DIRECTORS' REPORT ON PGNiG SA'S OPERATIONS ... - Notowania

Directors’ Report on PGNiG S.A.’s Operations in 2008
As at December 31st 2008, the Company held the following licences granted by the President of URE
under the Energy Law:
• one licence for transmission and distribution of gaseous fuels
• one licence for trade in gaseous fuels
• one licence for international trade in natural gas
• one licence for storage of gaseous fuels
• two licences for trade in liquid fuels
• one licence for electricity production
1.2. Tariff Policy
The crucial factor determining PGNiG S.A.’s regulated business is the dependence of the Company’s
revenue on tariffs which are subject to approval by the President of URE. Tariff prices are crucial for
the Company’s ability to generate revenue that can cover the incurred justified costs plus return on
capital employed. The gas prices are directly connected with the applied tariff preparation
methodology.
The tariff preparation methodology is based on the determination of prices and charge rates against
forecast costs and gas sales targets. In accordance with the guidelines issued by the regulatory
authority (the President of URE), calculation of prices of gaseous fuels included the cost of acquisition
of natural gas from all sources, that is of both imported and domestically produced gas. In practice this
means that both international trade and domestic production are subject to regulated pricing. Given
that the current prices of imported gas are higher than those of domestically produced gas, the
inclusion of production cost for gas from domestic sources in the cost basket, taken into account in
pricing, resulted in a situation where the tariff prices (applicable in settlements with customers) were
determined below the level that would have been set based on the cost of acquisition of imported gas.
In the settlements with customers with which PGNiG S.A. had concluded agreements for sale of
gaseous fuels with the delivery to points of acceptance were regulated by the settlement rules and
charge rates specified in subsequent tariffs approved by the President of URE.
1.3. Changes in Tariffs
On March 28th 2008, the President of URE issued a decision whereby PGNiG S.A. was released from
the obligation to submit for approval tariffs for compressed natural gas, used as fuel in motor vehicles.
Until April 24th 2008, settlements with customers were made according to Tariff No. 4 for Gaseous
Fuels approved by the President of URE on March 17th 2006.
On November 15th 2007, PGNiG S.A. applied to the President of URE for approval of the Gaseous
Fuel Tariff No. 1/2008 of Polskie Górnictwo Naftowe i Gazownictwo S.A. for the period from January
1st 2008 to March 31st 2008. On February 20th 2008, the Regulation of the Minister of Economy and
Labour on detailed rules for preparing and calculating tariffs for gaseous fuels and on settlements in
gaseous fuels trade (Dz.U. of February 20th 2008, No. 28, item 165) became effective, which
necessitated changes in the application. On February 20th 2008, the Company amended the
application in order to bring it to compliance with the new Tariff regulation.
Under his decision of April 10th 2008, the President of URE approved the Gaseous Fuel Tariff No.
1/2008, in effect from April 25th 2008. The tariff provides for:
• the prices, subscription fees and network rates applicable to settlements with customers receiving
gaseous fuels from the transmission grid,
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