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

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 1st 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

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

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].

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 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

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.

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. The main proposals for amendment of Regulation (EC) No 1775/2005 relate to:

  • 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.

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)

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].

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].

 

Priority Interconnection Plan

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 market in electricity

Internal market in electricity

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

Internal market in electricity (from March 2011)

Document or Iniciative

Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (Text with EEA relevance).

Summary

This Directive is aimed at introducing common rules for the generation, transmission, distribution and supply of electricity. It also lays down universal service obligations and consumer rights, and clarifies competition requirements.

Rules for the organisation of the sector

The rules for the organisation of the sector are aimed at developing a competitive, secure and environmentally sustainable market in electricity.

Member States may impose on undertakings operating in the electricity sector public service obligations which cover issues of security and security of supply, regularity and quality of service, price, environmental protection and energy efficiency.

Member States shall ensure that all customers have the right to choose their electricity supplier and to change supplier easily, with the operator’s assistance, within three weeks. They shall also ensure that customers receive relevant consumption data.

Electricity suppliers are obliged to inform final customers about:

  • the contribution of each energy source;
  • the environmental impact caused;
  • their rights in the event of a dispute.

Member States shall put in place an independent mechanism (energy ombudsman or consumer body) to manage complaints or disputes efficiently.

Member States are also obliged to ensure the monitoring of security of supply. They shall define technical safety criteria to ensure the integration of their national markets at one or more regional levels. In addition, the national regulatory authorities are to cooperate with the Agency for the Cooperation of Energy Regulators to guarantee the compatibility of regulatory frameworks between regions.

Generation

Member States shall define criteria for the construction of generating capacity in their territory taking account of aspects such as:

  • the security and safety of electricity networks;
  • the protection of health and public safety;
  • the contribution made towards the Commission’s “20-20-20” objectives.

Transmission system operation

From 3 March 2012, Member States must unbundle transmission systems and transmission system operators.

An undertaking must first be certified before being officially designated as a transmission system operator. A list of transmission system operators designated by Member States shall then be published in the Official Journal of the European Union.

Transmission system operators are mainly responsible for:

  • ensuring the long-term ability of the system to meet demands for electricity;
  • ensuring adequate means to meet service obligations;
  • contributing to security of supply;
  • managing electricity flows on the system;
  • providing to the operator of any other system information related to the operation, development and interoperability of the interconnected system;
  • ensuring non-discrimination between system users;
  • providing system users with the information they need to access the system;
  • collecting congestion rents and payments under the inter-transmission system operator compensation mechanism.

Distribution network operation

Member States shall designate distribution system operators or require undertakings that own or are responsible for distribution systems to do so.

Distribution system operators are mainly responsible for:

  • ensuring long-term capacity of the system in terms of the distribution of electricity, operation, maintenance, development and environmental protection;
  • ensuring transparency with respect to system users;
  • providing system users with information;
  • covering energy losses and maintaining reserve electricity capacity.

Member States have the option of putting in place a closed distribution system to distribute electricity within a geographically confined industrial, commercial or shared services site.

Unbundling and transparency of accounts

Member States and the competent authorities have right of access to the accounts of electricity undertakings but shall preserve the confidentiality of certain information.

Electricity undertakings shall keep separate accounts for their transmission and distribution activities.

Organisation of access to the system

Member States shall organise a system of third party access to transmission and distribution systems. The tariffs based on that system shall be published.

Member States shall also lay down criteria for the granting of authorisations to construct direct lines in their territory, on an objective and non-discriminatory basis.

National regulatory authorities

Member States shall designate a regulatory authority at national level. It shall be independent and exercise its powers impartially. It is mainly responsible for:

  • fixing transmission or distribution tariffs;
  • cooperating in regard to cross-border issues;
  • monitoring investment plans of the transmission system operators;
  • ensuring access to customer consumption data.

Retail markets

Member States shall ensure that contractual arrangements, commitment to customers, data exchange and settlement rules, data ownership and metering responsibility are defined.

Non-household customers may contract simultaneously with several suppliers.

Derogatory measures

A Member State may take the necessary safeguard measures in the event of a sudden crisis in the market or where the safety of persons is threatened. Derogations may also be obtained in the event of operating problems in isolated systems.

This Directive repeals Directive 2003/54/EC with effect from 3 March 2011.

Context

The Communications entitled ‘Prospects for the internal gas and electricity market’ and ‘Sector inquiry into the gas and electricity markets’ emphasised the inadequate framing of the rules and measures in force relating to the internal electricity market. The Commission deemed it important to amend the current rules with a view to ensuring fair competition and supplying electricity at the lowest possible price in order to complete the internal market in energy.

REFERENCES

Act Entry into force Deadline for transposition in the Member States Official Journal
Directive 2009/72/EC

3.9.2009

3.3.2011

OJ L211 of 14.8.2009

Internal market in gas

Internal market in gas

Outline of the Community (European Union) legislation about Internal market in 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 in gas (from March 2011)

Document or Iniciative

Directive 2009/73/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in natural gas and repealing Directive 2003/55/EC (Text with EEA relevance).

Summary

This Directive aims at introducing common rules for the transmission, distribution, supply and storage of natural gas. It concerns mainly natural gas, liquefied natural gas (LNG), biogas and gas from biomass.

Rules for the organisation of the sector

The rules for the organisation of the sector are aimed at creating a competitive, secure and environmentally sustainable market in natural gas.

Member States may impose on undertakings operating in the gas sector public service obligations which cover issues of security and security of supply, regularity and quality of service, price, environmental protection and energy efficiency.

Member States shall ensure that all customers have the right to choose their gas supplier and to change supplier easily, with their operator’s assistance, within three weeks. They shall also ensure that customers receive relevant consumption data.

Member States are responsible for monitoring security of supply issues and in particular those related to the balance of supply and demand on the national market, available supplies, maintenance of the networks and the measures to be taken in the event of supply problems. Regional or international cooperation may be put in place to ensure security of supply.

Member States shall ensure the integration of national markets at one or more regional levels, as a first step towards the integration of a fully liberalised internal market. The gas islands in isolated regions shall also be integrated. In this context, the national regulatory authorities shall cooperate with the Agency for the Cooperation of Energy Regulators.

Transmission, storage and LNG

From 3 March 2012, Member States shall unbundle transmission systems and transmission system operators.

An undertaking must first be certified before being officially designated as a transmission system operator. A list of transmission system operators designated by Member States shall then be published in the Official Journal of the European Union.

In addition, Member States shall designate one or more storage and LNG system operators responsible for:

  • operating, maintaining and developing transmission systems, storage and/or LNG facilities with due regard to the environment;
  • ensuring non-discrimination between system users;
  • providing information to any other transmission system operator, any other storage system operator, any other LNG system operator and/or any distribution system operator to ensure the interconnection of the transmission and storage of natural gas;
  • providing system users with the information they need to access the system.

Transmission system operators shall build sufficient cross-border capacity to integrate the European transmission infrastructure. Every year, they shall submit to the regulatory authority a ten-year network development plan indicating the main infrastructure that needs to be built or modernised as well as the investments to be executed over the next ten years.

Distribution and supply

Member States shall designate distribution system operators or require undertakings which own or are responsible for distribution systems to do so.

Distribution system operators are mainly responsible for:

  • ensuring the long-term capacity of the system in terms of the distribution of gas, operation, maintenance, development and environmental protection;
  • ensuring transparency with respect to system users;
  • providing system users with information;
  • covering energy losses and maintaining reserve capacity.

The distribution system operator shall be independent in legal terms from other activities not relating to distribution.

Distribution systems responsible for distributing natural gas within a geographically confined industrial, commercial or shared services site may be classified by the competent authorities as closed distribution systems. On this basis, they may be exempted from the requirement to have their tariffs, or the methodologies underlying their calculation, approved in advance.

Unbundling and transparency of accounts

Member States and the competent authorities shall have right of access to the accounts of natural gas undertakings but shall preserve the confidentiality of certain information.

Natural gas undertakings shall keep separate accounts for all of their activities relating to the supply of gas, such as transmission and distribution.

Organisation of access to the system

Member States or the competent regulatory authorities shall define the conditions for access to storage facilities and linepack. They shall take measures to ensure that eligible customers can obtain access to upstream pipeline networks. Moreover, they shall organise a system of third party access to transmission and distribution systems.

Natural gas undertakings may refuse access to the system on the basis of lack of capacity or where access to the system would compromise the performance of their public service obligations. Substantiated reasons shall be given for any such a refusal.

Final provisions

A Member State may take the necessary safeguard measures in the event of a sudden crisis in the market or where the safety of persons is threatened. These measures shall be notified to the other Member States and to the Commission.

This Directive repeals Directive 2003/55/EC as from 3 March 2011.

Context

The 2007 Commission Communications entitled “Prospects for the internal gas and electricity market” and “Sector inquiry into the gas and electricity markets” highlighted the inadequacy of the rules and measures in force relating to the internal market in gas in meeting the objectives laid down for the proper functioning of the internal market. The adoption of new rules was required.

REFERENCES

Act Entry into force Deadline for transposition in the Member States Official Journal
Directive 2009/73/EC

3.9.2009

3.3.2011

OJ L211 of 14.8.2009

Transparency of gas and electricity prices

Transparency of gas and electricity prices

Outline of the Community (European Union) legislation about Transparency of gas and electricity prices

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

Transparency of gas and electricity prices

Document or Iniciative

Directive 2008/92/EC of the European Parliament and of the Council of 22 October 2008 concerning a Community procedure to improve the transparency of electricity and gas prices charged to industrial end-users (recast) (Text with EEA relevance).

Summary

This Directive aims at establishing a European procedure to ensure transparency of gas and electricity prices charged to end-users.

The procedure is necessary, insofar as this information enables consumers to choose between different energy providers and also between energy sources.

Information provided

The Member States shall ensure that the undertakings that provide industrial end-users with gas and electricity communicate the following information to Eurostat:

  • the prices and terms of sale of gas and electricity to industrial end-users;
  • the price systems in use;
  • the breakdown of consumers and the corresponding volumes by category of consumption to ensure the representativeness of these categories at national level.

Procedures framing gas and electricity prices

Prices reported must be the prices paid by industrial end-users buying natural gas distributed through mains, and buying electricity, for their own use. They are to be expressed in national currency per gigajoule (for gas) and per kilowatt-hour (kWh) (for electricity).

These prices must include all charges payable, such as network charges and energy used, rebates or premiums. Initial connection charges are not to be included.

Three levels of price are to be provided:

  • prices excluding taxes and levies;
  • prices excluding VAT and other recoverable taxes;
  • prices including all taxes, levies and VAT.

These prices are collected twice per year (January and July) whereas the method of calculation and a description of the taxes levied on sales of gas and electricity to end-users are to be transmitted once per year (in January).

Information on the procedures framing gas and electricity prices is to be communicated by an independent statistical body.

This Directive repeals Directive 90/377/EEC.

Reference

Act Entry into force Deadline for transposition in the Member States Official Journal
Directive 2008/92/EC

27.11.2008

OJ L 298 of 7.11.2008

This summary is for information only. It is not designed to interpret or replace the reference document, which remains the only binding legal text.

Smart Grids

Smart Grids

Outline of the Community (European Union) legislation about Smart Grids

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

Smart Grids

Document or Iniciative

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 24 April 2011 – Smart Grids: from innovation to deployment [COM(2011) 202 final – Not published in the Official Journal].

Summary

This Communication proposes several actions which aim to develop Smart Grids * in order to contribute effectively to the European Union’s (EU) Europe 2020 Strategy for smart, sustainable and inclusive growth.

According to the European Bio Intelligence study , the use of these grids could:

  • reduce the annual primary energy consumption of the EU energy sector by almost 9 % by 2020;
  • create new jobs;
  • generate additional economic growth.

1st objective: develop common European Smart Grid standards

Since March 2009, the European Standardisation Organisations (ESOs) such as the European Committee for Standardization (CEN), the European Committee for Electrotechnical Standardization (CENELEC) and the European Telecommunications Standards Institute (ETSI) have been responsible for establishing European standards for the interoperability of smart utility meters (for electricity, gas, water and heat) and smart grids. The results of this research are expected in 2012 and will be based in part on the Directive on measuring instruments.

The ESOs also have the task of developing new standards for the interoperability of chargers for electric vehicles with all types of electric vehicles and with all electricity supply points.

The Commission intends to supervise the development of these standards throughout 2011-12.

2nd objective: guarantee data protection and security

In the EU, the protection of personal data is covered by Directive 95/46/EC which applies to the processing of data in any sector, including Smart Grids.

The challenge lies in distinguishing between personal and impersonal data. The Commission believes that it would be sensible to make adaptations in the national legal frameworks in order to accommodate the specific parameters of Smart Grids, whilst protecting the private life of European citizens.

The Commission proposes to guide the changes to national legislation which will accommodate the parameters of Smart Grids, while the ESOs will be responsible for developing the technical standards for these grids, taking the ‘privacy by design’ approach. An expert group shall assess the network and information security of Smart Grids.

3rd objective: incentivise Smart Grid deployment

The deployment of Smart Grids is market-driven. This is the reason why households and companies should have simple access to consumption information so they can keep their energy costs down.

Furthermore, investment in Smart Grids should be incentivised. The Electricity Directive and the Energy Services Directive should enable the emergence of a regulatory framework which provides incentives for such investment.

The Commission plans to define a methodology using national smart meter implementation plans. In addition, it encourages Member States to design action plans for establishing Smart Grids. Specific coordinated action by all the actors involved will be made possible using national regulators and the European Network of Transmission System Operators for electricity (ENTSO-E).

4th objective: develop Smart Grids in a competitive retail market in the interest of consumers

Member States must create transparent retail markets and facilitate competition between providers. Developing Smart Grids in a competitive retail market should encourage consumers to change their behaviour in terms of energy consumption, because they should have real-time access to their exact energy consumption.

To complete this market, the Commission plans to revise the Energy Services Directive in order to draw up minimum requirements for the format and content of information provision for customers. It will monitor the implementation of the Third Energy Package which, in particular, provides for time-of-use pricing and demand response.

5th objective: support innovation

Smart Grids require significant investment in terms of research and development. For example, the European Electricity Grids Initiative (EEGI) was established under the Strategic Energy Technology Plan (SET-Plan) to accelerate the deployment of smart grid technologies by 2020. Two other initiatives have the same objectives: the Covenant of Mayors and the Smart Cities and Communities initiatives.

The Commission intends to propose new initiatives similar to those mentioned above, with the aim of promoting the deployment of Smart Grids.

Key terms of the Act
  • Smart Grids: an upgraded electricity network to which two-way digital communication between supplier and consumer, intelligent metering and monitoring systems have been added.

Internal energy market

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

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.

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