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The Competition Authority investigated the reasons for the delay in launching Balticconnector

The Competition Authority conducted an analysis to investigate the delay in the commissioning of the Balticconnector gas pipeline between Estonia and Finland due to the delay in the completion of the Puiatu and Paldiski compressor stations.
The purpose of the analysis was to identify the reasons for the delay and full launch of the Balticconnector gas interconnection project, the prospect of full interconnection and the likelihood of the need to implement Article 5 (7) (bd) of the Regulation. The Member State or its regulatory authority (in this case the Competition Authority) must appoint a third party to complete the project in case delay is more than two years. This clause does not apply if the project promoter (in this case Elering) has itself been able to appoint a third party to complete the project before the end of the two-year period.
The Competition Authority pointed out that in the case of turnkey procurement process, that was used for Balticconnector compressor stations and is usually the procurement process chosen by Elering for large projects, it is extremely important to prepare thorough procurement documents as the full responsibility is given to service provider. Therefore it is crucial to  ensure an extremely qualified service provider in order to avoid excessive risks to project completion timeline or problems with quality and technical requirements. After concluding the contract with service provider, the possibilities for the contracting party to intervene in the progress of the project are rather small.

It is also critical for large-scale projects that the penalties for delays set in the contract are designed in a way that the contractor is motivated not only to eliminate short-term delays, but also to complete the project in a longer perspective. Additionally Competiotion Authority brought out that any amount received as a possible contractual penalty for such projects must be taken into account by the network operator as additional revenue to the gas network tariff.

The Balticconnector project is classified as a project of common interest (PCI) governed by Regulation (EU) No 347/2013 of the European Parliament and of the Council (hereinafter the Regulation). The project promoter is the system operator Elering AS and the Competition Authority is obliged to monitor the completion of projects of common interest in accordance with the procedure provided for in the Regulation.

According to the Competition Authority, the project has been carried out in accordance with the Regulation and its delay has not exceeded the two-year limit. Construction of the project is completed with the contractor during 2021. The additional capacity achievable with the Puiatu compressor station has been made available to the market since 29.04.2021, the additional capacity of the Paldiski compressor station reached the market from 19.06.2021. Both Puiatu and Paldiski compressor stations have passed all acceptance tests and can be operated according to the designed capacity. Today, Puiatu and Paldiski compressor stations and the Estonian gas transmission system are not the limiting elements in determining the technical size of Balticconnector's transmission capacity that can be given for market use.

In the course of the analysis, the Competition Authority did not assess Elering's communication and market information about the project delay according the Regulation (EU) No 1227/2011 of the European Parliament and of the Council (hereinafter REMIT). Competition Autrhority is currently assessing Elering's compliance with REMIT separately within the framework of a supervision procedure initiated on 08.01.2021 and additionally on the basis of the misdemeanour proceedings initiated on 10.03.2021. The Competition Authority cannot publish the results of analysis in full, as it contains Elering's business secret and disputes with the contractor of compressor stations are still ongoing.

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