GOVERNMENT OF THE REPUBLIC OF LITHUANIA

GOVERNMENT OF THE REPUBLIC OF LITHUANIA Official translation GOVERNMENT OF THE REPUBLIC OF LITHUANIA RESOLUTION No. 743 ON THE APPROVAL OF THE licensing REGULATIONS FOR THE TRANSMISSION, DISTRIBUTION, STORAGE AND SUPPLY OF NATURAL GAS 19 June 2001 Vilnius The Government of the Republic of Lithuania, acting pursuant to Article 13 of the Law on Enterprises of the Republic of Lithuania (Official Gazette No 14-395, 1990), Article 5 of the Law on Natural Gas of the Republic of Lithuania (Official Gazette No 89-2743, 2000) and in implementing Government Resolution No 88 of 25 January 2001 Concerning the Granting of Authorisations in the Implementation of the Law on Natural Gas of the Republic of Lithuania (Official Gazette No 10-286, 2001) hereby r e s o l v e s:

1. To approve the Licensing Regulations for the Transmission, Distribution, Storage and Supply of Natural Gas (attached hereto).
2. To establish that: 2.
3. on completion of each month, however by day 15 of the following month at the latest, county state tax inspectorates and territorial state social insurance bodies must notify the National Control Commission for Prices and Energy of tax underpayments by undertakings holding licences to engage in the transmission, distribution, storage and supply of natural gas (according to the position of an undertaking as of day 1 of each month) to the State Budget, municipal budgets and funds or the budget of the State Social Insurance Fund of the Republic of Lithuania; 2.
4. within 10 working days of the receipt of a request from the National Control Commission for Prices and Energy, county state tax inspectorates and territorial state social insurance bodies must submit to the National Control Commission for Prices and Energy the requested data on undertakings willing to acquire licenses to engage in the transmission, distribution, storage and supply of natural gas.
5. The Licensing Regulations for the Transmission, Distribution, Storage and Supply of Natural Gas, as approved by this Resolution, shall enter into force on 1 July
6. PRIME MINISTER ROLANDAS PAKSAS MINISTER OF ECONOMY EUGENIJUS GENTVILAS APPROVED by Order No 743 of 19 June 2001-08-21 of the Government of the Republic of Lithuania LICENSING REGULATIONS FOR THE TRANSMISSION, DISTRIBUTION, STORAGE AND SUPPLY OF NATURAL GAS I. GENERAL PROVISIONS
7. These Regulations shall regulate the procedure and terms relating to the issue, suspension and termination of licences to engage in the transmission, distribution, storage and supply (hereinafter referred to as the “license”) of natural gas (hereinafter referred to as “gas”) by gas undertaking (hereinafter referred to as the “undertaking”).
8. In these Regulations, “operating costs audit” shall mean the checking and establishment of the costs of a gas undertaking holding the relevant license, which relate to the specific type of activity subject to licensing. In these Regulations, other terms shall be used as specified in the Law on Natural Gas of the Republic of Lithuania and Law on Enterprises of the Republic of Lithuania.
9. To engage in the gas transmission, distribution, storage and supply activities, as referred to in paragraph 1 of Article 5 of the Law on Natural Gas of the Republic of Lithuania shall be permitted to those undertakings which hold the license to this effect. II. TYPES OF LICENSES
10. The types of licenses shall be as follows: 4.
11. to transmit gas; 4.
12. to distribute gas; 4.
13. to store gas; 4.
14. to supply gas.
15. A separate license shall be issued to engage in each type of activity. III. THE LICENSING AUTHORITY AND ITS AUTHORISATIONS
16. Licenses shall be issued by the National Control Commission for Prices and Energy (hereinafter referred to as the “Commission”).
17. The Commission shall have the right: 7.
18. to issue or amend the license; 7.
19. to refuse to issue or amend the license; 7.
20. to suspend the license; 7.
21. to cancel the suspension of the license; 7.
22. to terminate the license; 7.
23. to impose fines in cases provided for in the Law on Natural Gas of the Republic of Lithuania; 7.
24. to require that undertakings present their reports on activity subject to licensing. In addition, the Commission shall have other rights prescribed by laws.
25. The Commission shall: 8.
26. establish an application form for the issue or amendment of the license; 8.
27. issue (amend) the license or give to the applicant in writing a reasoned explanation of its refusal to issue (amend) the license; 8.
28. record the issued licenses in a special log book; 8.
29. control observance of the terms of activity subject to licensing; 8.
30. review the terms of activity subject to licensing; 8.
31. investigate complaints about the violations of activity subject to licensing; 8.
32. furnish public authorities and bodies with information on the issue, amendment, suspension, cancellation of suspension and termination of the licence, which is necessary for the performance of the functions vested in them. 8.
33. perform other functions, as prescribed by laws.
34. The Commission shall publish information on the issue, amendment, suspension, cancellation of suspension and termination of the license in the addendum Informational Notices to the Official Gazette. The information shall specify the name and code of the undertaking, the address of its head office, the type of activity subject to licensing, the license number and the date of the issue, suspension, cancellation of suspension and termination of the license as well as the territory where the said activity is pursued. IV. ISSUE OF LICENSES
35. Licenses to engage in the transmission, distribution and storage of gas shall be issued to those undertakings only, which possess the gas systems by the right of ownership or lawfully use such systems otherwise. Licenses to engage in the supply of gas may be issued to the undertakings the authorised capital of which constitutes at least 10 per cent of the annual volume of gas being supplied, expressed as the gas-purchase price. In addition, undertakings seeking the license to supply gas have to insure the volumes of gas they supply with the Lithuanian insurance undertakings.
36. Licenses for the transmission, distribution, storage and supply of gas shall be issued for an unlimited period. Licenses may be amended.
37. Separate licenses shall be issued to an undertaking engaged in several types of activity subject to licensing, as specified in point
39. Licenses to transmit and distribute gas shall be issued to an undertaking to pursue the activity subject to licensing within the prescribed territory. City territories may be divided into districts. If the need arises, the Commission, in concert with the local authorities, may review the boundaries of the territories. Only one gas transmission or distribution undertaking may operate within the territory specified in the license.
40. The Commission must find out whether an undertaking willing to acquire or amend the licence pays taxes administered by the State Tax Inspectorate under the Ministry of Finance, discharges obligations to the customs and pays contributions to the budget of the State Social Insurance Fund. To this end, the Commission shall submit to the responsible public authorities and bodies a request to present the necessary data on undertakings willing to acquire or amend the license. Within 10 working days of the receipt of the Commission’s request to present the necessary data on undertakings willing to acquire or amend the license, public authorities and bodies must furnish the Commission with the data indicated in the request.
41. An undertaking seeking the license shall submit to the Commission an application in the prescribed form. The application shall indicate: the name of the undertaking, its code, address of the head office, telephone and fax numbers, title of activity in respect of which the license is requested, the territory where the activity subject to licensing is planned, full name, responsibilities and telephone number of the head of the undertaking.
42. The following documents shall be attached to the application referred to in point 15 for the license to engage in the transmission, distribution and storage of gas: 16.
43. copies of the registration certificate and articles of association of the undertaking, attested by the stamp of the undertaking and signature of the head of the undertaking; 16.
44. documents attesting the place of gas systems or the territory they occupy; 16.
45. documents attesting the ownership of gas systems or the right of their use; 16.
46. an authorisation granted by the State Energy Inspectorate under the Ministry of Economy to engage in the operation of energy facilities; 16.
47. information on the internal organisational structure of the undertaking; 16.
48. the list of licenses held by the undertaking and the list of authorisations established by laws, as well as the list of licenses and authorisations the validity of which in respect of the undertaking has earlier been cancelled; 16.
49. an audited report on the operation and balance sheets of the undertaking for the last two years (provided that the undertaking has pursued the activities subject to licensing).
50. To obtain the license to engage in the supply of gas, insurance documents on the volume of gas being supplied and the documents referred to in points 16.1 and 16.5-16.7 shall be submitted in addition to the application referred to in point 15 above.
51. The Commission, in concert with the Ministry of Economy, shall establish the forms of licenses to be issued to undertakings.
52. The license shall indicate: 19.
53. the type of activity subject to licensing; 19.
54. the issuing authority; 19.
55. the license number; 19.
56. the requisites of the license holder – the name, code (registration number) and address of the undertaking; 19.
57. the grounds for issuing the license as well as the date of the issue and duration of the license; 19.
58. the territory where activity subject to licensing (gas transmission and distribution) is pursued; 19.
59. the terms of activity subject to licensing.
60. The license shall provide for the following aspects relating to activity subject to licensing: 20.
61. the security and reliability of activity; 20.
62. the efficacy of activity; 20.
63. the principles of fair competition; 20.
64. the principle of non-discrimination; 20.
65. obligations of undertakings, as prescribed by legislation, and their execution; 20.
66. transparency of activity and provision of information in relation thereto; 20.
67. the responsibility.
68. Within 30 days of the receipt of the required documents, the Commission must issue (amend) the license or give to the applicant in writing a reasoned explanation of its refusal to issue (amend) the license. Where not all documents have been submitted, the period shall be calculated from the date of the presentation of all documents. The Commission shall register the issued and amended licenses in a special log book of the prescribed form. This log book may also be kept in computerised records.
69. In the event of loss of the license by an undertaking, the Commission, within 10 working days, shall issue a duplicate of the license bearing the note “Duplicate”, provided that the undertaken has submitted a reasoned explanation and a copy of the announcement about the lost license made in the press circulated in the whole territory of Lithuania. The license may be amended – new territories and terms of activity subject to licensing may be specified therein.
70. The Commission shall be entitled to take account of the financial position of the undertaking, objective reasons for its indebtedness and take a decision to issue or amend the license, as well as not to suspend or terminate licenses in respect of undertakings which are indebted to the State Budget of the Republic of Lithuania, municipal budgets and funds, the taxes paid to which are administered by the State Tax Inspectorate under the Ministry of Finance, to the budget of the State Social Insurance Fund, as well as in respect of undertakings which fail to discharge their obligations to the customs, if the refusal to issue or amend the license and the suspension or termination thereof is likely to threaten the safe supply of customers with gas. V. REFUSAL OF THE LICENSE
71. The issue or amendment of the license may be refused in the following cases: 24.
72. not all required documents have been submitted; 24.
73. false documents have been submitted; 24.
74. the submitted documents do not meet the requirements established to them; 24.
75. the undertaking systematically violates the terms of activity subject to licensing or fails to discharge them, in due time fails to pay taxes administered by the State Tax Inspectorate under the Ministry of Finance (except where the payment of taxes, surcharges for late payment and fines is postponed pursuant to the procedure prescribed by legal acts of the Republic of Lithuania, or where tax dispute concerning such taxes, surcharges for late payment or fines takes place, or where the undertaking, pursuant to the procedure prescribed by the Government of the Republic of Lithuania, has appealed to the Commission for consideration of taxpayers’ requests for settlement for the said taxes, surcharges for late payment and fines in shares and assets), fails to discharge its obligations to the customs and does not pay contributions to the budget of the State Social Insurance Fund, or in case of existing statements presented in writing by the national supervisory authorities on the application of sanctions for the violations of the terms of activity subject to licensing.
76. The decision on the refusal of the license shall be taken by the Commission, with account being taken of safeguarding the interests of customers. The Commission must find out whether gas undertakings pay taxes established by laws. National supervisory authorities and bodies must submit to the Commission information on the debts of gas undertakings and violations of the terms of activity subject to licensing. VI. LICENSE FEES
77. A license fee shall be levied for issuing and amending licenses in the procedure prescribed by the Government of the Republic of Lithuania. VII. THE TERMS OF ACTIVITY SUBJECT TO LICENSING
78. License holders must observe the requirements of laws of the Republic of Lithuania, resolutions of the Government of the Republic of Lithuania, these Regulations, other legal acts regulating the activities of enterprises, settlement and the payment of taxes, as well as regulatory enactments relating to environmental protection, sanitation, hygiene, safety at work, operation of potentially hazardous equipment, fire protection and other areas.
79. License holders may not, in their own name, authorise other undertakings and their agents to pursue the activity indicated in the license and may not transfer such a right to them under a contract.
80. The original copy of the license shall be kept at the head office of the undertaking at the address specified in the license. A copy of the license, attested by the signature of the head of the undertaking and the stamp of the undertaking, must be given for safekeeping in the undertaking’s branches.
81. License holders must submit to the Commission information on the activities of the undertaking pursuant to the procedure prescribed by the Commission.
82. An undertaking, in the context of commercially sensitive information about business partners, shall keep to the procedure established for the use of confidential information, and shall not use such information and prevent others from using it for unfair commercial advantage.
83. In extreme conditions in the energy sector, an undertaking shall act in accordance with the legal acts regulating activities in extreme conditions.
84. In the Republic of Lithuania, the transmission, distribution, storage and supply of gas, the acquisition of which has not been attested by the documents having legal force and which has no documents attesting the quality thereof, or the quality indicators of which do not meet the requirements established in the Republic of Lithuania, shall be prohibited.
85. An undertaking engaged in the gas transmission activities must: 34.
86. transmit gas in prices, which may not exceed the upper price thresholds set by the Commission for the transmission of gas; 34.
87. ensure secure, reliable, economical and efficient operation of the gas transmission system; 34.
88. ensure secure, reliable and efficient transmission of gas in the volume and of the quality established under the contract; 34.
89. ensure, pursuant to the prescribed procedure, that the capacity of the gas transmission system is sufficient to meet the needs of customers; 34.
90. localise expeditiously and liquidate emergencies and breakdowns in the gas transmission systems; notify the Ministry of Economy of each case of emergency in the gas transmission system; 34.
91. pursuant to the procedure prescribed by legislation, connect the systems of other undertakings or customers to the transmission systems; 34.
92. develop and operate gas accounting systems, give an accounting of the marketed volume of gas; 34.
93. within 30 days of the end of the accounting quarter, submit to the Commission information on the activity subject to licensing and the reports thereon; 34.
94. make, on an annual basis, an analysis of the use of the gas transmission system and submit to the Ministry of Economy and Commission data on the perspectives with regard to the development of the gas transmission system; 34.
95. pursuant to the procedure prescribed by legislation, confer a right to gas suppliers, free customers, distribution undertakings and enterprises transporting gas in transit to make use of the gas transmission system; 34.
96. not discriminate the system users; 34.
97. ensure balanced operation of interconnected gas systems existing in the whole territory of Lithuania – perform the functions of the operator of the gas system; 34.
98. communicate information to customers; 34.
99. keep separate accounts for the gas transmission activities; 34.
100. carry out, on completion of each year, an audit of the operating costs of the activity subject to licensing and notify the Commission of the results thereof; 34.
101. inspect, once a year, the gas systems of the final customers for the purpose of verifying their compliance with the safety requirements; 34.
102. develop the activities consistently and contribute to the co-ordinated and effective planning of the energy supply.
103. An undertaking engaged in the gas distribution activities must: 35.
104. distribute gas in prices, which may not exceed the upper price thresholds set by the Commission for the distribution of gas; 35.
105. ensure secure, reliable, economical and efficient operation of the gas distribution system; 35.
106. ensure secure, reliable and efficient distribution of gas in the agreed volume and of the agreed quality; 35.
107. ensure, pursuant to the prescribed procedure, that the capacity of the gas distribution system is sufficient to meet the needs of customers; 35.
108. localise expeditiously and liquidate emergencies and breakdowns in the gas distribution systems; 35.
109. pursuant to the established procedure, connect the systems of other undertakings or customers to the gas distribution systems of the undertaking; 35.
110. develop and operate gas accounting systems, give an accounting of the volume of the distributed gas; 35.
111. within 30 days of the end of the accounting quarter, submit to the Commission data on the activity subject to licensing and the reports thereon; 35.
112. make, on an annual basis, an analysis of the use of the gas distribution system and submit to the Ministry of Economy and Commission data on the perspectives with regard to the development of the gas distribution system; 35.
113. pursuant to the procedure prescribed by legislation, confer a right to gas suppliers and free customers to make use of the gas distribution system; 35.
114. not discriminate the system users; 35.
115. co-operate with the operator of the gas system and carry out the operator’s instructions to ensure balanced operation of the gas system; 35.
116. communicate information to customers on issues relating to the safe operation of the gas distribution systems and efficient use of gas; 35.
117. operate at its own expense the common use systems installed in blocks of flats, unless the customers require otherwise; 35.
118. keep separate accounts for the gas distribution activities; 35.
119. carry out, on completion of each year, an audit of the operating costs of the activity subject to licensing and notify the Commission of the results thereof; 35.
120. inspect, once a year, the gas systems of the final customers for the purpose of verifying their compliance with the safety requirements; 35.
121. develop the activities consistently and contribute to the co-ordinated and effective planning of the energy supply.
122. An undertaking engaged in the gas storage activities must: 36.
123. stock gas in a storage facility in prices, which may not exceed the upper price thresholds set by the Commission for the storage of gas; 36.
124. ensure secure, reliable, economical and efficient operation of the gas storage system; 36.
125. ensure secure and reliable storage of gas in the storage facility in the volume and of the quality established under the contract, as well as the transmission of gas to the transmission system; 36.
126. localise expeditiously and liquidate emergencies and breakdowns in the system; notify the Commission and the Ministry of Economy of each case of emergency in the gas storage facility; 36.
127. develop and operate the gas accounting systems, give an accounting of the volume of gas in storage; 36.
128. within 30 days of the end of the accounting quarter, submit to the Commission a report on the activity subject to licensing; 36.
129. make, on an annual basis, an analysis of the use of the gas storage system and submit to the Ministry of Economy and Commission data on the perspectives with regard to the development of the gas storage system; 36.
130. co-operate with the operator of the gas system and carry out the operator’s instructions to ensure balanced operation of the gas system; 36.
131. keep separate accounts for the gas storage activities; 36.
132. carry out, on completion of each year, an audit of the operating costs of the activity subject to licensing and notify the Commission of the results thereof; 36.
133. develop the activities consistently and contribute to the co-ordinated and effective planning of the energy supply.
134. An undertaking engaged in the gas supply activities must: 37.
135. ensure secure, reliable and efficient supply of gas in the agreed volume and of the agreed quality to customers and gas undertakings; 37.
136. within 30 days of the end of the accounting quarter, submit to the Commission information on the activity subject to licensing and its accounts; 37.
137. make an analysis (gas market) of the supply of gas to customers and submit to the Ministry of Economy and Commission data on the perspectives with regard to the development of the gas system; 37.
138. to co-operate with the operator of the gas systems and carry out the operator’s instructions to ensure balanced operation of the gas system; 37.
139. develop the activities consistently and contribute to the co-ordinated and effective planning of the energy supply. 37.
140. keep separate accounts for the gas supply activities.
141. With the intention to terminate the activity subject to licensing, an undertaking must inform the Commission thereof not later than six months in advance.
142. At least once a year and in cases of complaint, the Commission must check compliance of an undertaking with the terms of activity subject to licensing.
143. License holders shall: 40.
144. have the right to engage in activities specified in the license; 40.
145. have the right to demand an explanation from the Commission where the issue or amendment of the license is delayed or refused, or where the license is suspended or terminated; 40.
146. have the right, in accordance with the procedure prescribed by laws, to appeal to court about the Commission’s activities and decisions relating to the issue, amendment, suspension, cancellation of suspension and termination of the license; 40.
147. have other rights established by laws. VIII. RESPONSIBILITY FOR THE VIOLATIONS OF ACTIVITY SUBJECT TO LICENSING
148. In the event of violations of activity subject to licensing, the license may be cancelled, its validity suspended or a fine may be imposed on the undertaking concerned.
149. The validity of the license may be suspended if: 42.
150. it becomes clear that the undertaking has submitted false data to obtain the license; 42.
151. the undertaking systematically violates the terms of activity subject to licensing; 42.
152. the license holder fails to pay taxes administered by the State Tax Inspectorate under the Ministry of Finance (except where the payment of taxes, surcharges for late payment and fines is postponed pursuant to the procedure prescribed by legal acts of the Republic of Lithuania, or where tax dispute concerning such taxes, surcharges for late payment or fines takes place, or where the undertaking, pursuant to the procedure prescribed by the Government of the Republic of Lithuania, has appealed to the Commission for consideration of taxpayers’ requests for settlement for the said taxes, surcharges for late payment and fines in shares and assets), fails to discharge its obligations to the customs and does not pay contributions to the budget of the State Social Insurance Fund; cases of deliberate tax law violations, as laid down in Article 49 of the Law on tax Administration of the Republic of Lithuania, have been established, and the order of the State Tax Inspectorate under the Ministry of Finance concerning the imposition of a fine on the undertaking pursuant of paragraph 3 of Article 50 of the said Law is in force.
153. The validity of the license may be terminated if: 43.
154. the undertaking, to which the license has been suspended, fails to eliminate violations of the terms of activity subject to licensing within the prescribed period; 43.
155. the undertaking, to which the license has been suspended, continues to pursue the activity subject to licensing; 43.
156. the undertaking is in the process of liquidation or reorganisation leading to the termination of its activities; 43.
157. the license holder submits an application to terminate the license.
158. A decision on the termination, suspension, cancellation of suspension shall be taken by the Commission. The decision shall be notified to the undertaking within 5 working days of the adoption of the decision.
159. The undertaking must return the license, the validity of which has been terminated, to the Commission within 5 working days of the publication of the fact of termination in the addendum Informational Notices to the Official Gazette.
160. Fines for the violations of activity subject to licensing shall be imposed by the Commission in the procedure prescribed by laws.
161. A decision on the termination or suspension of the license, provided that it has an effect on the safe supply of customers with gas, may become effective not earlier than two months after the adoption of the decision. The Commission must notify the Ministry of Economy and the Government of the Republic of Lithuania of the planned decision.
162. Where the license is terminated, suspended, the license holder refuses the license, terminates the activities, or where the safe supply of customers with gas is threatened, the Commission shall forward to the Government of the Republic of Lithuania a proposal to take over management of the undertaking or redeem its assets until the new license has been issued. IX. FINAL PROVISIONS
163. The Commission, State Tax Inspectorate under the Ministry of Finance, territorial state tax inspectorates, Police Department under the Ministry of the Interior and national supervisory authorities, each within its competence, shall control the activities of undertakings holding licenses to engage in the transmission, distribution, storage and supply of gas and supervise their compliance with the terms of activity subject to licensing.
164. National supervisory authorities must forthwith inform the Commission in writing of the instances of violation of the terms of activity subject to licensing established in the undertakings.
165. Complaints about the violations of activity subject to licensing shall be investigated by the Commission which shall be held liable for its decisions in accordance with the procedure established by laws.
166. Disputes over the terms of activity subject to licensing and the observance of these Regulations shall be settled pursuant to the procedure established by the Law on Administrative Proceedings of the Republic of Lithuania (Official Gazette No 13-308, 1999, No 85-2566, 2000).