mercredi 8 juin 2011

Evolution of European energy directives


In 2000 the Council of Lisbon (March 23rd, 24th) recommended the fast achievement of domestic energy market opening. The Commission presented in May 2001 two texts in this direction:
- A proposal for a Directive on common rules for the domestic market of electricity and natural gas;
- A proposal for a Regulation concerning the access conditions to the network for transborder exchanges of electricity.

Two directives have been taken in 1996 and 1998, and both have a common purpose: the completion of the domestic energy market. These directives defined the thresholds of demand opening. The directive on electrical equipment envisages the three following stages for the liberalization of the demand:

- Opening of 27 % of the market in February 1997;
- Opening of 30 % of the market in February 2000;
- Opening of 35 % of the market in February 2003.

The directive gas envisages the three following stages for the liberalization of the demand:

- Opening of 20 % of the market in August 2000;
- Opening of 28 % of the market in August 2003;
- Opening of 33 % of the market in August 2008.

The directive on electrical equipment was transposed by all the Member States in time, i.e. in February 1999, except France which did it only on May 20, 2000. For the gas directive , a bill of transposition was filed in on the Desk of the French National Assembly, but was never part of the agenda. Consequently, France was suited in the Court of Justice of the European Communities into May 2001.
In 2002, the average threshold of opening was 66 % for the European market of electricity, and should pass to 79 % in 2007. This threshold is only 30 % in France. Concerning gas, the average threshold is 79 %, and 0 % in France. The French Government is put unnecessarily a bad position. Even in the absence of law of transposition, GDF (Gaz de France) decided to open with competition 20 % of the French gas market.

Hardly two years and an half after the setting in August 2000 of this first Gas directive to open the markets to competition, a new directive on the common rules for the domestic market of electricity and natural gas was proposed in March 2001. During the Summit of Barcelona in March 2002, the European Council impulsed this project while deciding to accelerate the opening of the markets of energy to competition.

The new Directives aim at completing the quantitative opening in three stages:

- Free choice of the supplier of electricity for the consumers of the non-residential sector at January 1, 2003;
- Free choice of the gas supplier for the consumers of the non-residential sector at January 1, 2004;
- Total opening of the market of electricity and gas at January 1, 2005;

In practice, the range of these provisions of demand liberalization for energy must be softened. Generally, there is an important shift between the legal degree of opening and the real degree of market opening. The number of eligible industrial customers having actually changed supplier is limited in main Member States: less than 5 % in Spain and in Portugal (and 0 % in Greece); 5 to 10 % in Austria, in Belgium and France; 10 to 20 % in Germany, in Italy and in the Netherlands. Only Scandinavian countries and the United Kingdom are an exception, with rates up to 80 % to 100 %.

The quantitative release of demand for electricity and gas is not enough. It also needs a lawful framework to follow the deployment by a true competition.
The organization set up by the directives of 1996 and 1998 distinguishes the functions from production of electricity/electricity transmission (on high-tension lines) or gas (via gas pipelines with high pressure)/distribution of electricity (on lines with middle and low tension) or of gas (via local area networks or regional of gas pipelines)/of storage in the case of gas/of supply of electricity and gas.
Historically, these various functions were very often integrated within some companies operating on their respective national market. The arrival of new competitors can encounter discrimination problems through benefiting to historical operators. The objective of the European legislation is to proscribe these discriminations, by opening to competition the two ends of the chain, i.e. the production and the supply of energy. On the other hand, the median functions of transport and distribution cannot be competing, because they are natural monopolies. Indeed, it would be economically not very rational to duplicate the powerlines and the existing gas pipelines. The Community lawful framework envisages however a mechanism of access of the thirds to the network which allows, under the monitoring of "national regulators", to make sure that the managers of network act in a non-discriminatory way.

As we’ll see, these two directives are on the same line than the former ones, but the framework has evaluated according to the past experiences. These evolutions belong to the organizations aspects of the new directives, as the opening of the electricity production to competition, the access to the transport network and distribution, the independence of network managers and the role of the national regulators. Finally, it is also necessary to deal with public service obligations which offently means supply security and respect of customer’s right.


EVOLUTION OF ORGANIZATIONAL ASPECTS

The opening of the electricity production to competition

The 1996 directive introduced an integral competition for all new output. It leaves the Member States the choice between two procedures:

- The system of the authorization, which leaves to the operators the initiative construction of new outputs;
- The system of the invitation to tender, which leaves with the authorities the care to plan the capacities of production;

The procedure of authorization, i.e. the most competing option, was retained by fourteen Member States. At that time, only Portugal chose to apply a system combining the two procedures.
In such a situation, the Commission proposes in its new text to bring up to date the 1996 directive, by making procedure of authorization as the standard and procedure of invitation to tender the exception.
The Member States could resort to invitation procedure only insofar as the output in construction would be insufficient, to guarantee the security of supply.

The access to the network of transport and the distribution:

The 1996 and 1998 directives offer to the Member States the choice between two major options, or a combination of these options, to give access of third network (ATR): the limited access and the negotiated access.

The limited access is based on tariffs published, and represents the access method producing the most effective competitive market. The fixed prices system for all companies guarantees not only the absence of discrimination with respect due to competitors, but as well the opportunity for companies to plan their future purchases.
Concerning electricity, all the Member States chose this method, except Germany.
The situation is not also sliced for gas. Last nine Member States have or will adopt this solution. Four Member States chose or consider the negotiated access option (Austria and Germany) or a combination of both (France and Netherlands).
The negotiated access is based on a negotiation of voluntary trade agreements between suppliers of electricity and gas and the eligible customers. Member States make sure that network managers publish an indicative price for electricity, and that gas companies publish their principal commercial conditions.

In order to avoid any discrimination and to promote transparency, the new text presented by the European Commission proposes to adopt only the solution of tariffs published and approved by the authority of national regulation. The Commission proposes to introduce the tariffs system also regulated for the access to the installations of gas storage. These installations enable to offer balance, which is relatively constant.

The independence of the network managers

The electricity directive provides that Member States appoint network of transport managers(GRT), high voltage network managers, as well as distribution network managers(GRD), and middle/low tension managers.
The former directive forbid managers from any discrimination between the network users, and provides that the transport function is separated in the management field of the production, distribution or supply functions of electricity.
Many Member States went further, either by deciding the creation of a subsidiary company of the producing group, or by deciding the creation of a legal entity which does not belong any more to the group.

The Commission considers it is necessary to reinforce the former provisions of separation of management while carrying out a legal separation of the managers of transport, as well as companies of distribution of electricity (with a threshold of minimis of 100 000 subscribers). It also legally extends the independence obligation on to the gas sector, as well on the stage of transport as of distribution (with a threshold of minimis also up to 100 000 subscribers).
The obligatory subsidiarization is an acceptable principle for transport network managers, who are responsible for the transborder exchanges and ensure the unit of the European energy market.


The role of the national regulators

Formerly, the 96/98 electricity and gas directives were setting mechanisms of resolving litigations, including an independent authority, in particular to solve the network access problems. Without being expressly envisaged, the majority of Member States instituted national regulators, whose statutes and missions are rather variable. These authorities of regulation do not merge with the national competition authorities, except in the German case, where the Bundeskartellamt is qualified in matter of electricity.

The 2003 Directives recommend that an independent regulator is indicated in each Member State and that it is exerts at least a certain number of competences, which would be common to all the regulators.
The compulsory introduction of independent and specialized authorities of regulation is a priori a symbol of convenient harmonization. But Germany declared itself against it, arguing it wants to keep its own competence system. After a long period of stalled negotiation, an agreement released under Belgian presidency let this point to subsidiarity. This compromise does not appear acceptable, because the Bundeskartellamt interventions a posteriori seem to have a quite doubtful effectiveness. The obligation for each Member State to establish an independent authority of regulation, specialized and intervening a priori, must be defended.


THE PUBLIC SERVICE PURPOSES

The supply security

The energy supply security implies the networks safety, which it is up to the Member States to guarantee. The two former directives provided that in the case of a sudden crisis on the energy market, of a threat on safety, each Member State can take temporarily measures of safeguard. These measures should not however exceed the strictly essential range to resolve these sudden difficulties. This clause could apply for instance in a case as the situation faced by France with the 1999/2000 storm.
Moreover, the 2003 directives lay out that Member States can oblige transport network managers to respect minimal levels of investment in maintenance and in the development of transport network, particularly in the interconnection capacities.

The customers rights

The new Directives of the Commission envisage, in addition to the right of the households to be fed in quality electricity at accessible prices, exposes the following purposes of public utility:

- Vulnerable consumer protection: guarantee counters the unjustified interruptions with the old people, unemployed, and the handicapped people;
- The protection of the rights of the final consumers: minimal conditions with regard to the contractual clauses, the transparency of information, availability of the resolution mechanisms of inexpensive and transparent litigation;
- Economic and social cohesion, in order to guarantee good tariff conditions in the outlying areas


The environmental protection

The former electricity and gas directives provide that Member States can impose environmental protection obligations to the producting undertakings. The electricity directive authorizes Member States to impose to the distribution and network transport manager to give priority to plants using renewable or combined sources of energy.

It is obvious in the 2003 directives that the commission added the renewable energies in the energetic sphere mentioned in the directives.
In accordance with directive 2001/77/CE, all Member States have adopted national objectives for the consumption of electricity produced from renewable sources of energy. If all Member States carry out their national objectives, 21 % of the total quantity of electricity consumed in the EU should be produced from renewable sources of energy by 2010. In 2011 such goal is far from being reached… Additional efforts are thus essential, and this is why environmental protection is one of the stone touch on these 2003 directives.
Moreover, after the debate raised by the former green book in November 199, the white book presented by the Commission expressed the purpose to reach in 2010 a minimal penetration of 12% of the renewable sources of energy in the European Union.

Renewable sources of energy can contribute to reduce the dependence to imports and to increase the supply security. Obviously Positive consequences are also foreseeable in terms of CO2 emission and employment. The action plan aims at offering to the renewable sources of energy equitable outlets on the markets without excessive financial constraints. With this intention, a list of priority measures was drawn up, among which appear:

- The non-discriminatory access to the market of electricity;
- Tax and financial measurements;

These two intentions are totally included in the 2003 directives.
(Written in 2009)

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