delivered on 6 October 2021 (1)

Case C‑290/20

AS ‘Latvijas Gāze’

interveners:

Latvijas Republikas Saeima,

Sabiedrisko pakalpojumu regulēšanas komisija

(Request for a preliminary ruling from the Latvijas Republikas Satversmes tiesa (Constitutional Court, Latvia))

(Reference for a preliminary ruling – Internal market in natural gas – Natural gas transmission system and distribution system – Possibility of direct connection of final customers to the natural gas transmission system)

In order to ensure an effective internal market aimed at enabling natural gas to be sold on equal terms and without discrimination, and which ensures economically reasonable and effective access to the natural gas network for third parties, is it necessary for Member States to adopt a regulatory framework permitting any final customer to choose which type of network – transmission or distribution – he or she wishes to connect to? Is the connection to the natural gas transmission network permitted only for a non-household final customer? Is Directive 2009/73/EC (2) compatible with national legislation which permits final customers to connect to the transmission network?

Those are, in essence, the questions asked in the request for a preliminary ruling from the Latvijas Republikas Satversmes tiesa (Constitutional Court, Latvia) in the present proceedings. They provide the Court with the opportunity to examine in more depth, in the light of Directive 2009/73, the subject of the natural gas transmission and distribution system, particularly as regards the possibility of direct connection of final customers to the natural gas transmission system.

In this Opinion, I will set out the reasons why I believe that Directive 2009/73 lays down obligations for Member States only as regards third-party access to natural gas transmission and distribution systems, leaving Member States the option of steering users towards a particular type of system, in accordance with the principle of non-discrimination and on the basis of objective considerations, such as safety and the technical characteristics of the network.

Legal framework

European Union law

Article 2(2) TFEU provides:

‘When the Treaties confer on the Union a competence shared with the Member States in a specific area, the Union and the Member States may legislate and adopt legally binding acts in that area. The Member States shall exercise their competence to the extent that the Union has not exercised its competence. The Member States shall again exercise their competence to the extent that the Union has decided to cease exercising its competence.’

Article 4(2)(a) and (i) TFEU provides:

‘2. Shared competence between the Union and the Member States applies in the following principal areas:

(a) internal market;

…

(i) energy;’

Recitals 1, 3, 6, 8 and 48 of Directive 2009/73 state:

‘(1) The internal market in natural gas, 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 trade, so as to achieve efficiency gains, competitive prices, and higher standards of service, and to contribute to security of supply and sustainability.

…

(3) The freedoms which the Treaty guarantees the citizens of the Union – inter alia, the free movement of goods, the freedom of establishment and the freedom to provide services – are achievable only in a fully open market, which enables all consumers freely to choose their suppliers and all suppliers freely to deliver to their customers.

…

(6) Without effective separation of networks from activities of production and supply (effective unbundling), there is a risk of discrimination not only in the operation of the network but also in the incentives for vertically integrated undertakings to invest adequately in their networks.

…

(8) Only the removal of the incentive for vertically integrated undertakings to discriminate against competitors as regards network access and investment can ensure effective unbundling. Ownership unbundling, which implies the appointment of the network owner as the system operator and its independence from any supply and production interests, is clearly an effective and stable way to solve the inherent conflict of interests and to ensure security of supply. For that reason, the European Parliament, in its resolution of 10 July 2007 on prospects for the internal gas and electricity market … referred to ownership unbundling at transmission level as the most effective tool by which to promote investments in infrastructure in a non-discriminatory way, fair access to the network for new entrants and transparency in the market. Under ownership unbundling, Member States should therefore be required to ensure that the same person or persons are not entitled to exercise control over a production or supply undertaking and, at the same time, exercise control or any right over a transmission system operator or transmission system. Conversely, control over a transmission system or transmission system operator should preclude the possibility of exercising control or any right over a production or supply undertaking. Within those limits, a production or supply undertaking should be able to have a minority shareholding in a transmission system operator or transmission system.

…

(48) Consumer interests should be at the heart of this Directive and quality of service should be a central responsibility of natural gas undertakings. Existing rights of consumers need to be strengthened and guaranteed, and should include greater transparency. Consumer protection should ensure that all consumers in the wider remit of the Community benefit from a competitive market. Consumer rights should be enforced by Member States or, where a Member State has so provided, the regulatory authorities.’

Under Article 2 of Directive 2009/73:

‘For the purposes of this Directive, the following definitions apply:

…

(3) “transmission” means the transport of natural gas through a network, which mainly contains high-pressure pipelines, other than an upstream pipeline network and other than the part of high-pressure pipelines primarily used in the context of local distribution of natural gas, with a view to its delivery to customers, but not including supply;

…

(5) “distribution” means the transport of natural gas through local or regional pipeline networks with a view to its delivery to customers, but not including supply;

…

(24) “customer” means a wholesale or final customer of natural gas or a natural gas undertaking which purchases natural gas;

(25) “household customer” means a customer purchasing natural gas for his own household consumption;

(26) “non-household customer” means a customer purchasing natural gas which is not for his own household use;

(27) “final customer” means a customer purchasing natural gas for his own use;

…’

8.Article 9 of Directive 2009/73, entitled ‘Unbundling of transmission systems and transmission system operators’, provides:

(a)each undertaking which owns a transmission system acts as a transmission system operator;

the same person or persons are entitled neither:

(i)directly or indirectly to exercise control over an undertaking performing any of the functions of production or supply, and directly or indirectly to exercise control or exercise any right over a transmission system operator or over a transmission system; nor

(ii)directly or indirectly to exercise control over a transmission system operator or over a transmission system, and directly or indirectly to exercise control or exercise any right over an undertaking performing any of the functions of production or supply;

…

Where on 3 September 2009, the transmission system belongs to a vertically integrated undertaking a Member State may decide not to apply paragraph 1. In such case, the Member State concerned shall either:

(a)designate an independent system operator in accordance with Article 14, or

(b)comply with the provisions of Chapter IV.

…’

9.Article 23 of that directive, entitled ‘Decision-making powers regarding the connection of storage facilities, LNG regasification facilities and industrial customers to the transmission system’, provides:

10.Article 32 of that directive, entitled ‘Third-party access’, provides in paragraph 1:

Member States shall ensure the implementation of a system of third-party access to the transmission and distribution system, and LNG facilities based on published tariffs, applicable to all eligible customers, including supply undertakings, and applied objectively and without discrimination between system users. Member States shall ensure that those tariffs, or the methodologies underlying their calculation are approved prior to their entry into force in accordance with Article 41 by a regulatory authority referred to in Article 39(1) and that those tariffs – and the methodologies, where only methodologies are approved – are published prior to their entry into force.

Latvian law

11.Article 84(1) of the Enerģētikas likums (Latvian Law on Energy of 3 September 1998, Latvijas Vēstnesis, 1998, No 273/275) is relevant here.

II.

The facts giving rise to the dispute, the procedure in the main proceedings and the questions referred

12.AS ‘Latvijas Gāze’ (‘the applicant in the main proceedings’) is a vertically integrated natural gas company involved in the transmission, distribution, marketing, purchase and storage of natural gas in Latvia.

13.Prior to the liberalisation of the natural gas market in Latvia – that is to say, until 3 April 2017 – the applicant in the main proceedings was the only natural gas company present in the Latvian market.

14.After that date, the public limited liability company, Conexus Baltic Grid had been created – a company separate to the applicant in the main proceedings – to which the national infrastructure for the transmission of natural gas and the single network for the transmission of natural gas had been transferred. The applicant in the main proceedings is not a shareholder in that public limited liability company.

15.The public limited liability company Gaso, was created, as a subsidiary, separate from the applicant in the main proceedings, which provides, under licence, a natural gas distribution service in the territory of Latvia. The applicant in the main proceedings is the sole shareholder of that company. Pursuant to its licence, the public limited liability company Gaso is the sole operator of the natural gas distribution network in Latvia, ensuring the supply of natural gas from the transmission network to final consumers.

16.In Latvian law, Article 84(1) of the Law on Energy) was introduced into that law by amendments made in 2016 that were necessary, inter alia, in order to comply with the requirements of Directive 2009/73.

17.That statutory provision of Latvian law states that the Sabiedrisko pakalpojumu regulēšanas komisija (Public Services Regulatory Commission, Latvia), which is the Latvian regulatory authority under Directive 2009/73 (‘the Latvian regulatory authority’), is to approve the rules on connection to the natural gas transmission and distribution system and network that are laid down by the operator of that natural gas transmission and distribution system.

18.On 18 April 2019, the Latvian regulatory authority adopted Decision No 1/7 (3) which provides, inter alia, that any user of natural gas may connect to the natural gas transmission system without the intervention of a distribution system operator.

19.According to the applicant in the main proceedings, the Latvian regulatory authority is not authorised to adopt such a decision, which allows any end user of natural gas to disconnect from the natural gas distribution system and to connect directly to the natural gas transmission system. The applicant in the main proceedings submits that the end user must connect to the natural gas network via the natural gas distribution network, which is operated by the distribution system operator.

20.However, the Latvian regulatory authority contends that Member States must guarantee the connection, on a non-discriminatory basis, of customers’ installations to the natural gas transmission system. According to the Latvian regulatory authority, neither the national rules nor Directive 2009/73 allow the possibility of restricting the right of natural gas customers to connect directly to the natural gas transmission system.

21.Faced with possible financial losses and alleging the infringement of its rights under the licence, the applicant in the main proceedings brought an action for a declaration of unconstitutionality before the Latvijas Republikas Satversmes tiesa (Constitutional Court), submitting that Decision No 1/7 is contrary to the Constitution of the Republic of Latvia and the Law on Energy and that Article 84(1) of the Law on Energy is itself contrary to the Constitution. In the same action, the applicant in the main proceedings also alleged the infringement of the provisions of EU law on energy.

Against that background, the Latvijas Republikas Satversmes tiesa (Constitutional Court) decided to stay the proceedings and referred the following questions to the Court of Justice:

(1)Must Article 23 and Article 32(1) of Directive [2009/73] be interpreted as meaning that Member States must adopt a regulatory framework permitting any final customer to choose which type of network – transmission or distribution – he [or she] wishes to connect to and imposing on the network operator an obligation to allow him [or her] to connect to the network in question?

(2)Must Article 23 of Directive [2009/73] be interpreted as meaning that Member States have an obligation to adopt a regulatory framework permitting only a non-household final customer (that is to say, only an industrial customer) to connect to the natural gas transmission network?

(3)Must Article 23 of Directive [2009/73], in particular the concept of “new industrial customer”, be interpreted as meaning that that article lays down an obligation for Member States to adopt a regulatory framework permitting only a non-household final customer (that is to say, only an industrial customer) who has not previously been connected to the distribution network to connect to the natural gas transmission network?

(4)Must Article 2(3) and Article 23 of Directive [2009/73] be interpreted as meaning that they preclude a regulatory framework enacted by a Member State according to which the transmission of natural gas includes the transmission of natural gas directly to the final customer’s natural gas supply network?

III. Legal analysis

(Common) aims of Directives 2009/73 and 2009/72 containing provisions for the internal market in natural gas and electricity

(23)Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (OJ 2009 L 222, p. 55), and Directive 2009/73 concerning common rules for the internal market in natural gas, form part of the ‘Third Energy Package’. They were intended to create an efficient internal market to ensure a level playing field for the sale of electricity and natural gas in the European Union, without discrimination or restrictions, and to ensure economically reasonable and effective access to the electricity grid and natural gas system.

(24)The internal market for natural gas is organised in a similar way to the internal market for electricity, and the relevant provisions of the two directives thus have a similar content. Therefore, the case-law of the Court on the interpretation of Directive 2009/72 as regards electricity, in so far as it interprets provisions with similar content, is, in my view, applicable to the interpretation of the provisions of Directive 2009/73, and thus to the market in natural gas.

(25)It follows from recitals 1, 3, 6 and 8 of Directive 2009/73 that the EU internal market in natural gas aims to give real choice for all consumers of the European Union, be they citizens or businesses.

(26)However, before proceeding with the analysis, we must first clarify what the term ‘choice’ means for EU consumers. On the one hand, the directive provides a general right of ‘access’ to the natural gas system – in other words, the right to the supply of natural gas, including the quality, regularity and costs of the service. On the other hand, the directive guarantees ‘connection’ in a technical sense, which relates to the physical connection to the system.

(27)In that respect, consumers – be they citizens or businesses – exercise their right of access to the natural gas system through a supplier that those consumers must be free to choose. To that end, the suppliers themselves must be able to have free access to the natural gas network.

(28)It follows from this – and I will examine this point in more detail in the analysis of the questions referred for a preliminary ruling – that the ‘right of access’ does not correspond entirely to the ‘right of connection’: (i) there are no limits to the right of access (apart from the exemptions provided in the directive itself), which is granted fully and exclusively to all consumers in the European Union; and (ii) the right of connection, which concerns the technical arrangements for connecting to the system, is specifically regulated by EU law and by the laws of the Member States. However, this regulation can vary, depending on the technical situation and energy policy in each Member State – in compliance, of course, with the general principles of EU law.

(29)Before the entry into force of Directive 2009/73, there was no regulatory framework in the Member States guaranteeing non-discriminatory access to the network, nor a level of control by national regulators.

(30)Since the entry into force of Directive 2009/73, a separation between transmission and distribution systems and production and supply activities – while leaving, as will be seen, the choice of different models to the Member States, has been required by EU law. Without effective separation between transmission and distribution systems and production and supply activities, there is, in fact, a risk of discrimination in the operation of the network.

(31)As for discrimination, this may arise, for example, where a vertically integrated economic operator pursues activities involving the production or supply of natural gas while at the same time operating a natural gas transmission and distribution network. In such circumstances, the vertically integrated economic operator may have no interest in providing any competitors on the market in the production or supply of natural gas with access to the natural gas transmission and distribution networks which it operates.

(32)This would hamper the exercise of the freedoms guaranteed by the Treaties, by failing to allow all consumers freely to choose their suppliers and all suppliers freely to deliver to their customers.

(33)In this context, the aim of Directive 2009/73 is to ensure that natural gas users have the right of access to the natural gas system, leaving Member States the option of deciding on the type of system to which to connect.

(34)The new provisions of the natural gas directive have introduced the structural unbundling of the activities of transmission and the production and supply of natural gas. As mentioned earlier, the aim of those provisions is to avoid conflicts of interest and to ensure that the transmission system operator (TSO) for natural gas makes decisions independently and does not discriminate against network users.

(35)Under Article 9 of Directive 2009/73, Member States may choose between three models for the unbundling of transmission networks and transmission system operators (with respect to production and supply facilities):

ownership unbundling;

independent system operator (ISO);

independent transmission operator (ITO).

(36)In the present case, the request for a preliminary ruling does not specify the model chosen by Latvia.

However, it would appear from the information available (10) that Latvia has opted for the first model, namely ownership unbundling. In the opinion of the European Commission of 25 July 2018 – Latvia – Certification of JSC Conexus Baltic Grid, (11) it was stated that Conexus had applied for certification of the ownership unbundling model. (12)

In adopting this model, each undertaking which owns a transmission network acts as a transmission network operator. Therefore, it cannot at the same time control or exercise any voting rights over the production or supply activities. Evidently, the same undertaking cannot control the production or supply activities and, at the same time, control or exercise any voting rights over the transmission system operator. (13)

Describing the follow-up to that opinion, the Latvian Government and the Commission confirm that the Latvian regulatory authority had adopted a decision finding that the conditions for the certification of Conexus Baltic Grid on the basis of ownership unbundling had been met. (14)

The questions referred for a preliminary ruling

The questions referred for a preliminary ruling can be summarised as follows: in the first place, the referring court asks whether Article 23 and Article 32(1) of Directive 2009/73 must be interpreted as requiring a national regulatory framework such as Decision No 1/7, which, on the one hand, permits any final customer to choose which type of network – transmission or distribution – he or she wishes to connect to, and, on the other hand, imposes on the network operator an obligation to connect any customer to the network in question (first question). In the second place, it asks whether Article 23 of Directive 2009/73 must be interpreted as meaning that the national regulatory framework must permit only certain categories of customer to connect to the natural gas transmission network (second and third questions). In the third place, and if the first question is answered in the negative, the referring court asks whether Article 2(3) and Article 23 of that directive must be interpreted as precluding such a national regulatory framework (fourth question).

In summary, Article 2(3) of Directive 2009/73 defines the concept of ‘transmission’ as the transport of natural gas through a network, other than the part of high-pressure pipelines primarily used in the context of local distribution of natural gas, with a view to its delivery to customers, but not including supply.

Article 23 of Directive 2009/73, on the other hand, regulates the connection of industrial customers to the transmission network, providing that the transmission system operator is not entitled to refuse the connection of a new industrial customer on the grounds of possible future limitations to available network capacities or additional costs linked with necessary capacity increase.

Article 32(1) of Directive 2009/73 provides, lastly, that Member States are to ensure the implementation of a system of third-party access to the transmission and distribution system based on published tariffs, applicable to all eligible customers, including supply undertakings, and applied objectively and without discrimination between system users.

Preliminary observations and positions of the parties

First, it should be noted that – as stated by the applicant in the main proceedings, the Latvian regulatory authority, the Commission, the Finnish Government and the Polish Government – (15) the fact that Chapter IV of Directive 2009/73 is entitled ‘Independent Transmission Operator’ is sufficient confirmation that the provisions of Article 23 contained in that chapter are applicable only where a Member State has opted for the third unbundling model (the independent transmission operator).

This interpretation is confirmed by recital 16 of Directive 2009/73, according to which the full effectiveness of the independent system operator (second model) or independent transmission operator (third model) solutions should be ensured by way of ‘specific additional rules’. These are mentioned in Article 9(8)(b) of Directive 2009/73, which expressly refers to the provisions of Chapter IV. This approach reflects the nature of the first unbundling model, which, in providing for a structural unbundling of transmission activities from production or supply activities, requires less control than the other two unbundling models and reduces the costs for both the transmission system operator and the national regulatory authorities.

In addition, the Court has already ruled that the ‘specific additional rules’ do not apply when the Member State chooses the first unbundling model. (16)

Furthermore, as the Commission affirms in its interpretative note, (17) once the Member State has chosen a specific unbundling model, all the elements of that model have to be complied with. Elements of different models cannot be mixed in order to create a new unbundling model which has not been provided for by the directive. The only exception is provided for in Article 9(9), which states that a Member State may decide not to apply Article 9(1) (first unbundling model) only where the transmission system belongs to a vertically integrated undertaking and there are arrangements in place which guarantee more effective independence of the transmission system operator than the specific provisions of Chapter IV (Articles 17 to 23), which apply to the third unbundling model.

For all of the above reasons, I consider that the interpretation given in the observations of most of the interveners in the proceedings (the applicant in the main proceedings, the Latvian regulatory authority, the Commission, the Finnish Government and the Polish Government) is correct, according to which Article 23 does not apply to the situation in the main proceedings, since Latvia opted for the first unbundling model – namely ownership unbundling – to which only the provisions of Article 9(1) of Directive 2009/73 apply.

In any case, it is worth providing an interpretation of the provisions in question, including Article 23, since the main parties have differed in their approach on this point.

On the one hand, according to the applicant in the main proceedings, the EU legislature has provided a right of access to the network for natural gas customers. However, it certainly did not intend the final customer to be permitted to choose the type of connection to the natural gas network, thus circumventing the natural gas distribution system and its operator. Nevertheless, if the distribution system operator is unable to provide natural gas distribution services for technical or other reasons, or indeed for any other objective reason, the national rules of a Member State may also provide for the possibility for customers to connect directly to the transmission system operator.

Accordingly, Article 23 of Directive 2009/73 only applies to a specific group of natural gas customers, the ‘new industrial customers’ – in other words, industrial customers who have not previously been connected to the natural gas supply network, whether to the transmission system or the distribution system.

The Polish Government and the Commission do not consider there to be an obligation for Member States to guarantee connection for any user. Yet in principle, Member States are not prohibited from enacting national provisions allowing final customers to connect to transmission or distribution systems on the basis of an objective criterion, such as connection capacity. Limiting the possibility of connecting to the transmission system to certain categories of consumers would not be contrary to the principle of non-discrimination if such a derogation were justified by objective technical safety standards.

In that respect, the Latvian regulatory authority recalls that the connection costs that the final customer must incur in order to connect to the transmission system could be significantly higher than those incurred for connection to the distribution system. Consequently, there is no reason to impose restrictions on the connection of final customers to the transmission network – for household customers, for example – since the costs of the connection are disproportionate to the benefits for that final customer. In other words, the final customer may have no reason to connect to the transmission system if the distribution system can provide him with a sufficient volume and pressure of natural gas, at considerably lower costs.

Agreeing with the Commission, the Latvian regulatory authority considers that the technical characteristics of a gas pipeline network and the conditions for the safe operation of transmission and distribution networks are objective criteria that must be taken into account in order to direct customers towards a given type of network.

On the other hand, the Latvian Government argues that under Article 23 of Directive 2009/73, natural gas customers have the right to be served with natural gas not only by the distribution network, but also by the natural gas transmission network. Therefore, placing natural gas customers in distinct categories is contrary to the principle of non-discrimination as set out in the directive.

The first question referred for a preliminary ruling

By its first question, the national court asks whether Article 23 and Article 32(1) of Directive 2009/73 must be interpreted as meaning that Member States must adopt a regulatory framework permitting any final customer to choose which type of network – transmission or distribution – he or she wishes to connect to and imposing on the network operator an obligation to allow him or her to connect to the chosen network.

To answer the first question, it is necessary to examine the distinction between access and connection, as I mentioned earlier in the point on the aims of Directive 2009/73. Indeed, that distinction is helpful in understanding both the scope of the principle of third-party access recognised by Article 32(1) of Directive 2009/73 and the connection of industrial customers to the transmission network under Article 23 of that directive.

As previously explained, the term ‘access’ means the right to use the natural gas system. By contrast, the term ‘connection’ corresponds to the physical connection to the network.

This interpretation is confirmed by the case-law of the Court of Justice, which had an opportunity to express its views on the principle of third-party access to the internal electricity market in the judgment in Sabatauskas. (18)

The Court has affirmed that Article 20 of 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 and repealing Directive 96/92/EC – Statements made with regard to decommissioning and waste management activities, (19) must be interpreted as defining the Member States’ obligations only in respect of the access and not the connection of third parties to the electricity transmission and distribution systems and as not laying down that the system of network access that the Member States are required to establish must allow an eligible customer to choose, at his or her discretion, the type of system to which he or she wishes to connect. Therefore, while recognising that Member States have a certain flexibility in steering network users towards a particular type of network, the Court emphasised that this should be done on a non-discriminatory basis and according to objective considerations.

To the extent that the internal market in natural gas is organised in a similar manner to the internal market in electricity and Article 32(1) of Directive 2009/73 is worded in broadly identical terms to Article 20(1) of Directive 2003/54, it could be concluded that Article 32(1) of Directive 2009/73 defines the obligations of Member States only as regards the access, but not the connection, of third parties to natural gas transmission and distribution systems, and that it does not provide that the system of access to the networks which Member States are required to implement must allow the final customer to make a discretionary choice as to which type of system to connect to. What is essential is that Member States exercise their discretion in steering users towards a particular type of network on a non-discriminatory basis and according to objective considerations.

The fact that the EU legislature sought to define the obligations of Member States only as regards third-party access, and not as regards connection, is confirmed by the content of Articles 35 and 36 of Directive 2009/73, which provide an exhaustive list of cases in which natural gas undertakings may refuse access to the third-party system.

The directive seeks to balance two interests: the recognition of free access to the network and the pursuit of an efficient energy policy. On the one hand, therefore, the principle of non-discrimination as regards third-party access must be fully applied, and on the other hand, exceptions to that principle must be provided for in certain cases, such as when new infrastructure is constructed.

The rationale behind the principle of third-party access in the natural gas sector is that potential competitors should be able to access the main networks if there are no reasonable alternatives. That principle applies not only to existing infrastructure, but also to new infrastructure. Nevertheless, the strict application of that principle could lead to distortions: the construction of new infrastructure, particularly in the natural gas sector, is costly and investors need assurance that they will be able to recover their investment. As a result, they prefer contracts that provide for long-term exclusive use, which guarantees them substantial returns. The downside of such exclusivity agreements is that they prevent potential competitors from entering the market and thus risk distorting normal competition. However, if the principle of the freedom of third-party access were applied disproportionately, even in the case of the construction of new infrastructure, it could discourage investors from financing such projects. As a result, the capacity of the natural gas network would not be increased and the entire sector could risk being harmed in the long term. (20)

In the light of such considerations, it is clear that the principle of non-discrimination relating to the implementation of a system of third-party access to transmission and distribution systems is not absolute. Similarly, the right to unlimited connection to the transmission system could have negative consequences for energy markets and ultimately harm consumers.

According to the Opinion in Sabatauskas, (21) this does not exclude the possibility that some customers have direct access to the transmission system. However, such a possibility must be guided by objective criteria, such as purchase quantity or purchase characteristics.

It is in the public interest to introduce such a limit: preventing small consumers from connecting to the transmission network could be justified by the need to optimise the operation of the transmission and distribution network. Connecting a large number of small consumers to the transmission network by increasing the number of exit points could have a negative impact on the safety and reliability of the functioning of the network. By contrast, such a limitation would have the effect of reducing the number of exit points from the transmission network and making more use of existing distribution infrastructure.

Moreover, distribution systems may not have sufficient technical capacity to support demand for significant quantities of natural gas from large customers, who would need to be directly connected to the transmission network.

Despite this, the concerns of the applicant in the main proceedings that the national regulatory framework could permit any customer to be directly connected to the natural gas transmission system do not appear to be entirely well-founded. As the Commission points out, (22) if the technical requirements laid down in Decision No 1/7 are taken into account, the connection to the transmission network is in fact possible only for a limited category of final customers.

In any event, it will be for the referring court to determine whether the right to connect directly to the transmission network should be restricted on energy policy or safety grounds (to optimise network use), for technical reasons (particularly taking into account the constraints associated with gas pressure) and for reasons to do with network efficiency. (23)

Such connection rules encourage competition in the natural gas supply market, since they allow customers to choose the type of connection according to their capacity, needs and constraints. Network operators are thus incentivised to improve the efficiency and increase the performance of their systems in order to make their services more attractive to customers.

Therefore, the answer to be given to the referring court must be that Article 23 and Article 32(1) of Directive 2009/73 should not be interpreted as requiring Member States to adopt a regulatory framework under which any final customer may choose which type of network he or she wishes to connect to – that is, whether to connect to the transmission system or to the distribution system.

Article 32(1) of Directive 2009/73 imposes on Member States obligations as regards access and not as regards the connection of third parties to the natural gas supply networks, and Member States retain a certain flexibility in steering network users to one or another type of network, whereas the requirements which Article 23 of the directive imposes on Member States as regards the connection of industrial customers to the natural gas transmission network apply only to cases where the national regulatory framework has steered a certain type of final customer towards the natural gas transmission network.

3. The second and third questions referred for a preliminary ruling

By its second and third questions, the referring court asks whether Article 23 of Directive 2009/73 must be interpreted as meaning that Member States have an obligation to adopt a regulatory framework permitting only a non-household final customer to connect to the natural gas transmission network. In the second question in particular, the national court understands the concept of non-household final customer to mean an ‘industrial customer’. In the third question, the referring court considers the ‘new … industrial customer’ – that is to say, an industrial customer who has not previously been connected to the transmission system – to be a non-household final customer.

To answer the second and third questions, it is necessary to analyse briefly the provisions of the directive as regards different users of natural gas.

Directive 2009/73 does not define the concept of ‘industrial customer’, so it is unclear which categories of customers have the right to be connected to the transmission system. Of the categories of customer referred to in point 24 of Article 2 of Directive 2009/73, the concept of ‘industrial customer’ might be classified under that of final customer since, as noted by the Polish Government, the concept of ‘industrial customer’ could refer to consumers of natural gas.

However, as emphasised by the Latvijas Republikas Satversmes tiesa (Constitutional Court), given that the final customer referred to in point 27 of Article 2 of Directive 2009/73 may be either a household or a non-household customer, an ‘industrial customer’ can only be a non-household customer within the meaning of point 26 of Article 2 of the directive – in other words, a customer who buys natural gas for non-domestic use. ‘New industrial customer’ should be understood to mean an industrial customer who has never been connected to the transmission network and who is seeking to connect to that network.

As far as the present case is concerned, Article 23 of Directive 2009/73 deals with the connection of industrial customers to the transmission system. Article 23(1) sets out the principle of non-discrimination with regard to industrial customers who want to connect to the transmission system. Conversely, paragraph 2 provides for the only two cases in which the connection of a new industrial customer cannot be refused – namely, on the grounds of possible future limitations to available network capacities or additional costs linked with necessary capacity increase. According to the latter provision, in all other cases, the transmission system operator may refuse to connect a new industrial customer to the natural gas transmission system.

The view might thus be taken that it follows from Article 23 of Directive 2009/73 that Member States have an obligation to enact a regulatory framework allowing ‘at least’ non-household customers (industrial customers) to connect directly to the natural gas transmission network.

Moreover, the connection of new industrial customers to the transmission network is, in principle, possible. Otherwise, if this possibility were simply excluded, the protection provided for in Article 23(2) would be rendered meaningless.

In that respect, the directive cannot impose an obligation on Member States to enact a regulatory framework allowing connection only for a non-household final customer (in other words, a new industrial customer), in so far as such a regulatory framework would be contrary to the principle of non-discrimination enshrined in the directive. From this point of view, there would be no restrictions on the connection to the transmission system for a new industrial customer, whereas such restrictions would exist for the industrial customer – already connected to the distribution network – but wishing to connect to the transmission system.

Furthermore, as mentioned earlier, the right of connection to the transmission system could be limited – both for existing industrial customers and for new industrial customers – on technical and safety grounds. Therefore, Member States could decide whether to authorise such connections on the basis of objective criteria.

Lastly, it is worth noting the Polish Government’s interpretation that Article 23 of the directive does not seek to establish a numerus clausus of the entities that can connect to the transmission network.

In the light of those considerations, the answer to the second and third questions raised by the referring court must be that Article 23 of Directive 2009/73 must be interpreted as meaning that Member States are not required to adopt rules under which only a final customer – whether a ‘new industrial customer’ or an ‘industrial customer’ tout court – may be connected to the natural gas transmission system. First, Directive 2009/73 does not lay down the criteria for defining the category of ‘industrial customers’ or ‘new industrial customers’; second – as seen in the general analysis and reiterated in the answer to the fourth question – it does not preclude, in principle and in certain conditions, a regulatory framework enacted by a Member State in which the transmission of natural gas includes the transmission of natural gas directly to the natural gas supply system of any category of final customer (and so not just ‘industrial customers’ or ‘new industrial customers’, as defined by the referring court).

4. The fourth question referred for a preliminary ruling

By its fourth question, the referring court asks the Court of Justice whether point 3 of Article 2 and Article 23 of Directive 2009/73 must be interpreted as meaning that they preclude a regulatory framework enacted by a Member State according to which the transmission of natural gas includes the transmission of natural gas directly to the final customer’s natural gas supply network.

In order to answer the fourth question raised by the referring court, it is worth making the distinction between the terms transmission, distribution and supply in relation to natural gas.

According to point 3 of Article 2 of Directive 2009/73, ‘transmission’ means the transport of natural gas through a network, which mainly contains high-pressure pipelines, other than an ‘upstream’ pipeline network and other than the part of high-pressure pipelines primarily used in the context of local distribution of natural gas, with a view to its delivery to customers, but not including supply; point 5 of the same article defines ‘distribution’ as the transport of natural gas through local or regional pipeline networks with a view to its delivery to customers, but not including supply; and in point 7 of Article 2, ‘supply’ means the sale, including resale, of natural gas, including LNG, to customers.

From reading the provisions in question, it cannot be inferred simply from the definition of the term ‘transmission’ that the possibility of connecting a final customer to the transmission network is excluded, since that definition includes ‘the transport of natural gas … with a view to its delivery to customers’. For the purposes of point 24 of Article 2 of Directive 2009/73, ‘customer’ also means ‘final customer’. As previously discussed, the definition of the term ‘final customer’ also covers industrial customers, who, under Article 23 of Directive 2009/73, enjoy an indiscriminate connection to the transmission system.

The accuracy of that interpretation is confirmed by the Court’s case-law on electricity. Indeed, Directive 2003/54 contains a definition of the ‘transmission’ of electricity which is similar to the concept of the ‘transmission’ of natural gas. That definition has been transposed unchanged into point 3 of Article 2 of Directive 2009/72, according to which ‘transmission’ means ‘the transport of electricity on the extra high-voltage and high-voltage interconnected system with a view to its delivery to final customers or to distributors, but does not include supply’. Therefore, since in the judgment in Sabatauskas the Court recognised the possibility of connecting final customers to the electricity grid, this possibility must also be recognised for the transmission of natural gas.

90.It is worth bearing in mind that in the Sabatauskas case, the national regulatory framework ‘obliged’ a customer, in certain conditions, to connect to the transmission system. In the present case, however, the national regulatory framework ‘allows’ any customer to connect to the transmission network in principle. Therefore, the Latvian regulatory framework should also provide detailed objective and non-discriminatory criteria which allow connection to the transmission system. Moreover, in their choice of energy policy, Member States could provide for the existence of objective conditions to allow any final customer to connect to the transmission network.

91.Furthermore, as I previously stated in my Opinion in the Elektrorazpredelenie Yug case – which the Court confirmed in its judgment – one of the criteria for distinguishing between ‘transmission’ activities and ‘distribution’ activities is the category of customers for whom the electricity is transmitted (and therefore transported). In view of the similar definition of ‘transmission’ in Article 2(3) of Directive 2009/72, there is no doubt that the concept of ‘transmission’ also includes the transport of natural gas to the final customer.

92.Lastly, the interpretation that the concept of the transmission of natural gas includes the transmission of natural gas directly to the final customer’s natural gas supply network is corroborated by the fact that Directive 2009/73 lays down the obligations of transmission system operators towards customers, including final customers. Otherwise, only distribution system operators would be bound by those obligations.

93.As the Polish Government points out, Regulation No 715/2009, as amended by Decision 2010/685/EU, which lays down the conditions for access to natural gas transmission systems, provides that the exit points connected to a single final customer are not considered relevant points which the transmission operator must comply with for the purposes of transparency requirements (paragraph 3.2(1)(a) of Annex I to that regulation). Nevertheless, the operator must publish information on the individual final customers connected to the transmission system (paragraph 3.2(2) of Annex I to that regulation).

94.Such requirements support the interpretation that the definition of transmission does not exclude the possibility of connecting a final customer to the transmission network.

95.For all the reasons stated, the answer to be given to the referring court must be that neither point 3 of Article 2 nor Article 23 of Directive 2009/73 precludes a regulatory framework enacted by a Member State according to which the transmission of natural gas includes the transmission of natural gas directly to the final customer’s natural gas supply network.

96.In the light of the foregoing considerations, I suggest that the Court answer the questions referred for a preliminary ruling put to it by the Latvijas Republikas Satversmes tiesa (Constitutional Court, Latvia) in the following terms:

(1)Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC defines the obligations of the Member States only as regards access, but not as regards the connection of third parties to natural gas transmission and distribution systems. Therefore, Article 23 and Article 32(1) of the directive should not be interpreted as requiring Member States to enact a regulatory framework allowing the final customer to choose at its discretion which type of system to connect to. It is for the national court to assess whether the certain flexibility of Member States in steering users towards a particular type of network (transmission or distribution) is exercised through a national regulatory framework that is not in breach of the principle of non-discrimination and that takes into account objective considerations, such as the safety and technical characteristics of the network. It will also be for the national court to verify the type of unbundling model chosen by the Member State and the relevant rules of the directive that apply to that model, given that Article 23 of the directive applies only to the third unbundling model, namely the independent transmission system.

(2)Article 23 of Directive 2009/73 does not require Member States to enact a regulatory framework that allows only a final customer – whether a ‘new industrial customer’ or an ‘industrial customer’ tout court – to connect to the natural gas transmission system. First, Directive 2009/73 does not lay down the criteria for defining the category of ‘industrial customers’ or ‘new industrial customers’; second, it does not preclude, in principle and in certain conditions, a regulatory framework enacted by a Member State in which the transmission of natural gas includes the transmission of natural gas directly to the natural gas supply system of any category of final customer.

(3)Point 3 of Article 2 and Article 23 of Directive 2009/73 do not preclude a regulatory framework enacted by a Member State according to which the transmission of natural gas includes the transmission of natural gas directly to the final customer’s natural gas supply network. Such a regulatory framework must be characterised by compliance with the general principle of non-discrimination and must take into account objective considerations, such as safety and the technical characteristics of the network. It will be for the national legislature and the regulatory authority – in the regulatory production phase and the implementation phase, respectively – to ensure that those conditions are met.

* Language of the case: Italian.

Directive of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (OJ 2009 L 211, p. 94).

Decision of the Council of the Latvian regulatory authority of 18 April 2019, entitled ‘Dabasgāzes pārvades sistēmas pieslēguma noteikumi biometāna ražotājiem, sašķidrinātās dabasgāzes sistēmas operatoriem un dabasgāzes lietotājiem’ (rules on connection to the natural gas transmission network for producers of biomethane, operators of liquefied natural gas networks and users of natural gas); ‘Decision No 1/7’.

See judgment of 9 October 2008, Sabatauskas and Others (C‑239/07, EU:C:2008:551, paragraphs 40 to 43 and 47).

See judgment of 22 May 2008, citiworks (C‑439/06, EU:C:2008:298, paragraphs 43 and 44).

Commission document of 22 January 2010, ‘Interpretative note on Directive 2009/72/EC concerning common rules for the internal market in electricity and Directive 2009/73/EC concerning common rules for the internal market in natural gas: the unbundling regime’.

Article 9(1) of Directive 2009/73.

Article 9(8)(a) of Directive 2009/73.

Article 9(8)(b) of Directive 2009/73.

(10) See Commission document of 25 May 2021, replies to the Court’s questions, p. 5, and document of the Republic of Latvia, replies to the Court’s questions, p. 5.

(11) Commission Opinion of 25 July 2018 pursuant to Article 3(1) of Regulation (EC) No 715/2009 [of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 (OJ 2010 L 293, p. 67)] and Article 10(6) of Directive 2009/73/EC – Latvia – Certification of JSC Conexus Baltic Grid (C(2018) 5060 final).

(12) However, in the same document, the Commission concluded that the participation of JSC Gazprom and Marguerite Gas I SARL in JSC Conexus Baltic Grid was incompatible with the requirements of Article 9(1) of Directive 2009/73.

(13) Bel, N. and Vermeeren, R., ‘Unbundling in the EU energy sector – The Commission’s practice in assessing the independence of transmission system operators for electricity and gas’, European Energy Law Report X (Roggenkamp, M. and Bjornebye, H., eds), pp. 49-64.

(14) In its replies to the questions put to it by the Court of Justice, the Latvian Government confirmed that following the Commission’s Opinion of 25 June 2018, the Latvian regulatory authority had instructed AS Conexus Baltic Grid to ensure that AS Gazprom could not, from 1 January 2020, exercise direct or indirect control over AS Conexus Baltic Grid, and to address the potential conflict of interest created by the simultaneous participation of Margarita Gas I and Margarita Gas II in both JSC Conexus Baltic Grid and in AS ‘Latvijas Gāze’. Consequently, on 21 July 2020, Marguerite and Gazprom sold all their shares in Conexus Baltic Grid.

(15) See paragraph 8 of the Polish Government’s written observations, paragraph 14 of the Finnish Government’s written observations, the document of the applicant in the main proceedings of 5 June 2021, replies to the Court’s questions, pp. 4 and 11, the Latvian regulatory authority’s document of 21 May 2021, replies to the Court’s questions, the Commission’s document of 25 May 2021, replies to the Court’s questions.

(16) See judgments of 26 October 2017, Balgarska energiyna borsa (C‑347/16, EU:C:2017:816, paragraph 33), and of 3 December 2020, Commission v Belgium(Market in electricity and natural gas) (C‑767/19, EU:C:2020:984, paragraph 48), and my Opinion in Commission v Germany(Transposition of Directives 2009/72 and 2009/73) (C‑718/18, EU:C:2021:20, point 38).

(17) Commission document of 22 January 2010, ‘Interpretative note on Directive 2009/72/EC concerning common rules for the internal market in electricity and Directive 2009/73/EC concerning common rules for the internal market in natural gas: the unbundling regime’, pp. 5 and 6.

(18) See judgment of 9 October 2008, Sabatauskas and Others (C‑239/07, EU:C:2008:551, paragraphs 45, 47 and 49).

(19) OJ 2003 L 176, p. 37. ‘1. Member States shall ensure the implementation of a system of third[-]party access to the transmission and distribution systems based on published tariffs, applicable to all eligible customers and applied objectively and without discrimination between system users. Member States shall ensure that these tariffs, or the methodologies underlying their calculation, are approved prior to their entry into force in accordance with Article 23 and that these tariffs, and the methodologies – where only methodologies are approved – are published prior to their entry into force. 2. The operator of a transmission or distribution system may refuse access where it lacks the necessary capacity. Duly substantiated reasons must be given for such refusal, in particular having regard to Article 3. Member States shall ensure, where appropriate and when refusal of access takes place, that the transmission or distribution system operator provides relevant information on measures that would be necessary to reinforce the network. The party requesting such information may be charged a reasonable fee reflecting the cost of providing such information.’

(20) van der Vijver, T., ‘Commission policy on third-party access exemption requests for new gas infrastructure’, European Energy Law Report VI (Roggenkamp, M. and Hammer, U., eds), p. 115.

(21) See Opinion of Advocate General Kokott in Sabatauskasand Others (C‑239/07, EU:C:2008:344, points 24 to 29 and 44).

(22) See paragraph 56 of the Commission’s written observations.

(23) See, to that effect, paragraph 68 of the Commission’s written observations.

(24) A wholesale or final customer of natural gas or a natural gas undertaking which purchases natural gas.

(25) See paragraph 67 of the Polish Government’s written observations. The concept of ‘industrial customers’ concerns entities that are ‘downstream’ of the transmission network, rather than ‘upstream’ of it.

(26) Customers purchasing natural gas for their own use.

(27) See judgment of 9 October 2008, Sabatauskas and Others (C‑239/07, EU:C:2008:551).

(28) See judgment of 17 October 2019, Elektrorazpredelenie Yug (C‑31/18, EU:C:2019:868, paragraphs 48 and 49): ‘In the second place, it follows from the definitions in Article 2(3) and (5) of Directive 2009/72 that, with regard to the purpose of the electricity transmission and distribution systems within the meaning of the directive, the relevant distinguishing criterion, as noted by the Advocate General in points 51 and 53 of his Opinion, is the category of customers for which the electricity transported is intended, since a transmission system serves to sell electricity to final customers or to distributors whereas a distribution system serves to sell electricity to wholesale or final customers. It follows that systems whose function is to transport electricity at extra-high and high voltage for sale to final customers or to distributors, on the one hand, and at high, medium or low voltage for sale to wholesale or final customers, on the other hand, must be considered to be transmission systems or distribution systems, respectively, and thus caught by Directive 2009/72.’

(29) Paragraphs 52 and 53 of the Polish Government’s written observations.

(30) Commission Decision of 10 November 2010 amending Chapter 3 of Annex I to Regulation (EC) No 715/2009 of the European Parliament and of the Council on conditions for access to the natural gas transmission networks (OJ 2010 L 293, p. 67).