Pricing basis

At the end of September 2000 , Gasum published its first pricing system, M2001, under the Finnish Natural Gas Market Act. In compliance with this ct, Gasum started to state separate transmission and energy costs in the price of natural gas.

The Finnish Natural Gas Market Act defines the pricing principles for transmission and grid services. The transmission charge must correspond to costs and may include a reasonable return on equity. The equity value is based on the current value of the transmission pipeline.

The energy cost of wholesale natural gas depends on user volume. The sales capacity is the same size as the transmission capacity. The energy cost for each contract depends on the sales capacity and is linked to the price of coal imported into Finland, the international price of low-sulphur heavy fuel oil and the energy index for electricity and district heating prices calculated by Statistics Finland.

Natural gas is sold by annual contract, with the customer determining the gas required for the following calendar year. Customers may use more natural gas transmission and sales capacity than they have reserved. Separate transmission and energy costs are payable for the additional gas used. The price of natural gas is linked through indexing to that of other forms of energy. Coal and oil prices have the greatest impact on the price of natural gas.

The Finnish natural gas market partly opened to competition in 2000 with the launch of secondary market trading. The secondary market allows Gasum’s customers to trade among themselves any natural gas that they have bought from Gasum but not used. Gasum’s new company, Kaasupörssi Oy (Gas Exchange Ltd) established a trading place on the internet for the secondary gas market.

The secondary market is also part of a broader period of transition during which the Finnish natural gas market is becoming an open market, allowing customers to choose their natural gas supplier, as required by the European Union’s Gas Directive. To date the EU Directive grants Finland exemptions. The transition period will last as long as Finland is not linked to the European gas grid and has only one principal natural gas supplier.