98 Cyprus Energy Regulatory Authority Legislative framework for the Natural Gas Market The current Laws Regulating the Natural Gas Market of 2004 to 2021, which adopts the important features of the Third Energy Package, provides for the regulation of the natural gas market in the Republic of Cyprus and, among others, establishes the rules for the transmission, distribution, supply and storage of natural gas. In addition, it specifies the rules for the organization and operation of the natural gas sector, the access to the market, the exploitation of the networks and the criteria and procedures required to issue licenses for the transmission, distribution, supply and storage of natural gas. The Natural Gas Law also describes CERA's duties and responsibilities and specifies the range of activities and its role. It is noted that the Laws Regulating the Natural Gas Market of 2004 to 2021 contain the key provisions for the imminent introduction of natural gas in the energy balance of the country. However, it does not specify the model of the market and the organizational framework that will be used for the development of the market, providing, therefore, reasonable flexibility to decision-makers to make the right choices. Furthermore, the Natural Gas Law provides the possibility of derogations, in accordance with the provisions of Directive 2009/73/EC concerning common rules for the internal market in natural gas. However, it does not specifically establish these derogations leaving the full definition of these derogations to the discretion of the Council of Ministers. A key element of the new operating framework of natural gas and electricity markets, as it is described in the European legislative framework, is the unbundling of activities of generation and trade of natural gas. These activities should take place within a competitive environment, like the activities of transmission and distribution, for which the regulated access of third parties is allowed under the supervision of national regulatory authorities, ACER and the European Commission. The Laws Regulating the Natural Gas Market of 2004 – 2021, allow Cyprus to derogate from certain articles, because it can be considered either an isolated or an emerging market. In the case of Cyprus, it is possible, on one hand, to derogate from applying the competition in the supply of natural gas to end consumers, especially as long as the natural gas market of Cyprus is considered emerging. On the other hand, it is possible not to separate the activities of the operators of natural gas (transmission, distribution, storage, LNG, etc.) from those of trade and supply, in the manner described in the Directive 2009/73/EC, for example, as regards ownership unbundled transmission facilities. The Council of Ministers, by Decision 87.649, dated 5 June 2019, in accordance with the provisions of the Law, determined the operating framework of the natural gas market for the effective period of the emerging market or until the Council decides to terminate the derogations, and appointed the Operators. More specifically, according to the Decision, the competition is not applied in the supply of natural gas to the end consumers as long as the market is emerging. The supplier is, therefore, responsible for concluding all the relevant contracts of natural gas import, including the LNG, as well as all contracts of supply of natural gas to consumers of all categories. In addition, by this Decision, the Natural Gas Public Company (DEFA/CYGAS) was appointed as the TSO, DSO and LNG Operator for thirty years, starting from the date of issuance of the relevant licenses by CERA. NATURAL GAS MARKET
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