In the first quarter of this year, natural gas prices for households decreased to 16.76 euros per megawatt hour (MWh), but for legal users – to 19.17 euros MWh, PUC representative Baiba Jakobsone informed.
In March this year, the weighted average wholesale price paid by Latvian natural gas traders for the purchase of natural gas reached the lowest level since the opening of the market – 11.5 euros per MWh. Compared to the price in March 2019, it is about twice lower.
Due to the decline in wholesale natural gas prices, retail prices also decreased.
Compared to the first quarter of 2019, the price of natural gas is 40.63% lower for households and 26.24% lower for legal users.
Jakobsone also mentioned that in the second half of this year, the natural gas tariff will be 6.7-10.8% lower for connected household customers.
Purchase prices of natural gas are mainly linked to price changes on the European natural gas exchange, such as Germany’s Gaspool, the Netherlands’s TTF and Belgium’s ZTP. The sharp fall in stock prices contributed to the lowest price level in the last 10 years, which was observed in April and May this year.
The decline in natural gas prices was mainly driven by declining economic activity in China due to the Covid-19 pandemic, as well as warm weather in Northern Europe. As a result, the demand for natural gas for heating also declined sharply. Also, lower demand for natural gas was observed for electricity generation.
The total natural gas consumption in Latvia from November 2019 to April 2020 was 21.27% lower compared to the same period a year ago.
PUC explained that the fall in prices and low demand for natural gas also contributed to the filling of natural gas storage facilities throughout Europe, including Latvia. In the case of the Inčukalns underground gas storage facility, the filling was also facilitated by the Finnish-Estonian-Latvian single natural gas market, which started operating on 1 January this year.
Jānis Negribs, Head of the PUC Market Surveillance Department, pointed out that due to the new market conditions, the interest of traders in reserving capacity at the Inčukalns underground gas storage facility for the next pumping season in 2020/2021 was very high.
“The traders’ applications for capacity reservation submitted this year significantly exceeded the technical capacity of the storage facility. This clearly contributes not only to the liquidity of the natural gas market, but also to efficient use of infrastructure, reducing the average cost of system services to users,” Negribs said.
PUC regulates public services in the energy, electronic communications, postal, municipal waste management and water management sectors.
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