The internal electricity and gas market

In its Communication of 10 January 2007 "An Energy Policy for Europe", the European Commission stated that the current regulations for the European internal energy market do not comply with the objective of a well-functioning internal market.

On this basis, the Commission assessed that the existing common regulations should be revised and strengthened.

Therefore, the Commission put forward the third Energy Liberalisation Package on 19 September 2007, and this package includes a number of proposals on how to promote the liberalisation of the electricity and gas markets even more.

The Energy Liberalisation Package includes five EU legislative acts:

1. Common regulations for the internal electricity market
2. Common regulations for the internal gas markets
3. An agency responsible for cooperation between energy authorities
4. Allowing access to the grid in connection with cross-border exchange of electricity
5. Allowing access to the transmission grid for natural gas

Political agreement was reached on the Energy Liberalisation Package among the energy ministers at the Council meeting on 10 October 2008. In April 2009 a majority of the members of the European Parliament adopted the joint package. The package was adopted by the European Parliament in April 2009 and by the Council of Ministers in June 2009.

The main elements of the package are:

• a requirement for unbundling of ownership of the transmission grid, or alternatively increased independence in the operation and expansion of the transmission grid
• strengthening the powers of national regulators
• establishing a joint European supervisory agency, the objectives of which is to create a platform for cooperation between national regulators and focus on matters relating to crossborder transmission
• formalising the cooperation between transmission system operators, and
• increasing transparency of market data concerning cross-border transmissions and trade.

Ownership unbundling
The most important element in the revised electricity and gas directives is the requirement for ownership unbundling between generation/supply companies and ownership /operation of the overall energy grid (the transmission grid). Member states can also choose to ensure increase independence between the transmission grid and generation/supply activities by setting up a system operator who will operate the transmission grids independently of supply and generation interests, also called an ISO (Independent System Operator). In those Member States that neither implement ownership unbundling or the ISO option, transmission, generation and supply activities will still be possible under specific conditions within the same group that is without ownership unbundling of the transmission grid. This option, also referred to as ITO (Independent Transmission Operator) is subject to several requirements, e.g. measures to secure the independence of the ITO management and to secure independence in the operations as well as expansion of the transmission system. Furthermore, the ITO will be subject to increased supervision from national regulators.

The objective of this is to ensure that all players have equal access to the transmission grid and to avoid that the big energy companies that own the energy transmission grid can use their ownership of the grid to impede access for their competitors.

Agency
In addition to ownership unbundling, the proposal also includes establishment of a new agency for cooperation between energy supervisory authorities.

The objective is, at Community level, to supplement and where necessary coordinate the national regulatory tasks of the regulatory authorities related to the Electricity and Gas Directives.

The primary task of the agency is to promote and regulate cross-border trading of electricity and gas.

Establishment of the new agency will also strengthen the national supervisory authorities as they are required to be more independent. Furthermore their powers have been extended to ensure and promote competition on the electricity and gas market.

Access to the grids
The liberalisation package includes final amendments to the two EU regulations on the conditions for access to the grid in connection with cross-border electricity exchange.

The objective of the suggested amendments is to promote the development of a functional and transparent cross-border electricity and gas market.

The revised regulations include rules that commit transmission grid operators to strengthen their cooperation.

The proposal also aims at improving the statutory framework so as to make it easier for the third parties to gain access to infrastructure installations, for example by increased transparency.