Third Energy Package
The European Union's Third Energy Package is a legislative package for an internal gas and electricity market in the European Union. Its purpose is to further open up the gas and electricity markets in the European Union. The package was proposed by the European Commission in September 2007, and adopted by the European Parliament and the Council of the European Union in July 2009. It entered into force on 3 September 2009.
Core elements of the third package include ownership unbundling, which stipulates the separation of companies' generation and sale operations from their transmission networks, and the establishment of a National Regulatory Authority (NRA) for each Member State, and the Agency for the Cooperation of Energy Regulators which provides a forum for NRAs to work together.
- 1 The EU energy market
- 2 Legislation
- 3 Potential options for member states
- 4 National Regulatory Authorities
- 5 Significance
- 6 References
The EU energy market
The European Commission and the Parliament wants to reach the goals of “Europe 2020 Strategy” through a secure, competitive and sustainable supply of energy to the economy and the society. The correct transposition of the European electricity and gas legislation in all Member States is still not complete. Because of this, the Third Internal Energy Market Package was adopted in 2009 to accelerate investments in energy infrastructure to enhance cross border trade and access to diversified sources of energy. There is still a market concentration on the energy market in the European Union, where a small number of companies control a large part of the market. Together, the three biggest generators of each country hold more than two thirds of the total generating capacity of 840,000 MW. The EU advises three options to weaken the market power of the biggest electricity firms: ownership unbundling, independent system operator (ISO) and independent transmission operators (ITO).
- Directive 2009/72/EC concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC
- Directive 2009/73/EC concerning common rules for the internal market in natural gas and repealing Directive 2003/55?EC
- Regulation (EC) No 714/2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003
- Regulation (EC) No 715/2009 on conditions for access to the natural gas transmission networks and repealing Regulation (EC) No 1775/2005
- Regulation (EC) No 713/2009 of the European Parliament and of the Council of 13 July 2009 establishing an Agency for the Cooperation of Energy Regulators
Potential options for member states
Ownership unbundling is advocated by the European Commission and the European Parliament. This option is intended to split generation (production of electricity) from transmission (of electricity from electrical generating station via a system to a distribution system operator or to the consumer). The purpose of this system is to ensure that the European energy market does not suffer from vertical integration. The proposal is controversial, with questions as to who can buy the transmission networks, whether such a system will regulate the market-place and who will pay possible compensation to the energy firms. Moreover, some economists also argue that the benefits will not exceed the costs.
Independent system operator (ISO)
The Art. 13 – 16 of directive 2009/72/EC give the member states also the opportunity to let the transmission networks remain under the ownership of energy groups, but transferring operation and control of their day-to-day business to an independent system operator. It is also a form of ownership unbundling, but with a trustee. In theory, this would allow transmission and generation to remain under the same owner, but would remove conflicts of interest.
Independent transmission operator (ITO)
Austria, Bulgaria, France, Germany, Greece, Luxembourg, Latvia and the Slovak Republic presented at the end of January 2008 a proposal for a third option. This model, the ITO, envisages energy companies retaining ownership of their transmission networks, but the transmission subsidiaries would be legally independent joint stock companies operating under their own brand name, under a strictly autonomous management and under stringent regulatory control. However, investment decisions would be made jointly by the parent company and the regulatory authority. It is also named a legal unbundling.
National Regulatory Authorities
Chapter IX of Directive 2009/72/EC requires each Member State to designate a single National Regulatory Authority (NRA). Member States may designate other regulatory authorities for regions within the Member State, but there must be a senior representative at national level. Member States must ensure that the NRA is able to carry out its regulatory activities independently from government and from any other public or private entity.
The Directive sets out eight general objectives of NRAs and 21 specific duties. In addition to a duty to fix or approve tariffs, NRAs have a number of monitoring and reporting duties, and are granted information rights and investigative and enforcement powers to enable them to carry out their duties.
Agency for Cooperation of Energy Regulators
Regulation 713/2009 establishes an Agency for the Cooperation of Energy Regulators. The purpose of the Agency is to assist NRAs to exercise their duties and to provide means of coordingating their actions where necessary.
The directive 2003/54/EC gives the member states three possible ways to unbundle. One of them has to be transposed into national law. The United Kingdom, for example, has already implemented ownership unbundling.
- Art. 9 of directive 2009/72/EC
- Chapter IX of Directive 2009/72/EC
- Regulation (EC) No 713/2009
- European Commissioner Günther Oettinger: http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/264&format=HTML&aged=1&language=EN&guiLanguage=en
- The correct transposition of the European electricity and gas legislation in all Member States is still not complete. Because of this, the Third Internal Energy Market Package was adopted in 2009 to accelerate investments in energy infrastructure to enhance cross border trade and access to diversified sources of energy
- http://ec.europa.eu/energy/gas_electricity/legislation/doc/20100609_internal_market_report_2009_2010.pdf under 2.3
- Art. 9-12 of directive 2009/72/EC
- Michael Politt (The arguments for and against ownership unbundling of energy transmission networks) in Energy Policy) (Volume 36, Issue 2, February 2008, Pages 704 - 713
- Johann-Christian Pielow (Legal and economic aspects of ownership unbundling in the EU) in Journal of World Energy Law § Business (Volume 2, Issue 2, February 2009, Pages 96 - 116
- Art. 13-16 of directive 2009/72/EC
- Art. 17-23 of directive 2009/72/EC
- Article 35.1 of Directive 2009/72/EC
- Article 35.2 of Directive 2009/72/EC
- Article 35.4 of Directive 2009/72/EC
- Article 36 of Directive 2009/72/EC
- Article 37.1 of Directive 2009/72/EC
- Article 37.4 of Directive 2009/72/EC
- Article 1.2 of Regulation 713/2009