EU Adopts New Rules Strengthening Internal Energy Market

June 26, 2009 // Published as a news service by IHS

The new legislation is expected to strengthen the EU's internal energy market and give consumers more protection and the benefit of the lowest possible energy prices, while offering companies the chance to compete on a level playing field.

In addition, the legislative package will promote sustainability by stimulating energy efficiency. EU member states now have 18 months to transpose the new rules into national law.

The package is composed of:

• A regulation establishing the EU Agency for the Cooperation of National Energy Regulators.
• An electricity directive replacing Directive 2003/54/EC.
• A natural gas directive replacing Directive 2003/55/EC.
• An electricity regulation replacing Regulation (EC) No. 1228/2003.
• A natural gas regulation replacing Regulation (EC) No.1775/2005.

The main objective of the legislative package is to put in place the regulatory framework needed to make market opening fully effective. The new rules aim at:

• Providing for more effective regulatory oversight by truly independent and competent national energy regulators. Certain cross-border issues will be addressed by an EU Agency for the Cooperation of Energy Regulators.
• Increasing cross-border collaboration and investment with a new European Network for Transmission System Operators (ENTSO). Grid operators in the EU will have to develop common commercial and technical codes and security standards, as well as coordinate the investments needed at the EU level.
• Increasing solidarity. By bringing national markets closer together, member states will be better equipped to assist one another in case of energy supply threats.
• Creating a level playing field by effectively separating the production and sale of energy from the transmission of energy. This is to avoid companies involved with both the generation and transmission of energy using their privileged position on transmission to block access to transmission grids to other suppliers. Unbundling supply from transmission activities of integrated companies will serve to eliminate conflict of interests, promote network investments and prevent any discriminatory behavior.
• Increasing transparency. Improving market transparency on network operation and supply will guarantee equal access to information, make pricing more transparent, increase trust in the market and help avoid market manipulation.
• Putting the rights of citizens at the center of the market opening process, with strong obligations on member states to protect vulnerable energy consumers.
• Implementing intelligent metering systems with a target of 80% of the population to be covered by 2020. The installation of smart meters allows consumers to be informed precisely of their consumption and promotes energy efficiency.

European Commission (EC) President, José Manuel Barroso said, "This is a major step towards a truly integrated European energy market, and the right European Union response to the structural challenges we face. It is good news for business and citizens alike who need competitive prices and security of energy supply. The adoption of the internal market rules shows that Europe can deliver on its promises."

EC Energy Commissioner Andris Piebalgs added, "It is now up to the member states to put these new rules into practice and give a better deal to both consumers and businesses. Consumers will benefit from better protection and the lowest possible prices, while companies will have a chance to gain more business in a competitive market. The new rules will also take us a big step forward towards meeting the challenges of climate change, increased energy import dependence and global competitiveness."

The directives and regulations will be published in the EU's Official Journal in August 2009 and enter into force on the twentieth day following that of their publication.

The new electricity and natural gas directives have to be transposed into national law 18 months after entry into force, with the exception of the rules on unbundling of transmission, which are to be transposed after 30 months.

The new agency needs to be up and running 18 months after entry into force of the agency regulation.

The electricity and natural gas regulations shall apply 18 months after their entry into force; by that time, at the latest, the national transmission system operators are required to submit the founding documents for the new ENTSOs, one for natural gas and one for electricity, to the EC and the agency. After eight months, the ENTSOs for both natural gas and electricity need to be put in place.

Source: European Commission (EC).