Background: EU electricity and gas directives

3.rd Energy Market Package, proposed September 2007

September 2007 the EU Commission proposed a revision of the electricity and gas market directives with amendmets of the directives on electricity and gas markets and the directives on cross-border trade of electricity and gas. The main changes are that all countries must have independant regulators of the electricity and gas markets, that these regulators should cooperate, and that production, transmission, and distribution should be seperated more than with the current directives. The amendmens include some other important aspects, e.g. regarding support for low-carbon technologies, establishing of European networks of transmission system operators, opening of gas storages to market actors, transparent tariffs for use of transmission networks and gas storages, qualith standards, cross-border retails markets, and others.

Read more about the proposed directives 641/07 (electricity market) and 642/07 (gas market), as well as the EU regulations 643/07 (access to the network for cross-border exchanges in electricity) and 643/07 (for access to the natural gas transmission networks).

The proposal will be discussed among EU's energy ministers' December 3, 2007 and in the EU Parliament in 2008.

INFORSE-Europe comments

In its comments to the package, INFORSE-Europe stresses that the directives must more clearly support renewable energy, energy efficiency, and Combined Heat and Power(CHP), the three main solutions solutions that the EU countries have agreed upon to implement climate policy objectives in the electricity sector. They must also support a democratic control of the energy market, to counter the increasing monopolisation of the electricity and gas markets, and to give voices for citizens and all stakeholders in the regulation of the markets. Further they should continue the rights of the EU countries to set their own energy policies, within the agreed EU targets for climate and energy.

Therefore INFORSE-Europe proposes a number of amendments and call upon the EU countries to include them in the drafts when their energy ministers meet to discuss the issue December 5. The main amendments proposed are:

  • To clearly define 'low carbon technologies' (that are to be supported if the draft directives are adopted), to be only efficient CHP plants. It will be counterproductive to the agreed climate policies as well as to the objective of creating a level playing field in the eletricity market, if the coming directives will support nuclear power, large hydropower, waste incineration and other maturee technologies that are sometimes labelled 'low carbon technologies'. These technologies must compete on equal level with other power generation technologies
  • To ensure that Public Service Obligations (PSOs) can continue to support renewable energy support schemes, such as feed-in tariff schemes.
  • That there is a democratic control of the regulation of the energy markets, so the regulaters are not acting in isolation; but in dialogue with the democratic system and concerned citizens. This can be with Citizen's Utilities Boards, consisting of citizens that are elected to advice the regulators, which has been practiced with success in many states in the USA for more than two decades.

INFORSE-Europe supports the further seperation of the production, transmission, and distribution, proposed by the EU Commission in its draft directives, published in September. Among the different models for this seperation, we prefer the one with division in seperate companies for production, transmission, and distribution of electricity.

2. Energy Market Package, adopted August 2003
With the amendment of the EU electricity and gas directive in 2003, it was decided that the markets should be open for all electricity consumers 1. july 2007, while it should be open for non-household consumers 1. july 2004. A large part of the amendment had the purpose to guarantee that power companies are treated equally in the electricity market.

A positive part of the proposal was that electricity has to be labelled so the costumers can see the contribution of each energy source to the electricity they are purchasing. Electricity suppliers should specify:

(a) the percentage contribution of each energy source to the fuel mix for the supplied electricity (b) the contribution to CO2 and nuclear waste of their electricity consumption

For electricity obtained via an electricity exchange, the aggregate figures provided by the exchange over the preceding year may be used.

Another improvement in the proposal is that authorisation procedures for small and/or distributed generation shall take into account their limited size and impact on the power sytem. These measures shall apply to all production connected to the electricity distribution system.

The view of the directives are to achieve a competitive market, but in the new directive this is expanded to 'competitive, secure and environmentally sustainable market', which is of course a good idea, but the implication of this change is not clear.

The directives allow the countries to require power companies to take upon them 'public service obligations' which may relate to security, including security of supply, regularity, quality and price of supplies and environmental protection, including energy efficiency and climate protection. The words about energy efficiency are new, but this paragraph is used by some countries to demand the power companies to finance information on energy efficiency, as well as develop of and research in renewable energy.

The directives require (management) independence of system operators from other power companies, to ensure a more fair competition.

The amendment does not solve the problem that power companies with nuclear power plants and large decommissioning funds can invest them in the purchase of other power companies. This is a clear distortion of the market and it is important to find other ways to solve it. One way could be the proposed EURATOM directive on safety principles, but that proposal has in itself other problems, and is not supported by the countries..

Procedure for the second electricity and gas market pakcage
The amendment proposal was released by the Commission in March 2001.
In March 2002 the Parliament proposed a number of amendments to the proposal and the European Council of Prime Ministers adopted the Barcelona Conclusions that supported wider harmonisation of electricity and gas markets.

The Commission released an amended version of its original proposal in June 2002.

The amendments of the electricity and gas market directives came a step further with the energy ministers' common position in February, supporting the proposal, but with a full market opening only in 2007 for household consumers and in 2004 for other consumers. The requirement for substantial disclosure to consumers of the environmental impact of the power consumed remained in the proposal.

The next step was the EU Parliaments second reading, leading to a Final Decisison from the Parliament June 26.

In July the Commission and the council of EU energy ministers agreed to the last ammendments of the Parliament.

The new legislation entered into force August 4, 2003

The regulation of cross-border trade of gas was proposed laer as part of the 'dark' security of energy supply package, December 2003 and adopted in 2005.

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