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1European Commission DG TREN / C: Conventional Energy 05.03.2002
““The Regional Electricity Market in South The Regional Electricity Market in South East Europe: Mechanisms and Aims in East Europe: Mechanisms and Aims in
Unified European Energy Market”Unified European Energy Market”
Pedro de Sampaio NunesPedro de Sampaio Nunes
Director of Conventional EnergyDirector of Conventional Energy
Brussels, March 5, 2002
Extraordinary Co-ordination MeetingExtraordinary Co-ordination Meeting
2European Commission DG TREN / C: Conventional Energy 05.03.2002
Structure of the presentationStructure of the presentation
Where are we? - description of the main Where are we? - description of the main feature of the status quo of market opening feature of the status quo of market opening
Where do we want to go? - measures needed Where do we want to go? - measures needed to complete the internal market-main to complete the internal market-main elements of Commission initiativeselements of Commission initiatives
Conclusions Conclusions
3European Commission DG TREN / C: Conventional Energy 05.03.2002
Market Opening: Market Opening: Theory and practiceTheory and practice
• Shows variations in:• market opening- network access - tariffs /conditions- effectiveness of regulation- market structure- customer switching- prices
Completing the Internal Market
“Benchmarking” Report SEC(2001)1957
4European Commission DG TREN / C: Conventional Energy 05.03.2002
Electricity market opening State of play
0 10 20 30 40 50 60 70 80 90 100
AustriaBelgium
DenmarkFinlandFrance
GermanyGreeceIreland
ItalyLuxembourgNetherlands
PortugalSpain
SwedenUnited Kingdom
Legal minimum in 2000:30%
EU average in 2000: 66%
%
Legal minimum in 2003: 35%
Ben
chm
arki
ng
5European Commission DG TREN / C: Conventional Energy 05.03.2002
MarketMarket concentration in electricity generation
Concentration Minimummarket opening
Fast marketopening
Nearly fullmarket opening
Low NL,LU NO,DE,UK
Medium AT,ES,IT SE,FI
High BE,GR,FR,IE,PT DK
6European Commission DG TREN / C: Conventional Energy 05.03.2002
Customer switching supplier Customer switching supplier B
ench
mar
king
Estimated switching: electricityDeclaredmarketopening2000
Large industrialusersswitchrenegotiate
Small commercial/domesticswitch
renegotiateAustria 100% 5-10% naBelgium 35% 5-10% naDenmark 90% na 86%Finland 100% 30% 70% 10-20% 50%France 30% 5-10% naGermany 100% 10-20% 50% <5% 20%Greece 30% nil nilIreland 30% 30% 35%Italy 45% 10-20% naNetherlands 33% 10-20% naPortugal 30% <5% naSpain 45% <5% naSweden 100% 100% na 15% 15%UK 100% 80% na >30% nasource: Oxera, Eurostat, Information provided by survey
7European Commission DG TREN / C: Conventional Energy 05.03.2002
Completing the internal market: Commission proposals
A revision of the Electricity and Gas Directives
The draft Directive proposes qualitative as well as quantitative measures to create a truly operational internal energy market
A Regulation on cross-border exchanges in electricity
The draft Regulation sets rules for cross-border trade in electricity: tarification and congestion management.
A Communication: “Completing the internal energy market”The Communication takes stock of the progress of the internal energy market: degree of opening, prices, environment, security of supply and employment.
8European Commission DG TREN / C: Conventional Energy 05.03.2002
Revision of the Directives:Objectives
Quantitative
Greater opening of the market
• higher level of unbundling • regulated third-party access • independent regulators• improve public service provisions• safeguard security of supply
Full opening of national markets by 2005Revision of the
existing Electricity and Gas Directives
Qualitative
Better functioning of the market
9European Commission DG TREN / C: Conventional Energy 05.03.2002
QuantitativeFull opening of the energy market
All EU consumers free to choose electricity and gas suppliers
All EU companies free to choose electricity supplier
All EU companies free to choose gas supplier
2005
2004
2003
A new timetable for market opening
Revision of the existing Electricity and Gas
Directives
10European Commission DG TREN / C: Conventional Energy 05.03.2002
Qualitative Unbundling and third party access
Member States to ensure that transmission is carried out via an independent system operator, legally and functionally separate from energy generation and sales activities.
Independent Distribution System OperatorsAlso a legally and functionally separate undertaking. But Member States may exclude small distribution companies (100 000 consumers)
Tariffs to be published and regulated for transmission, distribution and access to LNG
Revision of the existing Electricity and Gas
Directives
Unbundling
Independent Transmission System Operators
Third party access
11European Commission DG TREN / C: Conventional Energy 05.03.2002
Qualitative Effective regulation
Revision of the existing Electricity and Gas
Directives
Regulatory authorities
Independent regulators are pivotal in ensuring non-discriminatory access to the network. Nearly all Member States have established regulatory authorities, save Germany.
Regulators will need to:
be independent of the electricity/gas industry
have a set of minimum competencies including the terms on conditions for network access (tariffs)
12European Commission DG TREN / C: Conventional Energy 05.03.2002
QualitativeSecurity of supply
• obligatory pool• prohibition of bilateral agreements to hedge risks• no tendering for new capacity• excessively strict planning procedures (7 years)• no internal market in the US• no effective trading arrangements
The situation in California resulted from inappropriate structures:
Such structures do not exist in the EU market
• careful monitoring at EU and national level• tenders where necessary• internal market• harmonised network security standards
Additional safeguards in new proposals
Comparison California/EU
Revision of the existing Electricity and Gas
Directives Security of supply
13European Commission DG TREN / C: Conventional Energy 05.03.2002
Universal serviceobligation to supply electricity to all at reasonable prices Protection of vulnerable consumersBetter protection of consumer rightscontractual terms, disputes settlementContinuous benchmark exercise of service levels in Member States
Qualitative Improving standards of service
Revision of the existing Electricity and Gas
Directives
Public service
The impact so far on service standards has been positive: standards have gone up.
The Commission proposes to increase their level further:
14European Commission DG TREN / C: Conventional Energy 05.03.2002
Regulation: New cross-border trade rules
Tarification rules
Compensation between Transmission System Operators TSOs• TSOs will receive compensation or pay for transit flows• Cost-reflective compensation• Fragmented national cross-border tariffs and pancaking abolished• Detailed implementing rules through comitology procedureRegulation on
cross-border exchange in electricity
Interconnection capacityInformation on available interconnection capacity to be made publicBetter information exchanges between TSOs
Allocation of capacity in case of congestionHarmonised market-based approaches to reduce trade distortions
Congestion management
15European Commission DG TREN / C: Conventional Energy 05.03.2002
• Number of customers having switched suppliers
UK
Finland
20%
30%
FranceGermanyPortugal
5%
Most opt for another national supplier
Highest where market
opening started early
Still 15 separate national markets
• Trade in electricity:around 8% of electricity production
• Cross border trade tarification rules • Congestion management rules• Increased interconnection capacity, where
Missing elements
Regulation: objectives
Regulation on cross-border exchange in electricity
Create a single EU energy marketCreate a single EU energy market
Spain
economically justified
16European Commission DG TREN / C: Conventional Energy 05.03.2002
Infrastructure package
A. Energy infrastructure: identifying the challenge
Improved use of existing infrastructureEnsuring a stable regulatory environment favourable to infrastructure investmentsCommunity political and financial support of priority projectsPolitical commitmentGas supplies to Europe
Reporton the implementation of TEN Energy guidelines
1996-2001
Draft decision
Revising TEN Energy guidelines
Communication
B. Main findings
C. Proposed actions
European energy infrastructure
17European Commission DG TREN / C: Conventional Energy 05.03.2002
Main findings and conclusions
Infrastructures could be used more efficiently. An increased interconnection level is needed for electricity in a number of Member States
Electricity infrastructure suffer in varying degrees from congestion or missing links which hamper the smooth functioning of the internal market and security of supply.
2. Obstacles
3. A
cti
on
s
The Commission proposes to take urgent action in 5 main areas.
1. Assessment
In line with good governance principles, actions have been allocated at the most appropriate levels, including industrial. Where necessary Community actions will support and provide a legal basis to give effect to the achieved results.
This process will require efforts at both EU and national level.
18European Commission DG TREN / C: Conventional Energy 05.03.2002
Five broad areas of action
Ensuring a stable and favourable regulatory Ensuring a stable and favourable regulatory environment for new infrastructureenvironment for new infrastructure
Five main areas of actionsImproving the use of existing infrastructureImproving the use of existing infrastructure
Re-focusing Community financial support on priority Re-focusing Community financial support on priority projectsprojects
Political awareness and commitment at the Political awareness and commitment at the Community and national levelCommunity and national level
Encourage gas supplies to EuropeEncourage gas supplies to Europe
19European Commission DG TREN / C: Conventional Energy 05.03.2002
ConclusionsConclusions
Experience thus far is generally positive but further measures are Experience thus far is generally positive but further measures are necessary to complete the internal markets for electricity and gas .necessary to complete the internal markets for electricity and gas .
The Completion of the internal market requires both quantitative The Completion of the internal market requires both quantitative and qualitative elements, in order to create a level playing field and qualitative elements, in order to create a level playing field and make market opening effective in practice.and make market opening effective in practice.
Rules on public service and security of supply are necessary, to Rules on public service and security of supply are necessary, to ensure that the competitive market is secure.ensure that the competitive market is secure.
Rules on cross-border trade, a more efficient use and the extension Rules on cross-border trade, a more efficient use and the extension of infrastructure are needed to ensure that the completed market of infrastructure are needed to ensure that the completed market is a real internal Community market is a real internal Community market
The Commission proposals are aimed at achieving these objectives The Commission proposals are aimed at achieving these objectives - their timely adoption is vital - their timely adoption is vital
20European Commission DG TREN / C: Conventional Energy 05.03.2002
THE REM IN SOUTH EAST EUROPETHE REM IN SOUTH EAST EUROPE
To create a functioning regional internal market compatible to the To create a functioning regional internal market compatible to the EU EU
To adopt the Community acquis in the most appropriate manner To adopt the Community acquis in the most appropriate manner Ensure security of supply at regional and individual national Ensure security of supply at regional and individual national
systemssystems