Internal energy market

In order to harmonise and liberalise the EU’s internal energy market, three consecutive legislative packages of measures were adopted between 1996 and 2009, addressing market access, transparency and regulation, consumer protection, supporting interconnection, and adequate levels of supply. As a result of these measures, new gas and electricity suppliers can enter Member States’ markets, while both industrial and domestic consumers are now free to choose their own suppliers. Other EU policies related to the internal energy market address the security of the supply of electricity, gas and oil, as well as the development of trans-European networks for transporting electricity and gas.

Legal basis

Article 194 TFEU.

Objectives

In the energy sector, completion of the EU’s internal market requires the removal of numerous obstacles and trade barriers; the approximation of tax and pricing policies and measures in respect of norms and standards; and environmental and safety regulations. The objective is to ensure a functioning market with fair market access and a high level of consumer protection as well as adequate levels of interconnection and generation capacity. In February 2011, the European Council set the objective of completing the internal energy market by 2014 and developing interconnections so as to put an end to any isolation of Member States from the European gas and electricity grids by 2015.

Achievements

a.Liberalisation of gas and electricity markets

The first legislative package (Directives 96/92/EC concerning common rules for the internal market in electricity and 98/30/EC on common rules for the internal market in natural gas) was replaced in 2003 by a second legislative package that enabled new gas and electricity suppliers to enter Member States’ markets and enabled consumers (industrial consumers from 1 July 2004 and domestic consumers from 1 July 2007) to choose their own gas and electricity suppliers. In April 2009, a third legislative package seeking to further liberalise the internal electricity and gas market was adopted, amending the second package. Directives on electricity (2009/72/EC) repealing Directive 2003/54/EC and gas (2009/73/EC) repealing Directive 2003/55/EC notably:

  • regulate transmission network ownership by ensuring a clear separation of supply and production activities from network operation through three models of organisation: full ‘ownership unbundling’, independent system operator (ISO — responsible for the maintenance of the networks, while the assets remain the property of the integrated company) and independent transmission operator (ITO — a system of detailed rules ensuring the autonomy, independence and investments necessary in the transmission activity);
  • ensure more effective regulatory oversight from truly independent national energy regulators, strengthening and harmonising the competences and the independence of national regulators so as to allow effective and non-discriminatory access to the transmission networks;
  • reinforce consumer protection and ensure the protection of vulnerable consumers;
  • regulate third party access to gas storage and liquefied natural gas (LNG) facilities, and lay down rules concerning transparency and regular reporting about gas reserves;
  • promote regional solidarity by requiring Member States to cooperate in the event of severe disruptions of gas supply, by coordinating national emergency measures and developing gas interconnections.

The Third Energy Package, which entered into force on 3 March 2011, has not yet been transposed and fully implemented in several Member States. The EU is not on track to meet the 2014 deadline for completion of its internal energy market. In its November 2012 communication setting out an action plan on making the internal energy market work (COM(2012) 0663), the Commission identifies hurdles that still hinder the completion of the internal market and a need for further action in order to update energy systems and to better protect consumers and enable them to take advantage of the price differentials and diversity of services offered by a fully liberalised energy market with deregulated prices. The Commission plans to publish in 2014 a report on progress in implementing the internal energy market, as well as a retail market initiative aimed at facilitating consumer engagement.

b.Energy market regulation

In 2003, the European Regulators’ Group for Electricity and Gas was set up, responsible for ensuring cooperation between national regulators and coherent application of the internal market directives in the Member States (Decision 2003/796/EC). In 2010, the European Agency for the Cooperation of Energy Regulators (ACER) was also established (Regulation (EC) No 713/2009). It started its work in March 2011. As a supervisory body with an advisory role, the Agency makes recommendations to the Commission regarding market regulation and priorities for transmission infrastructure. The Agency is mainly responsible for:

  • promoting cooperation between national regulatory authorities at regional and European level;
  • monitoring progress in the implementation of the 10-year network development plans;
  • monitoring the internal markets in electricity and natural gas; in particular, wholesale energy trading, the retail prices of electricity and gas, access to the network including access to electricity from renewable energy sources, and compliance with consumer rights.

As a further step, two regulations were adopted, creating structures of cooperation for European Network Transmission Systems Operators (ENTSOs): one for electricity (EC/714/2009) and one for gas (EC/715/2009 amended by Commission Decision 2010/685/EU). The ENTSOs, together with ACER, create detailed network access rules and technical codes, and ensure coordination of grid operation through the exchange of operational information and the development of common safety and emergency standards and procedures. ENTSOs are also responsible for drafting a 10-year investment plan every two years, which are then in turn reviewed by ACER. In October 2013, the Commission adopted the first EU-wide gas network code on cross-border capacity allocation (Commission Regulation (EU) No 984/2013). In November 2013, the Commission also issued a guidance document on public intervention in the internal electricity market with, notably, a checklist that Member States are to use in designing adequate generation capacities (COM(2013)7243).

Directive 2008/92/EC seeks to improve the transparency of gas and electricity prices charged to industrial end-users by obliging Member States to ensure that these prices and the pricing systems used are communicated to Eurostat twice a year. In October 2011, the EU adopted Regulation (EU) No 1227/2011 on wholesale energy market integrity and transparency aiming to guarantee fair trading practices on European energy markets. It gives ACER the competence to gather, review and share data from wholesale energy markets, monitor markets and trading, investigate cases of market abuse and coordinate the application of appropriate penalties with the Member States. The responsibility for applying sanctions applicable to infringements lies, however, in the hands of the Member States. The European Council meeting of 22 May 2013 called on the Commission to provide an analysis of the composition and drivers of energy prices and costs in the Member States, which the Commission issued in January 2014 (COM(2014) 0021 and SWD(2014)0020).

c.Security of the supply of electricity, natural gas and oil

Directive 2005/89/EC establishes measures aimed at safeguarding the security of electricity supply, to ensure the proper functioning of the internal market for electricity, an adequate level of interconnection between Member States, an adequate level of generation capacity, and balance between supply and demand. In light of the crucial importance of gas for the energy supply of the European Union and as a response to the Russian-Ukrainian gas crisis during the winter of 2008-2009, Regulation (EU) No 994/2010 concerning measures to safeguard the security of gas supply was adopted in 2010. The Regulation aims to strengthen prevention and crisis response mechanisms. With the aim of ensuring secure oil supply, Directive 2009/119/EC obliges Member States to maintain minimum oil stocks, corresponding to 90 days of average daily net imports or 61 days of average daily inland consumption, whichever of the two quantities is greater. Following the recent Russian-Ukrainian crisis and Russia’s annexation of Crimea, the European Council of March 2014 called on the Commission to draw up a comprehensive plan for the reduction of EU energy dependence by June 2014.

d.Trans-European Networks

Decision 1364/2006/EC lays down guidelines for trans-European energy networks that identify projects of common interest and priority projects among trans-European electricity and gas networks. Projects of common interest have priority for the granting of financial aid provided for under Regulation No 2236/95/EC. The budget allocated to the TEN-E is mainly intended for financing feasibility studies. Other instruments may also step in to part-finance investments, for example the Structural Funds in the convergence regions. A Commission proposal for a regulation to establish a common framework for the notification of investment projects in energy infrastructure in the EU (COM(2013) 0153) was adopted by the Council and Parliament in February 2014 (T7-0058/2014). The regulation requires Member States to notify the Commission of their investment projects in energy infrastructure.

In a report to the June 2011 Energy Council, the Commission estimated that about EUR 200 billion of investment would be needed by 2020 in energy infrastructure Europe-wide. In view of this need, the Commission, in its communication entitled ‘A Budget for Europe 2020’, put forward a new mechanism, the Connecting Europe Facility (CEF), for funding priority projects in the field of energy, transport and critical digital infrastructure from 2014 to 2020. In November 2013, Parliament endorsed the deal reached with the Council on the budget for the CEF, with EUR 5.12 billion earmarked for the development of trans-European energy infrastructure projects (T7-0463/2013). Several projects of common interest were selected for EU support, based on the energy infrastructure guidelines endorsed in March 2013 by the Council and Parliament (T7-0061/2013). The Regulation on energy infrastructure guidelines identifies 12 priority corridors and areas covering electricity, gas, oil and carbon dioxide transport networks, and provides measures on streamlining and speeding up permit granting and regulatory procedures for projects of common interest. In 2013 the Commission proposed a list of 248 European projects of common interest in line with the procedure and criteria set out in the regulation. This list will be reviewed every two years. In March 2014, the European Council asked the Commission to put forward by June specific interconnection objectives to be attained by 2030.

Role of the European Parliament

In adopting the legislative package on internal energy markets, Parliament has strongly supported transmission ownership unbundling in the electricity sector as the most effective tool to promote investments in infrastructures in a non-discriminatory way, fair access to the grid for new entrants, and transparency in the market. Parliament has also stressed the importance of a European common view of mid-term investments (indicative European 10-year plan focused on interconnections); greater cooperation between regulatory authorities, Member States and transmission system operators; and a strong process of harmonisation of network access conditions. On the initiative of Parliament, special importance was placed on consumer rights, which was part of the deal achieved with the Council: the resolutions insisted on increasing consumer rights (change of suppliers, direct information through smart meters and efficient treatment of complaints made to an energy ‘ombudsman’). Parliament also obtained recognition of the concept of ‘energy poverty’. It has strongly supported the establishment of ACER, stressing that it had to be granted the necessary powers to overcome those issues that cannot be solved by national regulators and which hamper the integration and proper functioning of the internal market.

Parliament further strengthened the role of the agency in cross-border issues by entrusting it with binding decision-making powers, ensuring the transparency of its activities and securing its democratic accountability vis-à-vis Parliament, as well as its financial independence. In addition, Parliament sees the need for a more comprehensive exchange of information on the part of operators regarding infrastructure and grid management. In order to strengthen transparency in wholesale energy markets, it pushed further for the creation of national registers for wholesale market traders and for the harmonisation of penalty schemes across the EU through minimum standards under the REMIT Regulation.

More recently, in March 2013, when adopting the guidelines for trans-European energy infrastructure (T7-0061/2013), Parliament called particular attention to the importance of energy storage facilities and the need to ensure the stability of European electricity networks with the integration of renewable energy resources. It approved an amendment improving the transparency of the methodologies used by the ENTSOs in their network development plans. It also introduced an amendment protecting consumers from bearing a disproportionate burden of the costs of common interest projects.

In September 2013 Parliament adopted a resolution on making the internal energy market work (T7-0344/2013), endorsing the Commission’s 2012 communication on the subject (COM(2012) 0663) and its accompanying action plan aimed at overcoming some hurdles that still hinder the completion of the internal market. Parliament expressed its support for a European Energy Community between the Member States and stressed the importance of improving the coordination of infrastructure projects and exploring new funding approaches for investment in energy networks.

In its resolution endorsing the Connecting Europe Facility in November 2013 (T7-0463/2013), Parliament stressed the importance of synergies between the transport, telecommunications and energy sectors and of leveraging funding from both the public and private sectors.

With regard to the regulation on the notification of investment projects in energy infrastructure, Parliament succeeded in securing the adoption of the proposal under the ordinary legislative procedure. It obtained the annulment of previous regulations (617/2010 and 833/2010) on the matter, under which it would only have been consulted. Parliament approved the regulation at first reading in February 2014 (T7-0058/2014). In its legislative resolution, it clarified the notification requirements in terms of content, confidentiality, monitoring and reporting.

Cécile Kerebel

05/2016