LIETUVOS RESPUBLIKOS

LIETUVOS RESPUBLIKOS REPUBLIC OF LITHUANIA LAW AMENDING THE LAW ON NATURAL GAS 20 March 2007 No X-1054 Vilnius Article 1. Republic of Lithuania Law Amending the Law on Natural Gas The Law on Natural Gas of the Republic of Lithuania shall be amended and set forth to read as follows: “REPUBLIC OF LITHUANIA LAW ON NATURAL GAS CHAPTER I GENERAL PROVISIONS Article 1. Purpose of the Law 1. This Law shall establish the general principles of organisation and functioning of gas sector activities, the operation of gas enterprises and their interrelation as well as relations with customers when supplying, distributing, transmitting, liquefying and storing natural gas. 2. The provisions of this Law shall be in compliance with the EU legal acts listed in the Annex to this Law. Article 2. Main Purposes of the Law The main purposes of the Law shall be: 1) creating legal condition for promoting competition in the natural gas sector; 2) ensuring the possibility for the eligible customers to choose the supplying company; 3) ensuring economic security of natural gas transmission, distribution, storage and supply; 4) ensuring customer protection. Article 3. Definitions 1. “Balancing” means equation in the transmission and/or distribution systems of the delivered and received amount of natural gas (hereinafter referred to as gas). 2. “Household customers” means natural persons purchasing gas for their own household consumption. 3. “Natural gas undertaking” means any legal person carrying out at least one of the following functions: production, transmission, distribution, supply, purchase or storage of natural gas, which is responsible for the commercial, technical and/or maintenance tasks related to those functions. 4. “Storage of gas in the pipeline” means storage of compressed gas compressing it in the gas transmission systems. 5. “Gas sector” means energy branch directly connected with natural gas supply, distribution, transmission, liquefaction, storage and transit. 6. “Gas transit” means transportation through the territory of the state of gas originating in the territory of a country that is not an EU Member State and is intended for the territory of that and/or third state. 7. “Natural gas” means a mixture of hydrocarbons extracted from the underground which in normal conditions is in the gaseous state, also liquefied natural gas, biogas, gas from biomass and gases of other types that may be technically and safely supplied to natural gas system or transported by it. 8. “Natural gas storage facility” means a facility used for the stocking of natural gas and owned and/or operated by a natural gas undertaking, including the part of LNG facilities used for storage but excluding the portion used for production operations, and excluding facilities reserved exclusively for transmission system operators in carrying out their functions. 9. “Horizontally integrated undertaking” means an undertaking engaged in at least one type of the following activity: gas transmission, distribution, storage, extraction or supply and a non-gas activity. 10. “Long-term planning” means the planning of supply and transportation capacity of natural gas undertakings on a long-term not shorter than 3 year basis with a view to meeting the demand for natural gas of the system users, diversification of resources and securing supplies to the customers. 11. “Integrated natural gas undertaking” means vertically or horizontally integrated natural gas undertaking. 12. “Interconnector” means a transmission line which crosses or spans a border between the EU Member States for the sole purpose of connecting the national transmission systems of these Member States. 13. “Interconnected system” means a number of systems, the customers’ systems excluding, which are linked with each other. 14. “Storage” means gas storage and keeping in a natural gas storage facility. 15. “Storage system operator” means a natural or legal person who carries out the function of storage and is responsible for operating a storage facility. 16. “Eligible customers” means customers who are free to purchase gas from the supply undertaking of their choice. 17. “The new areas where natural gas is being introduced” means the country’s territory where the systems have not been installed and the licence to engage in the territory in natural gas transmission or distribution activity have not been issued. 18. “Non-household customers” means customers purchasing natural gas which is not for their own household use. 19. “Independent supply” means supply of gas to eligible customers. 20. “Assigned supply” means supply of natural gas in the need to fulfil public service obligations. The assigned supply may be carried out for household customers. 21. “Services” means services provided to system users and customers by gas undertakings: gas transmission, distribution, liquefaction, supply, storage, connection of customers’ systems, balancing or any other services related to natural gas. 22. “Transmission” means the transport of natural gas through a high pressure transport network other than an upstream pipeline network with a view to its delivery to customers, but not including supply. 23. “Transmission system (main pipeline)” means high-pressure pipeline for the transmission of natural gas from the gas fields, LNG systems to natural gas storage facilities, distribution pipeline networks or gas-consuming facilities to gas distribution stations inclusively, as well as structures, installations and means ensuring the functioning of these pipelines. 24. “Transmission system operator” means a natural gas undertaking which carries out the function of transmission within the territory indicated in the licence and is responsible for the maintenance of transmission system and, as necessary, for its development and for ensuring the long-term ability of the system to meet reasonable demands for the transportation of gas. 25. “Security” means security of supply of natural gas and its technical safety. 26. “LNG system (liquefied natural gas facility) which is used for the liquefaction of natural gas or the importation, offloading and storage of natural gas and for re-gaseification of LNG, including ancillary services and temporary storage necessary for the re-gaseification process and subsequent delivery to the transmission system, but shall not include any part of LNG terminals used for storage. 27. “LNG system operator” means a natural gas undertaking which carries out the function of liquefaction of natural gas or the importation, offloading and re-gaseification of LNG and is responsible for operating a LNG facility. 28. “System” means any transmission networks, distribution networks, LNG facilities, and/or storage facilities owned and/or operated by a natural gas undertaking, including linepack and its facilities supplying ancillary services and those related to undertakings providing access to transmission, distribution and LNG. 29. “System users” means persons supplying natural gas to the system or to whom it is supplied from the system and who have concluded a contract with the system operator. 30. “Distribution” means the transport of natural gas through a distribution network, supply excluding. 31. “Distribution system (distribution pipeline)” means low-pressure pipeline for the transport of natural gas from the natural gas distribution stations of the main pipeline to the customer’s systems, as well as structures, installations and means ensuring the functioning of the pipeline. 32. “Distribution system operator” means a natural gas undertaking which carries out the function of distribution within the territory indicated in the licence and is responsible for the maintenance of distribution system and, as necessary, for its development and for ensuring the long-term ability of the system to meet reasonable demands for the distribution of natural gas. 33. “Liquefaction” means liquefaction of natural gas. In this Law attributed to liquefaction shall also be receipt, storage and re-gaseification of liquefied gas. 34. “Related undertakings” means every undertaking connected with a gas undertaking by common participants (participation), control (when 20 percent or more shares or the voting right are held, but excluding a subsidiary undertaking) or managers irrespective of its legal form, also undertakings owned by the same shareholders. 35. “Take or pay” contract is a contract for the supply (purchase-sale) of natural gas one of the main conditions of which is commitment to pay for the natural gas intended to be purchased but not taken. 36. “Supply” means the sale and/or resale, of natural gas to customers and its delivery to the system. 37. “Supply undertaking” means any undertaking which is engaged in the supply of natural gas. 38. “Direct line” means a natural gas pipeline complementary to the interconnected system. 39. “Managing personnel” means members, heads of the legal person‘s managing bodies with a decision-making position, having the right to give directions or orders to other employees the nature of whose work is directly linked with at least one type of activity carried out by the gas undertaking: natural gas production, transmission, liquefaction, supply and storage. 40. “Customers” means legal or natural persons who purchase natural gas. 41. “Customer system” means pipelines and facilities installed in the customer’s land plot or immovable object and assigned for natural gas access from the main gas pipeline or distribution network and safe use thereof for the needs of the customer. 42. “Vertically integrated undertaking” means a natural gas undertaking or a group of undertakings whose mutual relationships are defined in paragraph 3 of Article 3 of Council Regulation (EEC) No 4064/89 on the control of concentrations between undertakings and where the undertaking/group of undertakings is/are performing at least one of the functions of transmission, distribution, liquefaction or storage and at least one of the functions of production or supply of natural gas. 43. “Local system of common use” means a part of the distribution system installed in a limited territory whereby natural gas is supplied to at least two customers, which is owned by the person/persons or managed by him/them. CHAPTER II GENERAL RULES OF ORGANISATION OF GAS SECTOR ACTIVITIES Article 4. General Principles of Organisation of Gas Sector Activities 1. In compliance with the requirements of this Law natural gas undertakings shall seek by their activities to create a competitive, safe, balanced natural gas market and not to discriminate against other natural gas undertakings and customers taking into account their rights and duties. 2. The natural gas undertakings must function efficiently and economically, ensure security, regularity, quality of supply, customer protection and nature protection requirements. Article 5. Public Service Obligations 1. The Government or the institution authorised by it shall be entitled to impose on gas undertakings, in the general economic interest, public service obligations related to security, including security of supply, regularity, quality and price of supply, and environmental protection, including energy efficiency, and establish the list of these obligations, the rules of their performance and financing. The performance of these obligations shall be financed with funds received for the transmission, distribution, storage and/or supply of natural gas. The performance of these obligations may be financed with the State budget and other funds. The Government or the institution authorised by it shall submit to the European Commission information on the imposed public service obligations. These obligations shall be clearly defined, transparent, non discriminatory, verifiable. 2. The Government or the institution authorised by it shall have the right to adopt decisions on the installation or development of the main pipeline, natural gas storage facility and liquefied natural gas (LNG) facilities required to ensure safety. The natural gas undertakings and the State Prices and Energy Control Commission (hereinafter - the Commission) must implement such decisions. Article 6. Relations between Natural Gas Undertakings, Customers and System Users as well as the Concluded Contracts 1. The relations between the natural gas undertakings and system users shall be based on contracts. Contracts between natural gas undertakings and household customers shall be public. 2. The following shall be indicated in the contracts: the name of the gas undertaking, its legal form, registered office, number, the amount of gas, its quality, price, the procedure of supply, conditions of restriction or termination of natural gas supply, the procedure of provision of information on the prices of natural gas, provided services, the conditions of provision of services, the commitments, liability of the parties, payment procedure, the term of the contract, contract amendment and termination conditions, dispute settlement procedure. The gas undertakings shall notify the system users and customers of the contract terms in advance, not later than one month before the conclusion of the contracts or changing of the contract terms. Public contracts with household customers must be concluded following standard terms binding on both parties. 3. The Government or the institution authorised by it, upon agreement with the National Consumer Rights Protection Board under the Ministry of Justice, shall approve the standard terms of purchase-sale contracts with household customers. 4. The transmission, distribution, supply and use of natural gas without a contract or not according to the contract terms shall be prohibited. The customer or system user using natural gas illegally must compensate for the damage caused to the natural gas undertakings. Article 7. Customer Protection 1. The natural gas undertaking must ensure safe transmission, storage and supply to the customers of natural gas. Natural gas undertakings transmitting, storing, distributing and supplying natural gas to customers must comply with the fixed prices stated in paragraphs 1, 2 and 3 of Article 23 of this Law. 2. The customers shall be entitled to claim damages from gas undertakings if the gas undertaking does not ensure the quality requirements of gas and supplied services. 3. Natural gas undertaking shall inform the customers of the efficient consumption of natural gas, the services provided by the natural gas undertaking, terms of service provision, natural gas and service prices, prices and terms of access to the systems and any intention to modify contractual conditions. The natural gas undertakings shall notify the customers directly (in writing or otherwise) not later than one month before the intended modification of contractual conditions and prices. The information of natural gas undertakings regarding the costs, system operation, modernisation, development, investment into system development, price and tariff structure, information on service provision shall be public. 4. Natural gas undertakings must offer the customers two or more payment methods. The method of payment shall be chosen by the customer. 5. The customers shall have the right to: 1) freely choose their supplier; household customers shall have the right to freely and without payment choose the supplying undertaking from 1 July 2007. 2) to receive from natural gas undertakings the following information: the name of the natural gas undertaking, the registered address, the number and legal form; the services provided and the terms of the provision thereof; the prices of gas, services and the procedure of provision of information on natural gas; the time periods of the contracts, their conclusion and termination conditions; the conditions of provision of compensation; dispute settlement procedure; 3) to withdraw from the contracts in case of modification of the contractual conditions if the customers do not accept the new conditions. Household customers shall have the right to unilaterally and without charge withdraw from the contract according to the conditions laid down in Paragraph 1 of Article 6.390 of the Civil Code. 4) to receive from the natural gas undertakings proposals on the methods of payment and to choose the method of payment. 6. The natural gas undertaking may restrict or terminate the transmission, distribution or supply of natural gas: 1) when it is established that the customer’s system poses danger to human life, health or property; 2) in case the customer or system user fails to timely pay as prescribed for the natural gas supplied or services provided; 3) in case of an accident, energy emergency; 4) due to emergency repairs or works relating to the connection of other customer’s systems, having notified the customers according to the procedure established in the contracts; 5) in case of termination or restriction of natural gas supply to the territory of the Republic of Lithuania. 7. The Government or the institution authorised by it shall establish quality requirements for the services provided by natural gas undertakings and shall have the right to set the rules for the implementation of consumer protection measures. Article 8. Long Term Planning, System Development and Connection of New Customers 1. In compliance with the provisions of the National Energy Strategy the transmission, distribution, storage and LNG system operators shall draw up yearly and long-term, not less than three yearly, plans for the development of transmission, distribution, LNG systems and natural gas storage facilities with a view to security, regularity, quality of supply, consumer protection and environmental protection requirements. The natural gas undertakings must agree with the Commission the yearly system development plans with the specific list of objects. 2. Only the licence holder shall have the right to install or develop the transmission, distribution systems in the territory specified in the operator’s licence 3. The right to install new transmission or distribution systems in the territory where the natural gas systems are being newly installed shall be vested in the legal or natural persons who have acquired the right by way of competition. System operators to whose systems new natural gas distribution systems are being connected must connect the systems. The decision to permit installation of new systems shall be adopted by the Commission. The Commission’s decision to permit installing new transmission or distribution systems shall be a binding condition for the issuance of a permit to build these objects according to the procedure established by the Law on Construction. The Government or the institution authorised by it shall approve the rules for installing new systems in the new territory where the natural gas systems are being installed. 4. The transmission or distribution system operators must connect to their systems in the territory specified in the licence the new customers’ systems according to the rules laid down by the Government or the institution authorised by it. 5. The Commission shall work out and approve the methodology of establishing connection rates. The Commission shall approve the connection rates of new household customer systems. The transmission or distribution system operators shall have the right to participate in establishing the methodology of establishing the connection rates. 6. The natural gas undertaking shall cover economic costs of system development and new customer connection. The new customers shall cover the costs exceeding economic costs of connecting new customers. 7. The costs of connecting new customers to the available natural gas systems shall not be recognised as economically justified if they result in a price increase for the existing gas customers. In the new territories where the natural gas systems are being installed such natural gas transmission and distribution price may be established which would cover the investments. 8. The natural gas undertakings shall have the right to supply natural gas to the eligible customers through the direct line. The eligible customers shall have the right to be supplied with natural gas from the natural gas undertakings through a direct line when the natural gas undertaking refuses to grant access to the natural gas system in the cases provided for in paragraph 4 of Article 19 of this Law. If the natural gas undertaking refuses to grant access to the natural gas system in the cases specified in paragraph 4 of Article 19 of this Law, the dispute shall be settled by the Commission. The decision on the installation and terms of a direct line shall be taken by the Commission. The decisions on the installation of a direct line taken by the Commission shall be binding on both parties, they must be substantiated, objective, transparent and non-discriminatory with respect to other customers. Authorisation for the installation of a direct line shall not be granted if the existing capacity is not saturated. Article 9. Interoperability of Systems 1. The transmission and distribution systems, natural gas storage facilities, LNG facilities should meet installation and operational requirements so as to ensure interoperability and safe activities of the systems, storage facilities and other facilities. Dispatching of transmission, distribution and storage systems must be ensured. 2. The Government or the institutions authorised by it shall adopt legal acts which establish the requirements specified in paragraph 1 of this Law. The Government or the institution authorised by it shall submit to the European Commission information about the rules regulating connection to the system. Article 10. Licences in Natural Gas Sector 1. Legal persons seeking to engage in transmission, liquefaction, storage, distribution, system operator or natural gas supply activity must receive a licence for the appropriate activity. 2. The following activity shall be subject to licensing in the natural gas sector: 1) transmission; 2) distribution; 3) storage; 4) liquefaction; 5) supply. 3. Licences shall be issued, suspended, revoked and the activities subject to licensing shall be controlled by the Commission. The licensing rules shall be approved by the Government. Transmission and distribution territories in which the operator has exclusive rights for the performance of activities shall be indicated transmission and distribution licences. The Commission shall provide to the European Commission information about the reasons of refusal to issue the licences. 4. The Commission shall have the right to commit the natural gas undertaking holding a supply licence to perform assigned supply according to the procedure established by the Government. 5. Persons seeking to be issued a licence to engage in the activity specified in this Article must be registered according to the procedure established by legal acts and be ready to duly comply with the requirements laid down in the licensing rules. Natural gas undertakings which are engaged in the licensed activity must have the authorised capital of at least LTL 1 million. The requirement shall not be applicable to activities of systems of common use. 6. One transmission system operator shall be appointed on the Commission’s decision for transporting gas in the linked transmission system. 7. When the natural gas undertakings terminate their activities and security of natural gas supply to customers is compromised, the Government, seeking to ensure security and meet the public demands, shall have the right to adopt a decision regarding the takeover of the property management of the undertaking or property buyout. The Government shall approve the rules of the takeover or buyout of property of such natural gas undertakings. 8. The persons operating the transmission, liquefaction, storage, distribution systems must possess a gas facilities exploitation certificate issued according to the procedure established by the Law on Electricity. Article 11. Gas Transit Natural gas shall be transported by transit by mutual agreement of the economic entities, under contracts and taking into account the capacity of the available transmission systems and the priority of meeting of demand of the country’s system users. The procedure for using transmission system for transporting natural gas by transit shall be established in the rules specified in paragraph 2 of Article 18 of this Law. CHAPTER III SYSTEM OPERATORS AND SUPPLY Article 12. Unbundling of Activities 1. In natural gas undertakings transmission, liquefaction, storage, distribution activities must be unbundled. Unbundling shall be effected by establishing a subsidiary or a separate undertaking. 2. An integrated natural gas undertaking supplying natural gas to less than 100 000 customers must not unbundle the activities and establish a subsidiary or a separate undertaking. 3. Performing transmission, liquefaction, storing, distribution shall be permitted in one natural gas undertaking. Other non-gas activity must be unbundled by establishing a subsidiary or a separate undertaking. The performance of other non-gas activity and supply activity shall be permitted in one natural gas undertaking. 4. The transmission, storage, distribution or liquefaction activity managing personnel shall act independently and may not take part in the management of the integrated natural gas undertaking. 5. Decisions on the assets necessary to operate, maintain or develop the system shall be taken by the transmission, storage, distribution or LNG system operator of his own accord. The parent company shall have the right to approve the system operators’ annual financial plan, the annual rate of return on assets and the level of indebtedness. These provisions must be compatible with the regulated activity indicators of natural gas undertakings. A parent company may not give instructions to system operators regarding the activities of system operators and system management. Assets of the transmission system shall be assigned to performing transmission activity. Article 13. Duties of System Operators 1. Every transmission, storage, distribution and/or LNG system operator shall: 1) operate, maintain and develop secure, reliable and efficient transmission, storage, distribution and/or LNG systems with due regard to the environment; 2) refrain from discriminating between system users, particularly in favour of its related undertakings; 3) provide any other system operator or system user with information they need for efficient access to the system, also the interconnected system; 4) every year prepare annual reports on the activities and on ensuring the security and submit them to the Commission and the Ministry of Economy. The contents of system operators’ annual activities and security ensuring reports shall be established by the Ministry of Economy 2. Transmission or distribution system operators upon agreement with the Commission shall lay down system balancing rules. The terms of system balancing laid down in balancing rules must be objective, transparent and non-discriminatory. The requirements of system balancing rules shall be binding on the customers and system users except for household users. System balancing rules shall be published in the supplement Informaciniai pranešimai to the official gazette Valstybės žinios. Article 14. Local System of Common Use 1. Local system of common use shall be a constituent part of the distribution system and applied to it shall be the same requirements as to the distribution system, with the exceptions established by this Law. 2. The owner(

1. s)of the local system of common use must grant access to the system, to connect systems of other users and ensure safe and efficient functioning of the system. The Commission shall lay down the rules for using the local system of common use which must be published every year or in case of changes in the terms. The terms laid don in the rules for the use of the local system of common use must be objective and non-discriminatory. 3. The owner(
2. s)of the local system of common use shall have the right to carry out distribution activity on his own according to the procedure established by this Law or must conclude a contract with the natural gas undertaking possessing a distribution licence. Article 15. Confidentiality of Information The system operators shall preserve the confidentiality of commercially sensitive information obtained in the course of carrying out its business. It shall be prohibited to use commercially sensitive information without an authorisation and to discriminate against the recipients of information. Article 16. Supply 1. Natural gas shall be supplied to customers by supply undertakings holding a supply licence. The supply undertaking shall be responsible for the supply to the system of natural gas complying with the quality requirements, for the regularity of natural gas supply and must participate in balancing gas flows. 2. The supply licence shall entitle the supply undertaking to supply natural gas to customers and natural gas undertakings. 3. Assigned supply may be performed to household customers and customers to those objects energy generation capacity whereof is below 5 MW and which contain no reserve fuel stocks. The eligible customer shall have the right to choose another supply enterprise than the one performing assigned supply. 4. The assigned supply undertaking must conclude contracts with system operators regarding natural gas transportation and shall be responsible for the supply of natural gas up to the customers’ systems. 5. The supply undertaking must submit to the Commission and Ministry of Economy information about the principal terms of the concluded purchase-sale contracts for monitoring the security of natural gas supply. 6. The supply undertaking shall prepare annual reports on the activities and on ensuring the security and submit them to the Commission and the Ministry of Economy; The contents of annual activity and security ensuring reports of supply undertakings shall be established by the Ministry of Economy. CHAPTER IV UNBUNDLING AND TRANSPARENCY OF ACCOUNTS Article 17. Accounting of a Natural Gas Undertaking 1. The natural gas undertaking shall handle separate accounting of every activity – transmission, liquefaction, distribution, storage, supply to non-household and household customers. The Commission shall have the right to obligate gas undertakings to handle separate accounting connected with the fulfilment of public service obligations and with the assigned supply activity. The natural gas undertakings, upon agreement with the Commission, shall establish the rules for the unbundling of accounts. The rules must provide for the distribution of assets, commitments, expenses, income and amortisation. The Commission shall have the right to produce specific recommendations for the unbundling of accounts. 2. The natural gas undertaking shall keep account which may cover other gas activities not relating to the activities specified in paragraph 1 of this Article as well as other non-gas activities. 3. Separate accounts shall be kept for each activity as they would be required to be done if the activities in question were carried out by separate undertakings with the assets assigned to them. The internal accounts shall include a balance sheet and profit and loss account for each activity. The natural gas undertakings shall make the accounts public. 4. The State institutions carrying out, according to the procedure established by laws, the functions of control of undertakings entrusted to them shall have the right of access to the natural gas undertakings but must preserve confidentiality of commercially sensitive information. 5. The reports of the natural gas undertakings must be reviewed by the independent audit with a view to the aspect of discrimination and cross-subsidisation. The auditor’s reports shall be submitted to the Commission. The financial statements of natural gas undertakings must cover information about the contracts worth LTL 1 million and more concluded with the subsidiary enterprises. CHAPTER V NATURAL GAS MARKET Article 18. Right of Access to the System 1. The system operators shall grant to the eligible customers, natural gas undertakings and persons transporting natural gas in transit the right of access to the system under the contracts. 2. Upon agreement with the Commission the system operators shall lay down the rules for using the system. The system operators must every year publish the rules for using the system in the supplement Informaciniai pranešimai to the official gazette Valstybės žinios or, upon the change in the terms, not later than one month before the beginning of application thereof.. The right of access to the systems must be granted objectively, not discriminating between system users. 3. The customers shall have the right to conclude contracts for system use for the consumption of such an amount of gas as they themselves shall consume. Article 19. Refusal to Grant the Right of Access to the System 1. The natural gas undertaking may refuse access to the system on the basis of lack of capacity or if the right of access to the system would prevent them from carrying out public service obligations or on the basis of serious economic or financial difficulties with the fulfilment of the concluded take-or-pay contracts. The reasons of the refusal of access to the system must be duly substantiated. The refusal on the basis of fulfilment of take-or-pay contracts may be recognised only upon the receipt of the Commission approval. 2. The natural gas undertaking having refused to meet the written demand filed by another natural gas undertaking or eligible customer to use the system for the transportation of gas shall within 10 working days notify the Commission of its decision and its reasons. 3. The Commission shall have the right to obligate the natural gas undertaking to grant access to the system. 4. The natural gas undertaking, having refused access to the system due to lack of capacity, must upon the request by the system users increase the system efficiency or construct a new pipeline where this is economic or if the requesting person obligates himself to cover the costs of increasing the system efficiency to the extent they exceed the economic costs of increasing the system efficiency. Article 20. Exemptions to the Installation of New Systems 1. The owners or operators of new interconnectors between the EU Member States, LNG and storage facilities may, upon submitting a request to the Commission, be exempted from the provisions of Article 18 of this Law under the following conditions: 1) the investment enhances competition in gas supply and security of supply; 2) the investment would not take place unless an exemption was granted; 3) the owner of the new infrastructure is separate in terms of its legal form from the system operators in whose system systems that infrastructure will be built; 4) charges are levied on users of that infrastructure; 5) the exemption is not detrimental to competition or the functioning of the internal gas market, or the efficient functioning of the interconnected system. 2. Paragraph 1 of this Article may also be applied to significant increases of capacity in existing infrastructures and to modification of such infrastructures in order to develop new sources of gas supply. 3. The decision on the application of exemptions specified in paragraphs 1 and 2 of this Article and in Article 8 of this Law shall be adopted by the Commission. Exemptions shall be granted for a restricted time period. The exemption decision adopted by the Commission must be well-founded and shall be published. The Commission shall notify the European Commission of the decision made. Article 21. Market Liberalisation 1. As from the entry into force of this Law all non-household customers shall be eligible customers. 2. As from 1 July 2007 all customers shall be eligible customers. CHAPTER VI CONTROL AND REGULATION OF THE GAS SECTOR Article 22. The Functions of the Commission in Gas Sector 1. The Commission shall ensure efficient functioning of the gas sector guaranteeing that the customers, system users and natural gas undertakings would not be discriminated against and that natural gas market would be open to effective competition. 2. In the natural gas sector in addition to other functions established by this Law and the Law on Energy the Commission shall control: 1) the terms and conditions of licensed activity of system operators; 2) costs of regulated activity of natural gas undertakings; 3) comprehensiveness and due presentation of the information published by system operators concerning the terms and conditions granting the interested parties the right to use the systems, interconnectors and natural gas storage facilities; 4) the access conditions to the systems; 5) unbundling of accounts with a view to avoiding of cross subsidisation; 6) the rules on the management and allocation of interconnection capacity; The Commission shall perform the supervision in conjunction with the regulatory authority of that EU Member State with which interconnection exists; 7) the time taken by transmission and distribution system operators to make connections or repairs; 8) compliance with natural gas supply security and service quality requirements; 9) the level of transparency and competition of natural gas undertakings. 3. The Commission shall have the right to: 1) be given access to the contracts concluded by natural gas undertakings and request that the natural gas undertakings fine-tune the contracts so that they comply with the requirements laid down by this Law and other legal acts. In case the natural gas undertaking fails to meet the requirement the Commission, protecting the public interest, shall have the right to apply to the court for the amendment of the contract. 2) with a view to the possibilities of the natural gas undertakings set the time limits for the presentation to the Commission of information and documents submitted to it for agreement; 3) set the rules for choosing the gas supply undertaking; 4) fix separate transmission and/or distribution tariffs according to exemptions provided for in Articles 8 and 20 of this Law; 5) set the rules for system balancing and system use if the draft rules worked out by system operators do not meet the requirements of this law and other legal acts. 4. When performing its functions the Commission shall cooperate with the State institutions responsible for the regulation of the energy sector. The legal acts drafted and/or agreed by the Commission intended for the implementation of the EU legal acts shall be agreed with the institutions of State administration responsible for the transposition into national legislation of the provisions of the appropriate legal acts of the EU. 5. The Commission shall set the price caps of the regulated prices or specific prices. 6. The Commission shall draw up for the European Commission the natural gas market reports. Article 23. Price Regulation 1. In the natural gas sector the following prices shall be regulated by setting the price caps of: 1) transmission; 2) liquefaction; 3) storage; 4) distribution; 5) supply. 2. In the natural gas sector the prices of the following services shall be regulated by setting the specific prices. 1) connection (to household customers); 2) system balancing. 3. The Commission shall draw up and approve the methodologies of price setting specified in paragraphs 1 and 2 of this Article. 4. The prices specified in paragraphs 1 and 2 of this Article shall be published by natural gas undertakings after their examination by the Commission. 5. The required investment ensuring effective safe functioning of the systems and the normative profit for ensuring the activity must be provided for in the methodologies of fixing regulated prices. Natural gas transmission and distribution prices shall be fixed regardless of the distance of natural gas transportation. The transmission system users shall be divided into the following groups: system users transporting to one place of natural gas delivery up to 1 billion m3 of natural gas per year and system users transporting to one place of natural gas delivery over 1 billion m3 of natural gas per year. Gas distribution prices to customers (system users) shall be set taking into account the amount of natural gas delivered per year to a specific place of natural gas delivery. To household customers the transmission or distribution systems balancing service shall be provided financed with the funds of the undertaking. To non-household customers the natural gas transmission and distribution prices shall be fixed and differentiated according to the amount and capacity of natural gas. To household customers distribution prices shall be differentiated based on the amount of gas consumed. The principles of differentiation of the amount and capacity of gas shall be set in price fixing methodologies. Regulated prices, the differentiation thereof among customer groups must be public with a view to avoiding cross-subsidisation and the principles of their fixing must be substantiated, objective, transparent and non-discriminatory. 6. Price caps for the regulated prices shall be set for five years. Should there be a change in the inflation level, taxes, the amount of natural gas transported, the requirements of the legal acts or if the natural gas undertakings exceed the established indicators, the price caps of regulated prices may be adjusted on the decision of the Commission, but not more frequently than once per year. The prices of regulated services may be adjusted not more frequently than once per year. 7. The specific transmission, liquefaction, storage, distribution, assigned supply prices and the amounts payable for gas by household customers not exceeding the fixed price caps shall be every year fixed by gas undertakings. The Commission, having examined and established that the prices have been calculated not in compliance with the methodology or are erroneous, must indicate to the natural gas undertakings their mistakes. The natural gas undertakings must correct them within 15 days. If the natural gas undertakings do not fulfil the demand of the Commission, the Commission shall have the right to unilaterally fix the specific regulated prices. 8. A single appropriate regulated price specified in paragraph 1 of this Article shall be fixed for heat supply undertakings supplying to customers heat from two or more sources. Article 24. Ensuring Security 1. Natural gas undertakings must be in constant readiness to function in a potential energy emergency situation or in case of a potential gas supply disruption and plan preventive measures to ensure gas supply security and technical safety of gas systems. In the energy emergency situation or in case of reduction of natural gas supply, when the safety of the systems is endangered, when an accident occurs, human health or security is threatened, natural gas undertakings must forthwith take all justified measures to ensure security of natural gas supply and technical safety of natural gas systems. These measure must be duly substantiated and proportionate. The natural gas undertakings shall notify the Ministry of Economy of the preventive measures applied. In case of disruption or termination of natural gas supply its supply to the customers shall be ensured by the supply undertaking which supplied natural gas before the restriction or termination of the natural gas supply. 2. The natural gas undertakings and customers possessing objects of energy generation capacity exceeding 5 MW must plan the future demand for natural gas, the capacity of natural gas systems. The gas undertakings must plan the technical condition standards of the natural gas systems, the measures to cover the peak demand and to deal with shortfalls of one or more suppliers. The natural gas undertakings shall every year by 1 May prepare security of supply reports and submit them to the Ministry of Economy. 3. The Government or the institution authorised by it shall have the right to set specific measures for ensuring security, the implementation whereof shall be binding on the natural gas undertakings, customers and the Commission. The measures shall be non-discriminatory, transparent and publicly announced. The measures shall provide for the prioritised security of gas supply, including stock in the gas pipeline, to household customers and customers to those objects whose energy generation capacity is less than 5 MW, which hold no reserve stock of fuel and to which gas supply may not be terminated. 4. The Government or the institution authorised by it shall have the right to set the requirement or the terms and conditions for natural gas undertakings and non-household customers to make use of natural gas storage facilities. Gas stocks must be supplied from the natural gas storage facilities located in the territories of the EU Member States. 5. Non-household customers using gas for energy generation if the energy is sold or used for satisfying public or residential needs must keep a 1-year reserve stock of energy resources. The customers shall of their own volition choose the type of reserve stock. 6. The costs of uninterrupted supply of natural gas to household customers shall be included in the natural gas supply price upon establishing the separate supply price component. Non-household customers shall cover the costs of uninterrupted natural gas supply under contract themselves with their own funds. 7. The State Energy Inspectorate under the Ministry of Economy shall exercise control over the main terms of the supply contracts and the activities of the natural gas undertakings with regard to ensuring the security of natural gas supply between the natural gas undertakings and final customers using natural gas to generate energy where the energy is sold or used for satisfying public or residential needs. The natural gas undertakings and final customers shall provide to the State Energy Inspectorate under the Ministry of Economy information about measures for ensuring natural gas safety and the principal terms and conditions of gas supply contracts. 8. The Ministry of Economy shall provide to the European Commission and the EU Member States information about the measures for ensuring security specified in paragraph 1 of this Article. The Ministry of Economy shall every year not later than by 31 July prepare and publish a generalised report on security and submit it to the European Commission. Article 25. Investigation of Complaints 1. The Commission shall investigate according preliminary extrajudicial procedure complaints about the acts or omission of the natural gas undertakings in natural gas transmission, liquefaction, re-gaseification, distribution, supply, purchase and storage, about the right of access to the system, the procedure of connection of the customers’ system (methodologies, prices), the terms and conditions of system balancing, price application, investment and contract. 2. The State Energy Inspectorate under the Ministry of Economy shall investigate according to preliminary extrajudicial procedure complaints regarding the installation and operation of equipment, gas meters, the system installation, also accidents and failures of equipment, complaints about non-compliance with gas metering requirement and payment of gas bills, the terms and conditions of customer system connection and technical safety and security of transmission, storage, distribution and LNG systems. 3. The National Consumer Protection Board under the Ministry of Justice shall investigate according to preliminary extrajudicial procedure complaints of Household Customers regarding the application in gas sale-purchase or service provision contracts of unfair terms and conditions. 4. The Government or the institution authorised by it shall lay down the procedure for the investigation of complaints as specified in paragraphs 1 and 2 of this Article. Article 26. Liability The persons in breach of the provisions of this Law shall be held liable under law. Annex to the Law of the Republic of Lithuania on Natural Gas IMPLEMENTED EU LEGAL ACTS 1. Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the Internal market in natural gas and repealing Directive 98/30/EC (OJ, 2004, Special Edition, Chapter 12, Volume 2, p. 230) 2. Council Directive 2004/67/EC of 26 April 2004 concerning measures to safeguard security of natural gas supply (Text with EEA relevance) Council Directive 2004/97/EC of 26 April 2004 concerning measures to safeguard security of natural supply (OJ, 2004, Special Edition, Chapter 12, Volume 3, p. 19)” Article 2. Implementation of the Law The Government or the Institution authorised by it shall draft legal acts required for the purpose of implementing the provisions of the Law on Natural Gas. I proclaim this Law passed by the Seimas of the Republic of Lithuania PRESIDENT OF THE REPUBLIC VALDAS ADAMKUS