Opinion of the Economic and Social Committee on:the Proposal for a Directive of the European Parliament and of the Council amending Directives 96/92/EC and 98/30/EC concerning common rules for the internal market in electricity and natural gas, andthe Proposal for a Regulation of the European Parliament and of the Council on conditions for access to the network for cross-border exchanges in electricity
Date: 2001-10-17
Institutions: European Economic and Social Committee
Subjects: electrical energy, energy grid, energy transport, liberalisation of trade, natural gas, single market

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Opinion of the Economic and Social Committee on:

— the ‘Proposal for a Directive of the European Parliament and of the Council amending
Directives 96/92/EC and 98/30/EC concerning common rules for the internal market in
electricity and natural gas’, and

— the ‘Proposal for a Regulation of the European Parliament and of the Council on conditions

for access to the network for cross-border exchanges in electricity’

(2002/C 36/03)

On 22 May 2001, the Council decided to consult the Economic and Social Committee, under
Articles 47(2), 55 and 95 of the Treaty establishing the European Community, on the above-mentioned
proposals.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 25 September 2001. The
rapporteur was Mr Herna´ndez Bataller.

At its 385th plenary session of 17 and 18 October 2001 (meeting of 17 October 2001), the Economic
and Social Committee adopted the following opinion by 84 votes in favour, with nine abstentions.

1. Background

In terms of

1.1.
legislation, the first steps towards an
internal electricity and gas market in the European Union were
through the Directives on the transit of gas and electricity
through grids, adopted in 1990 and 1991 (1). The Economic
and Social Committee issued its opinions on these Directives
and welcomed their various provisions, particularly those
relating to long-term security of supply.

1.2.
The next step was the approval of the Directives
concerning common rules for the internal market in electricity
and natural gas, which were adopted following a complex
process that began with the first Commission drafts. The
objective of these Directives was to open up the electricity and
gas markets by gradually introducing competition with a view
to making the energy sector more efficient and the European
economy as a whole more competitive.

In its opinion adopted in January 1993 (2), the Com-
1.3.
mittee again welcomed the Directives but expressed a number

(1) OJ C 75, 26.3.1990.
(2) ESC opinion on the proposal for a Directive concerning common
rules for the internal market in electricity and the proposal for a
Directive concerning common rules for the internal market in
natural gas of 27 January 1993, OJ C 73, 15.3.1993 and ESC
opinion on the amended proposal for a Directive concerning
common rules for the internal market in electricity and the
amended proposal for a Directive concerning common rules for
the internal market in natural gas of 28 April 1994. OJ C 195,
18.7.1994.

far-reaching reservations. To be precise,

of
this opinion
criticised the proposed Directive in a number of key areas such
as the plan and deadlines for introducing third party access to
the grid, security of supply, capacity of interconnection grids,
harmonised energy policy in the Member States, and public
service obligations.

1.4.
The Directives concerning common rules for the
internal market in electricity and natural gas were finally
adopted in 1996 and 1998 respectively and since then have
been incorporated, not without some difficulties,
into the
national legislation of Member States.

2. Grounds for the Commission proposals

2.1.
According to the information provided by the Com-
mission, since the implementation of Directives 96/92/EC and
98/30/EC, the degree of opening of the gas and electricity
markets in the Member States has improved considerably and,
by the end of 2000, the targets laid down in the Directives had
already been far exceeded. However, the degree of market
opening varies considerably from Member State to Member
State (ranging from 30 % to 100 % for electricity and from
20 % to 100 % for natural gas) and, unless corrective measures
are taken, such differences are likely to increase in the future.
The Commission believes that these discrepancies between
Member States hinders the construction of a true single market
in Europe.

2.2.
Since the liberalisation process began in the Member
States, electricity prices for large consumers have fallen
considerably (between 15 % and 35 %, according to statistics
provided by the Commission), with prices falling furthest in

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those countries with the highest degree of market opening.
Domestic consumers and SMEs, however, have not benefited
from such significant improvements in electricity prices since
these reductions go hand in hand with the ability to change
supplier, which — until
the market opening process is
completed — is a very limited possibility for them.

2.7.
The Lisbon European Council of March 2000 asked the
Commission to draw up proposals to speed up liberalisation in
order to achieve a fully operational internal market as soon as
possible.

2.3.
Natural gas prices have not evolved so favourably,
mainly due to fluctuating oil barrel prices which determine
natural gas prices. However, even here the Commission links
differences in average price between the various countries to
the degree of opening of the respective markets.

The implementation of

2.4.
the Directives has had a
considerable impact on establishing public service obligations
which in the past were met largely through public utilities or a
system of public concessions. Market opening, together with
the privatisation of many of these companies, has forced the
Member States to stipulate certain minimum levels of public
service and ensure that these levels are met. However, the
Commission believes that additional measures must be adopt-
ed to reinforce existing legislation in this area.

In its statement on services of general economic
2.8.
interest, the Nice European Council of December 2000 stressed
that such services should be ‘carried out in such a way as to
meet the legitimate expectations of consumers and citizens
looking for affordable prices in a transparent pricing system,
and anxious for access on equal terms to quality services
essential to their economic, territorial and social integration’.

2.9.
The European Council of Stockholm, held on 23 and
24 March 2001, reiterated the need to open up the electricity
and natural gas markets, ‘taking into account the requirement
to satisfy user needs and the need for transparency in the
market through appropriate regulatory instruments’.

3. The proposal for a Directive

3.1.
The document submitted identifies the specific amend-
ments to each Directive. The amendments to Directives
96/92/EC and 98/30/EC, however, are very similar and can be
divided, as pointed out in the preamble to the document, into
quantitative proposals and qualitative proposals.

2.5. Most Member States have also opted to regulate the
system of third party access to the grid, draw up authorisation
procedures for the construction of new power generating
plants, fully unbundle the activities of transmission system
operators and even create independent regulatory authorities.
The Commission therefore believes that some of the pro-
cedures that were initially proposed but have not been properly
developed by the different Member States can be dropped and
that greater guarantees are needed that grid operators operate
independently.

3.2.
The quantitative proposals include a timetable for all
electricity and natural gas customers, regardless of their size,
to be able to choose their suppliers freely. In the electricity
sector, all non-domestic clients will therefore be able to choose
freely as of 1 January 2003, with full market opening two
years later. In the natural gas sector, the deadline for market
opening for non-domestic users is likely to be delayed until
1 January 2004, but the target for all customers to be able to
choose their supplier freely will continue to be 1 January
2005.

2.6.
Another effect of market opening, which in itself is a
key indicator of the degree of internal market consolidation, is
trade between countries. According to Commission statistics,
trade in electricity currently accounts for 8 % of all the
electricity generated in the European Union. This percentage is
lower than that recorded in other sectors and much lower than
what could be expected of an integrated European market. In
a bid to increase international trade in electricity, the Com-
mission proposes regulating at European level specific areas
which have a negative impact on such trade.

3.2.1.
The qualitative proposals focus on two main areas:
the procedure for third party access to gas and electricity grids
and the unbundling of the activities of companies in these
sectors.

The proposed procedure for third party access to
3.2.2.
grids is based on a system of published and regulated tariffs
which would apply in a non-discriminatory manner to all
users of
transmission and distribution grids. This system
replaces alternative procedures defined in the current Direc-
tives based on negotiated access between the supplier and
eligible customers or on the concept of the single buyer.

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3.2.3.
The measures relating to the unbundling of activities
are intended to establish a framework within which each
grid operator can operate independently of the commercial
interests of the group to which it belongs. The document
therefore extends the principle of unbundling activities which
from now on would apply to all grid operators, whether gas
or electricity distribution or transmission networks. Specific
criteria are also drawn up governing operators’ activities to
ensure they operate independently of the group to which they
belong. The proposed Directive fixes January 2003 as the
deadline for the effective unbundling of activities in electricity
distribution networks, and one year later for natural gas.

The document defines in greater detail public service
3.3.
obligations and regulatory bodies for the electricity and gas
sectors. It also proposes amending certain procedures, such as
the procedure for the construction of new power generating
plants.

3.3.1.
The article on public service obligations includes a
detailed list of the aspects covered by this concept. These
obligations clearly include the universal service for electricity
(i.e. high-quality supply for all customers) and other aspects
relating to the supply of natural gas and electricity, such as
the protection of domestic consumers, economic and social
cohesion, environmental protection and security of supply.

3.3.2.
The new Directive proposes appointing independent
national regulatory authorities who will be responsible for
fixing tariffs and conditions for access to the grid, and for
drawing up mechanisms to prevent distortions of competition.
It also proposes setting up a body to monitor security of
supply of electricity and natural gas.

3.3.3. With regard to the construction of new electricity
generating capacity, the new document only provides for the
authorisation procedure (as currently adopted by all Member
States) and reserves the tendering procedure as a safeguard in
the event that the capacity envisaged through authorisation is
not sufficient to ensure supply.

3.4.
The draft Directive proposes repealing the Gas and
Electricity Transit Directives (1) so that different procedures do
not continue to be in force, as this could lead to confusion
among the various market parties.

(1) Directives 90/547/EEC and 91/286/EEC.

4. The proposal for a Regulation

The document drafted by the Commission proposes

4.1.
three different types of measures:

— establishing compensation mechanisms for flows of

electricity;

— defining harmonised principles for cross-border trans-

mission tariffs; and

— allocating available interconnection capacity between

national transmission networks.

4.2.
The document accepts that the reality in these sectors
is constantly changing and that the rules of the game must
therefore adapt to this reality as swiftly as possible to prevent
delays in approving changes to the established framework
giving rise to future distortions in the market. The proposal
for a Regulation therefore provides for a series of guidelines
that could be adopted and amended without the need for
changes to the Regulation itself. These guidelines, which must
be in compliance with the principles laid down in the
Regulation, would be amended by the Commission following
consultation of a regulatory committee made up of representa-
tives from the Member States and chaired by a representative
from the Commission. This Committee would be created
under Article 5 (Regulatory
Procedure) of Decision
1999/468/EC laying down the procedures for the exercise of
implementing powers conferred on the Commission.

In accordance with this procedure, the Commission
4.3.
will be responsible for drawing up the fundamental aspects of
the Regulation, such as: the allocation of powers and the
corresponding procedure for paying compensations for elec-
tricity transit; the methodology for determining the quantities
of electricity concerned and the costs of transit; the criteria for
harmonising charges applied by national grid operators; the
methods for allocating available interconnection capacity; and
common rules on network security and operation.

4.4.
The Commission also reserves the right to decide how
much compensation will be paid for transit flows of electricity
via trans-national grids. For this it will rely on the support of
an advisory committee in accordance with the procedure
defined in Article 3 (Advisory Procedure) of Decision
1999/468/EC. This committee will also be made up of
representatives from the Member States and chaired by the
Commission representative.

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The proposal for a Regulation establishes the basic
4.5.
principles governing international
trade in electricity and
includes an annex setting out guidelines on the management
and allocation of interconnection capacity between national
systems. This annex lays down criteria for congestion manage-
ment and surplus transmission capacity, long-term contracts,
information exchange between grid operators and the pro-
cedure for explicit auctions of available capacity. These guide-
lines are in line with free market and non-discriminatory
criteria and also seek to achieve the optimum use of existing
infrastructures.

facto’ or ‘de iure’ monopoly on their national markets to
benefit unduly from the situation, or abuse their individual or
collective dominant positions.

5.5.
Furthermore, the ESC is concerned by a number of
inconsistencies in the proposed Directive, as it still includes
systems and procedures that are to be replaced, does not
develop premises set out in the preamble, mentions reports
that should have been issued when the Directives were adopted
and refers to terms — and articles — that do not appear in the
new draft. Concrete objections to these shortcomings will be
discussed under the specific comments.

5. General comments

5.1.
The Economic and Social Committee wishes to point
out that the proposed initiatives are part of the strategy to
construct the European single market. The ESC has repeatedly
expressed its support for this strategy as it contributes towards
achieving the Treaty principles, e.g. promoting economic
development, employment, competition, quality of life, and
economic and social cohesion.

5.2.
The Committee therefore welcomes these proposals
since it shares the Commission’s interest in moving towards a
genuine internal market in electricity and natural gas within
the European Union as this will result in greater competition
between companies, lower energy prices for companies and
domestic consumers, a more competitive European economy
as a whole, and a better quality of life for the whole population.

However, past experience in other States, both within
5.3.
and outside the European Union, shows that the market
opening process and the very existence of an internal market
in electricity and natural gas give rise to a number of
uncertainties and have an indirect social and/or geographical
impact. This requires special comment. All the institutions
involved in this process must cooperate to achieve the objective
of a single market and limit
the negative consequences.
Drawbacks should therefore be pointed out as and when they
are encountered and solutions proposed to allow them to be
resolved as swiftly as possible. The ESC hopes that all the
aspects discussed in this opinion will be included in the next
assessment report on the internal market in electricity and gas.

6. Specific comments

6.1.

Full market opening

6.1.1.
The ESC fully endorses the Commission’s proposal
to set as short a deadline as possible, so that all consumers will
have the freedom to choose an electricity and gas supplier by
1 January 2005 at the latest.

Full electricity and gas market opening will help to
6.1.2.
put an end to the co-existence of different regulations in the
Member States, which is currently causing distortions of
competition and hindering the completion of the internal
market.

6.1.3.
This measure will also help reduce the drawbacks
suffered by SMEs, which often have to pay more for gas and
electricity supplies than larger companies due to the fact that
it is easier for large companies to change gas and electricity
supplier during the current phase of partial market opening.

6.1.4. Measures must therefore be adopted so that this
acceleration in the market opening process does not create
even greater job losses in companies in the sectors concerned.

6.2.

Safeguards to ensure security of supply

5.4.
The ESC also asks the Commission to ensure that
the market opening process genuinely benefits domestic
consumers, does not create distortions of competition and, in
particular, does not allow suppliers which previously had a ‘de

6.2.1.
The Committee wishes to express its concern regard-
ing problems experienced in other areas of the world, such as
California, where a badly planned liberalisation process has led
to a considerable fall in the quality of services offered to users
and a dramatic rise in final prices. Although the two situations

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are very different, when opening up European markets we
must learn from the mistakes made in foreign markets and
adopt all the measures necessary to prevent shortages and
artificially high prices.

6.2.2.
The Committee therefore welcomes the measures
proposed by the Commission to establish safeguards reducing
the risk of such problems. Most of
these measures are
mentioned in the Green Paper on security of energy supply,
which was welcomed by the ESC (1). The proposed Directive
therefore also includes specific measures, such as giving
independent regulatory authorities responsibility for monitor-
ing the supply/demand balance, maintaining the tendering
procedure for power generation plants in the event that
sufficient generation capacity has not been built, and giving
grid operators responsibility for maintaining and developing
networks.

The existence of sufficient reserve capacity is vital if
6.2.3.
the electricity system is to function properly. However, the
cost of this surplus capacity must be met by the whole system,
either at national level or through a Community-wide system.
The completion of a true internal market in which international
trade in electricity reaches the appropriate volume will help
create sufficient reserve capacity at European level.

6.3. Unbundling of activities

6.3.1.
The ESC welcomes the fact that the proposal aims to
further unbundle the activities of companies in the electricity
and gas sectors by incorporating the requirement that distri-
bution grid operators must operate independently of the other
activities of the parent group to which they belong and by
specifying the conditions that grid operators must meet to
ensure that they are genuinely independent.

6.3.2.
However, these measures must be in proportion to
their objective and must not place unreasonable administrative
burdens on economic agents.

6.4.

Public service obligations

6.4.1.
The ESC is pleased that the Commission understands
that moving further towards an internal market is compatible
with achieving public service objectives, as it has stressed since
its opinion of 1993 (2).

(1) OJ C 221, 7.8.2001, p. 45.
(2) OJ C 75, 26.3.1990.

6.4.2.
It therefore welcomes the fact that the Commission’s
proposal considers meeting public service objectives to be one
of its fundamental objectives in this area and provides specific
safeguards associated with these objectives, such as user
satisfaction, environmental protection, economic and social
cohesion, and the obligation of universal supply of electricity.
However, the Committee would like one of the Directive’s
stated objectives to be to ensure the supply of high-quality
electricity and natural gas at competitive prices, and therefore
help improve health, security of supply, and the economic
well-being of European citizens.

The Committee considers that provisions are needed
6.4.3.
to ensure that essential public service objectives are met, such
as a high level of protection for domestic consumers, with
special measures for the most vulnerable. Social measures
should be put in place to ensure that vulnerable groups can
benefit from electricity and gas supply at a fair price.

6.4.4. Minimum conditions for contracts, transparency of
information, and low-cost and transparent dispute settlement
mechanisms must also be adopted. The ESC therefore reiterates
that dispute settlement bodies must meet the criteria set out in
Recommendation 98/257/EC (3) and,
if possible, use the
European claims form drawn up by the Commission. In order
to improve the quality of life of domestic consumers, the
Commission should also look into introducing the concept of
standardised load profiles at European level (4).

6.4.5.
The proposal also respects changes that had already
been made to the original Directives. Exemptions designed to
promote the incorporation into the electricity grid of energy
from renewables and waste and from cogeneration plants are
therefore maintained. However, as provided for in the current
Directive on the promotion of electricity from renewable
energy sources, systems of state aid that help renewables

(3) Recommendation on the principles applicable to the bodies
responsible for out-of-court settlement of consumer disputes, OJ
L 115, 17.4.1998, p. 31-34.

(4) According to the Commission, under a standardised load profile,
an assumption on the consumption of electricity of a type of
small consumer is made, in volume and timing of demand. Any
discrepancies with the profile are settled after periodic readings of
the existing meter, eliminating the need for expensive minute-to-
minute reading of
the consumer’s actual consumption and
offsetting that against his/her contracted volume.

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compete in a liberalised market must be maintained, as
suggested by the Committee in its Opinion (1).

6.4.6.
Proper network maintenance is vital to ensuring an
ongoing high-quality service and also helps reduce the amount
of energy lost during transmission and distribution. The ESC
believes that the basic principle found in the proposal for a
Directive, i.e. that grid operators are responsible for network
maintenance, should be clearly specified when the Directive is
transposed into national legislation. To this end, a level of
investment must be reached that enables grid operators to
meet all the economic requirements of users in order to
provide the necessary infrastructure and thereby achieve the
agreed levels of security of supply at competitive levels.

6.4.7. T e r r i t o r i a l a n d s o c i a l c o h e s i o n

6.4.7.1.
Territorial cohesion is vital to the very existence of
the Union. Consideration should therefore be given to the fact
that less-favoured, isolated, island and outermost regions may
suffer as a result of the creation of the internal market.

6.4.7.2.
Because of their size, some of these regions are
unlikely to reap the benefits of competition for domestic
consumers and could therefore be forced to maintain consider-
ably higher energy prices than those found in the regions
of central Europe, where population density is higher and
infrastructure costs per unit of energy supplied therefore
lower. This would create extremely unfavourable competition
conditions and cause resentment among final consumers used
to practically identical tariffs within each Member State since
electricity and gas were first supplied.

6.4.7.3.
To prevent such an imbalance, compensation
mechanisms based on objective criteria that are stable in time
and compatible with the Community system of state aid must
be established at national level. As the ESC stated in its 1994
opinion on Community Energy Policy, funds intended for
structural purposes could also be used to compensate the
higher cost of developing these infrastructures initially. This
would considerably reduce the need for compensation during
the lifecycle of these installations.

6.4.7.4.
Directive 96/92/EC also provides for a procedure
for small isolated electricity systems which allows Member
States to apply for derogations from the Directive, providing

(1) OJ C 367, 20.12.2000, p. 5.

they can demonstrate that these systems have experienced
substantial problems. The ESC believes that Member States
should be granted derogations before unfair situations arise,
providing they have informed the Commission, which will
continue to ensure this complies with Community law.

Directive 98/30/EC also provides for derogations
6.4.7.5.
for natural gas, though here the procedure is targeted at
emerging markets. This definition applies only to States in
which gas was first supplied less than ten years ago, but must
be extended to include isolated regions in which gas was
supplied before this period.

The ESC believes that the construction of the single
6.4.7.6.
electricity and gas market must not block progress to date in
achieving the objectives of economic and social cohesion in
the less-favoured regions of the EU.

6.4.8.
Legislation in the various Member States differs
considerably when it comes to what can be included under the
concept of public service in the electricity and natural gas
sectors. These discrepancies may lead to distortions of compe-
tition and must therefore be removed. The Commission should
therefore consider drawing up specific legislation to harmonise
the rights of users (in particular, companies) and the obli-
gations of energy distribution companies, with a view to
ensuring the proper functioning of the internal market.

6.4.9.

E f f e c t s o n t h e e n v i r o n m e n t

6.4.9.1.
The environment would seem to be one of the
areas most affected by this market opening process, even
though the European Union and the Member States have
adopted measures to limit the environmental impact of energy
production and consumption, most importantly measures to
counteract climate change by promoting the use of renewables
and energy efficiency.

6.4.9.2.
If the internal market causes electricity and gas
prices to fall, this in turn would probably lead to an increase
in consumption. Improved efficiency in the system as a result
of competition in the sector is unlikely to compensate for
increases in energy consumption. The upshot could be an
increase in primary energy consumption, causing an increase
in pollutant emissions and hindering attempts to honour
commitments made in Kyoto.

In the same vein as the measures currently being
6.4.9.3.
adopted by the Commission with its Directive on the energy
performance of buildings and its SAVE programme, urgent
measures are needed at European and national
to
encourage efficient energy use and thereby compensate for
possible increases in demand. One possible solution would be
to reinvest some of the money saved as a result of the

level

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liberalisation process in the SAVE programme or in new
programmes concerned with demand management, education
and training for domestic consumers, and reduction of energy
processes; another would be to provide extra funding for the
SAVE programme or create new programmes.

6.5.5.
The ESC calls on the Commission to make a real
effort to alleviate this situation and, within its sphere of
competence, to develop a strategy to promote the adoption of
Community measures during the market opening process
which in turn will lead to a coordinated strategy to achieve a
high level of employment.

6.4.9.4.
Increasing transmission capacity so as to increase
international trade in electricity and gas will have an impact
on the environment. This impact must be kept to a minimum
in order to overcome growing public opposition, especially in
environmentally sensitive areas.

6.5. The effects on employment in the gas and electricity sectors

6.6.

Effects on applicant countries

6.6.1.
The Committee also has many reservations concern-
ing the repercussions of the liberalisation of energy markets
on countries which are soon to join the European Union.

6.6.2.
In general terms, the electricity and natural gas
sectors in the applicant countries enjoy a high degree of
support and public intervention, and maintain uncompetitive
infrastructures and management methods.

6.5.1.
The ESC is concerned by current job losses in the
electricity and natural gas sectors following the liberalisation
of the markets, and the current trend for companies to
subcontract and externalise certain costs.

The immediate consequence of

6.6.2.1.
this could be
considerable job losses in companies in these sectors, which in
turn would cause unbearable social tensions in the applicant
countries, particularly for those countries which do not have
the same kind of social security system as found in the Member
States.

This would seem to suggest that the costs of introdu-
6.5.2.
cing competition are being met largely by employees of
companies in these sectors. However, the direct creation of
employment in new activities related to market opening does
not seem to have compensated for all job losses in traditional
companies. A social security system that adopts innovative
measures is needed to help workers in the sector accept the
deregulation process. Even workers who have lost their jobs
should be able to enjoy a stable economic situation. Ongoing
training systems should also be introduced in the sector, along
with efficient policies for labour market databases.

The European Union must

share with these
6.6.2.2.
countries the experience that has been gained from the
liberalisation processes currently underway in Europe, and
provide funding to help them modernise their companies.
Opening up these new markets is not enough; their energy
sectors must also be restructured so that companies in the
applicant countries can compete under the same conditions.

6.7. National regulatory authorities

6.5.3.
The potential problem of job losses in these sectors
is very serious and should be considered when drafting the
various national employment plans so that steps can be taken
to limit their impact. This is vital given that many job losses
involve highly-trained and highly-qualified people whose
experience could be useful in other fields.

6.7.1.
It is anticipated that the creation in all the Member
States of national regulatory authorities that are responsible
for fixing or approving tariffs for third party access to the grid
will ensure a transparent and non-discriminatory process.
The Committee therefore welcomes these authorities, but
nonetheless eagerly awaits the findings of the report to be
presented to the European Council in Barcelona.

6.5.4.
At all events, liberalisation must be managed with a
view to prevention and, in particular, best practice must be
followed with regard to information, consultation, and the
participation and training of workers, so that surplus labour
can be properly redeployed.

6.7.2.
The usefulness of such bodies is demonstrated by the
fact that practically all the countries of the European Union
have created national regulatory authorities. These authorities
in some cases, on their
allow them to act ‘ex ante’ and,
own initiative, unlike other bodies which only act once the
infringement has been committed.

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6.7.3.
The proposal for a Directive entrusts a number of
tasks to the national regulatory authorities, including fixing or
approving tariffs for access to the grid, ensuring companies
meet their public service obligations and congestion manage-
ment at national level.

6.7.4.
However, consideration should be given to the need
for these authorities to operate in a more transparent and
democratic way by allowing the various agents involved in the
electricity and natural gas markets (i.e. consumers, workers
and companies) to participate in the decision-making process.

6.9.2. Most Member States have adopted the system of
regulated access based on published tariffs as they believe this
system is the best guarantee of free access and also prevents
distortions of competition and/or potential abuses of dominant
position. Considering these tariffs as maximum prices may
help the remaining Member States overcome their misgivings
in this area. However, until now no assessment has been
made of the operating capacity of existing systems or actual
competition in the various Member States. The Commission
has therefore been asked to present a comparative assessment
report at the Barcelona summit.

6.7.5.
The ESC welcomes the creation of the Council of
European Energy Regulators and calls on the Commission,
after an assessment of its operation, to consider transforming
this Council at some future date into a European Agency
or similar body, with responsibility for matters relating to
international transport in electricity and natural gas.

The ESC believes the Commission’s proposal

6.9.3.
to
establish a single system for access to the grid based on
published tariffs is a step towards harmonising the sector, but
supports any third party access system providing it is neutral,
transparent, fair and non-discriminatory.

6.8.

Effects on consumers and SMEs

The creation of an internal energy market has been
6.8.1.
less beneficial to domestic consumers and SMEs than to large
companies. As mentioned above, this is particularly significant
during the transitional period when the freedom to choose a
supplier is gradually introduced, as the competitiveness of
SMEs suffers.

The ESC believes that,

to compensate for these
6.8.2.
discrepancies, the creation of joint purchasing-management
organisations for SMEs and domestic consumers needs to be
encouraged. These organisations can negotiate, on behalf of a
group of customers, a framework contract with various
suppliers. As a result suppliers would not have to negotiate
individually with each customer and customers would be
offered better supply conditions.

6.8.3.
In the same vein, flexible and transparent mechan-
isms must be drawn up for settling disputes between suppliers
and customers.

6.9.4.
However, specific measures are needed to effectively
guarantee non-discriminatory access, such as, setting a deadline
for replying to access requests and drawing up flexible dispute
settlement mechanisms.

6.10. Aspects relating to competition

The process of completing the internal market
6.10.1.
will, in many cases, result in the disappearance of national
monopolies and sector deregulation, thus making way for
a market
in which companies can compete under equal
conditions.

However, the search for new markets and econom-
6.10.2.
ies of scale in companies may lead to a process of concentration
in which small companies — many of them local authority-
owned — will gradually disappear. The European electricity
and gas market may therefore end up being controlled by a
limited number of large companies which, in practice, operate
in their various areas of influence, distorting competition and
abusing their individual or collective market power.

6.9.

Systems for access to the grid

6.9.1.
Each Member State has different procedures for
access to the grid. This may give rise to imbalances with regard
to the reciprocal access of companies from different countries
to national grids.

6.10.3.
Even if the market is open and deregulated, such
situations — which are equivalent to a monopoly — could
allow companies to maximise profits at the expense of lower
quality services and higher prices, and to the detriment of the
European market’s competitiveness and consumers in general.

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6.10.4.
To prevent such a situation arising, competition
authorities at both national and Community level must make
to prevent concentrations and abuses of
a special effort
individual and/or collective dominant positions undermining
the principles of an open market economy and competition.

economic and social cohesion) and seriously damage the
interests of the Member States;

— Community action would offer clear benefits over and

above action at Member State level.

6.11.

Specific comments on the proposal for a Regulation

6.11.1.
The draft Regulation presented by the Commission
aims to encourage international trade in electricity and draw
up the necessary framework for regulating such trade.

6.11.2.
The ESC accepts the need for measures to increase
international trade in electricity and believes that the proposed
Regulation is a good instrument
for achieving this. The
principles defined in the proposal are well-grounded and cover
aspects of the issue that are fundamental if we are to see a
considerable increase in the volume of international trade in
electricity, providing they enter into force at the same time as
amendments to the Directive. If not, serious distortions of
competition could arise owing to different degrees of market
opening.

6.11.3.
However, applying Articles 3 and 5 of Decision
1999/468/EC so extensively means granting the Commission
far greater powers in this area. Delegating so much responsi-
bility could, however, be justified by the technical complexity
of the decisions to be adopted and by the need to properly
adapt rules to possible changes in the market.

The Committee accepts the need to delegate these
6.11.4.
responsibilities to the Commission, but believes that
the
Commission should be given the power only to amend
guidelines and rules already mentioned and approved in the
Regulation and not to draw them up without going through
the full legislative procedure.

6.11.5.
The ESC therefore calls on the Commission to
ensure that this proposal for a Regulation takes account of the
principle of subsidiarity and verify, in particular, that:

— the issue under consideration has trans-national aspects
that cannot be regulated satisfactorily through actions by
the Member States;

— the actions of Member States alone, or lack of Community
action, would clash with the requirements of the Treaty
(e.g.
the need to correct distortions of competition,
prevent disguised restrictions on trade and strengthen

6.11.6.

The Commission should also bear in mind that:

— the type of Community action chosen must be the
simplest possible and help achieve satisfactorily the
objective of the measure;

— Community measures must leave as wide a margin as
possible for decisions to be made at national level, in line
with the dual objective that measures fulfil their purpose
and the requirements of the Treaty are respected.

6.11.7.
Nevertheless, the ESC endorses the part of the
proposed Regulation that relates to the setting up of an
Advisory Committee and Regulatory Committee, inasmuch as
this will help complete the internal market. Regular reports
should, however, be submitted to the Council, Parliament and
Economic and Social Committee.

7. Specific comments on the amendments to Directive

96/92/EC

7.1.
As mentioned above, the proposal for a Directive
establishes a system for third party access to the grid based on
published tariffs, which must be fixed or approved by the
national regulatory authority. However, throughout the docu-
ment doubts are raised concerning the exclusivity of this
system and its possible co-existence with a system of ‘nego-
tiated access’, as discussed in Art. 20(1). This article, which
has not been amended in the proposal presented by the
Commission, establishes the possibility of ‘negotiated access’
for autoproducers and independent producers. The second
paragraph of this article also includes a new general reference
to negotiation. The new text therefore needs to clarify whether
the intention is to maintain this system of negotiated access
and, if so, what repercussions this could have in terms of
discrimination between grid users.

7.2.
The wording of Article 21, which is not amended in
the proposed new text, also leads to confusion as on several
occasions it refers to Articles 17 and 18 of Directive 96/92/EC.
These articles, which have both been deleted in the new draft,
refer precisely to systems based on negotiated access to the
grid or on the concept of the single buyer. The wording of
Article 21 therefore needs to be changed to include the
changes proposed by the Commission to the system of third
party access to the grid.

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Official Journal of the European Communities

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7.3.
Several references are found throughout the document
to the term ‘eligible customer’, namely in Articles 3, 16, 19
and 21. In some of these articles the original wording has been
kept, while in others it has been changed. According to
Directive 96/92/EC Article 19(3),
the Member States are
responsible for publishing each year the criteria for the
definition of eligible customers. However, this article is not
included in the new draft of the Directive and no definition is
therefore given for the concept of ‘eligible customer’.

7.4.
The text presented by the Commission states that
Member States need to ensure that transmission and distri-
bution system operators reply to access requests within a
reasonable period of time. However, the Directive should
specify a period of time to prevent discrepancies arising.

8. Specific comments on amendments to Directive

98/30/EC

8.1.
Natural gas storage undertakings are the only exception
to the access system laid down in both Directives as in this
case both regulated access and negotiated access are allowed
(Article 15). However, it is unclear whether liquid natural gas
(LNG) storage undertakings can be subject to negotiated access
or not, as under Article 14 only regulated access is allowed for
LNG undertakings.

As in Directive 96/92/EC, no definition is provided for
8.2.
the concept of ‘eligible customer’ as Article 18 has been
amended in the new version. This article established a number

Brussels, 17 October 2001.

of minimum requirements and called on Member States to
establish the final scope of the concept.

8.3.
The Directive does not give Member States responsi-
bility for appointing natural gas distribution system operators,
even though it does so for natural gas transmission systems
and, in Directive 96/92/EC, for electricity transmission and
distribution systems. This criterion would seem to suggest that
the Commission aims to equate the natural gas distribution
system operator with the company that owns the grid.
However, Article 10(4) and (5) specifically mention distri-
bution system operators, suggesting they are separate entities
to distribution companies. References to system operators
must be consistent.

8.4.
There are a number of cross-references throughout the
text which are based on the original wording of the Directive
but are no longer valid or should be amended. The references
made to Article 18 in Articles 20(1) and 23(1), for example,
make no sense in the new draft as again they refer to the scope
In the same way,
‘eligible customer’.
of
Article 26(1), (2) and (3) include references to Article 18(3),
(4) and (6), even though they do not appear in the new version.
Article 25 also refers to Article 16, which has been deleted in
the proposed text.

the concept of

8.5.
The Directive concerning the internal market in elec-
tricity lays down a safeguard to ensure security of supply in
the form of a tendering procedure for building new electricity
generation capacity in the event that capacity built on the basis
of the authorisation procedure may not meet demand. A
similar procedure should be considered for LNG plants.

The President

of the Economic and Social Committee

Göke FRERICHS