even in district-heating contracts. The associations see this as an important step towards increased transparency on the district- heating market. The new practice of publishing the EGIX values is very important since it provides an instrument which enables the companies of the district heating industry to present their market situation in price revision clauses in line with the market in a way customers can easily and transparently understand.
Two years ago, the European Energy Exchange (EEX) launched the publication of the EGIX. With EGIX, EEX provides a transparent index, which corresponds to the respec- tive current market price for natural gas deliveries in the next month at all times and which can be integrated into energy delivery contracts, to the market participants.
From now on, the EEX will publish the current and historical monthly and yearly aver- ages of the “EGIX Germany” free of charge on its website, in addition to the daily values. The values are publicly accessible for all market participants and customers under the following link:
Download > Market Data > Natural Gas - EEX
This solution fulfils the special transparency requirements contained in the Ordinance on the General Conditions for the District-Heat Supply (AVBFernwärmeV) and enables the district-heat customers to understand price changes through price adjustment rules in district-heat supply contracts. As has been the case so far, current and historical EGIX values are also available for all data users through the information products offered by the exchange.
Background
According to AVBFernwärmeV, price revision clauses in district-heat supply contracts have to fully disclose the material calculation factors in a generally understandable form. Furthermore, factors which develop approximately like the company’s costs of generating district heat have to be selected for the price revision clauses.
District heat is largely generated in gas-fired thermal power stations. In the past, the long-term gas procurement contracts with price adjustment clauses based on light heating oil (HEL) were used to fulfil this requirement because they reflected the devel- opment of costs for procuring natural gas with sufficient precision.
Upon the liberalisation of the gas market, the development of the gas and oil price be- came lastingly decoupled. In addition, many utility companies arrange purchasing of their gas requirements through other channels and forms of procurement. In this con- text, purchasing through the EEX is increasingly gaining in importance. Various price adjustment clauses which take account of the purchasing conditions and can comprise indices like EGIX will increasingly be used for the market-based and legally reliable presentation of the development of fuel costs. At present, it can be expected that the indices which have been used for the district-heat industry will perhaps no longer be reflected in the “Special Series 17 – Series 2” of the German Federal Statistical Office in the future. In order to still present their own cost situation in supply contracts the associations mentioned above have developed the future option for price revision clauses outlined above in co-operation with EEX.
The associations anticipate that the importance of transparent exchange trading in gas on EEX will increase for the entire energy industry and, moreover, they expect the reference price for natural gas on EEX to become an essential factor in price adjustments in district-heat supply contracts.
