Category Archives: Internal Energy Market

To create a genuine internal market for energy is one of the European Union’s (EU’s) priority objectives. The existence of a competitive internal energy market is a strategic instrument in terms both of giving European consumers a choice between different companies supplying gas and electricity at reasonable prices, and of making the market accessible for all suppliers, especially the smallest and those investing in renewable forms of energy. There is also the issue of setting up a framework within which the mechanism for CO² emission trading can function properly. Making the internal energy market a reality will depend above all on having a reliable and coherent energy network in Europe and therefore on infrastructure investment. A truly integrated market will contribute to diversification and thus to security of supply.

Prospects for the internal gas and electricity market

Leave a reply

Prospects for the internal gas and electricity market

Outline of the Community (European Union) legislation about Prospects for the internal gas and electricity market

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Energy > Internal energy market

Prospects for the internal gas and electricity market

New measures must be added to the existing rules of the internal gas and electricity market in order to guarantee its integral operation. An inventory of the market in fact reveals that there is still malfunctioning and that the current rules do not allow it to be corrected effectively.

Document or Iniciative

Communication from the Commission to the Council and the European Parliament of 10 January 2007 entitled “Prospects for the internal gas and electricity market” [COM(2006) 841 final – Not published in the Official Journal].

Summary

The aim of the European Union (EU) is to set up a truly competitive internal market for gas and electricity to offer consumers a real freedom of choice at fair, competitive prices, to stimulate clean energy production and to improve security of supply.

Although the internal energy market is well established, malfunctioning (identified by the sector inquiry into the gas and electricity markets) persists, preventing both consumers and the economy from getting the full benefit of the advantages of opening up the national gas and electricity markets.

As current rules do not allow effective correction of this malfunctioning, new measures must be taken as the final step in achieving integrated operation of the internal energy market in Europe.

Advantages of creating the internal energy market

The opening of national markets in gas and electricity to competition visibly gives consumers the freedom to choose their energy supplier and, therefore, the opportunity to make savings. It also improves the security of supply by encouraging, on the one hand, investment in facilities, so that interruptions to supply can be prevented, and, on the other hand, diversification of transport routes and energy sources. The existence of a truly competitive energy market also contributes to sustainable development, notably by enabling suppliers of electricity from renewable energy sources to enter the market.

Continued malfunctioning

In practice, the EU is still a long way from achieving its objective of a real internal market in which each consumer has the legal right to choose his supplier and exercise this right simply and effectively armed with the facts, and the current rules do not effectively prevent market malfunctioning.

The legal and functional unbundling of system operators vertically connected to suppliers and producers has proven insufficient to guarantee equal access to the networks. The traditional operators thus maintain their dominant position and new companies wishing to enter the market encounter many problems caused by discriminatory access conditions, lack of available network capacity, a lack of transparent data on the network situation and poor investment.

National regulators do not have the powers or independence necessary for succeeding in their mission. Their powers vary considerably from one Member State to the next, hindering cross-border trade and access to consumers in other Member States.

New set of rules for completion of the internal energy market

Provision of non-discriminatory access to the networks through unbundling

Current legal and functional unbundling has proven insufficient in removing the conflict of interests arising from vertical integration. Clearer separation between operation of transmission systems and production or supply activities must be introduced to ensure that operators maintain, operate and develop the networks in the general interest of the network users.

The separation may be based either on complete ownership unbundling, due to transmission system operators being both operators and owners of the system, or on introduction of an independent transmission system operator for maintenance, development and operation of the systems, which remain the property of the vertically integrated companies.

Complete ownership unbundling appears to be the most economically effective way to ensure development of a real internal energy market. Not only does it eliminate the different interests of system operators but also avoids the need for excessively detailed and complex regulations ensuring independence of vertically integrated system operators.

Strengthening of the role of regulators at national and Community level

The regulatory framework and therefore the powers of the regulators must be strengthened to ensure the conditions of transparency, stability and non-discrimination necessary for development of competition and for investment.

Better coordination of national regulators at European level is, in addition, needed to mitigate the market segmentation resulting from the regulatory differences between Member States. In this sense, it is possible either to improve the present approach, with the disadvantage of continuing to rely on voluntary agreements between 27 national regulators often with different interests, or to formalise the role of the European Regulators Group for Electricity and Gas (ERGEG) into a European Network of Independent Regulators (ERGEG +), or lastly to set up a new single body at Community level.

Cooperation of transmission system operators (TSOs)

To enable free circulation of gas and electricity within the EU, it is essential to establish compatible technical rules and regular exchange of information, increase investment in the network and, in particular, in cross-border interconnections, and move towards regional system operators.

Reduction in possibilities for unfair competition

Due to the monopolies held by the traditional operators before liberalisation, the lack of integration and their natural characteristics, in particular low elasticity of demand, the gas and electricity markets are particularly exposed to the risk of dominant positions.

Greater transparency, recourse to the ‘use-it-or-lose-it’ principle, genuine access to gas storage facilities and maintenance of incentives in favour of new storage capacities would facilitate the transition to a more competitive gas and electricity market.

Encouragement of investment in electricity power plants and gas infrastructures

Creating a stable environment for investment is a priority. Other factors may also influence investment, such as the award of emission certificates or specific incentive measures, for example for production of electricity from renewable energy sources.

Consumer protection

Consumer protection and public service obligations must be an integral part of the process of opening up the gas and electricity markets. An energy consumers’ charter must therefore protect their essential rights: the right to relevant information on the different suppliers and supply possibilities, the right to a straightforward procedure for changing supplier, protection against energy poverty for the most vulnerable consumers, protection against unfair commercial practices, etc.

Background

The internal energy market has been put in place gradually, starting with Directive 96/92/EC laying down rules for the internal market in electricity and Directive 98/30/EC laying down rules for the internal market in natural gas, which were replaced respectively by Directives 2003/54/EC and 2003/55/EC.

The Commission draws conclusions from the review of the internal gas and electricity market drawn up by its sector inquiry, and announces that a third legislative package will be added to the current rules.

Related Acts

Report from the Commission to the Council and the European Parliament – Progress in creating the internal gas and electricity market [COM(2008) 192 final – Not published in the Official Journal].

The report presents the progress made on the internal gas and electricity market since the opening of national markets to competition on the 1^st July 2007. Among the main advances it highlights regional initiatives which have stimulated cross-border cooperation.

Three years after the deadline of July 2004 for implementation passed, it nevertheless appears that the requirements of the directives on electricity and gas have not been appropriately implemented in certain Member States.
A notable finding of this report is that regulatory oversight, unbundling and regulated supply tarifs, as well as the communication of Public Service Obligations, are not satisfactory.

Communication from the Commission to the European Council and the European Parliament of 10 January 2007 entitled “An energy policy for Europe” [COM(2007) 1 final – Not published in the Official Journal].

Communication from the Commission of 10 January 2003 entitled “Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and electricity sectors (Final Report)” [COM(2006) 851 final – Not published in the Official Journal]

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 [Official Journal L 176, 15.7.2003].

Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC [Official Journal L 176, 15.7.2003].

Sector inquiry into the gas and electricity markets

Leave a reply

Sector inquiry into the gas and electricity markets

Outline of the Community (European Union) legislation about Sector inquiry into the gas and electricity markets

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Energy > Internal energy market

Sector inquiry into the gas and electricity markets

A sector inquiry into the gas and electricity markets confirms the existence of distorted competition preventing companies and consumers from taking full advantage of liberalisation.

Document or Iniciative

Communication from the Commission of 10 January 2007 entitled “Inquiry pursuant to Article 17 of Regulation (EC) No 1/2003 into the European gas and electricity sectors (final report)” [COM(2006) 851 – Not published in the Official Journal].

Summary

An effective internal energy market ensures security of supply at competitive prices and is a key factor in economic growth and consumer welfare within the European Union (EU). To fulfil this objective, the EU decided to fully open up European gas and electricity markets.

An inquiry pursuant to Community rules on the agreements and abuses of dominant position (Article 17 of Regulation (EC) No 1/2003) has revealed that there is still distorted competition on these markets preventing companies and consumers from taking full advantage of liberalisation. The inquiry identified the obstacles hindering creation of the internal gas and electricity market and will therefore help to eliminate them.

High market concentration

Wholesale markets are only experiencing slow growth and the degree of concentration has stayed the same as it was prior to liberalisation. The traditional operators remain dominant with widespread control of electricity generation as well as of gas imports and production. Their market power is consolidated, therefore leaving them free to increase prices.

Improved access for new entrants and development of market liquidity are the keys to dampening market concentration. The competent authorities must, amongst other things, put in place corrective measures, such as energy release programmes.

Vertical foreclosure

The vertical integration of production, systems and distribution leads to a conflict of interests, and decisions therefore tend to be in the interests of the associated companies and not in the general interest of network users.

Vertical foreclosure is reflected by a lack of transparency and discrimination in access to the market, with new entrants unable to obtain fair access to essential information. It is also characterised by underinvestment in infrastructures and a lack of available network capacity. As a consequence, new suppliers find their access to the market hindered and cannot reach the end-user, thus limiting consumers’ choice.

Absence of market integration

Cross-border competition remains derisory. Barriers to cross-border supply of gas and electricity (lack of cross-border capacity, long-term capacity reservations, lack of investment in additional capacity, lack of regulation for cross-border issues) stand in the way of development of an integrated energy market.

Application of Community competition law and consolidation of regulations

While strict application of Community competition law is not enough in itself to solve the problems in the gas and electricity markets, it nonetheless plays a decisive role in strengthening competition. The Commission therefore makes full use of the powers vested in it by the Treaty’s antitrust, merger-control and State Aid rules.

The regulatory framework must also be consolidated, on the basis of proposals submitted by the Commission in its communication entitled “Prospects for the internal gas and electricity market”, published in parallel with the sector inquiry.

Background

Complaints about the barriers to market entry or even about consumer difficulties in choosing their supplier led the Commission to open an inquiry into the operation of the gas and electricity markets. The initial results were the subject of public consultation, enabling contributions from companies in the energy sector and traditional operators, and also from new entrants, national regulators, competition authorities, network operators and consumers. The Commission presents the final report of the sector inquiry.

Related Acts

Communication from the Commission to the European Council and the European Parliament of 10 January 2007 entitled “” [COM(2007) 1 final – Not published in the Official Journal].

Communication from the Commission to the Council and the European Parliament of 10 January 2007 entitled “” [COM(2006) 841 final – Not published in the Official Journal].

Internal market for natural gas

Leave a reply

Internal market for natural gas

Outline of the Community (European Union) legislation about Internal market for natural gas

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Energy > Internal energy market

Internal market for natural gas

Document or Iniciative

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.

Summary

Directive 2003/55/EC provides for the complete opening of national gas markets to competition and therefore helps create a true internal gas market within the European Union (EU).

Completion of the internal gas market increases competitiveness and improves service quality, guarantees fair prices for consumers, establishes rules on public service obligations, improves interconnection and bolsters security of supply.

Market access

Directive 2003/55/EC lays down the right of third parties to non-discriminatory access to transmission and distribution systems and to liquefied natural gas (LNG) facilities. Consequently, new suppliers can now enter the market and consumers are free to choose their gas supplier.

For the internal gas market to operate properly, all the companies, even the smallest ones, such as those which invest in renewable energy sources, must be able to enter the market. Fair competition conditions must be put in place to prevent the risk of dominant positions, in particular of the traditional operators, and predatory behaviour.

A gradual approach has been adopted so that companies can adapt whilst guaranteeing the protection of consumers’ interests. Since 1 July 2004, industrial consumers have been able to choose their supplier. Domestic consumers have had had this opportunity since 1 July 2007.

Access to storage facilities is covered by specific provisions by virtue of which access may be either negotiated or regulated.

System operation: system operators

In each Member State, system operators are appointed for the transmission system on the one hand, storage, liquefied natural gas and the distribution system. Their mission is the operation, maintenance and development of transmission and distribution, storage and liquefied natural gas (LNG) facilities. They are obliged to ensure the safety, reliability, efficiency and interconnection of facilities with due regard for the environment.

System operators must guarantee non-discriminatory and transparent access to the system for all users. Access must therefore be based on fair tariffs that are applied objectively.

System operators may not favour certain companies, in particular any with which they are associated. In order to avoid any discrimination relating to network access and enable equal access for new entrants, when companies are vertically integrated, the transmission and distribution activities must be legally and functionally separate from other activities, such as production and supply. This separation does not, however, mean ownership unbundling.

System operators are also obliged to provide other operators with the information necessary for safe and effective running of the interconnected system.

Public service obligations and consumer protection

The internal gas market can only become a reality if consumers play an active role and actually exercise their right to free choice of their gas supplier. It is therefore essential for operation of the internal gas market to inform consumers of their rights and to ensure their effective protection.

Directive 2003/55/EC lays down common minimum standards to ensure a high level of consumer protection (the right to change supplier, transparent contract conditions, general information, dispute settlement mechanisms, etc.) and takes particular care to provide adequate protection of vulnerable consumers (for example, by taking the appropriate steps to avoid disconnection of the gas supply).

Gas supply is considered as a public interest service that citizens have the right to access in return for payment. Therefore, the Directive provides for the possibility for Member States to impose public service obligations to guarantee security of supply, economic and social cohesion objectives, regularity, quality and price of the gas supply and protection of the environment.

Regulatory authorities

As key elements in the smooth operation of the internal gas market, independent regulators, appointed in each Member State, are responsible, in particular, for monitoring respect of the non-discrimination principle, the level of transparency and competition, and the tariffs and methods for calculating them. These regulatory authorities also act as dispute settlement authorities.

A European group bringing together the national regulatory authorities to consolidate the development of the internal gas market and ensure coherent application in all the Member States of the provisions of Directive 2003/55/EC (the European Regulators Group for Electricity and Gas – ERGEG) has been established through Decision 2003/796/EC.

Derogations

The Directive lays down derogations or allows for their laying down according to the terms of the Directive in certain situations:

for isolated markets, i.e. when a Member State is not directly connected to the interconnected system of another Member State and has only one main external supplier;
for emergent markets, i.e. markets where the first commercial supply of a Member State from their first long-term natural gas supply contract was made not more than ten years earlier;
for geographically limited areas in Member States, for example depending on the size and maturity of the gas system in the area concerned, as well as the pay-back prospects of investments required for application of the Directive;
in the event of a lack of capacity;
during development of the infrastructure capacity or of new infrastructures;
if access to the system prevents delivery of public service obligations;
due to serious economic difficulties of a gas company, in particular due to its ‘take or pay’ commitments (clauses of a gas purchase contract obliging the supplier, on the one hand, to make defined quantities of gas available and the customer, on the other hand, to pay for the gas, whether he has taken it or not).

Furthermore, safeguard measures may be temporarily taken by a Member State in the event of a sudden crisis in the market, or the physical safety or security of persons, apparatus or installations or system integrity being threatened.

Monitoring and security of supply

The European Commission draws up an annual benchmarking report that evaluates the progress in the implementation of competitive electricity and gas markets, on the basis of information supplied by national governments and regulatory authorities.

It is also essential to improve security of supply by guaranteeing sufficient investment in the transmission systems, thus avoiding interruptions to the gas supply, by monitoring the supply and demand balance in the different Member States, the interconnection capacity and the quality and maintenance level of the systems. Such monitoring will enable appropriate measures to be prepared ahead of any supply problems.

Scope

Directive 2003/55/EC applies to the gas market, which must be taken to mean natural gas, as well as liquefied natural gas (LNG), biogas, gas from biomass and other types of gas that can technically be transported in the natural gas system.

As a consequence, and while taking into account quality requirements and technical and safety standards, Member States must make sure to guarantee non-discriminatory access to the gas system of biogas and gas from biomass, as well as other types of gas.

Background

The existence of an internal gas market, parallel to an internal market in electricity, is essential for completion of a true internal energy market within the EU. The internal gas market was put in place, firstly, by Directive 98/30/EC, which was then repealed and replaced by Directive 2003/55/EC.

References

Act	Entry into force – Date of expiry	Deadline for transposition in the Member States	Official Journal
Directive 2003/55/EC	4.8.2003	1.7.2004	OJ L 176, 15.7.2003

Related Acts

Communication from the Commission of 11 March 2009 to the Council and the European Parliament – Report on progress in creating the internal gas and electricity market [COM(2009) 115 final – Not published in the Official Journal].
The Report examines the transposition of the second package of measures on the internal energy market. Many efforts have been made to introduce true competition, particularly as part of regional initiatives.

However, gas prices increased considerably during the first half of 2008, and the functional unbundling of distribution system operators (compulsory since 1 July 2007) has not been applied systematically. Member States still make extensive use of derogations in this area.

Moreover, the Commission has few figures available concerning users changing gas suppliers, which makes the evaluation of competition on the market rather difficult.

The internal gas market is still too segmented. In order to remedy this segmentation priority should be given to action on the integration of markets, as well as the development of infrastructures and cross-border trade. Finally, it is highly recommended that price regulation be abandoned which hampers competition and dissuades other potential suppliers from entering the market.

Proposal for a Directive of the European Parliament and of the Council of 19 September 2007 amending Directive 2003/55/EC concerning common rules for the internal market in natural gas [COM(2007) 529 final – Not published in the Official Journal].
A third and final legislative package is proposed to complete opening of the European energy markets to competition and creation of the internal energy market.

The internal energy market demonstrates malfunctioning that cannot be corrected effectively by current rules, as stated by the Commission in its sector inquiry. The proposals of the third legislative package go in the same direction as the communication on the prospects for the internal gas and electricity market, and relate to:

the separation of production and supply activities from transmission system operation, either based on ownership unbundling (a single company could no longer own the transmission system at the same time as carrying out energy production or supply activities) or on an independent system operator (vertically integrated companies could retain ownership of the network on the condition that it is actually managed by a completely independent company or body), and provisions specify that non-European operators should meet these separation requirements if they wish to acquire a significant share in a European system;
the increased powers and the independence of national regulators as well as their cooperation through the setting up of a cooperation agency of the energy regulators authorised to make binding decisions and impose penalties;
formalisation of the European groups of transmission system operators for better coordination and, in particular, the drawing-up of joint market and technical codes;
improved market operation, notably greater transparency, effective access to storage facilities and LNG terminals.

The Commission proposes five drafts to amend Directives 2003/54/EC and 2003/55/EC relating to the electricity market and the gas market respectively, as well as Regulations (EC) No 1228/2003 and No 1775/2005 on access to the electricity networks and access to the gas networks respectively, and to set up an energy regulators cooperation agency.
Codecision procedure (COD/2007/0196)

Communication from the Commission to the Council and the European Parliament of 10 January 2007 entitled “Prospects for the internal gas and electricity market ” [COM(2006) 841 final – Not published in the Official Journal].

Regulation (EC) No 1775/2005of the European Parliament and of the Council of 28 September 2005 on conditions for access to the natural gas transmission networks conditions for access to the natural gas transmission networks [Official Journal L 289, 3.11.2007].

Commission Decision 2003/796/EC of 11 November 2003 on establishing the European Regulators Group for Electricity and Gas [Official Journal L 296, 14.11.2003].

Conditions for access to the gas transmission networks

Leave a reply

Conditions for access to the gas transmission networks

Outline of the Community (European Union) legislation about Conditions for access to the gas transmission networks

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Energy > Internal energy market

Conditions for access to the gas transmission networks

Document or Iniciative

Regulation (EC) No 1775/2005 of the European Parliament and of the Council of 28 September 2005 on conditions for access to the natural gas transmission networks.

Summary

Provisions relating to the conditions for access to the natural gas transmission networks add to the provisions of Directive 2003/55/EC and contribute to completion of the internal gas market.

Complete opening-up of national gas markets, as provided for by Directive 2003/55/EC, has brought about a truly competitive internal gas market within the European Union (EU). In practice, industrial clients and domestic customers have had the freedom to choose their gas supplier since 1 July 2004 and 1 July 2007 respectively.

Effective and non-discriminatory access by third parties to the gas transmission networks is an essential condition for the existence of a genuine internal gas market. With the aim of ensuring a minimum level of harmonisation, Regulation (EC) No 1775/2005 therefore lays down the basic principles.

Service conditions for third-party network access

Gas transmission system operators are obliged to offer their services to all users on a non-discriminatory basis. They must therefore offer the same service to different users under identical contractual conditions (nature, duration, etc.). The operator can choose to draw up harmonised transmission contracts or a joint system code.

This does not mean, however, that other transmission system operators are obliged to offer the same contractual conditions, apart from the minimum contractual requirements.

Capacity allocation mechanisms and balancing rules

The system operator makes the technical network capacity available to users in its entirety, taking into account system integrity and efficient use of the network. Capacity allocation is performed on the basis of non-discriminatory and transparent mechanisms.

Different rules, both technical and commercial, allow balancing of the network and guarantee its smooth operation.

Therefore, in the event of contractual congestion, i.e. when the level of demand for firm capacity (transmission capacity which the operator has guaranteed by way of a non-interruptible contract) exceeds the system’s technical capacity, the operator may offer the unused capacity of certain users to other users on a short-term basis.

As for users, they have the freedom to freely trade their capacity rights, by selling or subletting their unused capacity. This trade is an essential factor in the development of a competitive internal market and creation of market liquidity.

The transmission system operator also sets fair and transparent technical balancing rules. In order to guarantee continuity of the gas supply, it must in fact ensure that the system pressure is constantly maintained at a certain level, which depends on the balance between the entry and exit of gas in the network. It provides users with relevant information on the balancing status and they then take the necessary corrective measures.

Criteria and methodologies for setting network access tariffs

Tariffs set by system operators are transparent and non-discriminatory. They reflect the actual costs borne by them.

The prices take into account not only maintenance of system integrity (guarantee of gas transmission from a technical point of view, in particular in relation to gas pressure and quality) but also its improvement (investment incentives and construction of new infrastructures).

Definition of the technical information needed by users and transparency requirements

To encourage effective access to the network, users must have relevant information, particularly on the services offered by the operator, and more specifically the methodology of tariffs, as well as on the technical capacity and available capacity. Users can also use the different commercial possibilities offered by the internal market. System operators publish this information with regard for the confidentiality of commercial information.

Background

The gas regulatory forum, or ” Madrid Forum “, a discussion group for concrete implementation of European regulations in the natural gas market, has enabled definition of guidelines relating to market access conditions. The experience gained from implementation has shown that it is useful to turn these guidelines into legally binding rules.

References

Act	Entry into force – Date of expiry	Deadline for transposition in the Member States	Official Journal
Regulation (EC) No 1775/2005	23.11.2005	–	OJ L 289, 3.11.2005

Related Acts

Proposal for a Regulation of the European Parliament and of the Council of 19 September 2007 amending Regulation (EC) No 1775/2005 concerning conditions for access to the natural gas transmission networks [COM(2007) 532 final – Not published in the Official Journal].

A third and final legislative package is proposed to complete the opening-up of the European energy markets to competition and creation of the internal energy market.

formalisation of the European groups of transmission system operators for better coordination and, in particular, the drawing-up of joint market and technical codes;
improved market operation, in particular greater transparency, effective access to storage facilities and liquefied natural gas (LNG) terminals.

Codecision procedure (COD/2007/0196)

Commission Decision 2003/796/EC of 11 November 2003 on establishing the European Regulators Group for Electricity and Gas [Official Journal L 296, 14.11.2003].

Priority Interconnection Plan

Leave a reply

Priority Interconnection Plan

Outline of the Community (European Union) legislation about Priority Interconnection Plan

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Energy > Internal energy market

Priority Interconnection Plan (PIP)

Document or Iniciative

Communication of 10 January 2007 from the Commission to the Council and the European Parliament entitled “Priority Interconnection Plan” [COM(2006) 846 final – Not published in the Official Journal].

Summary

Interconnection of networks allows the transmission of electricity and gas between markets usually organised on a national basis, and is a key element in setting up trans-European gas and electricity networks.

Interconnected networks are vital to the development of healthy competition and constitute a prerequisite to successfully creating an internal energy market. They also prevent the risk of short supply by diversifying sources, for example for electricity, by facilitating the introduction of a “green network” based on renewable energies.

Development of energy structures in Europe

The trans-European networks are currently underdeveloped as a result of insufficient funding. Certain malfunctions demonstrate the lack of coordination between the national energy networks and of a genuine separation of production, transport and distribution functions. System operators belonging to vertically-integrated companies have no incentive to develop their interconnections with other networks and expose themselves to competition from new producers and suppliers in the sector.

The infrastructures are increasingly operated at the limit of their physical capacities which hampers the integration of additional energy resources necessary for market growth. Thus the large-scale production of electricity from renewable sources could be compromised in certain regions. The saturation of the networks also threatens to generate temporary breakdowns in supply and an increase in energy prices. Numerous regions remain “energy islands” with poor interconnections, or none at all, with the rest of the internal market.

The Priority Interconnection Plan (PIP) details the progress of the 42 projects of European interest listed in the Guidelines for trans-European energy networks (TEN-E) adopted in 2006.

Sixty percent of electricity network projects are behind schedule, largely due to the complexity and lack of harmonisation in planning and authorisation procedures. Funding problems and environmental or health objections also constitute obstacles.

Although the gas projects of European interest are progressing more satisfactorily, the completion of terminals and storage facilities for liquefied natural gas (LNG) sometimes encounter major problems in some Member States where a number of projects have been abandoned or frozen. External interconnections require particular attention since they are responsible for more than 50% of our supplies and are becoming increasingly political.

Key activities for a stable environment favourable to investments

The PIP proposes five priority actions to ensure a stable environment favourable to investments:

identify and closely monitor projects which are vital to the creation of an internal market, ensuring at the very least that the projects of European interest (PEI) likely to encounter serious difficulties are completed satisfactorily and to a reasonable deadline;
appoint coordinators for these PEI, starting with the following four: the power link between Germany, Poland and Lithuania, interconnection of the North Sea wind farms, power link between France and Spain, and the southern gas corridor linking the Caspian and Black Sea basins to the European Union, including the Nabucco gas pipeline from Turkey to Austria via Bulgaria, Romania and Hungary;
plan networks according to consumer requirements using a regional approach with increased cooperation from the transmission system operators, responsible for monitoring and analysing development scheduling and investments at this level;
accelerate planning and authorisation procedures by encouraging their simplification and harmonisation, and obliging the Member States to establish national procedures to ensure that planning and approval for projects of European interest are completed within a maximum five-year period;
consider the value of increasing Community funding and encourage the European banks (EIB and EBRD) to give funding priority to energy interconnections.

Gains

Implementing the PIP will create a genuine single market for energy where prices will be acceptable to all categories of consumers, and external supplies and internal exchanges will be secure, with limited risk of saturation and outage. It will ensure the additional capacities necessary to meet the inexorable increase in demand for electricity and gas, and will satisfy CO2 reduction targets whilst integrating on a large scale new sources of renewable energy. Cohesion objectives will also be fulfilled, with the required capacities guaranteed even in isolated or sparsely populated regions.

Related Acts

Decision No 1364/2006/EC of the European Parliament and of the Council of 6 September 2006 laying down guidelines for trans-European energy networks and repealing Decision 96/391/EC and Decision No 1229/2003/EC [Official Journal L 262 of 22.9.2006].

Communication of 10 January 2007 from the Commission to the Council and the European Parliament entitled Prospects for the internal gas and electricity market [COM(2006) 841 final – Not published in the Official Journal].

Directive 2005/89/EC of the European Parliament and of the Council of 18 January 2006 concerning measures to safeguard security of supply of electricity and infrastructure investment [Official Journal L 33 of 4.2.2006].

Council Directive 2004/67/EC of 26 April 2004 concerning measures to safeguard security of supply of natural gas [Official Journal L 127 of 29.4.2004].

Internal energy market

Leave a reply

Internal energy market

Outline of the Community (European Union) legislation about Internal energy market

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Energy > Internal energy market

Internal energy market

A COMPETITIVE INTERNAL MARKET

Agency for the Cooperation of Energy Regulators
Internal market for natural gas
Internal market for energy (until March 2011)
Internal market in gas (from March 2011)
Internal market in electricity (from March 2011)
Prospects for the internal gas and electricity market
Sector inquiry into the gas and electricity markets
Transparency of gas and electricity prices
Prospection, exploration and production of hydrocarbons
Greenhouse gas emission allowance trading scheme

AN INTERCONNECTED INTERNAL MARKET

Green Paper – Towards a secure, sustainable and competitive European energy network
Trans-European energy networks
Community financial aid to trans-European networks
Priority Interconnection Plan (PIP)
Conditions for access to the gas transmission networks
Conditions for access to the network for cross-border exchanges in electricity (up until March 2011)
Natural gas transmission networks (from 2011)
Cross-border exchanges in electricity (from 2011)
Smart Grids

PUBLIC PROCUREMENT

Public procurement in the water, energy, transport and postal services sectors
Remedies mechanisms: water, energy, transport and postal services sectors

TAXATION

Community framework for the taxation of energy products and electricity

Internal market for energy

Leave a reply

Internal market for energy

Outline of the Community (European Union) legislation about Internal market for energy

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Energy > Internal energy market

Internal market for energy (until March 2011)

Document or Iniciative

Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC.

Summary

This Directive establishes common rules for the generation, transmission and distribution of electricity. It lays down the rules relating to the organisation and functioning of the electricity sector, access to the market, the criteria and procedures applicable to calls for tenders and the granting of authorisations and the operation of systems.

Public service obligations and customer protection

Electricity undertakings must be operated in accordance with commercial principles, with no discrimination between undertakings as regards either rights or obligations. The objective is to achieve a competitive, secure and environmentally sustainable market in electricity.

Member States must:

impose on undertakings operating in the electricity sector public service obligations which may relate to security, including security of supply, regularity, quality and price of supplies and environmental protection, including energy efficiency and climate protection;
ensure that all household customers and small enterprises, at least, enjoy the right to be supplied with electricity of a specified quality within their territory at reasonable, easily and clearly comparable and transparent prices;
take appropriate measures to protect end-users and vulnerable customers, including measures to help them avoid disconnection;
ensure the implementation of a system of third party access to the transmission and distribution systems for all eligible customers;
inform the Commission upon implementation of this Directive.

Tendering for new capacity

Member States must ensure the possibility of providing for new capacity or energy efficiency/demand-side management measures through a tendering procedure or any procedure equivalent in terms of transparency and non-discrimination, on the basis of published criteria.

Details of the tendering procedure for generating capacity and energy efficiency/demand-side management measures must be published in the Official Journal of the European Union at least six months prior to the closing date for tenders.

Designation of transmission and distribution system operators

Member States must designate, or require the undertakings owning transmission or distribution systems to designate, one or more transmission or distribution system operators for a period to be determined by Member States having regard to considerations of efficiency and economic balance.

Each transmission system operator is responsible for:

ensuring the long-term ability of the system to meet reasonable demands for the transmission of electricity;
contributing to security of supply through adequate transmission capacity and system reliability;
managing energy flows on the system, taking into account exchanges with other interconnected systems;
providing the operator of any other system to which its system is interconnected with sufficient information to ensure secure and efficient operation;
ensuring non-discrimination between system users;
providing system users with the information they need for efficient access to the system.

The tasks of the distribution system operator are:

to maintain a secure, reliable and efficient electricity distribution system in its area with due regard for the environment;
to ensure non-discrimination between system users;
to provide system users with the information they need for efficient access to the system;
to give priority to generating installations using renewable energy sources or waste or producing combined heat and power;
to procure the energy they use to cover energy losses and reserve capacity in their system according to transparent, non-discriminatory and market-based procedures;
to take energy efficiency/demand-side management and/or distributed generation measures that supplant the need to upgrade or replace capacity.

The minimum criteria which must be applied to safeguard the independence of transmission or distribution system operators are that:

they may not participate in the integrated electricity undertaking responsible, directly or indirectly, for the day-to-day operation of the generation, transmission or supply of electricity;
appropriate measures must be taken to ensure that the professional interests of the persons responsible for the management of the distribution system operator are taken into account so that they are capable of acting independently;
they must have effective decision-making rights, independent from the integrated electricity undertaking, with respect to assets necessary to operate the network;
they must establish a compliance programme, which sets out the measures taken to exclude discriminatory conduct, and make sure that it is adequately monitored.

Unbundling of accounts

Electricity undertakings must keep separate internal accounts for each of their transmission and distribution activities, as they would be required to do if the activities in question were carried out by separate undertakings, with a view to avoiding discrimination, cross-subsidisation and distortion of competition.

Reporting

The Commission will monitor and review application of this Directive and submit an overall progress report to the European Parliament and the Council before the end of the first year following the entry into force of the Directive and, thereafter, on an annual basis.

References

Act	Entry into force	Deadline for transposition in the Member States	Official Journal
Directive 2003/54/EC	4.8.2003	1.7.2004	OJ L 176 of 15.7.2003

DEROGATIONS TO THE ACT

Decision 2004/920/EC [Official Journal L 389 of 30.12.2004].

This derogation applies to the refurbishing, upgrading and expansion of existing capacity of the nine isles of the archipelago of the Azores (Portugal).

Directive 2004/85/EC [Official Journal L 270 of 29.9.2006].

This derogation applies to Article 21.1 for Estonia.

Decision 2006/375/EC [Official Journal L 142 of 30.5.2006].

This derogation applies to the refurbishing, upgrading and expansion of existing capacity in the isles of the archipelago of Madeira (Portugal).

Decision 2006/653/EC [Official Journal L 270 of 29.9.2006].

This derogation applies to Article 21.1 for the Republic of Cyprus.

Decision 2006/859/EC [Official Journal L 332 of 30.11.2006].

This derogation applies to Article 20.1 and Article 21.1 for Malta.

Directive 2008/3/EC [Official Journal L 17 of 22.1.2008].

This derogation applies to Article 21.1 for Estonia.

Related Acts

Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 (Text with EEA relevance) [Official Journal L 211 of 14.8.2009].

Communication of 11 March 2009 from the Commission to the Council and the European Parliament – Report on progress in creating the internal gas and electricity market [COM(2009) 115 final – Not published in the Official Journal].
The Report examines the progress in transposing the second package of measures relating to the internal energy market. Considerable efforts have been made in order to introduce genuine competition, especially in the context of regional initiatives. In addition, Member States are endeavouring to comply with the Electricity Regulation and the congestion management guidelines.
There is also an increase in volumes being traded on the power exchange spot market and growing activity of traders on power exchanges. However, electricity prices (for household consumers) in the first half of 2008 differed quite considerably, which is a sign of insufficient market integration.
The internal electricity market is still too fragmented. In order to rectify this situation, action should be taken as a priority on market integration and on the development of infrastructures and cross-border trade. Finally, it is strongly recommended that price regulation which obstructs competition and deters other potential suppliers from entering the market should be abandoned.

Commission Decision 2003/796/EC of 11 November 2003 on establishing the European Regulators Group for Electricity and Gas [Official Journal L 296 of 14.11.2003].

Prospection, exploration and production of hydrocarbons

Leave a reply

Prospection, exploration and production of hydrocarbons

Outline of the Community (European Union) legislation about Prospection, exploration and production of hydrocarbons

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Energy > Internal energy market

Prospection, exploration and production of hydrocarbons

Document or Iniciative

Directive 94/22/EC of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons.

Summary

The Member States have sovereign rights over hydrocarbon resources within their territories. Given their sovereignty, it is therefore up to each Member State to determine the geographical areas in which the rights to prospect, explore for and produce hydrocarbons may be exercised and to authorise entities to exercise those rights.

With a view to reinforcing the integration of the internal energy market, encouraging greater competition within it and improving the security of supply, common rules should be established which guarantee non-discriminatory access to the activities of prospection, exploration and production of hydrocarbons.

The Directive stipulates that the limits of the geographical areas covered by an authorisation and the duration of that authorisation must be determined in proportion to what is justifed in terms of the best possible exercise of the activities from an economic and technical point of view. The aim is to prevent a single entity from having exclusive rights for an area whose prospection, exploration and production can be carried out more effectively by several entities. The provisions which reserve for a single entity the right to obtain authorisations for a specific geographical area within the territory of a Member State were therefore abolished by the Member States concerned by 1 January 1997.

The procedures for granting authorisations must be introduced in a transparent manner based on objective, non-discriminatory criteria. They must therefore be open to all interested entities. Selection from among the various entities must be based on criteria relating to their technical and financial capabilities, the way in which they propose to prospect, explore and/or bring into production the geographical area in question and, if the authorisation is put up for sale, the price which the entity is prepared to pay in order to obtain the authorisation.

All the information relating to the authorisation (type of authorisation, geographical area which may be applied for as a whole or in part, deadline envisaged for granting the authorisation, selection criteria, etc.) is published in the Official Journal of the European Union at least 90 days before the deadline for the submission of applications.

The Member States nevertheless retain the right to make access to these activities and their exercise subject to considerations of national security, public safety, public health, security of transport, protection of the environment, protection of biological resources, the planned management of hydrocarbon resources or to the payment of a financial contribution or a contribution in hydrocarbons.

Conditions are introduced for reciprocity with third countries. The Member States’ entities must therefore be able to receive treatment in third countries which is comparable to that which third countries’ entities receive in the Community.

The Member States are required to provide annually a report on the geographical areas which have been opened, the authorisations granted, the entities holding those authorisations and the reserves available in their territory.

Directive 94/22/EC complements the Directive on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (initially Directive 90/531/EEC, which was repealed and replaced by Directive 93/38/EEC, which was itself then repealed and replaced by Directive 2004/17/EC).

Denmark is covered by a derogation in respect of activities in certain areas for which the concession expires on 8 July 2012.

References

Act	Entry into force – Date of expiry	Deadline for transposition in the Member States	Official Journal
Directive 94/22/EC	30.6.1994	01.07.1995	OJ L 164 of 30.6.1994

Related Acts

Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the[Official Journal L 134 of 30.4.2004].

Report from the Commission to the Council of 29 July 1998 on Directive 94/22/EC on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons [COM(1998) 447 final – Not published in the Official Journal].

The Commission gives details of the Directive’s implementation in the Member States and complies with the requirement under Directive 94/22/EC that it must present to the Council a report on the question of reciprocity, i.e. non-discriminatory access for Community firms to the activities of prospection, exploration and production in third countries. The conclusions are as follows:

all the Member States (except for Luxembourg and Finland, which are exempt from transposition because they do not have any potential hydrocarbon resources) have transposed Directive 94/22/EC into national law;
no reciprocity problems have been reported, as is borne out by the increased opening-up of exploration and production activity worldwide.

Conditions for access to the network for cross-border exchanges in electricity

Leave a reply

Conditions for access to the network for cross-border exchanges in electricity

Outline of the Community (European Union) legislation about Conditions for access to the network for cross-border exchanges in electricity

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Energy > Internal energy market

Conditions for access to the network for cross-border exchanges in electricity (up until March 2011)

Document or Iniciative

Regulation (EC) No 1228/2003 of the European Parliament and of the Council of 26 June 2003 on conditions for access to the network for cross-border exchanges in electricity [See amending acts].

Summary

The purpose of the Regulation is to stimulate cross-border exchanges in electricity by establishing a compensation mechanism for transit flows of electricity and by introducing harmonised principles on cross-border transmission charges and the allocation of available interconnection capacities between national transmission systems.

Compensation mechanism between operators of transmission systems

Transmission system operators (TSOs) receive compensation for costs incurred as a result of hosting cross-border flows of electricity on their network. This compensation is paid by the operators of national transmission systems from which the cross-border flows originate. Compensation received by TSOs for hosting cross-border flows will be calculated based on the costs of the infrastructure “used” for the flows.

Charges applied by network-operators for access to networks are transparent and take into account the need for network security and reflect actual costs incurred.

Information on interconnection capacities

TSOs install coordination and information exchange mechanisms to ensure security of the networks in the context of congestion management. Network congestion problems are addressed with non-discriminatory solutions, i.e. methods that do not involve a selection between contracts of individual market participants.

General principles of congestion management

Market participants must inform the transmission system operators concerned whether they intend to use allocated capacity a reasonable time ahead of the relevant operational period. Any allocated capacity that will not be used is reattributed to the market in an open, transparent and non-discriminatory manner.

New interconnectors

New direct current interconnectors may, under certain strict conditions, benefit from exemptions. In this context, the Commission has to monitor Member States’ decisions regarding exemptions and the restrictive way these measures are to be interpreted.

Guidelines

The guidelines specify in particular:

details of methods for determining the quantity of cross-border flows hosted and the magnitudes of such flows;
details of the treatment in the context of the inter-TSO compensation mechanism of electricity flows originating or ending in countries outside the European Economic Area (EEA);
harmonised, appropriate and efficient locational signals at European level.

Provision of information and confidentiality

Member States and the regulatory authorities provide the Commission, on request, with all necessary information. The Commission fixes a reasonable time limit, taking into account the complexity of the information required and the urgency with which the information is needed. The Commission does not disclose this information which is covered by the obligation of professional secrecy.

Penalties

The Member States lay down the rules on penalties applicable to infringements of the provisions of this Regulation and take all measures necessary to ensure that they are implemented. The Member States notify those provisions to the Commission by 1 July 2004 at the latest.

References

Act	Entry into force	Deadline for transposition in the Member States	Official Journal
Regulation (EC) No 1228/2003	4.8.2003	1.7.2004	OJ L 176 of 15.7.2003

Amending act(s)	Entry into force	Deadline for transposition in the Member States	Official Journal
Regulation (EC) No 1223/2004	1.12.2006	–	OJ L 312 of 11.11.2006

The successive amendments and corrections to Regulation (EC) No 1228/2003 have been incorporated in the original text. This consolidated versionis of documentary value only.

Related Acts

Commission Regulation (EU) No 838/2010 of 23 September 2010 on laying down guidelines relating to the inter-transmission system operator compensation mechanism and a common regulatory approach to transmission charging Text with EEA relevance

This Regulation lays down the parameters related to setting up an inter-transmission system operator compensation mechanism (ITC Mechanism). The transmission system operators receive compensation for the costs of hosting cross-border flows of electricity on their network.
The transmission system operators contribute to the ITC fund in proportion to the absolute value of net flows onto and from all national transmission systems.
Furthermore, this Regulation sets the annual average transmission charges paid by electricity producers.

Directive 2009/72/EC of the Parliament and of the Council of 13 July 2003 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC [Official Journal L 211 of 14.8.2003].

Natural gas transmission networks

Leave a reply

Natural gas transmission networks

Outline of the Community (European Union) legislation about Natural gas transmission networks

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Energy > Internal energy market

Natural gas transmission networks (from 2011)

Document or Iniciative

Regulation (EC) No 715/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005 (Text with EEA relevance).

Summary

This Regulation aims at laying down rules for natural gas transmission networks, gas storage and liquefied natural gas (LNG) facilities. It concerns access to infrastructures, particularly by determining the establishment of tariffs (solely for access to networks), services to be offered, allocation of capacity, transparency and balancing of the network.

Certification of transmission system operators

National regulatory authorities shall send the European Commission notification of decisions relating to the certification of a transmission system operator. The Commission then has a period of two months to deliver its opinion to the national regulatory authority. The authority then adopts the final decision concerning the certification of the transmission system operator. This decision and the Commission’s opinion are published.

European Network of Transmission System Operators (ENTSO) for gas

Creation of the ENTSO for Gas

By 3 March 2011, the transmission system operators for gas shall submit to the Commission and to the Agency for the Cooperation of Energy Regulators the draft statutes for the ENTSO for Gas, a list of members and draft rules of procedure.

Tasks of the ENTSO for Gas concerning network codes

The Commission shall consult the Agency for the Cooperation of Energy Regulators and the ENTSO for Gas in order to establish an annual list of the priorities which are to contribute to developing network codes. These codes shall be developed using a non-binding framework guideline submitted to the Commission by the Agency. The codes include rules and procedures relating in particular to:

network security and reliability;
data interchange;
technical and operational exchanges;
transparency rules;
harmonised transmission tariff structures;
energy efficiency.

Tasks of the ENTSO for Gas

The ENTSO for Gas is responsible for adopting:

common network operation tools;
a ten-year network development plan;
recommendations relating to the coordination of technical cooperation between Community transmission system operators;
an annual work programme;
an annual report;
annual summer and winter supply outlooks.

Costs and tariffs

The regulatory authorities shall determine tariffs or methodologies for their calculation. Member States may take decisions relating to tariffs such as fixing auction arrangements.

Third-party access services

Transmission system operators shall offer their services equitably to all network users on a rolling basis in the long and short term.

LNG and storage facility operators must also offer their services according to the procedure described above and make them compatible with the use of interconnected gas transport networks.

Allocation of capacity and congestion management

All market participants must have access to maximum network capacity as well as storage and LNG facilities.

Infrastructure operators shall implement and publish non-discriminatory and transparent congestion-management procedures which facilitate cross-border exchanges in gas on a non-discriminatory basis.

This Regulation repeals Regulation (EC) No 1775/2005 as from 3 March 2011.

Context

The 2002 and 2003 European Gas Regulatory Forums (the Madrid Forums) were at the origin of guidelines on best practice. However, experience acquired has demonstrated that these guidelines should be made legally enforceable. This Regulation is based on the guidelines in order to strengthen the internal market in natural gas.

References

Act	Entry into force	Deadline for transposition in the Member States	Official Journal
Regulation (EC) No 715/2009	3.9.2009	–	OJ L211 of 14.8.2009